BUSINESS AM FIRST EDITION, FEB 2018

6
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
EDITORIAL
business
a.m.
Our philosophy is driven
by the pursuit of more
efficient markets
Today we set out on a journey, like the Wall Street
Journal did over a century ago, influenced by the
twin principles of “free markets and free people”,
principles, we believe, the true fighters for our independence
believed in. They are anchored on Thomas
Jefferson’s Declaration of Independence in America and Adam
Smith’s Wealth of Nations in the United Kingdom, both occurring
in 1776.
So, we introduce to you, this maiden issue of business a.m., a
financial weekly with a philosophy underpinned by the pursuit of
more efficient markets. We seek to do this through a different approach
to the coverage and reporting of business and the economy.
We are driven by a desire to adequately present an understanding
of how the economy works and the developments that
shape the markets, including the actions and inactions of operators,
regulators and participants that impact our markets. In
doing this, we hope to enhance market performance and serve
for our readers, a veritable source of information and intelligence
on whom and what shape activities in the economy.
We acknowledge that in the harsh economic climate prevailing
today; it would seem like a rather difficult time to start a new
publication. Indeed, these times are times that try men’s soul,
but it does take the courage of few to reorder events and history.
Therefore, we are immensely excited by the risks and challenges
that this journey presents. We believe strongly that the
Nigerian public, especially its economic, financial and business
actors, deserves a genuine alternative voice in the coverage,
reportage and delivery of information and intelligence about
developments in the economy across its different markets. This
is what we have come to provide.
We intend on this journey to bring some intrusive value,
which would reorder financial journalism in Nigeria. In doing
this we will work tirelessly to be accurate, providing useful and
usable business information and intelligence through print, online
and digital publishing. We will provide accurate data and
information for businesses and markets in order to make them
more efficient, thereby offering value-based services for growth
and development of the economy.
We shall focus on products and operations in the financial
markets and the various other markets they support to grow the
economy, including energy and electricity, commodities and
agriculture, transport and telecommunications, manufacturing
and industry, among others.
In this first issue, therefore, it is worthwhile saying something
about our modus operandi, scope and content of the paper.
business a.m aims to publish investigative and rigorous theoretical,
conceptual, and empirical reports dealing with issues in
all areas of finance and the markets. The weekly is particularly
interested in issues that deal with the varying markets, the environmental,
social and governance factors in financial decision
making and their impact on valuation or what is popularly
known as price.
Specifically our editorial thrust is to provide insights into the
following broad areas – alternative assets, asset pricing, behavioral
finance, capital structure, central banking, commodities,
and cost of capital.
Other broad areas are credit markets, emerging markets, energy
markets, ethics in financial markets, exchange rates and how prices
are determined in the market for the sale of currencies, interest
rates and how they are determined with a view to promoting the
role of the markets in shaping such outcomes. We are interested
in experimental finance, financial accounting, fintech, foreign
exchange markets, governance, mergers and acquisitions, market
regulation, real estate finance, risk management and hedging,
private equity, investment banking, among others.
Other contending issues in the economy and in the markets that
we would focus on include pricing, innovation, the role of technology,
which would be addressed through well-executed ideas that
break from the tradition, and provide answers or solutions that
utilize a non-conventional approach or challenge group-think.
We are optimistic that ongoing positive developments in the
economy would support market efficiency in the near to medium
term, which we would report clearly with a sense of diligence
without fear or favour.
Welcome to our world.
87, Oduduwa Crescent,
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Tel.: +234 907 986 3875
Email: info@businessamlive.com
Website: www.businessamlive.com
Musings on Nigeria’s recent
economic landscape from India
DR. ASURI
VASUDEVAN
Former, Executive
Director, Reserve
Bank of India and
former Special Adviser
at the Central
Bank of Nigeria.
This article was first
published by Mint
newspaper, India.
Institutional
and governance
systems
need to
be thoroughly
checked and
if need be
overhauled
for their effectiveness.
Administrative
reforms
are critical for
the purpose
The changing role of the chief financial officer
DAVID MBATHA
Associate Director with KPMG
Advisory Services Limited
GLOBALLY, THE ROLE
of the Chief Financial
Officer (CFO), sometimes
referred to as the
Finance Director, has
transformed over the past decade
due to the global financial crisis, rise
of big data and the impact of social
and digital media.
Traditionally, the CFO role entailed
supervising, managing and
engaging the work of the financial
controller, credit manager and insurance
manager, and duties including
managing investments, analysing
expenses and tracking regulatory
trends. CFOs require that the focus
of the role will need to change.
Organisations are in a state of
continuous change, and the CFO
needs understanding and experience
beyond the basic finance function to
identify areas for growth and operational
excellence across all business
HAVING WORKED in Abuja, Nigeria
in the prestigious Central
Bank of Nigeria (CBN) for four
and a half years between December
2006 and end-June 2012
with a break in- between, I have come across a
number of professionals and ordinary people
who were highly motivated and well-meaning.
I did sense that in a fundamental sense, the
cultural differences between Nigeria and
many Asian countries are not really significant.
But economic ideologies and performances
differ sharply. Nigerians are aware of it. They
too want to grow fast along with price and financial
stability. This innate desire is manifest
in the periodic reports on improving economic
performance. For example, in the early 21st
century there was a report for growth and
stability which became the basis for many
development projects from 2003 onwards. In
March of this year, the new economic recovery
and growth plan (ERGP) was unveiled in the
context of the recession in the economy for five
quarters beginning 2016. It is a well-written
report and is worth careful reading.
The ERGP identified two issues that are
well known to all the scholars on Nigerian
economy: excessive consumption and crude
oil exports. What is new, according to ERGP
report, is that implementation is at the core
of delivery strategy. Implementation is to be
done by different Ministries and Departments
of the Federal Government. At the Presidency,
there will be a Delivery Unit.
The intent of the report is very good. And
implementation and delivery—the two words
much used in the report—are undoubtedly
critical for the ERGP to succeed, assuming that
all the numbers given in the report are feasible.
Prima facie, the two words seem to weave a
magic formula. But one needs to go a little
deeper. One should recognize the imperative
need for unleashing elaborate accountability
mechanisms for implementation to proceed
successfully. Each Ministry and Department
would have implementation groups which,
going by past experience, would be very large
because each sitting of the group would entail
some material gains for members. Implementation
groups will obviously submit reports
to the persons who would be heading the
Ministries/Departments. The lags here could
be long. If implementation faces obstacles or
faces constraints because, say, of lethargic
response from another Department or Ministry
that may have to contribute its mite to
the implementation, then the exercise would
be further delayed. How does one resolve this
governance issue? Through inter-Ministerial
coordination groups? Or let reports go to respective
Ministerial Heads to give their final
decisions? Let us assume that the entire pro-
domains. This requires a range of
skills, from the foundation and basics
of the finance function to a strategic
level focusing on the outside world.
People Skills of which 97% of
CEOs said that attracting and retaining
top talent was the path to improve
the finance function. Global reach
where 48% of the CEOs surveyed
listed global experience as the most
important attribute a CFO can possess.
Tech Savvy how the Mastery of
IT like cloud enabled ERP systems.
To succeed in today’s business
environment and to thrive in tomorrows,
the CFO needs to excel in the
following five areas. (Adopted from
The Changing Role of the CFO, Hugh
Morris. Financial Management, 2014
and KPMG CFO Global Survey, 2015).
Having a strategic outlook and an
intimate knowledge of the business,
which enables a focus on growth
and optimization of the value from
investments. The CFO is also expected
to understand emerging technology
and where things are headed;
cloud-based solutions, emerging
cess goes smoothly and reaches the Delivery
Unit. What does it do? How accountable would
it be? Where will the buck stop?
These questions may sound like those of a
skeptic but the institutional and governance
systems need to be thoroughly checked and
if need be overhauled for their effectiveness.
Administrative reforms are critical for the
purpose. So is the need for political will and
commitments. The last mentioned, however,
cannot be taken for granted. After all, everyone
knows how much time is spent in passing annual
budgets. On some occasions, it has taken
almost five and odd months from the beginning
of the fiscal year in question.
There are a few more observations that
need to be made on the ERGP. How good are
the projections for the three-year mediumterm
period? Real GDP growth is expected to
leap from -1.54 per cent in 2016 to 4.8 per cent
by 2018 and further to 7.00 per cent by 2020.
In the terminal year, agriculture growth is
projected at 8.37 per cent which will perhaps
be the highest in recent years. Industry will
record 8.02 per cent from a negative of 10.13
per cent in 2016. Both the sectoral growth
projections need to be carefully looked into,
after duly taking into account base effects.
How much of public investment would go
into these sectors, given the ERGP’s emphasis
on the necessary investment for environmental
restoration in Niger delta area? How does
gross saving rate (gross savings to GDP) go
up from 11.29 per cent to 21.31 per cent by
2020—almost double—within a matter of
three years is not properly explained. There
would be a deceleration in consumption
by little over 10 percentage points between
2016 and 2020, giving a return to the classical
concept of ‘forced saving’ that has no place
in most modern societies. Current account
deficit in 2016 of 1.84 per cent of GDP is projected
to turn out to be a surplus of 2.89 per
cent by 2020. This number is lower than the
projected excess of saving over investment
of 3.97 percentage points in 2020. How does
one account for this discrepancy?
It is with regard to oil GDP that one has
to ask a few questions with reference to the
developments in the international arena.
Many observers believe that alternatives to
oil have grown recently and would have accelerated
growth in near future. Shale oil is
only one of the alternatives. There are efforts
at generating wind energy and solar energy in
large quantities particularly in the light of the
climate change concerns and overall global
agreement for moving away from fossil fuels
to non-fossil ones. Oil GDP growth of 4.45
per cent projected for 2020 from a negative of
15.41 per cent could, therefore, turn out to be
an unfeasible proposition.
work and collaboration platforms.
Driving innovation will also be a key
role, which entails developing new
creative ideas based on data insights
to help drive change towards cutting
costs and fueling innovation.
Fourthly, investing and retaining
talent which means employing
diverse talent and attracting talent
to organically grow the business,
sourcing from diverse backgrounds
working closely with HR executives.
Finally the art of effective communication
on complex financial
results and business performance
to both internal and external stakeholders
is extremely crucial.
To enable the CFO to focus on more
strategic and value aspects of the role,
the more traditional aspects of the role
should run as efficiently as possible.
The finance function strategy will
therefore be geared towards providing
the CFO and the business with insights
and thereby taking on the role business
partnering and decision support as opposed
to traditional book keeping; an
Intelligent Finance Function.