BusinessDay 24 May 2017

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Wednesday 24 May 2017 12 BUSINESS DAY C002D5556 EDITORIAL PUBLISHER/CEO Frank Aigbogun EDITOR-IN-CHIEF Prof. Onwuchekwa Jemie EDITOR Anthony Osae-Brown DEPUTY EDITOR John Osadolor, Abuja NEWS EDITOR Bill Okonedo EXECUTIVE DIRECTOR, SALES AND MARKETING Kola Garuba EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure CHIEF FINANCE OFFICER Folashade Odusanya MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi HEAD OF SALES, CONFERENCES Rerhe Idonije SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North) Bashir Ibrahim Hassan GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu Deepening LPG usage Nigeria’s per capita consumption of Liquefied Petroleum Gas (LPG) commonly called cooking gas is about 2 kg or 350,000 metric tons a year. It ranks very low especially when compared to some African countries like Ghana (4.7kg), Senegal (9kg), Egypt (60kg) and Morocco (68kg). LPG is the least utilized of the four major cooking fuels (Firewood, Kerosene, Charcoal, and Gas) in Nigeria. Though, Nigeria’s LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to the current 400,000MT (471.4 percent increase within 10 years), there is, however, potential to grow Nigeria’s consumption to over 1 million metric tonnes in the near term. This will throw up investment opportunities in the LPG value chain especially in-country cylinder manufacturing which was previously the case for Nigeria. Nigeria currently relies mostly on gas from Nigeria Liquefied Natural Gas Limited (NLNG) to meet local demand but even that suffers from delays due to government’s decision to prioritise petrol in discharge to jetties and limited number of jetties and terminals. Recently, there was price volatility of LPG due to unpredictable and supply shortages. The cost of 12.50 kg cylinder moved from between N2, 900 and N3, 100 to between N 6,000 and N 7,000. During the price hike, some of the users of cooking gas around the country, especially food sellers vowed that except the price of cooking gas becomes affordable they would return to their old ways of using fire wood. One of the impediments to ramping up LPG usage is Nigeria’s gas cylinder manufacturing capacity which is still low largely due to high cost of steel, power challenges and freewheeling exchange rate that has seen the cost of production hit the roof. Raw materials for gas cylinders are imported and they suffer 40 per cent duties and tariffs. The consequence of this situation is increased importation of gas cylinders and the use of expired gas cylinders which pose risk of leakage and endangers lives and property. Industry analysts say the Federal Government should put in place intervention funds to encourage the manufacture of cylinders in the country to stem the loss of about $10m being spent annually to import them. Another major issue is that Lagos is the only point in the country where you can bring in LPG. Ships have to wait for many days sometimes to unload leading to demurrages. This means that consumers cannot depend on LPG because supply is sporadic and unreliable and will instead continue to use kerosene. Consumers become extremely susceptible to fluctuation in prices due to inconsistent availability or government support. There should be a deliberate policy by government to drive investments in the LPG sub-sector and remove current challenges. There are operators who need to have certain guarantees in relation to market, even in terms of taxes when they are investing in much needed infrastructure. There is an urgent need for an LPG road-map in Nigeria that would drive development and growth in the market. If this is not done, we will continue to talk and work without noticeable progress. There is also the need for a greater level of sensitization of Nigerians on the importance and relevance of the usage of LPG, which is a factor for the pursuit of a cleaner energy that is also affordable. EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Wole Obayomi Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo NEWS ROOM 08022238495} Lagos 08034009034 08033160837 Abuja ADVERTISING 01-2799110 08116759801 08082496194 ENQUIRIES SUBSCRIPTIONS 01-2799101 07032496069 07054563299 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union MISSION STATEMENT To be a diversified provider of superior business, financial and management intelligence across platforms accessible to our customers anywhere in the world. 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Wednesday 24 May 2017 C002D5556 BUSINESS DAY 13 COMPANIES & MARKETS COMPANY NEWS ANALYSIS AND INSIGHT ‘No Premium No Cover’ undermines Staco Insurance premiums …Company Posts N1.85 billion loss BALA AUGIE The ‘No Premium Cover policy introduced by regulators in order to ensure that operators are liquid has undermined Staco Insurance premium income as the insurer posted a loss of N1.85 billion to end the 2016 financial year. Gross premium written was N5.40 billion in December 2016 as against N6.18 billion the previous year. Net premium income fell by 23.07 percent to N3.60 billion in the period under review as against N4.68 billion as at December 2015. “There was a decrease of 12.33% and 15.96% in gross written premium respectively for group and company in 2016 in comparison with 2015 due to the reality of no premium no cover policy that was put in force by the Nigerian Insurance Industry regulator,” the company said in its Management’s Comment and Analysis. A combination of weak top lines and rising operating expenses was responsible for Staco Insurance 2016 loss. The Nigerian insurer has an operating expenses ratio of 94.05 percent, which means it spent nearly its entire net premium income to fund the its operational costs of close to N3.4 billion. The National Insurance Commission (NAICOM), the body that regulates insurance business in Africa’s most populous nation introduced the ‘No Premium No Cover’ Policy in order to make the government Electricity market gears for competition as Gencos sell power to customers ISAAC ANYAOGU Nigeria’s electricity market is bracing for competition after the Federal Government through the Nigerian Electricity Regulatory Commission directed that electricity generation companies can now sell power directly to customers. The directive is based on the provisions of Section 27 of the Electric Power Sector Reform Act 2005 that allows eligible customers are permitted to buy power from a licensee other than electricity distribution companies. Prior to this policy, the DisCos operated like a mo- more committed to premium obligations and make it pay large amount of debts it owed the insurance industry. “The receipts of an insurance premium shall be a condition precedent to a valid contract of insurance and there shall be no cover in respect of an insurance risk unless the premium is paid in advance,” Section 50 of the Insurance Act says. nopoly. Even investors interested in mini grid plants were constrained by the exclusive rights the DisCos assume over their franchise areas. This is changing. “It will deepen competition in the electricity market,” says Idowu Oyebanjo, a Power System Engineer from the UK. Oyebanjo further said, “The expectation is that the large industrial consumers like Manufacturers Association of Nigeria, (MAN) industrial clusters and business and energy parks will benefit from this policy. This is will gravitate towards the independent electricity distribution networks own- Apart from the negative impact of the aforementioned policy on the performance of Staco, the economic downturn created apathy towards the insurance industry. A recession caused by a sharp drop in the price of oil and a severe dollar shortage rendered consumers impotent and unable to acquire properties worth insuring. ership.” The four categories of eligible customers in the Nigerian Electricity Supply Industry (NESI) comprises of a group of end-users registered with the Commission whose consumption is no less than 2MWhr/h and connected to a metered 11kV or 33kV delivery point on the distribution network and subject to a distribution use of system agreement for the delivery of electrical energy. The next category includes those connected to a metered 132kV or 330kV delivery point on the transmission network under a transmission use of system Rising unemployment evidenced by layoffs means insurers lost premium they would have made on employee contributions. Insurance contributed less than 1 percent to the country’s GDP in 2016. A recent survey by the Chartered Insurance Institute of Nigeria (CIIN) revealed that about 86.6 million Nigerians do not have any form Primary education should be the focus of educational policies of insurance cover. In spite of all these challenges, Staco Insurance remained profitable and efficient as combined ratio (CR) stood at 57.77 percent, lower than the 100 percent threshold. The Nigerian insurer’s total net claims plunged 37.50 percent to N1.05 billion; claims ratio dropped to 29.16 percent in December 2016 from 35.89 percent as at December 2015. L-R: Monica Peach, Human Resources Director, Guinness Nigeria Plc (GN Plc); Peter Ndegwa, Managing Director, GN Plc; Bola Olajomi-Otubu, Human Resources Director, Commercial; and Rotimi Odusola, Acting Corporate Relations Director, during the grand finale of the Guinness Cup held at Agege Stadium, Lagos. Pic by Pius Okeosisi agreement for connection and delivery of energy. Other category of customers includes those with monthly consumption in excess of 2MWhr/h, and who are connected directly to a metered 33kV delivery point on the transmission network under a transmission use of system agreement. The last category comprise eligible customers whose minimum consumption is more than 2MWhr/h over a period of one month and who are directly connected to the metering facility of a generation company, and has entered into a bilateral agreement for the construction and operation of a distribution line with the distribution licensee licensed to operate in the location. “But it’s not all doom and gloom for Discos,” said Wesley Omonfoman. “Other than those connected directly to the transmission system, eligible customers at 11KV and 33KV would need to enter into an agreement with Discos, called Distribution Use of System (DUoS) to get supply from Gencos.” Omonfoman further said, “Thus Discos expectedly would still earn their percentage of the revenues due to them from the overall electricity tariff.” P15 Synergy Capital’s $100mn maiden fund buys Dimension Data INNOCENT UNAH Synergy Capital, the Mauritius-domiciled private equity fund that focuses on West Africa investments, has acquired the Nigerian and Ghanaian subsidiaries of technology company Dimension Data in a deal whose terms were not disclosed. The purchase is the 10th investment Synergy is making with its $100 million maiden fund. Dimension Data is based in Johannesburg, with a turnover of USD 7.4 billion and offices in 49 countries, is a member of the Japan-based NTT group, the world’s largest colocation provider that owns more than 12.5 million square feet of gross data center spaces as at 2015. The Nigerian and Ghanaian business concerns of Dimension data will now be called Cloud Exchange Limited in a brief transitional period; the company will provide IT systems integration services to large corporations and government entities across West Africa. “Our deep understanding of the region together with the Dimension Data and NTT’s technological capabilities will unlock value for our clients,” said Akintoye Akindele, Partner at Synergy Capital. “Our ability to anticipate and adapt to technological changes has been the drive for this partnership and acquisition.” The Economist Intelligence Unit’s ‘Building a digital Nigeria’, a report published last year, said that digital technology is helping to drive growth in promising non-oil sectors in Nigeria, from media and entertainment to finance and fast-moving consumer goods. The report said that digital technology could play an enabling role in increasing access to government services like health and education, improving financial inclusion through mobile money, and helping businesses overcome infrastructure deficits. Nigeria is connected to the Internet by 5 submarine cables, all of which land in Lagos,11 providing upwards of 11 terabytes of bandwidth per second, much higher than many other West African countries, although only between 10 and 20% of this capacity is actually used. This gap reflects the lack of necessary surrounding digital infrastructures like fibre optic cable and base transceiver stations (BTS).
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