4 BUSINESS DAY C002D5556 Wednesday <strong>25</strong> <strong>Oct</strong>ober <strong>2017</strong> 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 <strong>BusinessDay</strong> 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 <strong>2017</strong>, 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 <strong>BusinessDay</strong> 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 <strong>25</strong> 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 <strong>2017</strong>. 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.
Wednesday <strong>25</strong> <strong>Oct</strong>ober <strong>2017</strong> BUSINESS DAY 5