The Nation Newspaper

Tag: gains

  • Adeboye to those behind naira devaluation: you won’t live to enjoy your illicit gains

    Adeboye to those behind naira devaluation: you won’t live to enjoy your illicit gains

    From the board rooms and seminar halls, the battle to strengthen the naira went spiritual yesterday. The Redeemed Christian Church of God Worldwide General Overseer Pastor Enoch Adejare Adeboye has declared that those responsible for the drastic loss in the Naira’s value will not live to enjoy their illicit gains.

    The cleric was delivering a sermon at the special Sunday service organised by RCCG Region 11 (aka Ikoyi/Victoria Island family) at the Tafawa Balewa Square, Onikan, Lagos.

    Pastor Adeboye said the message was a revelation he received from God early this year, but which he was sharing for the first time.

    “Those who are deliberately destroying the Naira will make the money but will not spend it,” he said.

    The Naira has drastically and dramatically nose-dived in value in recent months, exchanging at over N500 to the United States (U.S.) dollar before it began to appreciate lately.

    Yesterday’s service was the first of its kind by Region 11, whose appellation was changed from “Ikoyi/Victoria Island Family” by Pastor Adeboye.

    “On my way here this morning, while I was on the long bridge, God told me to change your name to Blessed Family,” he said.

    Dwelling on the theme of the programme, which is “Enlarge”, Pastor Adeboye said it connotes the presence of the enlarger as well as the one to be enlarged.

    “God is not interested in addition but in multiplication” he said, adding that God has pleasure in the prosperity of His people.

    He enjoined the organisers to  take next year’s edition to the National Stadium because “God would have so much enlarged you that this venue would be too small for you”.

    Pastor Adeboye  admonished the congregation to always do the will of God and be ready to pay the price for greatness.

    Using his personal life as an example, Pastor Adeboye said his greatest desire was to become the youngest vice-chancellor in Africa but that God blessed him beyond his wildest imagination.

    “I might not have become the youngest Vice-Chancellor, but today I have many vice-chancellors who call me ‘daddy’ and I have my own university,” he said.

    “If you would be committed to the vision and mission of RCCG, you cannot die without commanding influence.

    “There is a special influence and special anointing upon RCCG,” he added.

    The Mother-in-Israel, Pastor  Folu Adeboye, described the programme as “the beginning of a new day” while appreciating those who grew the region from humble beginnings at Our Saviour’s School in the 1980s.

    The service started with the Regional Pastor, Charles Kpandei, leading the congregation to sing the Blessed Family’s special song.

    He paid tributes to his predecessor, Pastor  Oretayo Adetola, whom he described as the “matriarch” of the Blessed Family.

    Dignitaries at  the special Sunday service include the RCCG National Overseer, the National Secretary (represented), National Treasurer, Elders Fola Aboaba, Felix Ohiwerei, Okey Mofunaya, the Chief of Defence Staff, General Gabriel Olonisakin and provincial pastors, among others.

  • Sustain the gains on AIDS, TB and Malaria

    Atinuke recently completed her national youth service having graduated from the University of Ibadan in 2014 where she read Pharmacy. She was born HIV positive in 1990. Now 26, she has lived with the disease all her life. She had once coped with TB co-infection but being the fighter she is, had beaten TB hands down. Both her father and mother are also HIV positive, everyone is fine now, with undetectable viral loads, a clear indication of the progress in HIV/AIDS treatment.

    Atinuke and her family represents a generation of Nigerians whose lives were shaped by HIV/AIDS in its entirety, and they come not in small numbers, with 3.4 million Nigerians projected to be living with HIV/AIDS. For Atinuke and others in her shoes, they got a second shot at life and are able to live productive lives because of the programmes being supported by the Global Fund which provides treatment ensuring they can have children of their own who are free of the burden of the disease. It is instructive to note that several others are not as lucky as Atinuke, lacking every access to the life-saving treatment they require.

    HIV/AIDS remain a major development crisis. Since the pandemic began, it has killed millions, separated families, and destroyed and impoverished communities. In some countries, life expectancy has fallen by more than 20 years. The scale of the epidemic is causing informal social safety nets to collapse. Overall, health care is under pressure as health services struggle with mounting demand. Workforces are being decimated, with severe consequences for investment, production, and per capita income while posing as a severe threat to global health, development, and security.

    In retrospect, we have to appreciate the tremendous progress that has also been made in the fight against the three diseases achieving life-saving impacts that were unthinkable at the turn of the millennium. In 2000, just 50,000 people were receiving antiretroviral (ART) therapy in sub-Saharan Africa, but by 2011, it had climbed to over 7 million. Now, more than 17 million lives have been saved. Current projections show that more than 2 million lives are being saved each year. About 8.6 million people are receiving lifesaving antiretroviral therapy for HIV and 16 million people with HIV-TB co-infection have been treated. Nearly 3.3 million mothers have received treatment to prevent the transmission of HIV to their babies and 560 million people with malaria have been treated.

    However, if global funding for HIV / AIDS and TB were to remain static as we are currently experiencing, some of the consequences would include: 2.6 million new HIV infections every year, of which 1.3 million could be averted through scale-up. In total 3.9 million new HIV infections was projected for the period 2014-2016 and $47 billion of costs throughout the lifetimes of those additional people infected. Three million less people will be treated for TB and one million lives would be unnecessarily lost with uncontrollable multi-drug resistant TB (MDR-TB) if we don’t treat TB now for as little as $30 per patient because MDR-TB can cost up to 1000 times more to treat. It will also mean 196,000 lives lost to Malaria per year and 430 million malaria cases that could have been prevented, according to Cost of Inaction, a report on how inadequate investment in the Global Fund to fight AIDS, Tuberculosis and Malaria will affect millions of lives across the globe.

    It is crucial to acknowledge that the fatigue in donor replenishment of the Global Fund is coming at a time that experts have suggested offers the most hope in the fight against HIV, TB and malaria. It therefore goes to show that the Global Fund needs a robust infusion of pledges from traditional donor countries most notably world economic powers such as Germany and China, to successfully hit, and hopefully exceed, the fundraising target of $13 billion for the Fifth Replenishment Round.

    It is in this regard that we must acknowledge the AIDS Healthcare Foundation (AHF) and its global partners on the launch of The Fund campaign targeting countries like Germany, Japan and China to act in the interest of humanity and increase their contributions to the Global Fund. Across AHF country programmes, Nigeria inclusive, various activities have been launched, ranging from advocacy meetings with country reps at various embassies to staging press conferences to put the issue on the global agenda and highlight the sense of urgency.  In May, Japan announced a contribution of $800 million for the fifth replenishment of the Global Fund to fight AIDS, TB and Malaria which shows AHF’s effort and messages is reverberating.

    Nowhere else can the Global Fund’s impact be louder than Nigeria where the Fund has provided HIV care and treatment to 750,000 people, ensuring TB treatment to 310,000 as it provided 93.4 million mosquito nets to households to ward off malaria. Nigeria also currently represents the Global Fund’s largest portfolio with a total of $1.1 billion allocated to fighting the three diseases from 2014-2016. Unfortunately, since 2010, the Global Fund has never achieved its targeted funding. Therefore, increasing and sustaining the funding to the Global Fund is imperative to sustaining the gains achieved over the last decade, and the last few years in particular.

     

    • Aborisade is Founder/Coordinator, Projekthope.
  • UBA chief stresses gains of African expansion

    UBA chief stresses gains of African expansion

    The outgoing Group Managing Director/CEO, United Bank for Africa Plc, Phillips Oduoza, has said the bank’s footprint and reach within the African continent comes with immense benefits, including cost cutting.

    At the fourth valedictory lecture organised by the Chartered Institute of Bankers of Nigeria (CIBN) in his honour in Lagos, at the weekend, the bank chief said the lender’s African reach helps it initiate and complete Letters of Credit (LC) transactions within the continent.

    This, he said, saves time and resources for its customers. He said other lenders, without the African spread advantage, may not have the same advantage.

    He said the huge informal trade as well as the growing intra-African trade is opportunities that financial institutions operating within the continent can capture via the use of existing trade products, such as LCs.

    “The current practice for an LC confirmation is for it to be done outside Africa by European and United States banks even if the companies consummating the trade both reside within the continent. This need not be so. It is my strong belief that businesses conducted across African borders can be efficiently financed by eliminating the extra cost incurred when LCs are confirmed outside the shores of the continent. There will also be efficiency gains in the reduced time to confirm and negotiate LCs for customers coming from two African countries. As a Pan-African, UBA has provided and will continue to provide this unique service and support to its customers across the continent,” he said.

    He said the Pan-African banking model creates room for innovativeness and ability to benefit from economies of scale to be more cost efficient. The ability to group related banking functions together and provide service from a single platform could lead to huge cost savings.

    “UBA leveraged this concept by setting up a group shared services platform. The group shared services platform has been used to handle some routine tasks carried out at our business offices and subsidiaries, thereby cutting costs, ensuring standardisation and improving efficiency across the entire group. We established two platforms to handle some transactions relating to either Anglophone or Francophone countries,” he said.

  • Capital market: Groans, growls and gains of 2015

    Capital market: Groans, growls and gains of 2015

    For the second consecutive year, Nigerian equities closed within the global worst-performing stock markets in 2015. Against the background of a loss of N1.75 trillion in 2014, additional loss of N1.63 trillion in 2015 rocked the Nigerian stock market to its bottom. Notwithstanding the negative overall market position, the year witnessed several landmark initiatives that promise to further enhance the market structure and efficiency of the Nigerian market. Capital Market Editor, Taofik Salako, highlights the market performance within the context of the macro-economic environment and regulatory and corporate performances

    For investors, quoted companies, operators, regulators and other stakeholders in the Nigerian capital market, the year 2015 appeared longer than 12 months. An election year that brought political change, the initial dilly-dallying of political transition and global crude oil price crash combined with subsisting macroeconomic deficiencies, especially inadequate infrastructure, to constrict the performance of Nigerian capital market. Against all projections, the Nigerian stock market closed 2015 with a negative full-year average return of -17.36 per cent, nearly a notch above -16.14 per cent recorded in 2014. Approximately, this implied a loss of N1.63 trillion in 2015, a somewhat hard-to-bear addition on a loss of N1.75 trillion recorded in 2014. Altogether, Nigerian equities had lost N3.38 trillion in the past two years, nearly a quarter of their market value of N13.226 trillion recorded at the beginning of the period.

    The Nigerian stock market tumbled to its worst performance in three years in 2015. In spite of a massive two-day rally that added N648 billion to market values of quoted equities, the benchmark index at the Nigerian Stock Exchange (NSE) indicated that investors lost almost one-fifth of the values of their portfolios during the year. Aggregate market value of all quoted equities on the NSE closed 2015 at N9.851 trillion as against its opening value of N11.478 trillion for the year, representing a loss of N1.627 trillion. The All Share Index (ASI)- the benchmark index that tracks prices of all quoted equities, indicated a negative full-year average return of -17.36 per cent. The ASI, a value-based common index that tracks prices of all quoted companies on the NSE, doubles as Nigeria’s sovereign equity index; the barometer to measure the performance of the Nigerian investment market within a given period. The movement of the ASI, up or down, implies losses or gains in monetary value. As such, the ASI and aggregate market value of all quoted companies on the stock market move proportionately in the same direction. While new listing, delisting and supplementary listing could temporarily distort full directional view of the market capitalisation, the market over a period corrects such distortion to align capitalisation with the benchmark index.

    The ASI closed 2015 at 28,642.25 points as against its opening index of 34,657.15 points. The losses in 2015 worsened the downtrend that had in 2014 marked out Nigerian equities among the worst-performing stocks globally with average full-year decline of 16.14 per cent. Aggregate market value of all quoted equities had closed 2014 at N11.478 trillion as against its opening value of N13.226 trillion for the year, indicating a loss of N1.75 trillion during the year. Within the context of historic trend, the ASI had peaked above 57,000 points in 2007 and recently in 2013 closed above 41,000 points.

    With inflation rate at 9.4 per cent and interest-rate benchmark’s Monetary Policy Rate at 11 per cent, average inflation-adjusted return for the stock market was -26.76 per cent and effective cost-of-fund adjusted real return could be in excess of -38 per cent in 2015. This was further compounded by the steep currency depreciation of 39.3 per cent in the parallel market and 9.9 per cent depreciation in the official interbank market. The Naira/Dollar exchange rate, which opened at N181.50/$1 and N191/$1 at the interbank and parallel markets respectively, closed 2015 at N199.50/$1 and N266/$1 respectively.

    There appeared to be few safe places for investors in the Nigerian capital market in 2015. Across the sectors and categories of stocks- financial to consumer goods, high-cap to mid and low caps, the downers left gaping holes in the pockets of investors. The NSE 30 Index, which tracks Nigeria’s 30 most capitalised companies, recorded a full-year return of -17.63 per cent, underlining the obvious influence of high-cap stocks on the ASI. The NSE Premium Index, which tracks the trio of Dangote Cement, FBN Holdings and Zenith Bank International, returned -13.89 per cent. The broader NSE Main Board Index, which tracks all the equities on the main board of the Exchange, with the exception of the trio under the NSE Premium Index, indicated average decline of 17.60 percent. Banking stocks, which continued to wriggle under the spiral effects of the crude oil price crash, were the worst-hit with average return of -23.59 per cent. For the insurance sector, were most stocks were already down at nominal value of 50 kobo; average return of -4.70 per cent loomed larger than other sectors. The NSE Consumer Goods Index declined by 17.41 per cent, highlighting the suppressed performance of several fast moving consumer goods companies. The NSE Oil and Gas Index showed average decline of 6.20 per cent as the downstream oil sector fluctuated between product supply and scarcity amidst stunted industry reforms. The NSE Lotus Islamic Index, which tracks ethical stocks that comply with Islamic investment rules, dropped by 10.92 per cent. The NSE Pension Index, which tracks 40 companies specially screened as model portfolio for pension funds’ investments, recorded average return of -18.96 per cent. The only exception was the NSE Industrial Goods Index, where gains by large-cap cement companies left average modest full-year gain of 1.27 per cent. Indices present the average, balancing and counter-balancing gains with losses. For several investors, losses were in doubles and triples of the average losses. Investors in flour-milling companies were particularly hard hit with average loss of some 54 per cent. Former Dangote Flour Mills, now Tiger Branded Consumer Goods, capped the industry loss with a 12-month decline of 75.16 per cent. Breweries’ were in the double of average benchmark, which also applied to most banking stocks. But for many investors too, it was a year to cherish. Evans Medical’s loss of 78.07 per cent, the highest price depreciation during the period, was counterbalanced by Beta Glass’s 92.40 per cent gain. Many contrarian stocks such as Forte Oil, with a gain of 44.80 per cent; Presco, 34.69 per cent; Vitafoam, 34.24 per cent; University Press, 42.2 per cent and Unilever, which rose by about 21 per cent, helped many investors to cushion losses in other stocks.

     

    Global slowdown

    The Nigerian market was not alone. Across America, Europe, Asia, Middle East and Africa, there were less safe havens for investors in 2015. Nigeria trailed Egypt on the downside. Egypt 30 Index indicated average return of -21.52 per cent, the worst performance among tracked African markets. Ghana’s Ghana Stock Exchange Composite Index showed a return of -11.77 per cent. In Kenya, the Nairobi Stock Exchange All Share Index dropped by 10.55 per cent. South Africa played the contrarian market with the JSE ASI indicating a modest gain of 1.85 per cent.

    Other advanced and emerging markets also showed a tinge of the downtrend. In the United States, the Dow Jones Industrial Average (DJIA) Index returned -2.23 per cent while the S & P 500 Index dropped by 0.73 per cent. The New York Stock Exchange Composite Index declined by 6.42 per cent. However, the NASADAQ Composite Index rose by 5.73 per cent, according to figures tracked by Bloomberg. In the United Kingdom, the FTSE 100 Index UK indicated average return of -4.93 per cent. The other European markets showed considerable resilience. France’s CAC 40 Index indicated a full-year return of 8.53 per cent. The regional Europe Stoxx 50 Index showed average gain of 3.85 per cent.

     

    Drumbeats of recession

    Executive vice-chairman, Capital Assets Limited, Mr. Ariyo Olusekun, said foreign exchange crisis was a major factor in the dynamics that shaped the market in 2015. He pointed out that the steep depreciation suffered by the Naira and the uncertainty around the foreign exchange management have continued to undermine attractive valuations of the Nigerian equities. In a market dominated by foreign portfolio investors, a forex crisis is a bitter pill that sours the mouth. Foreign portfolio outflows had risen and Nigeria’s foreign portfolio investment (FPI) has been running deficits since 2014. The 12-month foreign portfolio investment report for 2014 had 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 stood at N531.26 trillion compared with outflow of N510.78 trillion, leaving a positive balance of N20.48 billion. By October 2015, the latest available figure, Nigeria’s FPI deficit was N57.28 billion, according to figures supplied by the NSE.

    The fall in crude oil price, Nigeria’s major foreign exchange earning resource, from a $100 per barrel to a $49 sell rate in January, triggered a foreign exchange crisis, which has continued to haunt the country. The price slump meant decrease in the national foreign reserve, which forced devaluation of Naira. With additional pressure on the Nigerian economy, many foreign investors became frightened with the possibility of additional currency risk. The Central Bank of Nigeria (CBN) responded to the forex scare with direct and indirect controls, constricting the forex market and heightening fears about worse devaluation. These fears were underscored by the removal of Nigeria from JP Morgan Government Bond Index-Emerging Markets Indices (JP Morgan GBI-EM Index). The fright-exit of foreign investors, decreased national productivity and uncertain fiscal and monetary outlook combined to create a sustained sell down at the stock market. Instructively, foreign investors account for the largest transactions and trades on the Nigerian stock market. Foreign transactions account for nearly two-thirds of turnover on the Nigerian stock market.

    Besides, there were anxieties about the elections in April as many investors were worried and were unsure of the aftermath of the presidential election. To the relief of most, the elections were peaceful and a new wave of change was ushered in the election of President Muhammadu Buhari. The market quickly reacted to this with an 8.30 per cent rise in the ASI from 34,380.14 to 31,744.82 basis points in the immediate days after the presidential election in what has been termed the Buhari Bounce. But as the new government struggled with and delayed composition of its executive cabinet, the excitement started to wane. With continuing global crude oil price decline, a highly emaciated foreign reserves, and North East insurgency, the new government is yet to get the macro momentum to quicken investors’ appetite.

    Group head, financial advisory, GTI Capital, Mr. Hassan Kehinde, said the stock market, which had been bogged down by political and policy risks during the political transition period, was affected by post-transition uncertainties and foreign exchange crisis, which led to the exit of influential foreign investors.

    Acting President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said political risk and uncertain macroeconomic direction contributed to the downtrend at the stock market. According to him, it’s a normal pattern for the stock market to slow down during a political transition as investors wait for the policy direction of the market. Head, research and investment, Capital Bancorp Plc, Mr Oluleye Ademola, said the downtrend market might also not be unconnected with the high interest rate in the fixed-income market, weak earnings by some companies and panic selling from anxious investors.

    Analysts at Afrinvest Securities- a Lagos-based investment firm, said uncertainties around fiscal and monetary policies, especially foreign exchange, have been major driving forces for the market downtrend. “Specifically, the economic and political risk of the country is currently too high for multinational and foreign investors. Factors influencing this includes dwindling price of Brent Crude Oil, uncertainly of the post-election period, decreasing value of Naira and unfavourable foreign exchange. Local investors are further affected by the increased volatility of the market,” managing director, Finawell Capital Limited, Mr. Tunde Oyekunle said.

     

    Counter-productive cycle

    The grueling downtrend at the secondary market has further worsened the apathy in the primary new issues market, starving companies of much-needed funds. Several companies have been unable to raise funds and many that braced the odds to launch new capital raising ended with under-subscription. The much-awaited listing of the third real estate investment trust on the Nigerian stock market was aborted by low subscription to the initial public offering (IPO) of the Haldane McCall Real Estate Investment Trust (HMK Reit). The N13 billion IPO by the HMK Reit recorded less than a third subscription by the close of extended offer period. Securities and Exchange Commission (SEC) requires that a public offer must record at least 50 per cent subscription to be deemed successful. With initial filings below the cut-off, SEC had granted a two-week extension of the offer period.

    Many well-established companies that braced the odds to float new issues in recent period largely fell below their offer targets. All the companies subsequently fell below their offer price, putting subscribers to the issues in losses and increasing apathy for future participation.  Access Bank, which had offered about 7.63 billion ordinary shares of 50 kobo each at N6.90 to existing shareholders, recorded 79.4 per cent success rate. The bank raised N42 billion as against its offer target of N53 billion.  “The reason why companies are shying away from public offers is that the new issues may not necessarily get patronage or commitment from new investors due to the current state of the market,” said Sewa Wusu, economist and head of research and investment advisory at SCM Capital Limited, formerly Sterling Capital Markets Limited.

    With the market showing little signs of recovery, most companies that had recently launched bids to raise new capital have been hesitant to further the issuance process as share prices continued to fall below intrinsic fundamental values. For instance, Flour Mills of Nigeria Plc, which had submitted application for regulatory approval to raise N30.25 billion through a proposed rights issue of 1.09 billion ordinary shares of 50 kobo each at N27.50 per share, closed the year at  N20.80, around its 52-week low of N18.99. Another company, May and Baker Nigeria Plc, which had announced plan to float a rights issue, closed at N1.10, a price the promoters of the issue considered to be below the intrinsic value of the company. Skye Bank and Sterling Bank, which had indicated plans to raise new funds, closed at N1.58 and N1.83 respectively, representing 40.6 per cent and 28 per cent declines in their share values during the year.

    With high financial leverage, huge interest financing and the slumbering effect of financial mismatch, corporate earnings have been adversely affected by the inability of companies to secure amenable long-term funding from the primary market. May & Baker Nigeria, which had been forced to complete its new multi-billion Naira manufacturing complex with bank loans, is feeling the pinch, like other companies, of the interest expense.  The unaudited financial results of the 9 months of 2015 show that May &Baker  made  9 per cent growth in turnover and 165 per cent growth in profit when compared with the same period in 2014. Against gross profit of N1.8 billion and operating profit of N470 million by the third quarter ended September 30, 2015, interest expense was N425 million. It ended the period with net profit of N60.63 million. Managing director, May & Baker Nigeria, Mr. Nnamdi Okafor, said injection of new equity funds was a priority in the mix of the corporate plan of the company but he was afraid the current share price at the stock market might discourage existing shareholders from taking up their rights. Many other venture capital and institutional investors, both local and foreign, were interested in buying into the healthcare company, but Okafor feared the market value- which will form the basis of corporate valuation, would not lead to fair valuation for the company. Yet, the secondary market needs strong corporate earnings to tickle investors, but the primary market is undermining the earnings capacity of companies.

     

    Towards a better, more efficient market

    The steep decline was not a whirlwind that brings no good after all. The apathy and continuing decline had goaded market regulators to implement several forward-thinking initiatives that promise to enhance market’s infrastructure, investors’ confidence and future price discovery. In August 2015, the NSE, South Africa’s Johannesburg Stock and Kenya’s Nairobi Stock Exchange announced a collaboration to improve liquidity on Africa’s exchanges through cross listings of Exchange Traded Funds (ETF’s). Executive Director, Business Development, NSE, Haruna Jalo-Waziri , said the collaboration underscores the commitment to provide investors with a wide range of investment products to help them realize their financial goals. “ETFs are becoming attractive to many investors offering them portfolio diversification and reduce cost of investing,” Haruna Jalo-Waziri said. Both the NSE and Securities and Exchange Commission (SEC) started disbursement of funds to investors under their investors’ protection fund (IPF). The NSE has begun implementation of its Minimum Operating Standards (MOS), which seek to ensure stockbroking firms have adequate technology, human resources and structures to safeguard investors’ interests. The NSE also recently coordinated central launch of online mobile stock-trading portals that promise to bring the tech-savvy generation into the market. The ongoing weeding out of inactive and poorly capitalised operators by both SEC and NSE is addressing a weak point in the market link. SEC has driven the implementation of the 10-year Capital Market Master Plan, with several initiatives such as dematerialisation, e-dividends, direct cash settlement, reduction of transaction costs, unified licensing model across money and capital markets, obtaining liquidity status for non-interest capital market products and strengthening market institutions by completing the recapitalisation exercise on the front burner. “The market is well regulated and operators are following a strong regulation regime and we are putting in strong processes to make sure the operators are fit, strong and proper. Markets go up and down, what is more important is the fundamentals of the market,” Gwarzo said on the outlook of the Nigerian market. The electronic dividend (e-dividend) portal, which basically automatically transfers dividends to a shareholder’s bank account, whatever the status or type of the account, has been launched. Direct cash payment is scheduled to take off today January 4, 2016. As against the current general practice whereby the payments for investors’ transactions go into the accounts of the brokers for onward disbursement to their clients, the general practice under the ‘direct cash settlement’ will be to send the net proceeds directly from the clearing and settlement system straight to the investors’ accounts. SEC had in September concluded the recapitalisation exercise for market operators and it is currently undertaking post-recapitalisation audit preparatory to the release of the final list of compliant market operators. The final list of operators is scheduled to be released this week. SEC had also led the launching of the Capital Market Master Plan Implementation Committee- a highly influential advocacy group for the market; Corporate Governance Scorecard-a review mechanism for best practices and the National Investor Protection Fund (NIPF)-a fund dedicated to compensating investors for non-market risks. SEC provided the NIPF with take-off grant of N5 billion. SEC had also reduced the transaction fee on secondary market transactions involving government bonds, corporate debentures, money market instruments and other derivatives by 5,000 per cent.

     

    Pains of yesterday, gains of today

    With regulatory initiatives kicking in on market structures and processes, most analysts believed the sustained depreciation in the past two years has created opportunities for medium to long term investors. Head, research and investment advisory, Meristem, Mr. Basheer Bashir, noted that the current market situation provides attractive buy opportunities for discerning investors. “Valuations look attractive for quite a number of stocks across all sectors of the market irrespective of the economic headwinds. We are of the opinion that current economic factors and realities have been overpriced into the market,” Bashir said.

    Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said opportunities still exist for investors in stocks, in spite of the current downturn in the capital market.

    “So, it is important for investors to dig deeper and understand the dynamics of the market. Investors also need to understand that there have been significant sell-offs between last year and this year and it could present opportunity,” Onyema said.

    But there is need for government to align its fiscal and monetary policies with the yearnings of the capital market. Several years after privatisation, privatised companies have balked from listing their shares, other nationally strategic companies see no incentives to list, listed companies receive little or no special status from national economic policies and the capital market is relegated to the background in government economic management. These have compounded the shallow domestic participation in the Nigerian capital market. Less than three per cent of Nigerians are participating in the Nigerian stock market, less than 0.2 per cent of Nigerians have ever invested in collective investment schemes otherwise known as mutual funds and foreign investors account for some 60 per cent of retail transactions at the market.

    Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr Emeka Madubuike said incentives should be given to listed companies and prospective listings so as to have some advantage over unlisted companies.

    “We propose some tax incentives for listed companies and those that are in the process of getting listed. Governments at the highest level must continue to make positive statements and assurances that will engender investors’ confidence,” Madubuike said.

    Chairman, Association of Issuing Houses of Nigeria (AIHN), Mr Victor Ogiemwonyi urged the CBN to strive towards reduction of the Monetary Policy Rate (MPR) to stimulate activities in the bond market.

    According to him, government borrowing rate in the capital market should drop to avoid crowding out of funds and to make the market attractive for private sector to raise funds.

    He said the government should revisit privatisation in order to allow for listing of government enterprises that are operating sub-optimally.

    “All the government needs to do is to set up a capital market committee to work with the Bureau of Government Enterprises (BPE) to drive the process,” Ogiemwonyi said.

    “With the expectation for massive capital spending and expansive budget in 2016, we anticipate a better performance for Nigerian equities in 2016. However key risk in the horizon remains exchange rate uncertainties and a bearish oil price outlook,” Afrinvest Securities stated in its closing note for 2015. There is much hope for recovery in 2016, but much still depend on government’s handling of the macroeconomic dynamics drumming the downbeats for the stocks.

  • Local firms set to drill gains from oil reforms

    Local firms set to drill gains from oil reforms

    The news that the new helmsman at the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Kachikwu, has taken the bull by the horns by signing on an international audit company to review the contracts between the NNPC, its subsidiaries and the oil companies, is a good omen for the nation’s troubled oil sector.

    It falls in line with the pledge of President Muhammadu Buhari to clean the sector and give it a new direction so that it can serve the long term interests of the Nigerian people.

    It is regrettable that despite huge crude oil and gas deposits, the country is yet to get on top of the management of this critical resource to address the challenges of power generation and industry. Clearly, the election of President Muhammadu Buhari, a former Petroleum Resources minister, has put in place a round peg in a round hole, a man historically and mentally fitted for the task of revamping the oil sector.

    His first move was to bring Kachikwu, an internationally exposed and renowned top brass of the multinational oil company, Mobil, to work  with him on the task of transforming the oil sector from a parasitic institution to an elixir that would breathe new life into the nation’s populous consumers.

    When the refineries were built, the strategy was to reduce the reliance of Nigeria on the imports of petroleum products, develop local capacity and take advantage of the numerous by-products of crude oil. The hope of a vibrant petro-chemical industry that would be the foundation of the country’s industrial and agro-allied sectors was built on the expansion of the refineries and increase in value-added.

    Unfortunately, the leadership of the country until May 29, 2015 could not rise to the challenge of implementation,  even when the vision seemed to be apparent and the urgency seemed so pressing. Forty-five years after the import substitution strategy was unveiled, it has taken a key operative of the generation of the 70s to lead us back to the Promised Land.

    In recent interactions with indigenous oil companies, President Buhari declared that his administration would support them in the implementation of his reforms, re-kindling hope of the revival of the indigenisation culture that his generation spearheaded with the Indigenisation Law that put many commercial sectors in the hands of Nigerians and gave the economy a truly Nigerian face.

    According to the President, “we have the manpower for a more effective participation in our oil industry. We will give you all possible encouragement. You certainly won’t be ignored under my leadership.”

    Industry sources believe the cleansing of the oil sector should position the indigenous oil companies to play greater role in determining how the oil sector would help in ending the years of misery of the millions of Nigerians who seek jobs and dream of setting up their own small scale industries.

    The auditing of the Strategic Alliance Contracts (SAC), should aim at ensuring that there were no sacred cows and under-the-table deals in the contracts signed to date. The SAC, is by its definition, a distress call from the Nigerian Petroleum Development Company (NPDC) to private companies for assistance. Under its terms, there is a clear admission that NPDC devised the SAC because it lacked the required funds to fund the petroleum operation costs and provide the technical and professional skills needed to produce oil and gas in contract areas.

    A regular clause in the agreements states that the “government, in considering the huge capital outlay and other resources required for petroleum operations has approved NPDC to enter into strategic alliance for the provision of funding and technical expertise”. Considering the fact that many of the companies have paid entry fees running into millions of dollars, it is important that the on-going audit recognises the risk of time and value of the operations and the need to ensure that a level playing field is achieved in favour of indigenous companies.

    It is therefore gladdening that very reliable sources at the NNPC have assured that the exercise is not meant to witchhunt any company but to ascertain the state of the contractual agreements, fine-tune where necessary and ensure that there is value for money, performance and excellent benchmarking. This also means partners in the SAC must be ready to meet their obligations and ensure that the country does not lose money due to lack of diligence in enforcing the contract terms.

    Considering the challenges of benchmarking, it is obvious that many indigenous oil companies do not have the same years of experience as their foreign competitors and a bench mark that refuses to recognise this fact may work against the President’s obvious determination to grow the indigenous petroleum sector to international stature.

    Similarly, the current crude oil price regime and the dynamics of the financial market indicate that the expectations which underscore the negotiations have headed downwards. This raises the possibility of reviewing the entry fee to suit the current climate of the market and ensure that crude oil and gas production service the refineries and the local industry.

    As it walks on the tight rope of national economic stability and international investors’ confidence, the Buhari administration must not be torn between a citizenry, whose high expectations of a Messiah that has come to put the country in good shape and an international community watching silently and studiously, the opportunities that the new reforms promise. Both the local and foreign stakeholders must meet at a point where needs meet feeds and reforms call for cocktails.

    The oil reforms are already registering visible impact. The responsive management of Dr. Kachikwu has been able to ensure that the Kaduna Refinery, which was comatose, has been repaired and now operates at 60 per cent installed capacity.

    Similarly, there is good news from the New Port Harcourt Refining Company. Despite the on-going Turn Around Maintenance (TAM) to overhaul its Fluid Cracking Catalytic Unit (FCCU), the refinery reported production of 39 million litres of petrol in July. The return of the Warri Refining and Petochemical Company to full production following the conclusion of its TAM will increase its contribution to daily production from its current 30 million litres.

    No doubt, for a country with estimated crude oil reserves of 35.3 billion barrels lying pretty in over 159 oil fields and 1,481 wells, and a daily production of 2.2 million barrels per day at the peak of its capacity, the Buhari administration has only stepped on to the throttle on a journey of economic stability.

    The indigenous oil companies must respond positively to the pledge of Mr. President by investing in the vision of the administration to make the petroleum sector serve the citizenry. In this regard, the utilisation of our 187 trillion feet gas reserves not only for export but to be piped to gas stations so that more cars can run on Liquified Natural Gas (NLG) must come under the Strategic Alliance Agreement (SAG) model.

    As it is said by philosophers, the past is a story told, the future of our petroleum sector can still be written in gold.

  • Gains of Buhari’s visit to US

    Gains of Buhari’s visit to US

    Being the first since the transfer of power from one political party to the other, President Muhammadu Buhari’s recent visit to the United States of America is an epoch-making event. Assistant Editor LEKE SALAUDEEN looks at the benefits the country is likely to derive from the renewal of bilateral relations between the two countries.

    President Muhammadu Buhari’s recent visit to the United States of America has opened a new chapter in the bilateral relations between the two countries. The moment the visit was made public, the question on the lips of most Nigerians was, what are the benefits of such a visit to the country? Washington had bluntly refused to sell arms to the Nigerian government in the twilight of the immediate past administration of President Goodluck Jonathan, ostensibly because of the accusation of human rights abuses by the military. The general expectation was that the visit would provide an opportunity to explain the Nigerian side of the story to the US and secure a fresh arms deal. But, at the end of the day, it is difficult to say whether such expectations were met or not.

    So, what does Nigeria really stand to gain from the visit? A university lecturer, Dr David Aworawo, said the visit would impact positively on Nigeria’s image. According to him, the international community is beginning to see the country in good light.

    Aworawo, a senior lecturer in the Department of History and International Studies, University of Lagos (UNILAG), said: “President Buhari’s visit will further strengthen our diplomatic relations with America. Nigerians in America will have a better deal. The visit will get Nigeria out of the cold, which our past government has put us. At least we will get out of America’s list of blacklisted countries.

    “Buhari seems to be the first Nigerian government to enjoy the trust and confidence of the United States of America. For once America is ready to do business with Nigeria like never before. He is someone the American government feel will bring about the desired change. Definitely, our president’s visit will enhance the bilateral relations between the two countries.”

    To the former Senate Deputy Minority Leader, Senator Olorunnimbe Mamora, the president’s visit was successful and the gains are too many.  “It is a measure of goodwill Obama and the United States government has for President Buhari and his administration. That goodwill goes beyond America; it also extends to international community especially, the western world.”

     

    Security

     

    Mamora said it was an opportunity to give Obama first hand briefing on the level of assistance needed in combating Boko Haram in terms of military assistance. He noted that under former President Goodluck Jonathan, Nigeria did not get the kind of assistance required from America mainly because of the poor perception of his administration. “The United States did not have confidence in Jonathan’s administration, so the military assistance to combat the insurgency was not there. But now that Washington is ready to work with Buhari’s administration, he is confident of the military assistance from US,” he added.

    A university don, Dr Adetunji Ogunyemi, said since the greatest challenge facing Nigeria today is insecurity and that President Buhari’s visit had afforded Nigeria the opportunity of presenting her security problems to the US. This, he said, would assist the country in the following areas: intelligence gathering; supply of weapons and ammunition; and the training of Nigerian security personnel in counter-insurgency tactics. He said the US has a wealth of experience in the above areas, because of her long engagements with similar challenges in Afghanistan, Syria and Iraq in the last two and half decades.

    But, Aworawo has ruled out possibilities of supply of arms from the North American country because of a subsisting rule that forbids the government from selling arms to the countries grappling with insurgency. Thus, he believes nothing concrete will come from Buhari’s visit, as far as supply of arms is concerned.

    Nevertheless, observers still believe that one major thing Nigeria stands to gain from Buhari’s visit is America’s support in the fight against Boko Haram. At a press briefing after holding talks with Buhari, United States’ Secretary of State John Kerry, affirmed his country’s support for Nigeria’s fight against Boko Haram. With America proposal to set up an African military base likely to have its headquarters in Nigeria, it will definitely boost the country’s security.

     

    Anti-graft war

     

    Another thing Nigeria stands to gain from the visit is America’s support for Buhari anti-graft war. Mamora said the American government promised to assist Nigeria in fighting corruption, particularly in tracing looted funds “warehoused” in American banks, which Washington has promised to repatriate back to the country.

    Ogunyemi agrees with Mamora’s position. He said the visit would enhance the bilateral cooperation between the two countries in the fight against corruption, particularly as the US has promised to help identify, seize and repatriate funds stolen by former government officials, so that the new administration can use same to stabilise the balance of payments situation and the cash crunch problem facing it.

     

    Economy

     

    Analysts are optimistic that the fresh rapprochement between Nigeria and America will boost American investments in the country. Over the past few years America has faced serious threats and competition from China and India over African markets like Nigeria. America knows that Nigeria’s economy is the largest in the continent and is perhaps interested in leveraging on it to boost her economy. This new relation will definitely see America doing business with Nigeria more than ever before. More American investments in Nigeria will generate huge employment opportunities and boost the economy.

    An economist, Dr Emmanuel Ezira, said it is possible that the US may reconsider buying the country’s oil. Contrary to widespread belief, Ezira said the US did not stop buying Nigerian oil because of shale oil, but as a punitive measure against the introduction of the Petroleum Industry Bill. He premised his argument on the fact that the US still buys Saudi Arabia’s oil which, according to him, is not better than Nigeria’s but costs far more to transport to the US.

    But, Aworawo does not agree. He said Nigeria had no prospects of selling more oil to the US, because the North American country is self-sufficient. “She is second or third largest producer of crude in the world by producing 9.2 million barrels per day. They don’t need our oil for now; it has nothing to do with the strain in diplomatic relations under the former administration. It is because the US now produce enough for its local needs.”

    Ezira said the new friendship will make Nigeria navigate the global economic and trade diplomacy with less difficulty. He said the visit will make Buhari’s efforts to recover Nigeria’s stolen hundreds of billions of dollars kept overseas by former government officials easy to find and repatriate. “Even if the US for whatever reasons is not willing to invest in Nigeria, the truth is that America has laundered Nigeria’s image and presented her as a serious investment destination for serious-minded global investors. The visit has once again confirmed Nigeria’s status in today’s world as the most beautiful bride that everyone wants to befriend at all costs,” he said.

    Mamora is confident that the level of trade between the US and Nigeria will increase with Buhari as leader of the country. According to him, “the trip offers the US and her people the opportunity to know there is a serious government in Nigeria that they can rely on in doing business in the country. They want to invest in Nigeria and they want to be sure they are doing business in a country with a serious leadership, where their interest can be protected.”

     

    Improved relations

     

    Nigeria’s relation with the US may likely improve under Buhari’s leadership. The relations turned sour over the failure of the Jonathan’s administration and the military to deal decisively with the Boko Haram insurgency, particularly the inability to locate the over 200 Chibok girls kidnapped by the terrorists. Angered by the refusal of the US to sell helicopter gunships to Nigeria, Jonathan retaliated by halting a US military training programme for the Nigerian military.

    The first step towards normalising relations with Nigeria, according to White House, was Obama’s invitation to Buhari for a state visit, immediately after he was declared the winner of the March 28 presidential election. “This feels to us like Nigeria is at an important moment in which there can be real reforms across the board. We are looking forward to what we can do with a President who has staked out an agenda that we think is the right agenda at the right time. The visit emphasises US commitment to strengthening and expanding our partnership with Nigeria’s new government,” Grant Harris, senior director for African Affairs at the National Security Council told reporters.

    Ogunyemi said the visit has enhanced Nigeria-US bilateral relations, after many years of significant lull. “To be received by the US President for four days is no small deal in real international diplomacy and countries that qualify for this, especially on invitation by the US President (unlike Benjamin Netanyau of Israel who invited himself earlier in the year) is a significant public relations achievement for any country,” he said.

    On what the US stands to gain from Buhari’s visit, he said it was a re-launch of her friendships with Africa’s largest democracy and population. He said: “This is significant for the projection of America’s influence in Africa, particularly in the light of increasing Chinese presence and likely dominance of Africa’s investment and mining industry.

    “It is an opportunity of a bilateral coalition in stopping or, at least, reducing the expansion of ISIS’s influence in the whole of Africa. Remember after Iran and North Korea, ISIS is the next hater and enemy of US’s interest in the whole world. Hence, it is not in the US’s long term strategic interest to see that ISIS has a foot-hold in Nigeria or sympathisers in the government.”

    Buhari’s visit has stirred up a lot of expectations of better things from the US. But, only time will tell if these expectations will materialise.

     

  • Buhari’s visit to the U.S.… The gains that should come

    Buhari’s visit to the U.S.… The gains that should come

    A lawyer and lecturer at the Faculty of Law of the University of Lagos, WAHAB SHITTU, writes that Nigeria and the United States stand to gain a lot from President Buhari’s visit

    The recent President Muhammadu Buhari’s visit to the United States (U.S.) is significant in many respects, not only for Nigeria and the United States in particular but the international community in general.

    On the part of Nigeria, beyond focus on security, war against terrorism as well as trade and economic relations, it is expected that the far reaching outcome of the visit will result in the strengthening of the United States’ long lasting friendship with Nigeria.

    The first point to note is that the visit was apparently in honour of President Obama’s invitation on the strength of our president’s local and international goodwill. Thus international goodwill is as a result of the president’s acclaimed integrity, discipline and incorruptibility. This goodwill largely accounted for the way Buhari and his entourage were accommodated in Blair’s House, which serves as a site for “American Diplomacy” during the visit. This shows the esteem with which President Buhari is held on account of this goodwill considering the fact that previous visiting Nigerian leaders never had such luxury treatment.

    One important lesson arising from this privilege is that our president must never allow this uncommon international goodwill to be squandered. The challenge is how to deploy this international goodwill in building a more strategic relationship with the United States to meet our developmental aspirations. One way of retaining this important goodwill is to keep to promises and commitments made by the Nigerian delegation during the visit. Our commitments on security, war against terrorism, war against corruption as well as trade and economic relations must be respected. Two of these areas particularly war on terrorism and corruption cannot be treated with kid gloves. It is important to note that the international community treats issues relating to terrorism and corruption with priorities as they are conceived as crimes against humanity outside the domain and sovereignty of states. In other words, no state can use the excuse of state sovereignty to evade its international obligations to curtail terrorism and forestall corrupt practices.

    On terrorism, it is important in deploying counter terrorism measures to be guided by respect for international rules of engagement, international law, international humanitarian law, international refugee law and international human rights law. With respect to fight against corruption, it is important to lead by example, curtail impunity, indiscipline, breaches of rule of law and constitutionalism and also deploy resources and mechanisms in building enduring systems, institutions, societal traditions, ethical and moral values and strengthening personal behaviours. These require proactive, preventive and reactive measures. We must also keep our future elections credible, free, fair and peaceful if we are to continue to retain this international goodwill.

    The challenge therefore is deploying this current international goodwill enjoyed by the current leadership in building more strategic relationships not only with the United States but with the rest of the international community to meet our developmental aspirations. Indeed future achievements and successes of this administration may well depend on the extent it is able to retain and consolidate on the strength of this goodwill.

    President Buhari’s visit to the United States is also significant coming as it were before the administration settles down to serious governance. This is because being a new administration, the need for external support to prosecute its policies is fundamental as Nigeria takes on both economic and security crisis currently ravaging the land. Indeed international partners have a rare opportunity to engage Nigeria on a new beginning given the fact that Ministers are yet to be appointed and key policies are still being worked out. There are also diplomatic consequences of the visit. It has the prospect of strengthening diplomatic relations of both countries. President Obama has never visited Nigeria in his almost eight-year-tenure. This is not too good for the image of Nigeria as the greatest black African Nation. President MohammaduBuhari’s visit may have provided a convenient platform for President Obama to reciprocate the gesture by undertaking a visit to Nigeria in no distant future.

    It is also important to review and retool Nigerian’s diplomatic objectives to emphasize service to the Nigerian state by diplomatic officials as opposed to service of the whips and caprices of the Nigerian ruling elite. A strong strategy to encourage skilled Nigerians deploying their expertise in the United States to return to Nigeria to develop our economy should be vigorously pursued.

    Nigeria must be clear on what its needs and priorities are arising from the visit of our President to the United States. Undoubtedly, Nigeria requires military support to combat terrorism but more importantly, training, equipment and intelligence exchange are what Nigeria actually needs more critically at this period in time. Nigeria also requires assistance in retrieving stolen wealth starched in some American Commercial banks or covert agencies. There are strong indications and suggestions that some of these lootshave been deployed in the purchase of expensive and expansive estate in Washington D.C. and its environs particularly the State of Maryland. Sonala Olumhense, a respected columnist of The Guardian on Sunday alluded to this discovery in his article last Sunday in the Guardian. This is a vital lead that the Nigerian authorities may wish to follow up.

    There may be need to put in place some form of international agreement or memorandum of understanding with the United States on how some of these loot can be traced and recovered for the benefit of the Nigerian State. Currently, Nigeria’s economy bleeds and much of these looted funds if recovered will assist Nigeria’s economic recovery.

    Nigeria currently grapples with challenges on security, economics, institutions and development leading to lower levels of living and productivity, lower levels of human capital, higher levels of inequality and absolute poverty, higher population growth rates, greater social fractionalisation, larger rural populations but rapid rural to urban migration, lower levels of industrialisation and manufactured exports, underdeveloped financial and other markets and high levels of corruption and impunity amongst others. These are inspite of our physical and human resource endowments. The expectation is that the president’s latest visit to the United States will mark a good beginning for the realisation of Nigerian’s vast potential. As noted by President Obama, President Buhari came into the office with a reputation of integrity and a clear agenda on corruption and Boko Haram insurgency includ

  • Pains, gains of concession deals in aviation sector

    Pains, gains of concession deals in aviation sector

    The belief that government has no business running commercial ventures gave rise to Public-Private Partnership (PPP). In the aviation sector, where the problem of decaying facilities stares all in the face, the PPP has shown that there is no pain without gain and that if the country keeps to the terms of concession,  Nigerians will be the ultimate winner, writes OLUKOREDE YISHAU

    No one is sure how it will end. The battle has been on for years. From one court to the other, AIC Limited, owned by former presidential aspirant and business mogul Chief Harry Akande, has tried to get an order that will enable it start work on a five-star hotel near the Murtala Muhammed International Airport (MMIA), Ikeja, Lagos.

    The deal centres around a parcel of land awarded to Messrs AIC under the administration of former military Head of State, the late Gen. Sani Abacha. Almost two decades after its exit, the administration’s transparency and accountability records are still being questioned and public funds stolen by the military ruler are still being returned by foreign governments.

    The deal was sealed on February 17, 1998. AIC won a 50-year concession to build a hotel on an 11.654-hectare land near the MMIA.

    The late Gen. Abacha died before the company could start work on the site and when former President Olusegun Obasanjo took over, his administration reviewed many of the contracts awarded by the late dictator. It claimed to have found a lot of discrepancies. This affected the AIC project. The concession was cancelled, compelling the Federal Aviation Authority of Nigeria (FAAN), in May 2002, to write AIC/Hilton to vacate the land citing irregularities in the concession process and concerns about the proposed height of the hotel.

    Citing the airport’s master plan, FAAN said the land earmark for the firm was meant for the expansion of the international terminal and apron in the .

    AIC, in a court document, said it was mobilising workers to site when FAAN served it a quit notice. The development triggered a legal tussle, in which Justice Regina Nwodo, of the Federal High Court, granted an injunction on February 18, 2002, restraining FAAN from disturbing AIC on the land, pending the determination of the dispute to an arbitrator.

    Since then, it has been in and out of the arbitration tribunal and the courts. On January 13, 2013, hell almost broke out on the land as FAAN alleged that AIC attempted to take possession of the land, an allegation the company denied.

    A statement by FAAN reads: “On January 13, 2013, AIC Limited, in an unprecedented act of brigandage by a private investor on government property, forcefully took possession of part of MMA’s land with the help of armed policemen and hired thugs, thereby causing a security breach at the airport. Again, on January 24, 2013, thugs hired by the company physically assaulted top officials of FAAN, who went to inspect the site of the incident of January 14, causing bodily harm to some of them.”

    The AIC’s case, pending before  the Court of Appeal, followed a June 19, 2013, ruling of the Federal High Court in Lagos, favouring FAAN.

    The AIC filed two different cases at the Federal High Court on the dispute and FAAN filed one at the same court, following the decision of the arbitration tribunal, headed by the late Justice Kayode Eso. The tribunal asked FAAN to pay $48, 124, 000 as damages to AIC on June 1, 2010.

    Justice Ibrahim Buba held that the  tribunal went outside its jurisdiction in rendering the final award between the parties.  He set aside the decision.

    FAAN said that by the judgment, the parcel of land in question has become free for massive infrastructural development under the aerotropolis project. But the AIC insisted FAAN misread the judgment.

    The project has remained unimplemented. Unlike the AIC Limited deal, Bi-Courtney Aviation Services Limited (BASL) has in the last eight years operated the MMA2, Ikeja. The airport, which is under the Build, Operate and Transfer (BOT) arrangement, has come a long way. At the weekend, it marked its eighth anniversary. Some weeks back, the airport added another feather to its cap with the inauguration of the Common User Passenger Processing System (CUPPS) and other technology innovations which enable passengers have the best of travel experience.

    BASL’s Chief Executive Christophe Penninck said MMA2 was the only airport terminal in Nigeria to “have solely installed the latest version of a computer system that enables passengers and terminal users as a whole to experience a fast, secure, safe and customer-friendly way to board a flight”.

    With the innovations, e-check in, automatic e-gates and a full Baggage Reconciliation System, which Nigerians only enjoy abroad, have been domecticated. But a lot went into achieving this feat.

    Penninck said: “To the layman, this system might seem as easy and simple as an electronic till you’ll commonly find at a supermarket. The product is stored in the system at a price; the barcode reference is scanned to add it on the bill and the customer gets the ‘manifest’ at the end for payment.

    “Unfortunately, this is not as easy. From the first idea of installing this system till today, it took the relentless efforts of our board, management team, various departments in BASL, the airlines, the ground handling companies and the system providers in the past 18 months to achieve what we are inaugurating today.

    “We at BASL didn’t want to do things halfway. We could have just installed a new system on the existing computers, original check-in desks, and limit ourselves to a basic check-in system.

    “Based on extensive research of what best system is available abroad, we selected RESA to be our system provider. The system we’re inaugurating today is the same as installed in major international airports like Charles De Gaulle, Bangkok International; the brand new airport terminal in Mauritius and over 200 airports worldwide.”

    The airport had to change all the check-in counters  and scales. It also  increased their number from 31 to 45. The design and manufacturing was done by the same company servicing Amsterdam Schiphol and many other major international airports. The computers at the check-in desks were also changed and each computer is connected to a brand new boarding pass printer and a new baggage tag printer.

    Also, each airline has a ticket barcode scanner to call up the ticket immediately and without any keyboard input to accelerate the check-in process.

    For passengers traveling without bags, the airport installed four self-check-in kiosks. The BASL has also increased the security features at MMA2 by installing e-gates before the security screening point, making it virtually impossible for an unauthorised person to enter the boarding zone. Also, each gate is now equipped with a boarding pass scanner and a brand new manifest printers.

    Interestingly, a technology known as PAXTRACK has been installed and with this, the airport can, among others,  analyse the peak periods and  thus better placed to plan. This facility also makes it easy to locate a passenger within the terminal and enable the boarding agent to have a better on-time performance

    The installation of a full BRS makes MMA2 the only terminal in Nigeria to offer an automated baggage reconciliation system as prescribed by the International Civil Aviation Organisation (ICAO).

    “We’re the only airport terminal in Nigeria that is providing baggage tags and boarding passes and the equipment was installed by our team and the system is owned by the airport,” Penninck said:

     

    Not a tea party

     

    It was not all bed of roses in the past for BASL. Its chairman Dr. Wale Babalakin gave an insight at the inauguration of the new facilities.

    He said: “It has been seven years of great difficulty, but we must commend the minister of Aviation for his vision; for his steadfastness and for his attitude to saying the truth. When I heard over the radio that MMA2 was voted as the best terminal in Nigeria, I was taken aback. My first reaction was that I hope this will not cost him his job. But he was sincere to himself and he was sincere to Nigerians. So, I continued to make the case that you should listen to him, to his analysis, to his depth of thought, his theory, which he captured with the acronym – MMI, which are Measurement, Monitoring and Improvement. This is a product of a very deep mind.

    “It is my belief that there is nothing called local aviation. Aviation is international. There is nothing called Nigerian aviation. Any time you say Nigerian aviation or Nigerian tendencies, we diminish ourselves. We must seek to comply with international standards and if we wish to make a good impression, we must exceed those standards. The minister has shown me here that if you appoint as minister of Aviation somebody with international perspective, someone who is considerably knowledgeable, and who is upright in his ways, aviation will go very far. I hope this is noted by those in position of authority.

    “I make bold to say today that if you combine an intellectual leadership in governance with the phenomenal private sector, you will grow the infrastructure of this country beyond the imagination of the people.

    “My belief is that money should follow strategy. Strategy should not follow money. It is not the best. MMA2 symbolises how money has followed strategy and not the other way. I won’t take your time, but we must commend everyone for coming and waiting patiently for the event; and we are very much impressed that the minister has told the industry in clear terms that please, if you cannot overtake MMA2, follow diligently for the benefit of all Nigerians. And I know we will get there.”

     

    Technology transfer

     

    One major benefit of concession in the aviation sector is technology transfer. For the new facilities to be installed and operated successfully, BASL workers were sent abroad for training. Some of the manufacturers also came to Lagos to train both BASL staff and others. “We’ve trained about 300 airport staff (airlines, ground handling and BASL). That was just for this project,” Penninck said.

    About 200 of the airport’s security staff  have just obtained ICAO Certificate in Aviation Security.

     

    The importance of technology

     

    For immediate past Aviation Minister Osita Chidoka, aside technology transfer, there are other benefits of the new facilities at the MMA2.

    He said: “If we can improve the people, make our processes transparent, and back same up with requisite technology, then, we will have a world-class organisation.

    “Part of the challenge is what brought us here today. I asked the Chairman of Bi-Courtney how many passengers have passed through this terminal and he said it is roughly about 1.2 million passengers every year. Now, the ministry of aviation does not know whether this is 100, 000 people travelling ten times; or 500,000 people travelling twice. But with what they have installed today – the passenger tracking system, at least, we will know in MMA2 the unique passengers and how many times they travel in a year.”

    Chidoka explained that with technology, the controversy over aviation statistics would be a thing of the past.

    His words: “Again, since I resumed office as the minister of Aviation, there has been a controversy. FAAN says there are 10 million passengers going through Nigerian airports, the airlines say it is not true, that it can’t be correct. The question now is who carries the passengers? If MMA2 has 1.2 million passengers a year, which is where the bulk of local airlines operate from, minus Arik and Air Peace, I wonder where the other passengers went through? Something as simple as knowing the data of air passengers across the airports is shrouded in mystery.

    “Technology is going to make it possible for us to be able to say things with more clarity. Therefore what we have seen today with the launch of the CUPPS is a step in the right direction; and that it is coming from the airport Nigerians have voted as the best in the country.”

     

    Concessionaires and battles

     

    Like Babalakin said, the last seven years have been difficult. Part of the difficulty is proper interpretation of the concession agreement. For instance, Bi-Courtney has had to do battles with FAAN over the General Aviation Terminal (GAT), which it said, should belong to it by virtue of its concession agreement.

    Another concessionaire which fell out of favour with FAAN is Maevis Nigeria. The firm entered into a concessionary agreement with FAAN on October 31, 2007 for the supply of Airport Operations Management System (AOMS) to the MMIA, Nnamdi Azikwe International Airport (NAIA), Abuja, Mallam Aminu Kano International Airport (MAKIA) and  Port Harcourt International Airport.

    The contract was to last for 10 years and renewable every five years, subject to satisfactory performance.

    Five years into the agreement,   FAAN terminated the agreement on February 24, 2011, saying it had lost N17 billion due to Maevis’ alleged incompetence and replaced the firm with Societe International Telecommunication Aeronautiques (SITA).

    SITA, an international communications and IT company which specialises in providing data information and airport operations management systems (AOMS) for both airlines and airports in several countries worldwide, operates in some other African airports in Cairo, Addis Ababa, Cape Town, Nairobi and Morocco.

    Maevis sought refuge in the court, where it accused FAAN of forcefully chasing its men out of the airports. It said it had committed over N5 billion into the project. Justice Buba last year asked SITA to pay Maevis N5 billion. He also invalidated SITA’s contract with FAAN.

     

    Concessionaires having it good

     

    Emanpop Limited, Things Remembered, ASL, Blue Lodge, NAHCO, SAHCOL, Gabfon, Double 4, Caverton, OAS, Evergreen, Dominion and Executive Jets are other concessionaires operating in the aviation sector and they have all demonstrated that once government plays its part, all will go well.

     

    Decaying airport facilities

     

    One of the sectors the Dr. Goodluck Jonathan administration focused on is aviation. Through its remodeling project, many airports across the country were given face-lifts. But the truth remains that despite these efforts, the problem of decaying facilities still bedevil the airports.

    With the success story of MMA 2 and other concessionaires in the aviation sector, there may be a lot of sense in Hillary Clinton’s words that “you cannot have development in today’s world without partnering with the private sector.”

    And like Chidoka said: “I think MMA2 has offered the template about how government should go about the issue of the operations of airports in the country. Feelers from the stakeholders in the industry, including pilots, grand handlers  among others also gave it to MMA2.”

    He added: “This technology is wholly welcome, and MMA2 is putting us into it and we want to believe that the improvement in passengers experience in MMA2, the continuous quest for improvement, the continuous quest for excellence is sustained. This continuous improvement is something I would like other managers of airports in Nigeria to begin to mimic. If they cannot truly capture it – all they need to do is just “copy and paste” since the template is already there.

    “So, it is my very good pleasure to congratulate the management of Bi-Courtney and MMA2 in that you have continued to be worthy partners in the aviation sector. What you have done today is a major boost in the nation’s aviation industry. It has once again promoted the concept which I have termed – World Aviation, which literally means whether you suffer any problem in any of the airports – Lagos Airport, Enugu Airport e.t.c., it affects, impacts the whole aviation sector. Whether it is fuel scarcity or whatever, the impact is all over, it affects the passengers, the pilots, the airlines’ sales drop, and everyone gets affected.

    “So aviation is a marriage; I must say it’s like a Catholic marriage that you cannot divorce one for the other. That is why the world aviation vision is safety across board, security in all our terminals, and making sure that customer service is at its highest best to increase the number of those who consume aviation services in order to increase revenues for airports, for airport authority, for the regulators and for the nation’s economy.

    “This is, indeed, one more step in the aviation industry to make the airport customer-friendly. What MMA2 has done today, is to show that what passengers and other airport users see in Dubai, Paris, UK, US can eminently be replicated here in Nigeria.”

  • Gains of strike

    Gains of strike

    While many of her peers may have done nothing worthwhile during the 10-month strike by the Academic Staff Union of Polytechnics (ASUP) last year, Nneamaka Ezeimo, who graduated from the Federal Polytechnic, Offa (OFFA POLY), learnt a vocation that will make her self-reliant after her Youth Service. JENNIFER UMEH (ND II Mass Communication) writes.

    The never dreamed to become an entrepreneur as a graduating student of the Federal Polytechnic, Offa (OFFA POLY) in Kwara State, but the 10-month strike by the Academic Staff Union of Polytechnics (ASUP) offered Nneamaka Ezeimo an opportunity to try her hands in bead making. Six months after the ASUP called off its, Nneamaka has acquired fame in the business and has floated her own company – Nicky Beads World.

    She could not stay at home while polytechnic teachers close campuses. She used the period to learn how to make beads and wire works. “I said to myself, let me do this. I don’t know where it will be useful,” she said.

    According to Nneamaka, who is now a Corps member, the decision paid up and after her Nation Youth Service, she does not have plan to search for white-collar job.

    Nneamaka, who studied Mass Communication, said she learned the vocation stage by stage. “I first learnt how to make local beads,” she said. “Then I followed this by learning how to make wire works, and then the combination of beads and wire works. I studied Mass Communication, but this does not correlate with what I love doing now. I have discovered bead making is what I like to do most.”

    Her first job, she said, is the turning point in her life. “I was very happy when I won my first contract in bead making. The first job I did was for a friend’s sister, who was getting married. My friend told me her sister would need bead works for the Asoebi (uniform) they picked. They asked me to make simple beads for the ladies. Because of the perfect work I did, they gave me the exact price I charged.

    I made the beads and packaged it. I told myself that, since I could achieve this, then I could do more things and making improvement. I keep on learning and I have not stopped, because I desire to grow bigger.”

    Asked if starting was rosy, Nneamaka said she had doubts if her craftwork would go beyond her thought. “We live in a society where people believe they have to patronise people they know,” she said, adding: “They want to deal with name. When I started, it was difficult. Even when you show people pictures, they will tell you ‘no problem, we will get back to you. Some people will tell you they have regular clients they patronise. People thought I could not do it. But I told myself I would continue to do what I know how to do best.”

    How lucrative is the vocation? Nneamaka said bead making could be money-spinning if the makers develop their creativity and satisfy their clients’ taste. She said the biggest job she had done was given to her by an American-based client, who wanted a unique design.

    “It was not easy to get the client’s taste but I used my initiative to get the job done. I have built my own taste and know what people love. It could be stressful, but if one has to make efforts to deliever what is good to clients,” she said.

    If Nneamaka had not been a bead maker, what else would she do?  “I would have been a caterer,” she said. “I like meeting people and attending to their needs. Although I am a shy person, I have been meeting clients and guests at social functions,” she added.

  • Pains, gains of insurance industry regulation

    Pains, gains of insurance industry regulation

    Enforcement of compliance with reforms in insurance industry by the National Insurance Commission (NAICOM) has been a mix of pains and gains. Since he assumed office, the Commissioner for Insurance, Mr. Fola Daniel has put pressure on the operators to comply with the reforms directive. Despite the pains associated with the compliance, operators have begun to reap gains as evident in their 2013 financial results which showed reasonable profitability. Omobola Tolu-Kusimo reports.  

    The insurer is in the business of providing security to the insured for a fee. The promise of this security in the event of loss gives the insured peace of mind. To be worth it, insurer must have continuous capacity to keep this promise and not fail.

    But the idea of insurance regulation is predicated on the need to protect the interest of policyholders, hence the strict regulatory reforms imposed on underwriters by the regulatory body, the National Insurance Commission (NAICOM).

    The regulator intervenes in the insurance industry to ensure the insurer remains solvent.  This is achieved by making and effectively monitoring the relevant laws and legislations within the jurisdiction. For effectiveness, the making of such laws and their enforcement must take into account, the changing national and global environments of business. In other words, regulation should be dynamic.

    In the last five years, most national jurisdictions have embarked on aggressive reforms of their financial regulatory system. This has been in response to the global economic crises.

    During the same period, the National Insurance Commission driven by a number of internal and external stimuli including those from the global insurance regulatory standard setters like the International Association of Insurance Supervisors (lAIS), has embarked on a number of regulatory reforms.

    The primary objective of all these reform initiatives is to maintain the stability of the financial system and also encourage growth and development of the insurance sector.

    In the case of Nigeria, the stricter regulations commenced in 2007 when the Commissioner for Insurance, Fola Daniel took over the baton of leadership at NAICOM. The Commission embarked on major regulatory reforms in areas such as Risk-based Supervision, Market Conduct Reforms; Financial Inclusion; Enforcement of Compulsory; No Premium, No Cover and Anti-money Laundering and Combating the Financing of Terrorism, Anti-money Laundering and Combating Financial Terrorism (AML/CFT) compliance, among others.

    In complying with these regulations, many operators recorded loss in their financial results especially in 2012 as they grappled to comply and adjust to the new rules. They lamented what they described as too many regulations coming from the regulator almost at the same time.

    But from their results in 2013, it became evident that their pains in complying with the regulations had started to yield increase. The testimonies of chief executives of insurance firms showed that it was difficult to comply with the various regulatory reform initiatives but the compliance has turned most of the firms from loss to profit positions.

    Commissioner for Insurance Fola Daniel said infractions by underwriting firms, insurance brokers and other operators in the industry will not be treated with levity. He said the industry will witness strict regulatory environment henceforth.

    He said the days of accommodating the excesses of operators are over noting that they (operators) should brace up to the new regulatory regime.

    Assistant Director, Inspectorate, NAICOM, Sam Onyeka said a major lesson by countries from the global economic crises is efficiency in financial allocations. He stated that as a concept, risk-based supervision advocates that supervisors should be able to allocate resources as efficiently as possible, paying more attention to areas of higher risks and less attention to areas of lower risks.

    He noted that although there may be several models, it seems that the European Solvency 2 model has come to represent the global standards for insurance supervision.

    He explained that risk-based supervision represents a complex of regulatory standards encompassing capital adequacies and disclosure requirements, risk management and corporate governance.

    He said: “Indeed, for us, the desire to implement the capital adequacies and disclosure requirements of the Solvency 2 has been the harbinger of the now extant regime of International Financial Reporting Standard (IFRS).

    “It is now evident that the Commission has successfully guided the insurance industry in Nigeria towards migration to the IFRS regime.”

    Onyeka however, stated that most operators are now at home with IFRS standards although some are still grappling with the challenges of understanding and coping with the new regime.

    Chairman, Royal Exchange Group, Kenneth Odogwu, stated that for a greater part of 2013, insurers grappled with the challenges of meeting solvency margin and lFRS requirements in the preparation and submission of their 2012 audited accounts to NAICOM.

    As at December 2013, only 38 companies’ accounts were approved by NAICOM out of the existing 59 companies, with 14 firms undergoing varying stages of review of their accounts, and seven companies are yet to submit their results for review.

    He said the general sentiment was that 2013 Gross Premium Income (GPI) would settle at N230 billion as a result of the “No Premium, No Cover” policy by NA1COM restricting only insurance policies paid for in advance to be recognised in insurers’ accounts. He said: “In the same vein, NAICOM rolled out operational frameworks, guidelines and sensitisation programmes for the Takaful and Micro-Insurance initiatives as promised in 2012 and continued its enforcement exercise on compulsory insurance regulations throughout the year.”

    As part of the Federal Government’s reform agenda for the industry, the newly inaugurated NAICOM board led by Mr. Chibudom Nwuche in September 2013 discontinued issuance of new insurance licences, offering investors the option to acquire existing companies and recapitalise their balance sheets.

    The government also charged the insurance regulator to toe the path of self-funding as it confirmed its readiness to cease budgetary allocation to the commission by 2014.

    The Group Managing Director, Royal Exchange, Chike Mokwunye, was of the opinion that the potentials for further growth in insurance penetration levels locally remain buoyant due to the continuing reforms being undertaken by the NAICOM. We believe that the group is now well positioned to drive businesses and extract value across the diverse product lines supported by our superior human capital and extensive distribution network, he added.

    Chairman, Staco Insurance Plc, Dere otubu stated that NAICOM has intensified its enforcement of regulations and guidelines to maintain global best practices and improve the confidence of the insuring public as well as investors in the industry.

    He added that income from the market development and restructuring initiatives (MDRI) was expected to hit N1 trillion after its introduction in 2008. This target was however, not met.

    Also, the challenge of high premium debtors, cum paucity of funds was addressed by NAICOM in January 1, 2013 with the enforcement of the no premium, no cover provision of section 50 of the Insurance Act 2003. The enforcement of anti-money laundering act was also intensified, he said.

    The Managing Director, NEM Insurance Plc, Tope Smart, commended the enforcement of the no premium, no cover policy describing it as a pragmatic solution to the seemingly intractable problem of bad debt associated with the industry.

    The Managing Director, Custodian and Allied Insurance Plc, said the sector experienced improvements in regulatory supervision particularly the release of the guideline on risk-based supervision, strict compliance with Anti-Money Laundering and Combating of Financial Terrorism guidelines and adoption of full implementation of IFRS from 2012.

    The Chairman, Niger Insurance Plc, Bala Zakariyau said the landscape for insurance business provided the usual opportunities and challenges scenario. He stated that the Commission continued in its commendable effort to deepen insurance penetration in the country while sanitizing the industry. These were reflected in the introduction of certain policies.

    During the year NAICOM released the guidelines and registration requirements of Takaful Insurance in recognition of the need to complement the current drive for financial inclusion and to increase insurance penetration in Nigeria. The no premium, no cover, he said was a challenge at the initial stage as the insuring public was yet to fully adjust to its reality.

    He noted that while it improved cash flow of the industry, the policy has applied pressure on the volume of premium generated by insurance companies due to failure of some members of the insuring public to renew their policies as at when due.

    He said: “The Commission’s reinvigorated regulatory parameters continue to set the standards for the players in the industry. Competition remained stiff owing to low insurance penetration in Nigeria. Premium generation accounts for only about one per cent of the GDP, giving rise to practitioners chasing the very few willing insurance services buyers.

    “In our 2013 annual financial report, our Group profit before tax was N716.108 million as against N703.499 million in 2012. The total comprehensive income declined from N988.27 million in 2012 to N794.621 million in 2013. This result is attributable to the stability in the value of property, plant and equipment and available for sale of financial assets following the adoption of IFRS reporting format.”

    The Managing Director, Adeduro Mayowa, Anchor Insurance, stated that in the last five years, the company has grown above the industry’s average, paid claims promptly in excess of N1 billion, met regulatory requirement as at when due, grew its branch network from five to 21 with spread in the major geopolitical zones of Nigeria and has consistently declared profit and paid dividends to its shareholders in the last four years.

    Mayowa stated that Anchor has joined the league of insurance companies that have scaled the hurdle of complying with the IFRS account. According to him, the company experienced a six per cent growth in gross written premium, which stood at N2 billion, when compared to the previous year’s result.

    He said the growth was mainly attributable to increasing marketing network via the various agency outlet spreads across the country with key emphasis on providing insurance services that meet the global needs of customers.

    The company incurred net claim expenses of over N236 million while the underwriting result at the end of the year amounted to N814 million compared to N1.154billion earned during the year ended December 2012.  Its investment income was N145 million in 2013 as against of N117 million in 2012 an increase of 24 per cent.

    It also improved operational efficiency in 2013 by recording a drop of 34 per cent in operational cost from N1.2 billion in 2012 to N0.75 billion in 2013 while its shareholders fund grew from N3.9 billion to N4.1 billion in the year 2013 thus showing 6.4 per cent growth in shareholders’ fund.

    Similarly, the Managing Director, Lasaco Assurance Plc, Mr. Olusola Ladipo-Ajayi, while addressing shareholders of the company during its 2013 annual general meeting, said the organisation moved from loss position of N180 million in 2012 to a profit position of N412 million in 2013 business year as a result of hard work.

    He stated that recapitalization and expansion through the instrumentality of merging and acquisition, new-level branding and world-class quality certification and financial system rating would be given critical attention in the fiscal year in order to sustain the gains already made.

    Successes recorded in net profit, gross premium income, net premium earned, underwriting profit and other positive indicators are not accidental but results of doggedness and strategic planning, he noted.

    Cornerstone Insurance Plc also recorded a growth in its profit before tax by 60 per cent in the 2013 financial year over the 2012 financial year.

    The Group Managing Director, Ganiyu Musa said that the company grew its gross premium by 15 per cent from N4.6 billion in 2012 to N5.3 billion in 2013.

    He said that a combination of robust investment performance and disciplined control of operating expenses resulted in an increase in profit after tax from N544 million to N870 million. Based on this performance, the company recorded 16 per cent growth in the total asset from N12 billion to N14 billion.

    Assistant Director, Inspectorate, NAICOM, Sam Onyeka, further stressed that in the light of the foregoing, it may be appropriate to assert that branch offices are critical for attaining overall regulatory compliance by individual insurance companies.

    In conclusion, the ongoing regulatory reform initiative in the sector is necessary fallout of the recent global economic crises. The reforms will continue for the time being and the natural outcomes will be continuous introduction of complex rules and regulations by the regulator.

    There is a growing need for improving compliance level across all levels of the operational base and this underscores the need for an all-inclusive training for key company staffs at both the head office and branch offices. Companies that will survive in the coming years must begin now to install robust compliance programme.