BusinessDay 25 Oct 2017

4 BUSINESS DAY
C002D5556
Wednesday 25 October 2017
NEWS
JP Morgan makes pick from Access Bank treasury room
... Group treasurer moves to manage West Africa’s operations
IHEANYI NWACHUKWU
JP Morgan, West Africa has
succeeded in headhunting
one of Access Bank
plc’s brightest personnel,
Dapo Olagunju, who was
the Group Treasurer of the tier-1
lender.
Olagunju, a celebrated treasurer
who has been at Access Bank
for over 14 years, has just resigned
to become the managing director,
West Africa at JP Morgan.
The Oxford and Harvard Business
School trained treasurer, who
managed the financial assets and
liabilities of Access Bank Group,
joined the bank from IBTC.
“He will certainly be missed.
Access Bank profitability has been
FG plans N871bn injection into power sector next...
Continued from page 1
Cos) and Electricity Generation
Companies (GenCos).
The sum of N61 billion would
be contributed through the World
Bank’s Program-for-Results, a
financing scheme that links
disbursement of funds to programme
results. Part of these
funds will go towards a performance
based loan to enable the
Nigeria Bulk Electricity Trader
pay 100 percent of its wholesale
invoices in full and on time.
The loan is also to be used
to reduce technical losses and
strengthen the distribution networks
of the various Discos as
well as to promote corporate
governance, especially if it is
lacking in the operations of the
companies.
The Federal Government will
make available budgetary provision
in the sum of N194 billion,
which will go into funding of
transmission lines and the national
grid undertaken by the
Transmission Company of Nigeria
(TCN).
A sum of N315 billion will go
towards power assets ownership
restructuring and settlement of
DisCos debts which were created
on account of FG’s refusal to allow
cost reflective tariff regime.
But players in the industry have
told BusinessDay that unless a
tariff reform is effected, new investments
in the sector will not
achieve the desired objectives of
improving power supply.
“The prevailing Disco tariff
today was modelled against variables
that have been overtaken by
time and events, and therefore
does not reflect the true pricing of
electricity. MYTO 2015 for Discos
were built on 196/$1, 8.3% inflation
rate, certain available capacity
and therefore the final tariff
was a product of these variables.”
“You recall that from late 2015,
there were changes in these
variables, which would require
reciprocal adjustment of the
tariff but the government did not
allow NERC to increase the tariff
to meet up with the current realities.
The shortfall that the Discos
driven mostly by treasury activities
lately,” an industry source said
last night.
In the half year ended June
2017, Access Bank recorded a
significant 82 percent increase in
interest from investment securities
to N37.5 billion on the back
of growth in investment securities,
the bank’s half year financial
presentation to investors show.
The bank also recorded a “strong
year on year growth in net trading
income of N55.4 billion, an
increase of 152 percent, driven by
an increase in the bank’s foreign
exchange income resulting from
trading activities.”
Sources have told BusinessDay
that Access Bank treasury under
“Dapo” as he is fondly called,
could not account for becomes
a debt for the market, which the
government is under obligation
to pay since it is at their instance
that the tariff was not increased,”
Chuks Nwani, an energy lawyer,
said.
But even this will not totally
resolve market shortfall of over
N500 billion attributed partly to
Discos inability to pay for all the
power it take and keeping more
for itself than it pay others in the
value chain.
The Federal Government says
it is negotiating with the Discos to
cede some of their shares to new
investors, so that the investors
with financial and technical capacity
can acquire some of them
in settlement of their debts.
“We have now come to the
point where investors in the
power sector must come together
and decide to cede some of their
holdings to enable new investors
with expertise come in to enable
us grow the power sector at the
pace that can impact on economy
growth,” Zainab Mohammed,
minister of state for budget and
national planning, said at the
last Nigerian Economic Summit
in Abuja.
“It involves negotiating with
existing owners and also government,”
she said.
But legal experts note that the
first point of call in determining
the legality or otherwise of divestment
of shares by the shareholders
to the Discos would be a combined
review of Shareholders’
Agreement, Performance Agreement
and the relevant Discos Articles,
according to Ayodele Oni,
an energy lawyer and partner at
Bloomfield Law Practice.
Following the privatisation
of the power sector, the Federal
Government of Nigeria retained
40 percent in the privatised power
companies.
During this process, the Bureau
of Public Enterprises (the
BPE) (on behalf of the government)
executed requisite agreements
to formalise the acquisition
of equity, by the private sector,
in the electricity distribution
is seen as one of the most “aggressive”
and profitable in the
industry.
In the full year to December
31, 2016, Access Bank’s profit
before tax (PBT) improved by
23.6 percent to N80.6 billion, the
highest the bank has recorded in
its history.
This translated to a pre-tax
return on average assets and average
equity of 2.7 percent and 20.9
percent, respectively.
Agusto & Co, which assigned
Aa- final rating on Access Bank
this year, said the rating assigned
to the tier-1 lender reflected its
good asset quality, consistent rise
in profitability and good market
share in the Nigerian banking
sector.
R-L: Roosevelt Ogbonna, group deputy managing director, Access Bank plc; Herbert Wigwe, group managing
director/CEO; Bruno Wenn, chairman of the Management Board, Deutsche Investitions - und Entwicklungsgesellschaft
(DEG); Klaus Helsper, director, German Corporates, DEG, and Ingo Herbert, consul general, German
Consulate General in Lagos (Standing), during the official signing ceremony of Bilateral Financial Partnership
between Access Bank and DEG to launch the ‘German Desk’ at Access Bank Head Office in Lagos, yesterday.
companies (the Discos).
Hence, the Shareholders’ and
Performance Agreement came
into force to detail ownership
rights and set the standards for
operation and management of
the Discos.
While the Performance Agreement
addresses restrictions and
conditions for the transfer of
shares by the new private sector
core investor, the Shareholders’
Agreement sets the requirement
for the transfer of shares of both
the FGN (represented by the BPE)
and the requisite private sector
core investor.
Specifically, the template
Shareholders’ Agreement
stipulates that “each Shareholder
undertakes to the other
Shareholder(s) and to the Company
(the Disco) that it shall not
at any time transfer or otherwise
dispose of any Shares or of any
interest in or option over any
Shares in any case otherwise than
in accordance with the Articles
and this Agreement and unless
and until the proposed transferee,
issuee or allottee executes
and becomes bound by a Deed
of Accession”.
The rating, which is assigned to the value chain strategy to capture
a financial institution of very good small businesses in the retail segment
of the market.
financial condition and strong
capacity to meet its obligations This has translated to a growth
as and when they fall due, was in market share with it becoming
further supported by the bank’s the third largest bank on the basis
good liquidity profile and the of its total assets and contingents
experience and skill of its management
team.
31, 2016. Access Bank ranks third
of N3.3 trillion as of December
In 2016, the bank took some among the 25 banks in Nigeria on
initiatives in line with its 5-year the basis of total assets.
strategic plan to rank among the Buoyed largely by the devaluation
of the domestic currency, its
top three banks in its chosen markets
and across financial metrics loans and advances amounted to
by the end of 2017.
N1.7 trillion as of December 31,
These initiatives included improvement
of the risk manage-
growth from prior year.
2016, representing a 30 percent
ment framework, the deepening As of December31, 2016, the
of a retail banking drive by creating
a digital business, a cost reduc-
bank’s liquid assets totalled N592
tion programme and the use of Continues on page 38
The Agreement contains further
provisions for a Pre-emptive
Right / Right of first refusal by
the private sector core investor
in any purported sale / transfer
of shares by BPE (on behalf of
the FGN).
“Thus, the BPE (on behalf
of the FGN) first has to offer
the shares to the private sector
core investors before they can
sell to third parties where these
core investors refuse to buy the
shares,” Oni of Bloomfield Law
Practice, said.
“On the face of it, it would
seem that the rationale behind
the intended sale would be to,
in addition to raising funds for a
sector over haul, introduce new
investors with stronger financial
and technical capabilities to rescue
the Discos from its present
challenges and under performance.”
“It is therefore unlikely that
the BPE would be satisfied with
extending additional shares to
the present shareholders of the
Discos. Notwithstanding, the BPE
is still bound by the restrictions
contained in the requisite Agreements
and would be required to
comply with same.”
On March 22, the Federal
Executive Council approved
the Power Sector Recovery Programme
(PSRP) to restore the
sector’s financial viability and
establish a contract-based electricity
market.
The PSRP are a series of policy
actions, operational, governance
and financial interventions to
be implemented by Federal
Government of Nigeria (FGN)
over the next five years. The key
objective is to reset the Nigerian
Electricity Supply Industry
(NESI) for future growth.
“Some key issues to be addressed
through the PRSP include:
eliminating accumulated
cash deficits in the sector; develop
and implement an appropriate
and sustainable electricity
tariff that supports liquidity over
time; enforce discipline and
accountability by electricity distribution
companies (DISCOs);
ensure grid stability; promote
sector transparency and an effective
communication strategy;
and, promote electricity access
and renewable energy,” said the
document.