02-05-18

Nigeria’s Financial & Business Newspaper
February, Monday 05 - Sunday 11, 2018 www.businessamlive.com
business
a.m.
TURNED ON
Still not for sale:
Aiteo’s prolific
Niger-Delta OML 29
Last November, formidable
indigenous but global Nigerian
oil producer, Aiteo, was forced
to go public to deny a claim
that had then been making the
round in the closed international
oil investment community,
that it was putting up its
oil mining lease 29 (OML 29)
for sale.
Back Page
OUTLOOK
A financial crisis in
2018? The danger
signs are starting to
emerge
It is 10 years since the last financial
crisis, and it has taken that
long for normality to return.
For the first time since the crisis,
major economies are expanding
together. Unemployment rates
in the US and UK economies
have halved.
Back Page
COMMODITIES
Energy Price Volume
OIL 65.06 839963
BRENT 68.58 0
NAT GAS 2.863 168368
Metal Price Volume
GOLD 1335.20 416963
SILVER 16.555 129884
PLATINUM 995.90 20715
COPPER 3.1815 118866
Agriculture Price Volume
WHEAT 447.00 67312
SOYBEAN 978.50 92666
CORN 361.00 184286
SUGAR 13.65 60829
COFFEE 120.30 23705
COTTON 77.36 26460
Foreign reserves mere accounting
item, not savings – Chike-Obi
PHILLIP ISAKPA AND
STEVE OMANUFEME
Mustafa Chike-Obi, the
immediate past managing
director of the Asset
Management Company
of Nigeria (AMCON) and
current executive vice chiarman, Alpha
African Advisory has told business a.m.
exclusively that the current fixation of
Nigerians, especially the government,
about rising foreign reserves is misplaced,
saying that foreign reserves are not savings
but mere accounting item, and therefore,
not a credible indicators to measure the
performance of an economy. Besides, he
queried the figures for foreign reserves being
promoted, saying that they are heavily
overstated.
Chike-Obi pointed out that reserves are
foreign exchange earned by government
through sale of commodities, in this case
crude oil, which the central bank buys off
the government and gives naira in return
for distribution by the Federation Account
Allocation Committee (FAAC) to all three
tiers of government for spending.
“You don’t hope to spend what you
have spent,” he said, adding that the only
savings government has are in the excess
crude account and in the sovereign wealth
fund.
According to him, the benefits of
reserves are that they can pay for foreign
goods and services.
“Talking about reserves as an economic
achievement does not ring right, it is just
an accounting item stating receivables into
Page 4
Summary
Pension investments return 21.72%
FINANCE & INVESTMENT
S&P outlook for global Sukuk market
COMPANY NEWS
ROUGH 12.47 515
RICE
COCOA 2049.00 32555
Nigerian pension funds asset
managers are looking no
further than stocks as the
rally in the market in the last
seven months have put their
investments in pole position,
returning 21.72 percent year-to
date.
Page 2
The favourable outcome of Nigeria’s tapping
the Sukuk market for the first time in 2017
may well position the country seeing it as a
veritable financing option going forward.
Page 13
United Capital, Stanbic IBTC take lead
Top ten stockbrokers operating in the Nigerian
stock market traded a total of 22.592
billion shares valued at N231.717 billion
during the four trading weeks of January,
a breakdown by business a.m. of statistics
made available by The Nigerian Stock Exchange
has shown.
Page 19
TECHNOLOGY & INNOVATION
Tech giants under scrutiny
Some of the world’s biggest technology
companies are facing off with regulators in
what’s being called a “tech lash”.
Page 22
Mustafa Chike-Obi
THE MONDAY INTERVIEW
‘Create more indigenous oil, gas coys’
Bank-Anthony Okoroafor, the chief executive
officer of Vherbarge International
Limited and President of Petroleum
and Technology Association of Nigeria
(PETAN), bares his mind on a number
of burning issues including how government
policies can create over a million
jobs in the oil and gas sector.
Page 16
EXECUTIVE KNOWLEDGE SERIES
Developing leaders through adversity
In the perfect storm our world is currently
experiencing, we need to develop
leaders with character, people who can
deal with complex and difficult situations
and act as forces for good.
Page 9
News: 2 & 4 Comment: 6 & 7 Industry: 27 Commodities & Agriculture: 31
WORLD BUSINESS & ECONOMY
Illicit financial flows peak at $1.6trn
A Financial Secrecy Index published
recently by the Tax Justice Network (TJN)
has ranked Switzerland and the United
States as the biggest promoters of financial
secrecy in the world. This is just as over $1.6
trillion illicit cross-border financial flows
take place annually.
Page 24
ENERGY, POWER & RENEWABLE
No angel can fix electricity distribution in Nigeria
Those who think privatisation should not
have been done are very shortsighted.
Page 25
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No 001

2
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
NEWS
Equities rally moderates as
NSEASI falls 1.98% week on week
Andy Nssien
N i g e r i -
an equities
NEWS traded lower
in the week
ended January
2, 2018 as
benchmark index (NSEA-
SI) fell 1.98 percent week
on week despite surge in
financial services stocks.
The NSEASI, the benchmark
index, and market
capitalization depreciated
by 1.98 percent and 2.09
percent to close the week
at 44,639.99 and N16.02
trillion respectively. Similarly,
all other indices
finished higher during the
week with the exception of
the NSE-main board, NSE
consumer goods and NSE
oil/gas indices that depreciated
by 0.33 percent,
3.33 percent and 0.70 percent
respectively. The NSE
ASeM Index closed flat.
A total of 3.268 billion
shares worth N28.123 billion
in 35,761 deals was
traded during week by investors
in contrast to a total
of 7.157 billion shares
valued at N42.545 billion
that changed hands in the
previous week in 39,037
deals.
The conglomerates
industry followed with
375.113 million shares
worth N1.047 billion in
1,968 deals. The third
place was occupied by
consumer goods industry
with a turnover of
262.198 million shares
worth N6.843 billion in
5,921 deals.
Top three traded equities
were FCMB, Transnational
Corporation of
Nigeria Plc, and Skye Bank
Plc (measured by volume)
accounted for 1.181 billion
shares worth N2.830
billion in 5,219 deals, contributing
36.14 percent
and 10.06 per cent to the
total equity turnover volume
and value respectively.
Market breath closed
better in the week as 49
equities appreciated as
against 30 in the previous
week. Forty-two (42) equities
depreciated in price,
Trading activities
in treasury
NEWS
bills and foreign
exchange drove
FMDQ’s market
turnover to
N142 trillion in 2017. This is despite
a slow recovery from economic
recession, which shaped
most activities in the year.
The FMDQ in its January
newsletter/market report said total
over-the-counter (OTC) market
turnover saw a year-on-year
A major
development
in the week
was the listing
of Seplat’s
additional
volume of
25,000,000
ordinary
shares of
50 kobo each.
Pension funds managers find fortune in
stocks as investments return 21.72% ytd
Steve Omanufeme
Nigerian
pension funds
NEWS
asset managers
are looking
no further than
stocks as the
rally in the market in the last
seven months have put their
investments in pole position,
returning 21.72 percent yearto
date.
The Nigerian Stock Exchange
(NSE) market report
for the week ended February 2,
2018 indicates that its pension
index, which includes about
40 companies with significant
market capitalization, in which
pension funds are invested
returned about 22 percent in
January 2018.
The pension index thus
emerged in the top three of
gainers in the review period.
The banking index topped
indexes with the highest yearto-date
gain of 24.5 percent followed
by the industrial goods
index at 21.92 percent
The pension index specifically
serves as performance
benchmark for pension asset
managers, non-pension asset
managers and investors for the
investment of pension assets. It
also helps PENCOM monitor
compliance and performance
of equities portfolios held by
pension managers.
It equally provides a tracking
mechanism for pension
funds administrators (PFAs),
closed pension funds administrators
(CPFAs) and others
that follow the PENCOM
guidelines, while acting as
benchmark for measuring
performance and reporting
performance to retirement
savings account (RSA) holders.
The Stock Exchange information
guide to the Pension
Index notes that given the size
of the pension fund assets
under management by PFAs,
it is imperative that only companies
with significant market
capitalization should qualify for
inclusion in it.
The NSE Pension 40 Index
has performed well since the
stocks market picked up in the
second quarter of 2017 following
policies by the CBN, which
brought a flurry of portfolio
investors into the market
The development thus freed
The NSE Pension 40
Index has performed
well since the stocks
market picked up in
the second quarter of
2017 following policies
by the CBN
pension schemes from building
up cash holding, which
pervaded the system in 2016
amid fears that equities and
bonds are having negative
returns or are too pricey for
purchase.
According to the Pension
Reform Act of 2014, the allowable
investment instrument
for pension funds shall include
bonds, sukuk, treasury
bills, global depository notes
and other securities issued
by the Federal Government
of Nigeria and CBN or their
agencies as well as special
purpose vehicles and companies
created/owned by
the Federal Government of
Nigeria, provided that the
securities are guaranteed by
the CBN or Federal Government
of Nigeria.
Others are ordinary shares
of public limited liability companies
listed or proposed to be
listed through an initial public
offering (IPO), on a securities
exchange registered by the
country’s Securities and Exchange
Commission .
Money market instruments
of banks and commercial papers
issued by eligible corporate
entities are also eligible
Kemi Adeosun (l), minister of finance, receiving the report of the National Tax Policy Implementation Committee (NTPIC), from
Taiwo Oyedele, vice chairman, NTPIC, in Abuja on Friday
Increased trade in treasury bills, FX drive FMDQ market turnover to 142trn in 2017
Steve Omanufeme
lower than forty-four (44)
equities of the previous
week, while eighty-one
(81) equities remained
unchanged lower than
ninety-eight (98) equities
recorded in the preceding
week.
Also traded during
the week were a total of
32,189 units of Exchange
Traded Products (ETPs)
valued at N1.299 million
executed in 19 deals,
compared with a total of
153,755 units valued at
N1.883 million that was
transacted last week in
11 deals.
A total of 16,268 units
of Federal Government
Bonds valued at N17.053
million were traded this
week in 28 deals, compared
with a total of 6,715 units
valued at N5.318 million
transacted last week in 15
deals.
A major development
in the week was the listing
of Seplat’s additional
volume of 25,000,000 ordinary
shares of 50 kobo
each. The additional
shares were as a result of
the company’s Long Term
Incentive Plan (LTIP) for
the benefit of it’s employees.
With this listing, the
company’s total issued
and fully paid up shares
now stands at 588,444,561
ordinary shares was recorded.
On bonds market, an
additional volume of
45,122,840 units and
64,877,160 units were
added to 14.50% percent
FGN Jul 2021 and
16.2884% percent FGN
Mar 2027 respectively on
the 2nd of February 2018.
growth rate of 24.97 percent, rising
from the N113.65 trillion recorded
in 2016 to N142.00 trillion in 2017.
According to the newsletter,
FMDQ’s markets experienced a
slow but steady improvement,
with growth primarily driven by
trading activities in the FX and
treasury bills (T-bills) markets.
It said trading activities in
the T-bills market contributed
the largest to overall turnover,
accounting for 42.47 percent
of the total market turnover,
whilst FX transactions (including
FX derivatives) followed
with a combined share of 26.90
percent, and repos/buy-backs
accounted for 22.46 percent.
Bonds and money market
transactions (including unsecured
placement & takings,
commercial papers and money
market derivatives), on the other
hand, had smaller shares of the
market, accounting for 7.01
percent and 1.16 percent respectively.
The reported turnover represents
trades executed among
dealing members, dealing
members & clients, and dealing
members & the Central Bank of
Nigeria (CBN).
The FMDQ OTC Market
Turnover Report shows the
turnover on all products traded
on the FMDQ secondary market
– FX, T-bills, bonds (Federal
Government of Nigeria (FGN)
Bonds, other Bonds (agency,
sub-national, corporate, supranational
& Eurobonds) and
money market (repos/buybacks
and unsecured placements/takings).
The figures exclude
primary market auctions
in T-bills and bonds
The FMDQ said it has remained
steadfast in its drive to
support and champion growth
and development in the Nigerian
debt capital, foreign exchange
(FX) and derivatives markets
and would continue to focus
on delivering its mandates for
these markets, in support of the
realisation of the economic development
agenda for Nigeria.
It said with relevant collaboration
and the effective support of
financial market stakeholders in
2017, the OTC Exchange delivered
value-adding initiatives and solutions,
provided quality and reliable
market data and information,
promoted price discovery and
transparency, facilitated education
and capacity building, and
has gradually commenced the
journey towards the integration
of the domestic markets with the
international counterparts.
“Focused on promoting the
development of the markets
within its purview through the
roll out of innovative initiatives
in 2018, with an even expanded
scope to unlock capital through
the markets for the development
of the Nigerian economy, FMDQ
shall continue to work with its
stakeholders to make the Nigerian
financial markets globally
Competitive.’’

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
3

4
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
NEWS
Foreign
reserves...
Page 1
government coffers from which it
spends for execution of projects.
So, it is not an accomplishment of
government,” he noted.
“Foreign reserves are used to
buy foreign goods and the question
is what type of goods should
we be paying for? Should we pay
for exotic goods like champagne
and Range Rovers?”
He also stated that the foreign
reserve figures being quoted by
the authorities are overstated,
and that the real reserves are the
gross reserves minus time-bound
commitments like the Eurobond
borrowings, which are obligations
to be paid for at a specific time.
“If we are honest as a nation we
should subtract all the time-bound
obligations and hot money investments
to get the net reserves,” he
stressed, adding that for him the
nation’s net reserves are far below
what is being reported.
“Have you heard the Americans
and the Britons talking
about foreign reserves? They
don’t, because it is not an important
economic item to measure
performance of a country,” he
explained.
He stated that even if the
figures being pushed about are
right, they are not enough to
procure foreign goods for the
teeming population in a sustainable
manner.
“The level of our reserves is not
sustainable with the rate of population
growth,” he stated further,
and asked if we must be import
dependent as a nation, given
that foreign reserves only shows
a country’s ability to support its
imports.
Proffering solutions, he said
Nigeria should look inward to
produce goods for its citizens and
that a strong currency is not one
of the solutions. He said the effect
of not supporting the local currency
would be tolerably painful,
suggesting that all the effort being
made to prop up the naira was
misplaced.
He said all Nigerians need to
make personal sacrifices. Government
should tell what the sacrifices
are upfront and show the people the
value of the sacrifice, then lead by
example, adding that the people will
bear with government because they
know that they will benefit at the end.
“Leadership is telling the
people what the sacrifices are,
the benefits and then leading by
example,” he said.
According to the CBN, the
nation’s external reserves rose to
$40.33 billion as of January 25, the
highest in four years, from $38.765
billion on December 29, 2017. The
figures represent a rise of $1.56 billion
this year.
The steady rise in the external
reserve, from July 7 last year, is
occasioned by improved foreign
exchange inflow resulting from
increase in crude oil price, dollar
inflow from foreign portfolio investors
facilitated by the Investors and
Exporters (I&E) window introduced
in April last year, as well as
reduction in dollar sale through
CBN’s forex intervention.
* Our full interview with
Chike-Obi will be published in
the next edition
104 stock dealers come under Stock
Exchange hammer in five years
Andy Nssien
The Council of The Nigerian
Stock Exchange
NEWS
has in the last five years
wielded the big stick
which caught up with
no fewer than 104 dealing members
involved in market infraction.
Last year, ten dealing members
were blacklisted for unprofessional
misconduct bordering on unauthorised
sales of clients’ shares, share
price and market manipulation,
and unauthorised transfer and sale
of clients shares. This brings to 28,
the number of those disciplined in
this category by the for the same
and similar offences since 2012,
business a.m. findings have shown.
In another category, sixteen other
dealing members, comprising the
firms and their dealing clerks, were
referred to the Economic and Financial
Crimes Commission (EFCC). In a
particular instance, a dealing clerk
was sentenced to seven years imprisonment
and a fine of N20 million
imposed on the firm by a Lagos State
High Court, following a guilty verdict
for unauthorized sale of shares and
stealing, fraudulently converting
31,886,200 units of IPWA Plc shares
worth N331,297,618.
Also, in another category, 21 dealing
members were hammered for unauthorised
sales of investors’ shares
and misappropriation of clients’
funds. The disciplinary actions for
this group included expulsion by the
Council, de-registration by Securities
and Exchange Commission (SEC) and
restitution of clients’ funds.
business a.m.’s findings in another
category indicated that 39 dealing
firms with inadequate shareholders
funds incurred the wrath of the
Exchange. Of this number eight were
active, while the others were inactive,
with three of them de-registered by
SEC. The active firms in this group
included, Atlass Portfolio Limited,
Diamond Securities Limited, Golden
Securities Limited, Financial & Analytics
Capital Limited, Marriot Securities
and Investment Co. Limited, Midas
Stockbrokers Limited, Mission Securities
Limited, and TFS Securities &
Investment Company Limited.
The Nige​rian Stock Exchange (​
NSE), in i​ts bid to improve investors’
confidence in the market commenced
a strong campaign against market
infraction by its dealing members
by introducing a dealing members
compliance report, BrokerTraX under
which the activities and operations of
quoted companies are mirrored and
sanctions meted out on defaulters.
According to the Exchange sources,
with the BrokerTraX, investors can now
make more informed decisions about
where to invest by viewing names of
dealing member firms t​hat have been
found liable for contraveni​ng market
rules. The goal is to reduce this infraction
of rules to its barest minimum in
line with the deliberate and sustain​ed
effort to restore confidence.​
Mike Ezeh, managaing director
and chief executive, Crane Securities
Limited, welcomed this initiative
by the Exchange and said the
move was capable of sanitizing the
market and, thereby, creating attractive
environment for both local and
foreign investors to operate. He said
the Brokertrax , a dealing member
compliance report, would prepare
investor’s mind in selecting which of
the stockbroking houses was viable
and engaged in genuine businesses.
He said this would prevent them from
putting their money into a drain pipe
by the wrong choice of fraudulent
dealing members.
However, he was wary of a plethora
of rules and regulations emerging from
the NSEvand the government regulatory
agency, SEC, adding that some of
those requirements, especially those
bordering on supervision were putting
a strain on financial resources of
stockbrokers.
John Egede, a capital market analyst
said the Brokertrax was a step taken in
the right direction, especially at a time
investor confidence needed to be restored
in the market. He said there were
other areas the NSE and the regulator
needed to address, especially in creating
a conducive environment for the small
investors to thrive.
He identified many charges paid by
the investors in the course of transaction
as constituting double taxation,
which is a disincentive to investing in
the market.
He said VAT and stamp duties are
overdue for scrapping, adding that
doing so would reduce the financial
burden of investing in the market.
L-R: Ganiyu Olatunde, professor and vice chancellor, Olabisi Onabanjo University; Ibikunle Amosun, governor of Ogun
State and visitor to the university; Adedotun Aremu Gbadebo, His Royal Majesty, the Alake of Egbaland; and Aigboje Aig-
Imoukhuede, at the 27th convocation ceremony of the university held in Ago-Iwoye, Ogun State, where Aig-Imoukhuede
was conferred with an honorary Doctor of Science degree
Coronation Capital chairman, Aig-Imoukhuede,
awarded honorary doctorate by OOU
Aigboje Aig-
Imoukhuede, the
NEWS
investment banker
and chairman of
Coronation Capital
Limited, has been awarded an
honorary doctorate degree by the
Olabisi Onabanjo University. He
was conferred with the degree at
Ago-Iwoye, Ogun State recently,
according to a statement issued
by Reputation Plus, a reputation
management company.
The university conferred the
award on him, according to Mbang
Femi-Oyewo, a professor and a
former deputy vice chancellor of
the university, “as a symbol of the
university‘s recognition of Aigboje
Aig-Imoukhuede’s contributions
to nation building and sustainable
development, as well as our association
with his vast achievements
in the different facets of human endeavours,
the University has found
Aig-Imoukhuede
led the 2002
acquisition of
Access Bank
and oversaw the
transformation of
the bank, leading it
to a top-5 position in
Nigeria, with assets of
$ 12 billion and 350
branches
him worthy of its Doctor of Science
(D.Sc.) Honoris Causa,” she said.
Well regarded in corporate
Nigeria, especially in the financial
services sector, as an astute
banker with great eye for detail
and diligence, Coronation Capital,
which he founded in 2014 after
he retired from Access Bank plc as
group managing director and chief
executive, is an Africa-focused
private equity and proprietary
investment firm.
He was trained as a lawyer
before his foray into banking and
is regarded as one of those who
changed the face of banking in
Nigeria.
Aig-Imoukhuede led the 2002
acquisition of Access Bank as
group managing director and chief
executive officer, and oversaw the
transformation of the bank, leading
it to a top-5 position in Nigeria,
with assets of $ 12 billion and 350
branches, employing 20,000 staff
in nine countries.
His financial industry acumen,
even while serving as chief executive
of Access Bank, saw him chair
the Presidential and National
banking industry committees. He
founded the FMDQ OTC Exchange,
which today specializes in fixed
income securities and derivatives.
Aig-Imoukhuede’s passion and
commitment to the development
of financial markets has seen him
take prominent roles within Nigeria’s
financial and capital markets.
Notable amongst these was his
election as President of the National
Council of the Nigerian Stock Exchange
in 2012; Co-Chairmanship
of the UK-Nigeria Capital Market
Task Force, and Chairmanship of
Board of Trustees of the Financial
Market Dealers Association, and
Wapic Insurance.
A director of TCX Investment
Management Company Netherland,
Aig-Imoukhuede is an entrepreneurial
philanthropist, whose social
engagements include; Chairman of
Friends Africa, a partner organization
of the Global Fund, Co-Chairman
of the Board of GBC Health,
and founding member of the Private
Sector Health Alliance of Nigeria.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
5
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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.
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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.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
COMMENT
7
Maybe central banks are too independent
EDITORIAL
NARAYANA
KOCHERLAKOTA
Throughout the
developed world,
central banks enjoy
a large measure
of independence.
This is considered
desirable because it guards
against elected officials’ preference
for overly easy monetary
policy, as a means to
generating jobs and votes.
But what if the central
bank wants easier money
than politicians do? This has
been the case in the U.S. for
much of the past decade, and
it raises important questions
about how independence
should be defined.
Matched photo of Nigeria
Central Bank Logo and A
conundrum of governance,
Federal Reserve
Consider the situation in
late 2010. The Republican
party won a huge victory in
the midterm congressional
elections, at least in part
thanks to voters’ unease with
the $800 billion fiscal stimulus
package that the Obama
administration adopted the
previous year. The newly
elected Republicans largely
opposed additional stimulus
as a way of addressing the
protracted recession.
Yet one day after the election,
with unemployment
still close to 10 percent and
inflation falling toward 1
percent, the Federal Reserve
began a new round of bondbuying
designed to provide
added economic stimulus
(a policy that I, as a Fed official
at the time, supported).
This was no isolated event.
Throughout the recovery,
the Fed systematically sought
to boost growth and inflation
even as Congress made
choices — such as the budget
sequestration of 2013 — that
seemed deliberately intended
to constrain them.
At first glance, the Fed’s
policy choices could be seen
as a great example of how an
independent central bank
works: By design, it acts in
isolation of, and possibly in
contradiction to, the wishes
of the public’s elected representatives.
The stimulus
was amply justified given the
Fed’s mandate to seek maximum
employment and price
stability. Indeed, I’ve argued
that it could and should have
done more. It was right about
the economy and Congress
was wrong.
Still, there’s something
wrong with this picture. It has
to do with the governance of
central bank policy. Congress
has given the Fed — a group
of unelected technocrats —
the power to pursue a more
pro-inflation and pro-growth
policy than the public’s elected
representatives desire.
What is the justification for
this delegation?
As far as I know, the vast
theoretical and empirical
academic literature addresses
central bank independence
only as a way to counter the
short-term pro-inflation biases
of elected officials. It
doesn’t explain why central
banks should be allowed to
do the opposite.
One argument, I suppose,
could be expertise: The unelected
technocrats just know
a lot more about monetary
policy than Congress does.
But, as someone who’s been
one of those technocrats, I’m
leery of this argument. The
aura of expertise can end up
being a way to hide political
biases — biases that should
really be up to the electorate
to adjudicate.
To arrive at a more defensible
approach, Congress
might have to rethink central
bank independence as it is
enshrined in the Federal
Reserve Act. It could, for example,
periodically establish
a lower bound for the level
of interest rates and an upper
bound for asset holdings,
leaving the Fed free to
choose a higher interest rate
and a smaller balance sheet.
This would give the central
bank ample power to keep
inflation in check but would
prevent monetary policy from
being too much easier than
what Congress and the voters
desire.
To be sure, this could on
occasion prevent the Fed
from doing the right thing
when Congress is wrong —
as it did in 2010. But over the
longer term, it would preserve
the most important part of the
central bank’s independence,
shielding it from accusations
that it has become too unaccountable
to the people.
Courtesy Bloomberg
The vast
theoretical
and empirical
academic
literature addresses
central
bank independence
only as a way
to counter the
short-term
pro-inflation
biases of
elected officials.
It
doesn’t explain
why
central banks
should be
allowed to do
the opposite
EXECUTIVE EDITOR
Phillip Isakpa
Tel.: 0809 400 0025
phillipi@businessamlive.com
MANAGING EDITOR
Steve Omanufeme
Tel.: 0802 501 3059
steveo@businessamlive.com
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ONLINE
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GRAPHICS
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Amadi Iheukwumere
Adedotun Akande
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Isaac Jayeola
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Website: www.businessamlive.com

8
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018

EXECUTIVE
KNOWLEDGE
SERIES
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
9
Developing leaders
through adversity
Manfred Kets De Vries
In the perfect storm our
world is currently experiencing,
we need to develop
leaders with character,
people who can deal with
complex and difficult situations
and act as forces for good.
Take the United Kingdom for
example. The responses from
Prime Minister Theresa May
following the horrific attacks in
London and Manchester were
inadequate and short-sighted
while her off-sider, Boris Johnson,
again showed himself
to be big on bluster but with
very little credibility. Both fell
well short of the strong, uniting,
calm leadership Winston
Churchill displayed, when rallying
a panicked Britain under
siege from German bombers
in the 1940s.
Endurance, courage and
character
The French novelist Victor
Hugo once said that if
all the world’s literary works
were to be destroyed, and he
could save but one, it would
be The Book of Job. Job’s tale
is a narrative on how to deal
with adversity, of courage,
and of leadership as a force
for good. A prosperous man,
Job’s wealth was coupled with
wisdom and integrity. He remained
humble in showing
concern about the plight of
the poor, weak and helpless,
and worked to serve others.
Satan, believing Man was
driven solely by materialism
and self-interest, insisted that
Job kept his faith because so
many good things had happened
to him. Take everything
away from him and his
real character would emerge.
Satan’s challenge to God was
that if Job were to lose everything
he had, he would curse
the Lord.
To demonstrate his faith
in Job, God gave Satan permission
to strip him of all
possessions, steal his cattle,
kill his servants and children
and smite him with leprosy.
Throughout these disastrous
experiences Job did not complain.
He persevered, and
remained steadfast in his
belief in himself and in God.
Despite friends’ attempts
to sway him, attributing his
suffering to God’s displeasure
with him, Job refused
to concede, knowing that,
as a virtuous man, he would
prevail. And that was exactly
what happened. All of Job’s
losses were restored twofold.
He had seven more sons and
three daughters; gained back
twice as much cattle as he had
before; and lived to be a very
old man, quietly, piously and
happily.
The tale of Job is one of endurance,
courage and character.
It also demonstrates
that adversity can be a great
educator. Without adversity,
we do not really know what
we are all about, nor do we
appreciate the limits of our
character.
The power of internal control
Characters like Job are role
models. Their deep-rooted
faith in systems of meaning
gives them strength. There
are people possessed with
a belief in their own abilities,
a positive attitude, the
ability to regulate emotions
and a capacity to reframe
failure as an opportunity for
development and growth.
These attributes help them to
overcome whatever obstacle
comes their way. This “internal
locus of control,” enables
them to “hang tough” when
times are difficult.
Churchill demonstrated
this ability. He was a truly extraordinary
leader who, when
delivering a speech at his
old school in October 1941,
urged students to “Never
give in. Never give in. Never,
never, never, never – in nothing,
great or small, large or
petty – never give in, except
to convictions of honour and
good sense. Never yield to
force. Never yield to the apparently
overwhelming might
of the enemy.” It was a simple
message taking on historical
significance and retains its
power today.
Remain the master of your
faith
Nelson Mandela is another
great example of a leader
who knew how to deal with
adversity. He was imprisoned
for 27 years; most of that time
on Robben Island, spending
his nights in a tiny, Spartan
cell, and his days chipping
rocks in limestone quarries.
In spite of the indignities
inflicted on him, he used his
years of imprisonment to
further develop his character
– and to persist in his belief in
human dignity and equality.
Like Job and Churchill, he
didn’t give up. Inspired by the
19th century poem, Invictus,
which urges us to remain
the master of our faith, stay
unconquered, and look for
solutions, Mandela relentlessly
kept pressing for social
change.
If adversity and challenge
boosts leaders’ effectiveness,
as it did for Job, Churchill and
Mandela, how can we simulate
life-changing learning
experiences to create courageous
leaders?
Character is developed
from an early age, but experiences
in later life do matter.
Negative work experiences,
such as receiving unpleasant
feedback, being fired,
demoted or passed over for a
promotion, can strengthen a
person’s resilience and ability
to manage setbacks. Positive
experiences can also influence
character development.
By placing budding leaders in
certain situations, we can give
them experiences that mould
character and help them develop
the internal qualities
needed to do an effective job.
Some attributes could be selfawareness,
self-regulation, a
belief in fair process, a sense
of justice, humanity and humility,
and, not to forget, as
Job, Churchill, and Mandela
demonstrate, courage.
In my work with executives,
there are a number of
interventions I use to accelerate
character development.
High-potential executives
are often given tasks that
require them to make difficult
choices, particularly
assignments that have profit
and loss (P&L) responsibility.
People really learn when
they have skin in the game.
Understandably, in these
roles they will make mistakes,
but mistakes are crucial
steps when learning, growing
and improving. Dealing with
these experiences provides
them with insight into their
own character’s strengths and
weaknesses.
Another great learning
experience in the character
formation of future leaders is
to expose them to multi-party
feedback processes from the
people who work most closely
with them – bosses, colleagues,
direct reports, as well
as friends and family members
– to create tipping points
towards behavioural change.
This feedback helps give them
a better understanding of self
and encourages reflection,
self-awareness and character
development.
Honourable role models
Character-building can
also take place by having
high potentials work with
exemplary executives; accompanying,
observing and
collaborating with them as
they deal with difficult situations.
By watching and talking
with leaders who do the right
thing, budding executives can
improve their own skills and
knowledge and (hopefully)
aspire to develop a similar
character.
Finally, leadership and
character development can
be accelerated through the
help of executive coaches
and mentors. They provide
knowledge, opinions and
judgment in critical areas.
Coaches can help their clients
become more attuned to the
communication and relationship
skills required to influence
and energise employees,
obtain greater self-awareness
about their strengths and
weaknesses and learn how to
deal with adversity.
In this day-and-age, leaders
with the qualities of a Job,
Churchill or Mandela are
needed more than ever. Many
of today’s business and political
leaders resort to magical
thinking and are caught up in
delusions of grandeur. They
engage in angry scapegoating
or spin wild superstitions.
All too often, instead of observing
moral, value-driven,
exemplary leadership, we’re
watching a sad reality show
where only clowns are making
appearances.
Manfred Kets De Vries is the
Distinguished Clinical Professor
of Leadership Development &
Organisational Change at IN-
SEAD and The Raoul de Vitry
d’Avaucourt Chaired Professor
of Leadership Development,
Emeritus. He is the Founder of
INSEAD’s Global Leadership
Centre and the Programme
Director of The Challenge of
Leadership, one of INSEAD’s
top Executive Development
Programmes. His most recent
books are: You Will Meet a
Tall, Dark Stranger: Executive
Coaching Challenges; How to
Make Sure Your Organization
Lives Happily Ever After; and
Riding the Leadership Rollercoaster:
An Observer’s Guide.
This article is republished
courtesy of http://knowledge.insead.edu.
Copyright
INSEAD 2017.
BNC Innovation Series
...The Future is Now

10
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
EXECUTIVE KNOWLEDGE SERIES
They continue
to thrive
because they
have ensured
smooth
successions
from one
generation
to the next
Five challenges that could
derail a succession plan
Morten Bennedsen & Brian Henry
Chinese family firms are a force
for change in China, bringing
a renewed interest in family
entrepreneurship to the
forefront. Notwithstanding the
rapid changes taking place at the very
core of Chinese family businesses, founders
share five common challenges when it
comes to succession. By reflecting on the
simple principles below, owner-managers
can advance the succession process in their
firms without the disruption that often
characterises poorly prepared transitions.
Family-owned businesses that have
survived the five great succession challenges
have lived to be hundreds of years
old, some more than a thousand years.
They continue to thrive because they have
ensured smooth successions from one
generation to the next, as have the following
examples of family-owned companies
from around the world:
• Peugeot – The famous French automobile
company was controlled and managed
by the same family from 1810 to 2014,
when they sold off its controlling share to
a Chinese carmaker and the French state.
• Jardine Matheson – One of the original
Hong Kong trading houses or Hongs,
Jardine Matheson Holdings has been controlled
by the Keswick family throughout
its 185-year existence.
• Tata Group – Owned and managed by
the Tata family since 1868, the conglomerate
has contributed much to India’s transformation
into one of the most dynamic
emerging countries in the world.
• Ford Motor Company – One of the most
recognisable names in the United States,
the automaker dates back to 1903 when
Henry Ford introduced mass manufacturing
of cars.
Chinese founders can learn many lessons
from these tried and tested winners.
To ensure their own longevity they should
master the five challenges below.
Understanding the culture of succession
All successions are a product of the cultural
norms that prevail in the particular
country or region. Succession is shaped
by the formal and informal rules of the
specific environment in which families
live and run their businesses. Influenced
by Confucianism, Taoism and Buddhism,
China’s culture transcends the individual,
favouring collective or group initiatives
instead. In this cultural setting, family
members who are interested in joining the
family business may not think their voice
is being heard by the founders. If these
key individuals are overlooked in favour
of group recognition, the generational
transfer of ownership and management of
their family-run firms may not happen as
planned. Hence, owner-managers should
play a unifying role to prevent next gens
from looking outside their family businesses
for recognition.
Transferring family assets to the next
generation
Family assets are unique value-creating
resources – they include the name, reputation,
legacy, networks, cultural traditions
and values of the family. While successful
founders have proven that they can contribute
assets to their firms, a key challenge
is how to transfer these assets to the next
generations and how to institutionalise entrepreneurial
spirit. Owner-managers can
act as role models, spending more time with
next gens, taking them to business meetings,
working out the governance structures, etc.
Founders must find relevant knowledgetransfer
measures if they want to maintain
the momentum of the business in the transition
to the next generation.
Developing competent children
Today’s Chinese family businesses often
have members of two or three generations
working side-by-side on the shop floor. In
this situation, founders face the challenge
of overcoming educational differences.
Next gens often want to develop their CVs,
while elders are proud of their knowledge
acquired from years of experience. While
showing tolerance and respect, founders
should not neglect higher educational opportunities
for next gens, encouraging them
to enrol in business schools abroad. They
should also encourage next gens to obtain
solid management experience outside the
family firm. Having solid management skills
and business experience, next gens will be
in a better position to qualify for top roles
in their family firms.
Communicating across
the generation gap
In traditional Chinese culture, first-borns
see themselves as junior in relation to their
parents or elders, but senior in relation to
younger siblings. This dual identity can
inhibit personal and professional development
if ideas from below are treated as less
valuable than those from above. Fixed patterns
can become etched in stone and resistance
to change endemic. When Chinese
families send their children overseas to be
educated, the learning they bring back may
be ‘lost in translation’. Hence tools for communication
must be developed within the
family and the firm to manage the expectations
of heirs, while ensuring that the older
generation does not lose face. This suggests
a counter-intuitive style of communication
that emphasises risk-taking where innovation
and new ideas are fostered, and which
reflects the entrepreneurial spirit that
founders seek to pass on.
Engaging in long-term planning
For many founders and owner-managers
there’s scarcely time enough in the day to
look after their own short-term needs, much
less the long-term needs of their heirs. Most
will start planning for succession far too
late in the game or not at all. But what if a
founder suddenly comes face-to-face with
a health shock? The family is then thrown
into a succession crisis with no long-term
planning to guide them. Research shows
that only 22 percent of Chinese founders
have succession plans in place. Without a
plan, next gens lack the guidance they need
to manage a successful transition. Founders
who have not developed a plan for the future
often look amateurish and unprofessional in
the eyes of their next gens. Disillusioned by
the confusing signals coming from above,
heirs may pursue other career options
available and often commit to alternatives
outside the family business, leaving no successors
to take over the firm.
If founders respond to these five simple
challenges of succession, the likelihood will
be greatly increased that their families and
firms will run smoothly for generations to
come. By building a solid foundation upon
which their firms will prosper and grow, they
will bring longevity within reach.
Morten Bennedsen is the André and
Rosalie Hoffmann Chaired Professor of
Family Enterprise at INSEAD and Academic
Director of the Wendel International
Centre for Family Enterprise.
He is also a contributing faculty member
to the INSEAD Corporate Governance
Initiative and is co-author of the book The
Family Business Map: Assets and Roadblocks
in Long-Term Planning.
Brian Henry is an INSEAD Research
Fellow.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
EXECUTIVE KNOWLEDGE SERIES
11
Wealth management: Why
you should be your own CEO
Wall Street
veteran
Charlotte
B e y e r
knows investing
can be an intimidating
experience. At Wharton,
she created the first private
wealth management curriculum
in the country and
dedicated part of her career
to helping demystify wealth
management for all. She spoke
with Knowledge@Wharton
recently to talk about the newest
edition of her book, Wealth
Management Unwrapped,
which offers advice on good
investment practices. Her goal
is for everyone to take charge
of their wealth, no matter how
lavish or modest, to become
the “CEO of my wealth.”
The following is an edited
transcript of the conversation.
Knowledge@Wharton: We
last spoke about Wealth Management
Unwrapped in 2014.
You have released an updated
version of your book for 2017.
How is wealth management today
different than it was three
years ago?
Charlotte Beyer: It’s very
different on at least two or
three fronts. First, we’re now
seeing an increasingly active
investor who is much
more knowledgeable about
what they want and what
they fear. Second, the advisor
community now recognizes
wealth management is really
about the individual and not
just the investments. On the
third front, there’s the whole
issue of fiduciary, and that’s
become the word that everybody
says. … It really means
trust. Those three areas of
change, just in three years,
are staggering to me.
Knowledge@Wharton:
We keep hearing a lot these
days about the emergence of
wealth tech or the digitization
of wealth management as a
specialized area of fintech.
Based on your more than 40
years of experience on Wall
Street and then with the Institute
for Private Investors,
how do you think digitization
has impacted investors and
advisors?
Beyer: Enormously. The term
that is often used in my industry
of wealth management is
robo-advisers. We see the big
firms in the advisor world offering
automatic investment
allocation and so on, but it’s
much bigger than that. That’s
going to happen in all of the
registered investment advisory
firms, and it’s going to
happen with the big firms.
But what’s more meaningful
to me is to see the increased
use of artificial intelligence,
machine learning, and even
going beyond that where an
individual can find out what
they need to be looking at
almost automatically.
“The adviser community
now recognizes wealth management
is really about the
individual and not just the
investments.”
There would be prompts
and so on. Just like the internet
of things, you walk down
the street and your phone
lights up and says, “Oh, you
were looking for this, and it’s
right in this store, and it’s on
sale.” I see the same thing
happening in wealth management.
It’s going to happen
much sooner than we think,
and it’s going to be driven by
the enormous interest by millennials
in a more meaningful
way to use their money.
Knowledge@Wharton:
Which robo-advisor should
high-net-worth investors and
advisors be paying attention
to? Also, do you believe that
robo-advisors will be as disruptive
as Google and Facebook
have been to the media
and advertising industries?
Or will they be absorbed and
acquired by traditional wealth
management companies?
Beyer: I wish I knew the definitive
answer to that. I think
it could be the latter, but I believe
that the spirit of innovation
will mean that it’s going to
be incredibly disruptive. The
old-line firms may acquire a
Betterment or a Wealthfront.
They have acquired some of
the smaller ones, but there
will be a new innovator or
a new idea coming up, and
if the culture in the old-line
firm doesn’t change and really
know how to use it and keep
advancing it, then the value
won’t be realized.
Just like when I pay my bills,
I wouldn’t think of writing a
check. I do it online. Everybody
does. I think that’s the basis
for my feeling that the roboadvisors,
in the larger definition,
are not only disruptive,
but they are here to stay and
will be continually enhanced.
Knowledge@Wharton: The
earlier edition of your book
had a lot of useful advice on
how to evaluate and select human
advisors. Do you have any
advice on how investors should
evaluate robo-advisors?
Beyer: I do. In the early days
of hedge funds, a hedge fund
manager would say, “Well, we
have this great black box, and
you can’t see inside it because
you wouldn’t understand it.
But look at our record.” I’m
afraid that in the robo-world,
investors can be similarly
fooled if they’re not careful. In
my book, I have a list of questions
to ask: Where are your
algorithms coming from? What
are your sources for the machine
learning or the AI you’re
using to tell me what I should
be doing? When an automatic
rebalancing takes place, what
if it’s wrong? Because we all
know that predicting markets
is not a science. This will be
an interesting evolution to
see when the next market dip
comes, what happens if your
robo was a little bit wrong.
Knowledge@Wharton: What
advantages do robo-advisors
have over human advisors and
vice versa? As there seems to
be a shift from active to passive
investment strategies, who do
you think will perform better in
this environment?
Beyer: The active versus passive
debate is the overlay on all
of it, as you so rightly point out.
For most investors, it makes
much better sense to have
some combination of passive.
It’s ETFs, and it’s index,
and I’m sure there will be yet
another product that will take
it even further. In my mind,
the advantages of the robo
are the same advantages of
technology in any area. I can
turn the air conditioner on in
my home when I’m 50 miles
from home. That’s an advantage.
It’s the same thing with
the robo. I can alter my investment
goals as life changes for
me. In the robo-world, that
will be known and anticipated
and asked about. In the world
of humans, humans are busy
doing other things. They may
forget to ask me something that
the robos will.
Knowledge@Wharton: One
advantage that the digital
wealth management platforms
offer is their appeal to
millennials. My impression
is that advisors often focused
on baby boomers, who are
either retired or close to retirement,
because they have more
money than millennials. How
should older advisors engage
with tech-savvy millennials?
How can registered investment
advisers (RIAs) become better
informed about technology
and innovation?
Beyer: I’m not going to be
very optimistic on that one.
As a baby boomer myself and
a technophile, it’s not easy to
learn new tricks. The millennials
do it intuitively. They’ve
grown up with this.
The other major challenge
is the baby boomer RIA is
much more comfortable with
the norms and the culture, the
language, the method of communication
of their cohort, so
to speak. Millennials, I believe,
want something different. They
always want to do something
different from their parents,
right? But it’s even more pronounced
today because they
see the efficiency of different
ways of communicating. You
wouldn’t ever dare send an
email to a millennial. They
don’t read their emails. You
wouldn’t dare have a threehour
meeting with them. It’s
too long.
“Many children who’ve
grown up with … substantial
wealth haven’t learned the joy
of struggle.”
The millennials will be the
p. 12
The adviser
community
now recognizes
wealth
management
is really
about the
individual
and not just the
investments

12
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
EXECUTIVE KNOWLEDGE SERIES
...Why you should be your own CEO
driving force, and the baby boomer
advisor will do well to hire enough
millennials in their own firm so that
it becomes a diverse group, not the
gray-hair speaking. The millennials
are the children of current clients.
They’re the grandchildren of current
clients. Ignore them at your peril.
Knowledge@Wharton: One of the
biggest challenges that millennials
face is learning about managing
wealth, especially if they happen to
be born in well-off families. One of
your chapters deals with whether
being born into wealth is a blessing
or a curse, and what parents should
do about it.
Beyer: It can be both. One of the
pieces in that chapter talks about
how it’s mighty hard for the acorn
to grow in the shadow of the mighty
oak. It’s a Hungarian proverb. In my
experience, many children who’ve
grown up with enormous wealth or
substantial wealth operated somewhat
at a disadvantage because they
haven’t learned the joy of struggle,
the joy of reaching beyond your
grasp. The parents who allow that
self-sufficiency and working at a job
— not just going on a philanthropy
vacation, but really working and
struggling to accomplish something
— those children and those parents
see the incredible rewards later on.
In terms of learning about money
and learning about wealth management,
the overarching trend is
millennials want money to have
meaning. As (investment consultant)
Charley Ellis so beautifully put
it, “The way you spend your money
is the ultimate manifestation of your
most deeply held values.” Millennials
get that much more intuitively.
They’re not as materialistic or commercially
thrown off and lured by all
the things. They want meaning, and
they want purpose. It’s why impact
investing is on such an enormous
tear right now. It’s not the false siren
of doing good by your investing. It’s a
much more disciplined look at how
can my investments more closely
align with what I value?
Knowledge@Wharton: I’ve heard
it described as the two-pocket
mentality versus the one-pocket
mentality, which used to be that one
pocket was for your business and the
other for philanthropy. Increasingly,
people are starting to realize that it’s
all the same pocket.
Beyer: It’s equivalent to that double
bottom line concept people talk
about in business. You may be
making a fortune, and your bottom
line might look fantastic, but if you
haven’t focused on the other aspects
of business — like the motivation
and engagement of your employees,
the motivation and engagement
loyalty of your customers — it’s a
flash in the pan. It’s not going to last.
Knowledge@Wharton: What advice
would you offer to young women
about how they should manage
money, especially at a time in life
when they may not have a lot to
invest?
Beyer: There are lots of apps out
there and firms that are happy to
help them, and I think some of them
are doing a very good job of combining
education with investing. But
I’ve heard it said often that the best
way that a man becomes a feminist
is by having a daughter. The moment
that daughter begins to grow up, and
the dad sees the good and the bad
of what’s going on out there in our
culture, in our media, he becomes a
feminist, a male champion.
“The overarching trend is millennials
want money to have meaning.”
Women are increasingly feeling
their own power, but culturally it’s
going to take time for that courage
and that confidence to be full
throttle. I was very blessed, and I’m
very grateful that I learned that early
on in my career, but not every young
woman does. I have young women
I mentor who still encounter horrendous
issues in the workplace. But
learning about wealth management
is something that’s probably going to
happen sooner than the incredible
cultural change we might need.
Knowledge@Wharton: Are there
any tools you recommend to help
young women to manage their
wealth better?
Beyer: I don’t like to mention names
because I haven’t done the due diligence,
but there are companies out
there that you can put in $5 a week
and buy stocks. There are companies
that not only are saying, “Come
and be a client,” but they’re saying,
“We’re going to teach you.” They’re
pretty easy to find on Google, and
you can take a look at them. There
are plenty of tools. The question is
whether a young woman takes the
time to do it. My book is trying to encourage
people to realize they don’t
have to become a technical expert.
They merely need to say, “I am the
CEO of my wealth, even if it’s modest,
and I need to step up and make
sure I know who I’m hiring.” Common
sense is very important here.
Knowledge@Wharton: You have
a new chapter in your book about
women and their wallets. Do you
think women investors face different
challenges in managing wealth
than men do?
Beyer: It’s more of a scientific challenge.
Women tend to live longer
than our spouses, and it doesn’t
show any signs of changing. But the
other huge change is that, in many
cases, women represent the primary
breadwinner in the family, and there
are certainly more two-income
households. In a recent study by
Columbia University and Barnard
College that Andrea Turner Moffitt
talks about in her book, Harness
the Power of the Purse, almost twothirds
of women consider themselves
the CFO of their own family.
The piece in the “Women With
Wallets” chapter that I emphasize
is that women want to feel comfortable
with whom they’re working
with, so I give a list of questions and
concerns. A firm they’re interviewing
should distinguish between the
different types of investing and goals
that different women might have. A
newly widowed woman shouldn’t
be stereotyped right in there with a
young career woman who’s single.
Nor should an advisor be so nosy as
to ask, “Do you plan to get married
and have children?”
Knowledge@Wharton: How do you
keep up with all the innovation that
is going on in wealth management?
Beyer: I’m an avid reader, and I have
all my social media alerts coming
to me, besides just the regular daily
news. Then there are a lot of very
smart people who blog and write
and are looking over the horizon at
the future.
“It’s not about the money; it’s about
what we do in our life to bring that joy.”
The other way I stay current is I
love to stay involved with younger
women. The mission of my foundation,
Principle Quest, is to support
women in innovative mentoring and
educational formats. By staying in
touch with these younger women in
their 20s and 30s, I am always struck
by how much I have to learn, how they
view the world, how they look at their
wealth, how they look at relationships.
That’s an enormous boon for me, on
a personal level, to stay in touch with
these women.
I just had a big celebration last
weekend where 54 of the women
who’d been on a Principle Quest
retreat came to a big party, and they
brought their spouses or boyfriends
and partners. We danced. We had fun.
But at the core of that is young and old
need to learn from each other. In our
society, we’ve become so polarized.
The diversity of age and ethnicity is
so vital to a common understanding
and progress on wealth management,
or in any area.
I am the CEO
of my wealth,
even if it’s
modest,
and I need
to step up
and make
sure I know
who I’m hiring
Knowledge@Wharton: There’s so
much innovation and disruption in
wealth management. What do you
think will change, and what will remain
the same?
Beyer: I believe the balance of
power that has been so skewed
toward the provider of the product
or advice will tip, and maybe tip too
far the other way. We all know CEOs
who are too autocratic, don’t listen,
don’t hire the right people. If that
happens, where the investor gains
too much power and is not selfaware
enough to realize the need
to have balance, that would be one
big change. But I think it’s going to
be technology and its incredible gift
to having the human brain and the
way we interact much stronger in
the areas that we need it to be strong
in — whether it’s planning, setting
goals, specifying outcomes. In the
end, wealth is really something that
should bring joy. It’s not about the
money. It’s about what we do in our
life to bring that joy.
This article is republished courtesy
of Knowledge@Wharton. Copyright
Wharton School of the University of
Pennsylvania.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
FINANCE & INVESTMENT
13
Insurers’ investment yield below
10% on inefficient asset allocation
German Cosulate welcomes Business a.m.: Topmost diplomat at the Consulate of the Federal Republic of Germany in Lagos recently warmly
welcomed global focused Nigerian financial newspaper, Business a.m., to the world’s media market, when consul general, Ingo Herbert,
received a team from Businessnewscorp Limited, publishers of Business a.m. Picture shows ingo Herbert (second right) in a handshake
with Phillip Isakpa, executive editor; flanked by Steve Omanufeme, managing editor (left) and Iheukwumere Amadi, COO (right).
S&P sees uncertain outlook for
global Sukuk market in 2018
...as Nigeria relishes success in first attempt
Steve Omanufeme
THE FAVOURABLE outcome
of Nigeria’s tapping the Sukuk
market for the first time
in 2017 may well position the country
seeing it as a veritable financing option
going forward. However, global rating
and research firm, Standard & Poor’s
says its outlook for the market remains
uncertain in 2018, adding that issuance
volumes may moderate to between $70
billion and $80 billion from the over $97
billion recorded in 2017.
“While we believe the financing needs
of some Islamic finance core countries
will remain high, we expect that total
issuance will likely decline to $70 billion-$80
billion in 2018.”
The S&P analysts outlined three main
reasons for their expectations including a
likely tightening in global liquidity, mount-
ing geopolitical risks and slow progress on
the standardization of Islamic products.
“The outlook for sukuk in 2018 looks
uncertain. While we still foresee significant
financing needs for core Islamic finance
countries, tighter global liquidity conditions,
mounting geopolitical risks, and slow
progress on the standardization of Islamic
finance products will continue to hold the
market back from its full potential,” S&P
analysts said in their January 2018 report.
While noting that global liquidity
remained abundant in 2017, they expect
some tightening in 2018, adding that they
see the federal funds rate increasing by
75 basis points in the course of the year.
“Overall, we think that the cost of
funding for issuers will rise and that
liquidity from developed markets channeled
to the sukuk market will reduce or
become more expensive,” they noted.
The analysts also believe that geopolitical
risk considerations are weighing
heavier on the minds of some investors,
citing sanctions imposed on Qatar in
early June 2017, by a group of Arab states,
which resulted in funding outflows from
the country’s banking system that is estimated
at $21 billion as of Sept. 30, 2017.
Similarly, they see investors look unfavorably
upon recent shifts in Saudi Arabia’s
power structure and societal norms, which
could increase the risk of policy mistakes.
However, a major concern is the
slow pace of standardization of Islamic
finance products.
“The standardization agenda is progressing
slowly: Standard-setting bodies
have expended a significant amount of
energy in advancing the standardization
agenda, but we are not there yet.
“The Accounting and Auditing Organization
for the Islamic Financial Institutions
(AAOIFI) and the Islamic Financial Ser-
Page 14
Business a.m
DESPITE THE BULLISH returns
on government securities,
which impacted other
money market investments
positively, Nigeria’s insurance
industry’s estimated investment
yield is still at single
digit of about 8 percent, according
to Agusto & Co.
The foremost credit rating
and research firm says the
abysmal poor returns in the
industry are as a result of inefficient
asset allocation and weak
balance sheet management.
In a November economic
newsletter released recently,
its analysts noted that the
woes in the industry are
equally compounded by poor
regulatory enforcement, weak
corporate governance and risk
management framework, as
well as general inefficiencies.
“The net effect of the financial
condition of the industry is
its poor return on Equity (ROE)
of about 8.4 percent. With inflation
averaging 15 percent and
one-year Treasury Bill rates
at about 18 percent, investors
are losing in real returns and
can earn higher returns on alternative
risk-free assets,” they
highlighted.
This is despite the insurance
industry controlling an
investment portfolio of about
N723 billion as at FYE2016,
with about 60 percent of total
investments in money market
placements (bank placements
and government securities).
Specifically, they noted
that 16 percent of the industry’s
investments are in
real estates that continue to
record poor rental yields on
account of poor location,
poor state of the infrastructure
and significant exposure
to undeveloped land.
“Unlocking the income
potentials of these real estate
investments alone could significantly
impact the bottom
line of the Nigerian Insurance
Industry in the near term,”
they opined.
To this end Agusto & Co
recommended industry recapitalisation
through consolidation
and foreign direct
investments (FDIs).
“The full implementation
of the risk based capital framework,
which simply measures
capital adequacy in view of
underwriting risks, should
spur recapitalization in the
near term,” they argued, adding
that it could be positive for
the industry by strengthening
underwriting capacity, while
fringe players may capitulate.
The industry has undergone
two major rounds of capitalisation
in the last 15 years
leading to a drop in number of
operators to 49 from 103.
Currently, the minimum
capital requirement for life,
non-life, composite and reinsurers
are N2 billion, ₦3
billion, N5 billion and ₦10
billion respectively.
At this level, it is clear that
capitalization remains inadequate
and a significant amount
of risks are insured overseas as
the capital base of most insurers
cannot carry the risks of
insuring assets in key sectors
such as oil & gas and aviation.
This has led to the consortia
of insurance companies pooling
funds together to underwrite
significantly large risks.
“In our view, there could
be major consolidations
within the Nigerian Insurance
Industry, driven by
recapitalisation which would
separate the wheat from the
chaff,” they stressed.
Tax seen major constraint on SMEs growth in Nigeria
Business a.m.
NIGERIA’S current
rules for
taxation, which
subject profitmaking
companies to multiple
taxations in their first
three years of commencement,
are increasing the risk
of failures of small and medium
enterprises, according
to Ani Chizoba, manager
tax & regulatory services at
Deloitte & Touche
In an article “Tax policy
on SMEs in Nigeria – How
fair?” published in Deloitte’s
newsletter, December 4,
2017, Ani argued that the exemption
of companies with
at least 25 percent imported
equity from minimum tax is
discriminatory to Nigerian
owned businesses.
“More notably, it discourages
investment and
increases the risk of failure
for companies in periods of
little or no profitability in the
case of SMEs. In the same
vein, a good number of SMEs
are not able to adequately
benefit from tax incentives
due to the small size of their
operations,” she stated.
Ani, maintained that
small and medium enterprises
(SMEs) are the
bedrock of the Nigerian
economy and there is need
to create a favourable business
and regulatory environment
for them to thrive.
“In order for SMEs to
thrive, there is need to create
a favourable business
and regulatory environment.
Most large companies
have their roots in SMEs. In
other words, the future large
corporations in developing
countries like Nigeria are
present day SMEs that need
to be nurtured.”
She noted that the absence
of harmonized tax regime
increases the strain on
cash flow and other limited
resources of SMEs when
compared to large corporations.
“In Nigeria, SMEs are
subjected to multiple taxes
by the different tiers of
government, each with its
own rigorous process and
significant compliance cost.
“Considering the size of
their operations, the absence
of harmonized tax
regime increases the strain
on cash flow and other limited
resources of SMEs when
compared to large corporations,”
she pointed out,
adding that SMEs are also
regulated by several government
agencies; thereby leading
to significant regulatory
compliance cost, which in
most cases are duplicated.
She however highlighted
that though, there are
numerous incentives and
support facilities available
to SMEs in Nigeria (e.g.
the Federal Government
Special Intervention Fund
for MSMEs, Bank of Industry
and the Central Bank
of Nigeria’s Intervention
Fund, etc.), access by SMEs
to such incentives and facilities
seems to have been
hampered by bottlenecks.
She also maintain that
lack of awareness of these
government funds and ab-
Page 14

14
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
FINANCE & INVESTMENT
Wealth
S&P sees
uncertain
outlook..
Page 13
vice Board (IFSB) issued several new
standards in 2017 aimed ultimately
at smoothing the process of sukuk
issuance. For example, the former
published a standard for central
sharia boards and the latter published
one on disclosure requirements
for sukuk,” they said.
Specifically, they feel market
participants still think that standardization
is unrealistic and that the
market should rather aim for harmonization–defined
as having standards
that may differ from one jurisdiction
to another, leaving some flexibility for
implementation.
Sukuk issuance in 2017 increased
by 45.3 percent, reaching $97.9
billion, up from $67.4 billion in
2016, underpinned primarily by the
jumbo issuances of some Gulf Cooperation
Council (GCC) countries.
Driving this performance, S&P
Global Ratings believes, were good
liquidity conditions in the GCC and,
more generally, globally, as well
as activity by some countries with
the goal of further developing their
Islamic finance industries.
Jumbo local and foreign currency
issuance by some GCC countries
drove the sukuk market higher in
2017. Of specific note, the $9 billion
sukuk issued by Saudi Arabia was
the largest issued globally to date.
The market also attract some
Islamic finance noncore countries,
with Hong Kong tapping the market
for the third time and the first issuance
of a Sukuk in Nigeria.
The N100 billion Nigeria sukuk
bond with a 7-year tenor was oversubscribed,
attracting a whopping
N105.88 billion.
“We expect this trend to continue
as Morocco and Tunisia plan to tap
the market in 2018 and the U.K.
announced its intention to go to
the market again in 2019 upon the
maturity of the Sukuk it issued in
2014,” S&P noted.
Tax seen major
constraint on SMEs...
Page 13
sence of supportive environment,
as well as poor access to finance
have reduced the competitiveness
of SMEs in Nigeria.
She recommends that tax policies
should be designed in such a
way that they do not only directly
affect SMEs but also indirectly
push them to grow.
Giving an instance, she said
provision of finance for SMEs
could be encouraged by granting
exemptions from business tax for
financial institutions that provide
guarantee for loans to SMEs.
“Policies can also be implemented
to ensure that businesses
in the informal sector regularize
their tax status to have access
to finances and tax incentives,”
she stressed, adding that this
way, business owners are able to
see the gains of moving from the
informal sector to formal sector.
This would also translate to a
much wider pool of taxpayers for
the government.
Nigerian market outlook: Analysts upbeat,
entertain no fears of election risk
Steve Omanufemi
THERE APPEARS a no
fears outlook for the
Nigerian market and
economy despite rising
geopolitical tensions and the
coming general election, according
to a cross section of market
and economic analysts who spoke
to businessamlive.com.
The analysts say growth in the
economy is anticipated to strengthen
as commodity prices firm up
and domestic demand gradually
gains ground, adding that the usual
downside risk of the 2019 elections
would not count for much.
According to United Capital
analysts, the sustained policy
stimulus by the European Central
Bank (ECB) and the Bank of Japan
(BOJ are seen positive for global
financial markets, while a stable
outlook for oil prices suggests
that the appetite for assets in oilexporting
economies like Nigeria
is set for another bullish year.
“Our outlook on the currency
market, the flow of funds and
movement of external reserves is
medium-term stable amid expected
stability in the oil market and
supportive policy environment.
The risk to this outlook includes
outsized exposure to Foreign
Portfolio Investments (FPIs) and
uncertainties associated with the
build-up to the 2019 election,”
the United Capital analysts noted.
The worry on the election risk to
the economy is equally expressed
by Bisi Oni, executive director and
chief operating officer at Fund-
Quest Financial Services Limited.
“Preparations for the coming
elections will begin in earnest in 2018
and may stand in the way of the CBN
in managing price movements and
the exchange rate,” he said.
He noted that the CBN has been
proactive since the past eleven
months with a cocktail of policies
that has brought to bear on
the economy, which has seen the
reflation of the forex market and
the return of foreign investors to
the capital market.
On the 2019 elections, Oni said
the hawks are already gathering.
“My fears are that election
spending may decide how far the
CBN can go defending the naira.
In a year to an election, attention
always shifts from the economy.
In real terms we just have only six
months to put value into the economy
before politicking starts,” he
pointed out.
However, analysts from other
investment houses who spoke to
businessamlive and who want to
be anonymous as they have no authority
to speak on the record for
their organisations, have played
down the impact of the elections.
They said international investors
seem to be wiser now following
the panic which heralded the
2015 elections in Nigeria and the
Real estate investment market slows
on ambiguous taxes, mispricing
Edidi Abdulrafiu
THE NIGERIAN
real estate investment
trust
market is bogged
down by a lack of assurance
on ambiguous ‘tax
pass through’ laws, that have
not provided comfort to
institutional investors, both
local and foreign, as well
as a traditionally opaque
market, which has resulted
in mispricing and undermining
confidence in real
estate assets.
These were the views of
real estate analysts at a recent
West African Property
Investment Summit in Lagos,
who noted that the Nigeria’s
real estate investment
trust market (REIT) is one of
the most underinvested and
marginalised markets of the
Nigerian stock market.
“Despite its existence for
more than ten years, the Nigerian
REITs market is underdeveloped
with only three established
and with a combined
market capitalisation of $151
million, or 0.36% of the local
stock market,” they noted.
They stated that the low
investment in the market
is a result of a lack of assurance
on ambiguous ‘tax
pass through’ laws, that
have not provided comfort
to institutional investors,
both local and foreign, resulting
in deficit of A-grade
real estate compared to
similar urbanising environments
combined with
an inherently volatile and
non-diversified economy
overly reliant on crude oil.
“These factors have created
cycles of boom and bust
which have negatively impacted
the real estate sector
and crucially investor confidence,”
adding that the REITs
market has failed to develop to
its potential, which they hope
new reforms would address.
The analysts, Adeniyi
Adeleye, head of real estate
elections in Kenya and Ghana,
which at the end did not turn out
as expected.
“Elections come and go but the
market remains,” one said, adding
that most portfolio investors
would make stakes on the market
with the hope of reaping big when
the elections are done with.
They are upbeat that the implementation
of a decent list of
pro-market policy actions with
the fact that the chill of recession
has given way to spring and leading
indicators turning positive,
may sustain investors’ sentiments
despite the coming elections.
finance for West Africa at
StanbicIBTC Capital and
Thomas Mundy global commercial
real estate provider,
in a collaborative white paper
on the market, were bullish
on a rebound in the market in
2018 provided that regulatory
improvements take place
coupled with the sustainable
creation of assets to reduce
the supply gap in Nigeria.
Adeleye and Mundy are
optimistic that these changes
will lead to a vibrant RE-
ITs market, which will transform
the real estate sector
and the larger economy.
They predict that an
evolving and reformed RE-
ITs market will strengthen
and deepen capital markets
and that it would also
assist in providing greater
transparency and data to a
traditionally opaque market,
which has resulted
in mispricing and undermining
confidence in real
estate assets.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
FINANCE & INVESTMENT
15
Governance
Is FSS 2020
a missed
target?
With about three years to the Financial System
Strategy 2020 set by the Central Bank
of Nigeria, DONATUS ELEKO wonders if the
target can be met?
With about three years
to the Financial System
Strategy 2020 set by the
Central Bank of Nigeria,
Donatus Eleko wonders if the target
can be met?
The Financial System Strategy
2020 (FSS 2020) was conceptualised
in 2006 by the Central Bank of
Nigeria (CBN), in collaboration with
other key financial sector regulators
to fast track and enhance the growth
and development of Nigeria’s financial
system as an integral part of the
national vision 2020.
The strategic vision of FSS2020
is “to be the safest and most diversified
financial system among
emerging markets supporting the
real economy by the year 2020.”
Also, its strategic themes are
to strengthen and deepen the
domestic markets, enhance integration
with the external financial
markets, and promote sustainable
economic development.
However, as the target year
draws closer, analysts are questioning
if the regulator can meet
the set target or there might be an
extension of the target year.
Globally, the relationship between
the financial system and
development remains very critical
for any economy to realise its potential.
Financial system development
depends largely on the flow
of funds from the banking system.
Patrick Honohan of the Trinity
College, Dublin, in a paper titled:
“FSS 2020: Finance and Growth –
Can the Engine Work for Nigeria?”
had pointed out that the financial
sector helps growth and lowers
poverty.
He stressed that Nigeria (as
other African financial systems)
has much to gain from energetic
financial policy development combining
modernism.
Financial development is clearly
an important cause of growth
and financial sector development
can be a powerful agent for growth
and transformation.
Based on the recognition of
the linkage between financial
deepening/growth and economic
developments, the vision of the
FSS 2020 is to make the Nigerian
financial sector the fastest growing
financial system among the emerging
economies while the mission
is to drive rapid and sustainable
economic growth primarily in
Nigeria and Africa.
From the onset, the FSS 2020,
which forms an integral part of the
national vision was designed and
developed with strategic objectives
that will enable the Nigerian
economy become one of the world
safest and fastest growing economies
by the year 2020.
The CBN has constantly evolved
appropriate regulations to achieve
its objective. Some of these include
policies such as the three-tiered
Know Your Customer, gradual
phasing out of the commission on
turnover (COT), cashless Nigeria,
which kicked off yesterday, revised
bank charges, creation of a secondary
market for the mortgage sector
through the Mortgage Refinancing
Company amongst others.
By the end of 2012, the FSS 2020
was reviewed and refined to strategically
make use of the various
structures within the financial sector
to achieve its goals. Its focus was
redirected at the pension, mortgage,
and insurance industries as well as
medium, small and micro enterprises
(MSME), the financial market
and the entire populace.
CBN’s Position
According to Godwin Emefiele,
governor of the CBN, the regulator
would not pretend that it not going
to be a daunting challenge to be
able to move from the percent level
of financial inclusion the country
is presently, to 80 per cent by 2020.
“I am happy that we have an
array of various agencies of government
in the regulatory and also the
executive arm of government coming
and working together towards
seeing to it that we improve the level
of financial inclusion saying how do
we ensure that we move from what I
describe as if today five out of 10 are
those that have access to financial
services, how do we ensure that by
next three years, eight out of 10 are
able to have access.
“I am sure at the end of this session
we would provide roadmap
that will help us achieve that. It is
daunting assignment but I think
what is important is even if you
achieve 80 percent financial inclusion,
how do we as under auspices
of FSS2020, see to it that all these
agencies in the financial and regulatory
sector contribute towards
the growth and development of
our country,” he added.
As part of efforts to ensure that
the country meets the FSS 2020,
Emefiele also revealed that the bill
for the establishment of financial
Godwin Emefiele, Governor, Central Bank of Nigeria
consumer ombudsman would
be re-submitted to the National
Assembly.
The bill, if passed into law, is
expected to address the challenges
of protection of consumers of financial
services as well protect the
integrity of the financial system.
Emefiele, also stressed the need
for increased collaboration among
government agencies and other institutions
involved in the FSS 2020.
This, he said was necessary to
move the country from about 50
per cent success in financial inclusion
presently, to 80 per cent in the
next three years.
“FSS 2020 will be resubmitting
to the National Assembly a Bill for
establishment of specific financial
consumer ombudsman to address
the challenges of protection of
consumers of financial services
as well as the protection of the
integrity of the financial system,”
he explained.
Continuing, Emefiele pointed
out that Nigeria has made significant
progress since 2007 in actively
reforming its financial system.
He noted that despite the global
economic meltdown in 2008, the
FSS 2020 Transformation Programs
and initiatives provided the
platform for fundamental changes
in the country’s economic and
financial landscape.
Central Bank
Upbeat statement
STRATEGIC VISION of
FSS2020 is “to be the safest
and most diversified financial
system among emerging
markets supporting the real
economy by the year 2020.
He explained: “Under financial
market, Pension, MSME,
Insurance and Mortgage sectors,
FSS2020 has introduced some
far-reaching initiatives which have
helped to deepen the economy.
“For example, our Payment System
has tremendously improved.
There is now a Central Bank of
Nigeria Immediate Transfer Service
(CBSITS) and an interbank
platform for effecting payment
transactions, Electronic Cheque
Clearing (ECC) system allowing
for a same day cheques-clearing
process, Nigeria Electronic Funds
Transfer (NEFT) as an alternative
means for interbank funds transfer
among others including the Real
time gross settlement system.
“In the Mortgage sector, one
of the initiatives of FSS2020 is the
establishment of Mortgage Refinancing
Company (NMRC), an initiative
which the Federal Ministry
of Finance embraced and drives.”
NMRC is a public private partnership
arrangement between
the federal government and the
private sector with substantial
take-off contribution from CBN
to bridge the funding cost of residential
mortgages and promote
the availability as well as the
affordability of good housing to
Nigerians by increased liquidity
in the mortgage market through
commercial banks, primary mortgage
banks, insurance companies,
private equity investors and international
financial institutions.
In the medium, small and micro
enterprises (MSME) sector of FSS2020,
he pointed out that the central bank
midwifed the establishment of the
National Collateral Registry (NCR).
Furthermore, Emefiele disclosed
that the FSS 2020 Insurance Sector
was collaborating with NAICOM
to promote insurance penetration
in Nigeria with the introduction of
micro insurance program, Takaful,
increase access to insurance and
diversifying of products into financial
services for long term financing.
According to him, a number of
bills had been initiated by FSS2020
to strengthen and deepen the
financial system including the
financial ombudsman bill for consumer
empowerment.
On his part, the outgoing CBN
Deputy Governor, Corporate Services,
Alhaji Suleiman Barau, who
has been the coordinator of the
FSS 2020, in his assessment, said
the FSS 2020 members have done
well, even as he ruled out a possible
extension.
“Strategy development or reform
document development is
not a problem, it is keeping it alive.
For us to be alive after 10 years is
the first measure of assessment. In
the context of things we have done
in specifics, we are not where we
want to be and that is the essence
of this review so that we can see
what we can do in three years that
we have not done in the last 10
years. I think we have done moderately
well,” he added.
Notwithstanding the milestone,
Barau pointed out that
there are some challenges still
militating against the achievements
of FSS2020 objectives.
These includes but not limited
to the following: funding and
logistics;technical challenges;
human capital development, especially
the inability to attract talent
from abroad to Nigeria; delays in
the passage of the identified financial
sector bills by the national assembly;
policy inconsistency; and
lack of continuity.
Speaking on what should be
done to boost the implementation
of the initiative, Barau stressed the
need to initiate policies that would
ease Doing Business in Nigeria
and encourage investment within
the country.
“There is need to ensure that
there is enabling infrastructure
and guarantee maximum peace
and security in the country. Also,
the development plan of government
must have bearing with the
needs and realities of the citizenry
especially issues of unemployment,
microeconomic stability and
capacity building in all sectors of
the economy.”
Well, beyond rhetorics, those
involved in the process should
speed up their acts while carrying
the public along on timelines and
achievements.

16
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
THE MONDAY INTERVIEW
Q&A
INSIGHTS FROM NIGERIAN AND INTERNATIONAL BUSINESS & CORPORATE LEADERS
‘We should create more indigenous oil, gas
companies for jobs, economic expansion’
BANK-ANTHONY OKOROAFOR, the chief executive officer of Vherbarge International Limited and President of Petroleum and Technology
Association of Nigeria (PETAN), in this interview with ANDY NSSIEN and AJOSE SEHINDEMI bares his mind on a number of burning
issues including how government policies can create over a million jobs in the oil and gas sector and what to do to get Nigeria’s
refinaries back to full capacity. He also speaks on opportunities for West African nations at this year’s West African International
Petroleum and Exhibition Conference (WAIPEC 2018) holding on February 7 & 8 in Lagos, Nigeria.
What is WAIPEC about, can you tell us more about it?
Yes, WAIPEC (West African International Petroleum
and Exhibition Conference) was formed to ensure
that all participants in the Nigerian oil & gas community
can continue to share views, develop partnership
and attract investment. So, it is basically focused on
high-level strategic sessions and discussions on game changing
solutions for the oil & gas industry. The strategy is to deliver better
programme every year and add value to the industry. It is an integral
platform combining plenary conference programmes with
a series of solutions and an international exhibition to ensure that
all participants in the Nigerian oil and gas community can continue
to share views, develop partnerships and attract investments.
I guess it is an annual event?
Yes, and it was held in Lagos last year.
Has it gone outside Nigeria?
It has not gone outside Nigeria.
Is it because you are operating from Nigeria?
No! We packaged WAIPEC as a regional conference to target Africa.
And most of the speakers you are going to see will cover the key
oil & gas sector, finance and government people from all of Africa.
Concerning the speakers, how were you able to get most of
the industry’s heavyweights to agree to attend the conference
and what do they stand to benefit?
That is a very good question. You know as I said, it is focused on
high-level strategic sections and discussions on game changing
solutions for the oil & gas industry. We have been able to get the
Group General Manager of NAPIMS, he is coming. We have been
able to get one of the COOs of NNPC, he is coming. . We have been
able to get the executive secretary, Nigeria Content Monitoring
Board, Simbi Wabote, she is coming. We have been able to get the
guy in charge of gas for the whole federation, he is coming. And
from the banking sector, the MD of Standard Chartered Bank for
Nigeria and West Africa, he is coming. We have been able to get
many of the key oil & gas top figures in Africa, they are all coming.
Looking at the conference you have been holding over
time, can we know how it has impacted on the nation’s
economy overtime?
You know, the idea is to promote the region’s oil & gas, seek
industry’s best practices, explore new technology and develop
commercial opportunities for business and international investments.
And if you watch, that is the key thing going on right
now. You see the oil price is inching up gradually; many of the
companies are still recovering from the drop in the oil price.
This gives them a lot of opportunities to seek solutions in this
depressed oil market, you understand? Seek solutions, seek best
practices and seek what they can apply to reduce their cost and
still be profitable in this challenging environment.
Can you talk briefly about your own company? Tell us
about yourself?
My name is Bank-Anthony Okoroafor and I run three companies,
CB Geophysical solutions, into seismic acquisition, seismic
processing, seismic interpretation and integrated reservoir
studies. Another company called Vhebarge International Limited
which is into early production facilities, pipeline, flow line
repairs and I have been in the oil and gas industry for 28 years
and still going.
Fuel scarcity is always an issue. Now that it has become a sour
point in Nigeria, how can Nigeria come out of this problem?
One, the government should stay away from refining and leave
the private sector to run it. As long as, the government continues
to run the refineries, problems will abound because government
runs like a social service but when you hand over to the private
sector, what do you think will happen? It will be working. Like
now, most of the refineries are not working to 20 percent capacity.
What do you think government can do to the refineries to get
to full capacity?
There are two things we need to do: one, deregulate and allow
the market forces. Deregulate fully the downstream and allow
the economics of demand and supply to determine the price,
and you discover at the end of the day, prices will come down
and the product will be available. The government has no business
in determining price. As long as refineries are not run by
private people, we are going to have a lot of problems.
What are the oil and gas global policies that Nigeria and
West African countries can tap into for their own benefits?
Like the local content we implemented in Nigeria, the best practices
can be shared. In a forum, people come up with best practice,
like funding. Which creative funding scheme are they using in other
countries? Those things that can be shared in a forum like ours are;
what mechanisms are they using in other countries, what is the best
mechanism for drilling that reduces cost, improves and save drilling
times. What is the best way for operating in the deep offshore?
In a conference, all these can be shared.
Out of these practices in your reports have been adopted by
the government and the private sector?
All recommendations are based on communiqués released after
BANK-ANTHONY
OKOROAFOR
Profile:
CEO Vhelbherg Group
Age: 54
Education:
University of Nigeria
University of Surrey, UK
Married to Uju, with
children
THE only thing
government can
do is to ensure
that the act is
properly enforced,
monitored and
sanctions applied
where necessary
conferences. Many things have been implemented, for example,
gas commercialization, flared down to zero was from a conference
held, local content started at a conference from (PETAN)
Petroleum and Technology Association of Nigeria. So, a lot has
happened, Nigerians owning vessels and rigs and Nigerians are
now handling jobs on land and swamps. So, from our conferences,
people build partnerships and learn and implement. As
practitioners, we see the changes and people are also seeing it.
The Niger Delta is always an issue with one crisis or the other.
How can it be resolved and controlled once and for all?
For us to have genuine peace in the Niger Delta, we have to
be sincere about what we want to do, we must create sustainable
development and empowerment there, it is key. Why
can’t we convert the Niger Delta to modular refinery belt?
Why can’t we have 24hrs power supply in Niger Delta using
the gas there? Why can’t we have the coastal rails or roads
system? When people see genuine development, the change
starts from their hearts and it would be sustainable.
Local content issue with Shell winning the award several
times, why do private companies fail to implement the local
content policy ?
Local content is now a law, so every company must abide with
it, else they face stiff penalties if they fail to do so. Unless there is
no capable Nigerian with capacity around, that is when they can

Q&A
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
THE MONDAY INTERVIEW 17
INSIGHTS FROM NIGERIAN AND INTERNATIONAL BUSINESS & CORPORATE LEADERS
disregard the policy. Whether, it is Shell, Agip or any other company,
we want genuine capacity building and content building.
Do you monitor the implementation of the local content
policy in Nigeria and what’s the penalty for those that
don’t practice it?
If you see anyone not practising the law, let us know, we will
follow it up. People can report and we go to check and it is
not true. As long as there is capability and capacity in the
country then there is a problem, but if there is no capability
and capacity and some body complains, because we don’t
want people to be five ‘per centers’. We want genuine capacity
building, genuine local content.
Looking at other member countries, how can you compare
the extent of implementation of the local content policy
with what obtains in Nigeria.
We do much better than most countries and also when
compared to others. Go to Kenya, the level of awareness is
not much, Ghana has taken our local content Act, Uganda
has copied our local content Act too, so the drive is there. Just
look at America when President Trump said you must buy
made in America, is that not local content act? So it is what
is going on all over the world.
Now that you mention America, is there anything government
can do to encourage the implementation of the local
content policy?
The only thing government can do is to ensure that the act is
properly enforced, monitored and sanctions applied where
necessary.
Even with government policies, it seems to most Nigerian’s
that Nigerian companies have not been able to be at par with
the international oil companies (IOC’s) in the affairs of the
energy and oil sector. What has been the special thing about
IOC’s? How come they are dominant in the oil sector?
You should understand that this business was started by them,
the Shell, the Chevron, they started this business and along the
line many of us worked with the multi-nationals , learnt some of
the few things and came back and started on our own. So, it will
also take some time to build to the extent of leveling up with them.
What can we use to jumpstart it, instead of taking time, say
5,10 years for our local people to meet up with them and develop
the sector in the country. What can be done to quickly
grow the sector?
We can jumpstart it with policy. Government can come now and
say, all FPSO’s must be built in Nigeria. That is policy statement,
“
Local content is
now a law, so every
company must abide
with it, else they face
stiff penalties
“
it will get the Samsung, the Kempels, the biggest ship players in
the world to come and set up here and that can generate more
than a million jobs. That is policy statement, if the policy statement
says now that all the drilling rigs to be used in Nigeria must
be built in Nigeria, all FPSOs, floating, production and storage
vessels must be built in Nigeria, You will start seeing the biggest
shipping companies all over the world setting up here in our
coast and that is where you create a lot of employment opportunities,
quality jobs in Nigeria. So, policy statements can change
everything. That was what Brazil did. Brazil says any FPSOs to
be used in their country must be built in Brazil, they took that
decision 15 years ago and till today, everything is built in Brazil.
What has your association done to influence government
into adopting those positions?
You know we are an advocacy group, we continue talking but at
the end of the day, decisions are made by the government. So,
our duty is to continue to talk, continue to advocate, educate but
we are not the ones to take the decisions.
Government said oil majors should relocate their headquarters
to the areas of their operation. What’s your take on it?
I don’t want to get involved with that because I think we should
first of all create an enabling environment. Once you create an
enabling environment where business will operate freely, you
don’t need to beg anybody to relocate. So, let the government
first create an enabling environment where nobody will be kidnapped,
where the sanctity of life and property is protected,
companies will generally move there, it’s a natural phenomenon.
You don’t create things by force. lt’s just like Foreign Direct
Investment (FDI). If you want people to invest in your country,
you create an enabling environment. The issue of forcing people
to relocate is not the way of doing things. You create an enabling
environment so that businesses will move.
The Liquified Natural Gas sub-sector is still a buyer’s market
as reliance on renewable energy gains tractions . What’s the
outlook for the LNG market?
No. LNG is still there, the market is still there. The only thing we
need to do as a country is to lock in key buyers because people are
setting up LNGs all over the world, so we should try and lock in a lot
of key buyers. You know LNG markets, you can sign contracts for 15
years, the buyers can sign contract for 15 years, 20 years.
How can the local market improve?
We want activities because if there are no projects, there are no
jobs. We want the equipment people to be working, we want to
create employment, A lot of Nigerians to be empowered. If you
watch, after Egina FPSO, the vessel that just arrived, if there is
no other projects, most of the capacities and capabilities already
built will be lying fallow and that would be disastrous. We need
as a country continuously sustainable activities. There have to be
projects, rig count in the country is very low, and we are not drilling
enough. We must keep the people busy and when we keep
people busy, it would affect everybody. If Nigeria is producing
4 million barrels per day, we would generate a lot of income. lf
we have a lot more reserve, our credit rating would be higher. We
need to create a lot of indigenous oil and gas producing companies,
we need to create a lot of oil and gas service companies to
create millions of employment and that is at the heart of PETAN
because we are wasting a lot of opportunities. There are no opportunities
for youths and for a country like Nigeria that has produced
crude oil for 50 years and still imports petrol, does it make
sense? Is it rocket science, no. We need to make changes.
What is the future of PETAN, what do you visualize in 5 to 10
years’ time for the Nigerian oil and gas industry?
I visualize a situation where 50 per cent of the Nigerian production
is going to come from indigenous companies, l visualize a
future where our FPSO would be made and fabricated in the
country, a country where we would never have fuel scarcity, a
country where we would not import petrol or diesel, a country
with 24 hrs power supply, self-sufficiency in energy, a country
where what we make in the oil and gas sector is used to develop
other sectors properly, get the educational system working well,
equip our universities, secondary schools, primary schools,
have excellent centers for research. I want a future that is very
bright for our children where they would have quality education
with quality jobs waiting for them after school.

18
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
COMPANY
19
L-R: Taiwo Akerele, chief of staff to the governor; Godwin Obaseki, governor, Edo State; Geoffrey Onyeama, minister of foreign
affairs; and Yinka Omorogbe, commissioner for justice and attorney general, Edo State and head, Edo State Task Force Against
Human Trafficking, during the governor’s visit to the minister in Abuja
United Capital, Stanbic IBTC take lead
as stockbrokers execute N231.72bn
transactions in January ‘18
Andy Nssien
The top ten stockbrokers
operating
in the Nigerian
stock market
traded a total of
22.592 billion shares valued
at N231.717 billion during
the four trading weeks of January,
a breakdown by business
a.m. of statistics made
available by The Nigerian
Stock Exchange has shown.
The numbers represent a
decrease of 46 percent in total
value and an increase of
98 percent in total volume of
transactions executed by the
Big Ten against the numbers
posted in December 2017,
which stood at N432.688 billion
and 11.436 billion shares
respectively.
Of the aggregate number
of shares traded this year, the
top ten brokers exchanged a
total of 2.743 billion shares
valued at N25.885 billion
during the week ended January
5; traded 5.054 billion
shares worth N97.581 billion
for the week ended January
12; 4.442 billion shares
valued N51.953 billion; and
10.353 billion shares worth
N56.298 billion for the weeks
ended January 19 and January
26 respectively.
Further breakdown of
the figures shows that for
the week ended January 5,
the top ten stockbrokers accounted
for 56.76 percent
and 68.78 percent of the
total volume and value respectively,
transacted during
the first week of the month.
For the second week ended
January 12, the top ten
stockbrokers volume and
value of shares traded stood
at. 53.33 percent and 70.72
percent respectively of the
total trading figures during
the period, while they accounted
for 44.31 percent
and 56.56 percent of the
volume and value traded respectively
in the week ended
January 19.
For the last week ended
January 26, the top ten brokers
accounted for 72.33
percent and 66.15 percent
of total volume and value
of shares respectively, exchanged
during the period.
Further analysis by business
a.m. indicates that
United Capital Securities
Limited, a member of UBA
Group, topped the table with
766,780,859 shares or 15.86
percent of the total volume
of shares traded during the
first week, while in value
terms, Stanbic IBTC Stockbrokers
Limited was ahead
with N8,218,058,000.90
or 21.84 percent worth of
shares traded.
Stanbic IBTC Stockbrokers
took prime position
in the second week
with its traded volume at
1,078,320,062 shares or 10.74
percent of the total business
for the week, while in value
terms it was also on top with
N31,179,957,198.04 or 22.60
percent worth of aggregate
transactions recorded by the
group during the period.
With 970,365,547 or 9.68
percent of the total volume
traded, United Capital Limited
again topped the list of
the total volume transacted
in the week ended January
19, while Stanbic IBTC
Stockbrokers Limited recorded
shares worth a total
of N12,402,934,630.66 or
13.50 percent to lead in the
value of business executed
in the week.
United Capital Limited
controlled both the volume
and value of shares
executed during the last
week of the month with
a total of 7,685,959,519
shares or 53.70 percent and
N19,530,014,642.34 worth
of shares or 22.95 percent
respectively garnered to
dominate the pack during
the period.
Oando appoints
Muntari Muhammed
Zubairu executive
director
Ajose Sehindemi
Oando Plc has
announced the
appointment
of Muntari
Muhammed
Zubairu as executive director
effective February 5, 2018. In
the notification to the Nigerian
Stock Exchange (NSE)
and the investing public,
the company said the appointment
of Zubairu was in
accordance with Article 88
of the Company’s articles of
association.
Zubairu would also double
as group chief corporate
services and operations O of
the company.
According to the notification,
Zubairu is a highly
respected leader with 26 years
progressive experience in the
financial services industry.
His experience and achievements
cover key aspects of
banking, including international
banking, treasury
operations, retail, corporate
and commercial banking.
He was until recently,
a deputy general manager
and group head, commercial
banking North, at Access
Bank Plc.
In that role, he used his
experience and vast network
to drive the bank’s strategy
and growth in the North. Prior
to working with Access Bank,
Zubairu worked at various
times as group head retail
banking and public sector at
FirstBank (2010-2017), group
head commercial banking
and divisional head public
sector at Diamond Bank
(1998-2010), and at FSB International
Bank (1995-1998)
and Citibank Nigeria (1992-
1995) amongst other leadership
roles.
Zubairu holds an MSc in
project management from
the University of Salford, an
MBA from the University of
Abuja and a B.Engr. electrical
engineering from Ahmadu
Bello University Zaria.
He is a member of Chartered
Institute of Bankers of
Nigeria, Nigerian Society of
Engineers and Council for the
Regulation of Engineering in
Nigeria. He has also attended
several Executive Management
Programmes in the
leading institutions including
Harvard Business School,
Insead Business School, Massachusetts
Institute of Technology
and Lagos Business
School.
Analysts at Cordros predict firming up for CBN’s purchasing managers index in 2018
Andy Nssien
The top ten stockbrokers
operating
in the Nigerian
stock market
traded a total of
22.592 billion shares valued
at N231.717 billion during the
four trading weeks of January,
a breakdown by business
a.m. of statistics made available
by The Nigerian Stock
Exchange has shown.
The numbers represent a
decrease of 46 percent in total
value and an increase of
98 percent in total volume of
transactions executed by the
Big Ten against the numbers
posted in December 2017,
which stood at N432.688
billion and 11.436 billion
shares respectively.
Of the aggregate number
of shares traded this year, the
top ten brokers exchanged a
total of 2.743 billion shares
valued at N25.885 billion
during the week ended January
5; traded 5.054 billion
shares worth N97.581 billion
for the week ended January
12; 4.442 billion shares
valued N51.953 billion; and
10.353 billion shares worth
N56.298 billion for the weeks
ended January 19 and January
26 respectively.
Further breakdown of
the figures shows that for
the week ended January 5,
the top ten stockbrokers
accounted for 56.76 percent
and 68.78 percent of
the total volume and value
respectively, transacted
during the first week of the
month.
For the second week ended
January 12, the top ten
stockbrokers volume and
value of shares traded stood
at. 53.33 percent and 70.72
percent respectively of the
total trading figures during
the period, while they accounted
for 44.31 percent
and 56.56 percent of the
volume and value traded respectively
in the week ended
January 19.
For the last week ended
January 26, the top ten brokers
accounted for 72.33
percent and 66.15 percent
of total volume and value
of shares respectively, exchanged
during the period.
Further analysis by business
a.m. indicates that
United Capital Securities
Limited, a member of UBA
Group, topped the table with
766,780,859 shares or 15.86
percent of the total volume of
shares traded during the first
week, while in value terms,
Stanbic IBTC Stockbrokers
Limited was ahead with
N8.22 billion or 21.84 percent
worth of shares traded.
Stanbic IBTC Stockbrokers
took prime position
in the second week
with its traded volume at
1,078,320,062 shares or 10.74
percent of the total business
for the week, while in value
terms it was also on top with
N31,179,957,198.04 or 22.60
percent worth of aggregate
transactions recorded by the
group during the period.
With 970,365,547 or 9.68
percent of the total volume
traded, United Capital Limited
again topped the list of
the total volume transacted
in the week ended January
19, while Stanbic IBTC
Stockbrokers Limited recorded
shares worth a total
of N12,402,934,630.66 or
13.50 percent to lead in the
value of business executed
in the week.
United Capital Limited
controlled both the volume
and value of shares
executed during the last
week of the month with
a total of 7,685,959,519
shares or 53.70 percent and
N19,530,014,642.34 worth
of shares or 22.95 percent
respectively garnered to
dominate the pack during
the period.

20
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
COMPANY
Hedge Funds
21
Institutional investors now own
more than 20% of UAC shares
Institutional investors’ stake
in United African Company
Plc. (UAC Plc.) has grown to
about 22 percent, according
to the company’s disclosure
of changes in beneficial membership
of its shares as announced
last Friday.
In a note to the Nigerian Stock
Exchange signed by Godwin
Samuel, its company secretary
and legal adviser, UAC noted that
the disclosure is pursuant to Rule
12.1 of the amendments to the
NSE Listing Rules.
It said it was notifying the NSE
that Stanbic IBTC Nominees Nigeria
Limited, Blakeney GP 111
Limited and Themis Capital Management
now owned more that
5 percent and above stake in the
company shares.
The notification specifically
indicated that Stanbic IBTC
Nominees own eight (8) percent,
Blakeney six (6) percent and Themis
Capital eight (8) percent of
the company’s shares.
UAC Nigeria was first incorporated
in Nigeria under the name
“Stanbic IBTC Nominees
Nigeria Limited, Blakeney
GP 111 Limited and Themis
Capital Management
now owned more that 5
percent and above stake
in the company shares”
Nigerian Motors Ltd on April 22,
1931 as a wholly owned subsidiary
of the United Africa Company Ltd.
which later became UAC International
(UACI).
UAC International, a subsidiary
of Unilever, included in its
business the activities formerly
carried on by a number of other
companies including The Niger
Company Ltd. and theAfrican and
Eastern Trade Corporation Ltd,
all of which had long-standing
trading links with West Africa.
The company, whose name
was changed to United Africa
Company Ltd in 1943, remained
dormant until 1955 when it became
The United Africa Company
of Nigeria Ltd and started acquiring,
over a period of five years, a
large part of the business of UAC
International. In 1960 C.W.A.
Holdings Ltd, England also a
subsidiary of Unilever, acquired
the interest of UAC International
in the company. Further reorganisation
concluded in 1973 and
resulted in the acquisition of a
number of wholly owned fellow
subsidiaries of C.W.A. Holdings.
Following reorganisation, the
company conducted the acquired
businesses as operating divisions,
which are now in voluntary
liquidation. The company took
the name UAC of Nigeria Ltd in
1973.
In compliance with the Nigerian
Enterprises Promotion Act
1972, 40 percent of the company’s
share capital was acquired in
1974 by Nigerian citizens and
associations and in accordance
with the provisions of the Nigerian
Enterprises Promotion Act
1977, an additional 20 percent of
the UAC’s share capital was publicly
offered in 1977, increasing
Nigerian equity participation to
60 percent. The name UACN Plc
was adopted in 1991.
Its areas of operation include
manufacturing, services, logistics
and warehousing, agricultural
andreal estate.
The current Chairman of the
Board as of 2010 is Senator Udoma
U.Udoma with Mr Larry Ettah
serving as Group Managing
Director and CEO.
Seplat Petroleum lists additional
25,000,000 ordinary shares
Austin Avuru, managing director, Seplat Petroleum Development Company
Seplat Petroleum Development
Company has
announced the listing of
an additional 25,000,000
ordinary shares (about
4.4% of existing shares) on the Nigerian
Stock Exchange, effectively
taking the company’s share capital
to 588,444,561 ordinary shares
of N0.50k each.
The shares all have voting
rights and are particularly allotted
to the management and directors
of SEPLAT in furtherance of
the company’s long-term incentive
plan.
“In light of the above,
SEPLAT’s share capital
now consists of
588,444,561 ordinary
shares of N0.50k each,
all with voting rights”
The company noted that the
corporate action is fully within
the jurisdiction of the powers
granted to the board of directors
by the company’s shareholders
at the annual general meeting
held on 30th June 2014 - to implement
the Initial Public Offer (IPO)
award and other remuneration of
the top management and directors
as disclosed in the IPO prospectus.
In a notification to the Nigerian
Stock Exchange and shareholders
Friday, February 2, 2018, the company
noted that the announcement
is being made in accordance
with Rule 14 of the Nigerian Stock
Exchange Amended Listing Rules
and Article 17 – 19 of the UK Market
Abuse Regulations 2016.
“In exercise of the powers
granted to the board of directors
of the company, by the shareholders
at the annual general
meeting (AGM) held on 30th June
2014 to implement the IPO award
and other remuneration of the
top management and directors as
disclosed in the IPO Prospectus,
25,000,000 ordinary shares of SE-
PLAT has been allotted to Stanbic
IBTC Trustees Limited as custodian
in furtherance of the company’s
long term incentive plan,”
the notification read.
“In light of the above, SE-
PLAT’s share capital now consists
of 588,444,561 ordinary shares
of N0.50k each, all with voting
rights.
“Therefore, the figure of
588,444,561 may be used by
shareholders as the denominator
for the calculations by which they
will determine if they are required
to notify their interest in, or a
change to their interest in SEPLAT
under the NSE Rules and the UK
Market Abuse Regulations 2016.”
CIAPS workshop to help companies see
opportunities in clients, staff complaints
Bukola Odufade
The Ikeja, Lagos-based
Centre for International
and Professional Studies
(CIAPS) has said that
Nigerian companies are
failing to see the opportunities that
exist in encouraging constructive
complaints in their clients and staff.
Anthony Kila, a professor and director
of the centre, told business a.m.
during an interview that companies
operating in Nigeria are failing to address
and encourage constructive
complaints by both staff and clients
and that they are operating under
the belief that complaints are bad for
business and so try as much as possible
to avoid them.
Kila said CIAPS is of the belief that
most companies in Nigeria lack the
requisite skills in staff and management
to see inherent benefits in complaints
that are made about them,
their products and services. It is to
this end that it is organising a one-day
workshop to for companies, businesses
and professionals this month
to deliver the requisite skills required
to address this shortcoming.
“Businesses are not doing enough
and it is a common thing. There is no
clear thing about managing conflict.
People even don’t know how to complain
and part of this is that companies
don’t encourage people to complain
in a proper way,” he said.
According to him, complaints
are formal and structured and
should be treated as such. “Given
the fact that there are no formal
procedures for making complaints
in most organisations in the country
and when there are, complaints
are not taken seriously, leaving the
clients or customers more dissatisfied,”
he explained.
Kila believes that as the economy
becomes more stringent, people
tend to get cranky and complaints
become more frequent, and so companies
have to redress the way they
handle complaints or risk losing
business.
He said: “Companies are not addressing
complaint enough partly
because of perception, as it is seen
as something very nasty; and also
because of the way consumers are
seen. For example, when you walk
into an MTN office, and people are
trying to retrieve stolen lines, you’ll
see that we don’t treat them like
consumers, you don’t think they
are paying, you would think they
are there to beg.”

22
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
Tech giants under scrutiny
as regulators tighten noose
Tiamiyu Adio, with agency
SOME OF THE WORLD’S
biggest technology companies
are facing off with
regulators in what’s being
called a “tech lash”.
As society struggles to catch up
with the pace of technological change,
governments around the world are
waking up to the fact that our Internet
economy and how it operates is unaccountable
and undertaxed.
The European Union is reviewing
Google for allegedly abusing its
dominant market position in search.
Germany is already investigating
how Facebook profits from user data.
The US is looking at whether Apple
broke laws with software updates
which slowed older iPhones. And
Congress is holding more hearings
on the use of social media platforms
to allegedly disrupt US elections.
Even so, with the increased scrutiny
over disinformation, fake news
and malicious actors buying ads, the
internet companies could still find
themselves hit by regulation sparked
by the big tech backlash.
Consumers, too, are asking if
things like smartphones, designed
to keep us online for longer are just
making companies richer at the
expense of children’s mental health.
“Since the Russia meddling and
fake news, you’re seeing a lot more
heat on Facebook, Twitter and Alphabet
- not just on Capitol Hill, but the
EU and abroad,” says Daniel Ives, chief
investment officer at GBH Insights.
Samsung squares up to Bitmain in cryptocurrency chip mining
Business a.m with agency
SAMSUNG’S FORAY
into the crypto-mining
space will pose
serious competition
to the existing
leader in the industry, Beijingbased
Bitmain, which claims
to supply 70 percent of the
world’s bitcoin applicationspecific
integrated circuits
(ASICs), according to analysts.
Bitmain is also said to control
around 30 percent of all the
processing power of the global
bitcoin network through the
two mining pools it operates,
for which it may have to relinquish
some share when Samsung
fully enters the market.
TECHNOLOGY&INNOVATION
The Korean tech giant
announced late last week
that it has started mass
producing chips designed
for cryptocurrency mining,
known as ASICs.
While reporting its fourthquarter
revenue, which came
in at 66 trillion won ($61 billion),
a 24 percent increase
year-on-year, the company
said in the first quarter of
2018, earnings are expected
to rise on the ramp-up of second
generation 10mm process
products for this year’s
flagship smartphones and
growing demand for cryptocurrency
mining chips.
The statement thus confirmed
previous reports that
Samsung has entered the
Facebook has recently changed its
news feed algorithm to reflect communication
from friends and family,
as opposed to news outlets, and Ives
believes “they’re definitely in the
crosshairs of legislatures. And I think
you’re seeing Twitter, Alpha, and Youtube
be a lot more strict and a lot more
focused on some of the content that’s
coming through as we’re seeing the
double-edged sword of social media.”
European regulators aren’t shy
against tech giants, explains Ives.
“There’s a boxing match between
Silicon Valley and the EU that’s getting
more intense. Part of the focus has been
on Apple and Microsoft, but now you’re
seeing stricter potential for regulatory
oversight. I think part of it is, these companies
need to play nice in the sandbox.
They need to have an olive branch to the
crypto-mining sector. Earlier
last week, Korean news
outlet, the Bell, reported
that the company would
produce ASICs in its own
foundry in a deal with Taiwanese
chipmaker, TSMC.
Later, a Samsung spokesperson
confirmed with Tech-
Crunch that the company
is “currently engaged in the
manufacturing of cryptocurrency
mining chips,” but refused
to provide more details.
Bitmain also contracts
with TSMC to produce customized
silicon. In the third
quarter of 2017, the Taiwanese
chipmaker received $350
million to $400 million in
revenue from crypto miners.
One advantage Samsung
might have over Bitmain, as
some note, is that the Korean
giant operates one of the
world’s largest semiconductor
EU. You’ve seen that with Facebook and
their change to the tax code and what
they’ve done in Ireland.”
According to Ives, “these companies,
at this point, basically own the
consumer kingdom...I don’t think their
core business model will change, but ...
transparency and a lot more oversight
around content” could be one example
in extending the olive branch.
“Facebook said they’re going to
stop crypto advertising and bitcoin
advertising, so they said if this could
be an issue [for the EU] then they’re
going to take it off.”
UK-China relations: Britain’s
Prime Minister Theresa May has
been in China this week to boost
trade between the two nations as the
UK looks to forge new partnerships
for when it leaves the EU. But China
will want to see what a final Brexit
deal looks like before making any
big commitments. There’s a great
deal at stake for both countries, as
Adrian Brown reports from Beijing.
In Germany, opposition MPs are
demanding answers from the government
about a scandal involving
well-known carmakers and diesel
fume tests. A research group funded
by BMW, Daimler and Volkswagen
reportedly exposed volunteers and
monkeys to toxic exhaust gasses.
VW’s suspended one of its senior
executives following the public
outcry about the secret tests, as
Dominic Kane reports from Berlin.
Panama has its famous canal,
the Suez canal cuts through Egypt,
and now there’s a plan to resurrect
a 400-year-old plan for a sea link in
the south of Thailand. The waterway
would link the Indian Ocean and Andaman
Sea, with the Gulf of Thailand
and the South China Sea. Wayne Hay
reports from Si Kao, which is home to
a coastal community.
Myanmar’s economic prospects
with the West are at risk, after mounting
international criticism over its
handling of the Rohingya crisis, as Scott
Heidler reports from Yangon. Recently,
a top US diplomat quit the government’s
advisory panel after a heated
exchange with Myanmar’s leader
Aung San Suu Kyi. Bill Richardson’s
departure shows how Aung San Suu
Kyi appears to be pushing away critics
- and relying on old allies for support.
Scientists in the West have long
disputed the therapeutic value of traditional
Chinese medicine, but it seems
the ancient craft is gaining popularity
at home and abroad. It’s even been
hailed by Xi Jinping’s government as
“the gem of Chinese science”. Rob
McBride reports from the country’s
biggest traditional medicine market in
the city of Bozhou, where business has
never been better.
plants, capable of matching
orders of any size. Bitmain
has in the past put its models
for sale in intermittent batches
in order to keep vendors from
placing large orders.
In its fourth-quarter earnings
report mid-last week,
the consumer-electronics
purveyor and world’s largest
chipmaker by revenue said
it expects its foundry business
to get a bump-up from
“growing demand for cryptocurrency
mining chips.”
Mining for cryptocurrencies
like Bitcoin means putting
your computer to work
solving thorny math problems
that are used to verify
cryptocurrency transactions.
In return for your gobs
Apple iOS 11.3
upgrade release
exposes new
product secret
Tiamiyu Adio
IN ROLLING OUT its first iOS
11.3 public beta, Apple has
unwittingly again given away
product secrets. Analysts
say after digging through
the code, 9to5Mac, they found it
is filled with references to a brand
new ‘modern iPad’, a name, which
according to them reveals a lot.
They said prior to release of
iPhone X, Apple’s reference for
it was ‘modern iPhone’. So the
terminology is a clear distinction
between it and what came before.
And of course what the iPhone X
brought to the table as ‘modern’
differentiators was a near bezel-less
display without a home button and
Face ID in place of Touch ID. Consequently
a ‘modern iPad’ strongly
suggests the same steps: goodbye
home button, goodbye chunky bezels
and hello facial recognition.
Furthermore, this move is said to
have precedent. Acclaimed Apple
analyst, Ming-Chi Kuo, stated back
in October that Apple will release
overhauled versions of the iPad Pro
during 2018. And it is easy to see
how a more compact design and
integrated 3D facial modeling could
prove very popular editions, given
their target market.
The downside, according to the
analysts, is that ‘modern’ will not
mean the new iPad Pros would get
dual cameras since the iPhone 7
Plus and iPhone 8 Plus both have
dual cameras, so this clearly isn’t a
prerequisite of ‘modern’ status.
“My guess is the camera from
the iPhone 8, and the inclusion of
3D Touch is surely long overdue
for such productivity-focused
devices,” an analyst noted.
“So while iOS 11.3 does have
more immediate fires to put out,
it’s interesting to see one essential
update has accidentally exposed
another,” he added.
of processing power, you can
be rewarded with coins.
And with some cryptocurrencies
worth thousands of
dollars per coin, and huge
hype around the phenomenon,
it’s no surprise a rush of
gold diggers are pumping up
their computer systems with
high-powered chips to get in
on the act.
In fact, despite a dip in the
value of Bitcoin, things have
gotten so frenzied that computer
gamers who want to
make home-brew systems for
playing Call of Duty (or whatever)
are having a tough time
getting hold of graphics cards.
It seems the cards have turned
out to be great for mining cryptocurrencies
like Ethereum.

Zinox set to reposition
e-commerce
in Nigeria,
acquires Konga
for leverage
Tiamiyu Adio
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
Zinox Group, an integrated
information communication
technology (ICT)
solutions conglomerate
and original equipment
manufacturer (OEM), has concluded
the acquisition of e-commerce giant,
Konga in a move that is expected
to raise the profile of e-commerce in
the country, Leo Stan Ekeh, chairman
of Zin ox Group has confirmed
to Business.a.m
Ekeh who spoke top Business.a.m
said the transaction has been approved
by the Securities and Exchange
Commission (SEC).
Analysts say the acquisition is a
major development that could see e-
commerce in Nigeria finally unlock
the massive revenue potential in the
global multi-billion-dollar industry.
The move is also expected to
see Zinox make a bold return to
an industry it pioneered in Nigeria
with the launch of BuyRight
Africa.com which was challenged
by the absence of credit card and
e-payment infrastructure when it
was launched over 12 years ago.
Details of the deal include Zinox
Group, one of Africa’s biggest technology
group assuming ownership
of the e-commerce platform, Konga.
com which remains as one of the
biggest players in the sector.
This development, coming at
a time when global e-commerce
spending is expected to top previously
unheralded levels, is widely
expected to reposition Konga for
a greater share of the e-commerce
purse in Nigeria and beyond.
Also some industry analysts estimated
that the acquisition could
lead to the integration of Konga and
Yudala, which is owned by Ekeh’s
son, to wade off competition and
make it one of biggest e-commerce
companies in Africa.
In 2017, retail e-commerce sales
worldwide amounted to $2.829 trillion
while e-retail revenues are projected
to grow to $4.48 trillion by 2021.
Ekeh explained that the acquisition
was expected to create
employment opportunities for over
750 Nigerians, both at home and
in the Diaspora, saying that many
erstwhile employees of the company
laid off in the restructuring process
may be recalled.
Konga recently announced a shift
to a prepay-only model, essentially
putting a stop to Pay on Delivery
(PoD) – a significant decision which
formed part of an internal restructuring
aimed at putting the business
on a sound footing in the market.
This move, coupled with the
new investment, were expected to
spark an up-turn in the company’s
fortunes which will see Konga assume
a more significant share of the
e-commerce market.
Led by serial digital entrepreneur,
Ekeh, the Zinox Group has
grown from a position of strength to
become one of the biggest names on
the African technology scene.
With its headquarters in Lagos,
Nigeria and branches all over the
country in addition to hubs in Africa,
Asia, Europe and the Middle East;
the Zinox Group boasts a 360-degree
spectrum orientation as an
integrated ICT solutions group with
advanced competencies in manufacturing,
distribution, retail and
after-sales support, among others.
TECHNOLOGY&INNOVATION
23
U.S House enact
bill to enable
consumers set
up account
without visiting
bank branch
Tiamiyu Adio
THE UNITED STATES House of
Representatives recently passed a bill
(HR 1457) that would enable financial
institutions accept personal identification,
such as scan of a drivers
license, to open up on bank account
on a mobile device or computer.
“The financial institution may
use the information for the purpose
of verifying the authenticity
of the driver’s license or identification
card, verifying the identity of
the individual, or complying with
legal requirements,” the bill said.
The bill passed with broad
bipartisan support and has now
been moved over to the Senate for
further discussion.
The fact that legislation is required
to authorize some banks to
accept a digital process for opening
an account is indicative of the fact
that bank branches may quickly
become extinct. Soon enough, bank
branches will experience the same
fate of the Blockbuster entertainment
outlets that once littered strip
malls across the US. The legislation
also highlights the disparate regulations
that exist in the 50 different
states – a fact that is an impediment
to more rapid innovation.
While allowing for ID scans
to be accepted should make it
simpler for some individuals in
opening accounts it is probably
just a temporary measure until
Blockchain based ID verification
takes over – globally.
Lenovo mobile unit drags business as group posts quarterly loss of $289m
CHINESE PERSONAL-COM-
PUTER maker Lenovo Group is
struggling with its mobile business
unit as it reported a net loss
of $289 million for its fiscal third
quarter, after taking a write-off of
$400 million resulting from the
recent US tax reform.
The company has struggled in
recent times to turn around its
loss-making mobile unit amid
tough global competition and
slowing market growth.
Lenovo swallowed a one-time
charge of roughly $400m as a
result of the Trump administration’s
tax overhaul, though it said
the reforms may result in a lower
tax rate for its U.S. operations in
the longer term.
Shares of Lenovo closed up
2.4 percent lower to HK$4.39 last
Thursday.
Lenovo, a unit of Legend
Holdings, reported a loss of $289
million for the three months to
December, versus a $98 million
profit a year ago.
CEO Yang Yuanqing stated
they will further improve the
profitability in their mobile division,
but probably breakeven will
not happen in the second half,
with more time needed to turn
around a unit that has yet to generate
income from its purchase of
Motorola Mobility.
Lenovo aims to expand, rather
than shrink, its geographical
reach and product lines. Yuanqing
said that it was well on track
to deliver a turnaround, but did
not specify a time frame. “We will
definitely stay in these markets”.
The mobile business was
expected to post revenue growth
based on seasonal demand and
efforts by Lenovo to push more
mid-priced to high-end smartphone
models, according to
Daiwa Capital Markets analyst,
Steven Tseng, in a recent report.
Compared to the third quarter
previous year, revenue was up six
percent, operating and pre-tax
profit was up 48 percent, and
net profit fell by negative 425
percent. The company went
on a shopping spree four years
ago, spending almost $3 billion
to acquire USA mobile-phone
maker Motorola Mobility in 2014,
which Lenovo hoped would help
it expand in the US smartphone
market.
The mobile business is part of
Lenovo’s efforts to diversify from
its core PC business, but it has
yet to bear fruit.
Wong Wai-ming, the chief
financial officer at Lenovo, said
on a media conference call last
week that the company has not
considered a write-off of the
mobile business even though it
performed below expectations
in the past quarter. Hewlett-
Packard has overtaken Lenovo as
the world’s No. 1 PC maker, said
International Data Corp.
By division, the PC group saw
revenue grow 9 percent year
on year to $9.3 billion, and was
profitable for the second straight
quarter in all geographies, contributing
$416 million in pre-tax
profit overall

24
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
WORLD BUSINESS & ECONOMY
Global illicit cross-border financial
flows peak $1.6trn annually
...Switzerland, U.S ranked top promoters of financial secrecy
Bukola Odufade
A
Financial Secrecy Index
published recently by
the Tax Justice Network
(TJN) has ranked Switzerland
and the United
States as the biggest promoters of
financial secrecy in the world. This is
just as over $1.6 trillion illicit crossborder
financial flows take place
annually.
The report stated that illicit crossborder
financial flows have been
estimated at $1-1.6 trillion per year:
dwarfing the US$135 billion or so in
global foreign aid, and that since the
1970s African countries alone have
lost over $1 trillion in capital flight,
while combined external debts are
less than $200 billion.
“So Africa is a major net creditor
to the world - but its assets are in the
hands of a wealthy élite, protected
by offshore secrecy; while the debts
are shouldered by broad African
populations, according to their findings,”
it said
It however stated that some rich
countries suffer as well too, citing
European countries like Greece,
Italy and Portugal, which have
been brought to their knees partly
by decades of tax evasion and state
looting via offshore secrecy.
The index, which ranks jurisdictions
according to their secrecy and
the scale of their offshore financial
activities, also indicated that an estimated
$21 to $32 trillion of private
financial wealth is located, untaxed
or lightly taxed, in secrecy jurisdictions
around the world.
According to the index, secrecy
jurisdictions is used as an alternative
to the more widely used term tax
havens as they use secrecy to attract
illicit and illegitimate or abusive
financial flows.
The ranking, which is politically
neutral, is a tool for understanding
global financial secrecy, tax havens
or secrecy jurisdictions, and illicit
financial flows or capital flight.
“The 2018 release confirms the
long-term picture, that the richest
and most powerful countries have
continued to pose the greatest
global risks – with Switzerland and
the U.S. established as the key facilitators
of illicit financial flows,” said
TJN chief executive Alex Cobham.
Switzerland, a well-known tax
haven, whose practices were uncovered
by ICIJ’s 2015 Swiss Leaks
investigation, is still the worst offender
as far as financial secrecy
is concerned, according to TJN’s
analysis.
“Switzerland has delayed the
implementation of automatic information
exchange, and in 2017
lawmakers attempted to stop it altogether
with countries they deemed
‘corrupt’,” the report noted.
As for the United States, it has
refused to take part in international
efforts to curb financial secrecy and
instead set up a parallel system that
seeks information on U.S. citizens
abroad but does not provide data to
foreign countries.
Several U.S. states are also considered
tax havens including Delaware,
which doesn’t tax intangible
assets such as intellectual property,
patents or trademarks.
“More than 66 percent of the Fortune
500 have chosen Delaware as
their legal home,” claims the state’s
Division of Corporations website.
Some of the criteria used to build
the index include the absence of
a public register, harmful tax residency
rules and whether the system
allows for bearer shares, which obscure
ownership.
TJN noted some improvements
since the 2008 financial crisis, most
notably the automatic exchange
of information that will be implemented
in 2018 for many countries,
including the Bahamas, Samoa and
St. Kitts and Nevis. The report also
underlines increased public pressure
in favor of public registers of
companies’ owners.
Yet, in the meantime the European
Union, put together a blacklist
of 17 secrecy jurisdictions last
month, only to delist eight countries
a few weeks later, including Panama
(ranked 12 on the secrecy index)
and Macao (ranked 22). In addition,
members of the EU themselves rank
high on the secrecy index: Luxembourg,
the Netherlands, Malta and
Germany are among the top 20
jurisdictions promoting financial
secrecy. As for the United Kingdom,
it continues to shelter financial secrecy
through its crown dependencies,
including tax havens Guernsey
(ranked 10), Jersey (ranked 18) and
the Isle of Man (ranked 42).
Among the countries that are
new on the TJN list are Kenya, with a
very high secrecy score of 80%, even
higher than Mauritius (72%), which
is one of Africa’s most high-profile
tax havens. Although Kenya ranks
high (9) on TJN’s secondary index
based on secrecy only, it is much
lower on the main index (27), given
its rather small market share. This “is
an example of how interests of western
financial service lobbyists have
successfully lured governments into
a race to the bottom,” said the report.
“The damage being done to
public services around the world is
incalculable, and the violations in
human rights are severe, whether
this be through a lack of access to
clean drinking water in sub-Saharan
Africa or the pressures facing public
health services in the UK and
U.S.,” said Liz Nelson, TJN Director
responsible for the Tax Justice and
Human Rights program.
2018 Secrecy Ranking
See full index here
1. Switzerland
2. USA
3. Cayman Islands*
4. Hong Kong
5. Singapore
6. Luxembourg
7. Germany
8. Taiwan
9. United Arab Emirates
(Dubai)
10. Guernsey*
11. Lebanon
12. Panama
13. Japan
14. Netherlands
15. Thailand
* British overseas territory or
crown dependency. If Britain’s
network were assessed together, it
would be at the top.
Electric cars, niche metals
lure cash to Africa’s mines
Rising commodity prices
may have revived enthusiasm
for African resources,
but it’s unlikely
to be the old mainstays
of coal and iron ore pulling crowds
next week as the mining industry
meets in Cape Town.
The electric-vehicle boom and
shifting industrial demand have
transformed formerly niche metals
-- from lithium and cobalt to
praseodymium and neodymium
-- into the hot new drawcards of
African mining.
Far smaller and cheaper than
the gargantuan mine, port and rail
developments pursued by the likes
of BHP Billiton Ltd. and Rio Tinto
Group during the last boom, these
next-generation mines may stand a
better chance of success.
Here are five metals grabbing attention
across the continent.
Rare Earths in Malawi
Struggling commodities trader Noble
Group Ltd. surprised metal market
watchers in November with a 12 million-pound
($17 million) investment
in a rare-earth project in Malawi. The
owner, Mkango Resources Ltd., says
its deposits of neodymium and praseodymium
will be used in magnets
for products such as electric-vehicles
and wind turbines.
Niobium in Tanzania
U.S. private equity firm Denham
Capital Management LP is backing
the Panda Hill niobium project in
northern Tanzania. Niobium --
named for a Greek goddess who
became a symbol of the tragic
mourning mother -- is used to
dramatically lighten steel for industrial
pipes and aircraft parts.
Panda promises to be the first new
niobium mine in 40 years. The
metal is currently mined in only
three places on Earth.
Graphite in Mozambique
Traditionally sold to steel mills
and the lubricants industry,
graphite is benefiting from new
demand for lithium-ion batteries
needed to power new electric
vehicles like Tesla Inc’s Model 3.
Australia’s Syrah Resources Ltd. in
November started shipments from
what it says is the world’s largest
deposit, located in northern Mozambique.
Cobalt in Congo
Although the world’s biggest
commodity trader, Glencore Plc,
was drawn to the Democratic
Republic of Congo for its copper,
by-product cobalt has become
the star performer. Prices for the
metal, another key component
in electric-vehicle batteries, have
tripled in the last two years and
Glencore is moving to capitalize
on the growing demand. It
will more than double its cobalt
production in the central African
country to at least 58,000 tons by
2019, approximately 40 percent of
global supply.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
ENERGY, POWER & RENEWABLE
25
No angel can fix electricity distribution
in Nigeria at current tariff’
SUNDAY ODUNTAN, EXECUTIVE DIRECTOR, research and advocacy, Association of Nigerian Electricity Distributors
(ANED), in an interview with Business.a.m says pricing is the major issue facing electricity distribution in
the country. He said for the sector to get out of the coma it has found itself, generator use by minister of power,
works and housing, and chief executive officers of power companies should be banned. Excerpts:
How would you measure the
impacts of privatisation of
the nation’s power sector in
the last four years? Does it
really worth the effort?
Those who think privatisation
should not have been
done are very shortsighted.
Anybody saying privatisation
is not a good idea is a
distraction. They should look
at how things are done in the
world over; whether we can
do better by putting things in
the private sector or whether
we should allow government
to continue. Government has
no business running business.
Government cannot run
business successfully.
A case of NEPA/PHCN
before privatisation, I am
not saying that we are there
yet but you cannot correct
wrongs of 50 years in four
years. It would be very unfair
for anybody to expect miracle
at this point but it is very fair
for people to expect more
progress that we have made.
So, I would admit that we
could have done better but
people need to ask why we
have not done better than we
have done. Those are the critical
issues and not sentiments;
saying privatisation is not a
good idea.
The way to go is privatization;
it is only the private sector
that can boost enterprises.
Largely, I would say that
the road has been rough and
I think it is a matter of time
before things definitely get
better.
For me, privatisation is a
good idea. How the process
was done? What happened
immediately after privatization?
Where were we? Where
are we now? Where are we
supposed to be? And why
are we not where we are supposed
to be? Those are the
issues we are supposed to address
and not why we should
have privatised.
We have not made much
more progress because those
who bought into the privatization
exercise also failed to
live up to the dotted lines that
were signed.
The government signed a
Performance Agreement with
new investors by saying that
they will fulfill their part of
the agreement, which would
be conditional upon fulfilling
our part of the agreement too.
The government then that
privatized also failed to live
up to what they committed
to do. Nigerians must begin
to respect the sanctity of
contract.
By and large, since the
power assets were privatized
on November 1, 2013,
there have been connections
of new electricity customers
and communities in the
country, while 612,552 meters
procured and installed.
Also, distribution companies
network upgrade is
happening faster than Power
Holding Company of Nigeria
(PHCN)era, improved customer
care services across
the discos and employment
and training of numerous
better qualified electricity
employees across Nigeria
There were insinuations
in some quarters that the
privatisation of the power
sector was fraught with
irregularities in order to
favour the cronies of the
former administration.
What is your take on this?
I think it is unfortunate to
say the exercise was rigged.
The World Bank was involved
in the privatization process
and it applauded it as the
most transparent in Nigeria’s
history. It was that transparency
that made powerful
people like Aliko Dangote and
Femi Otedola lose their bid.
Besides, the new investors
paid $1.4 billion for the
acquisition of the 11 distribution
companies. Regrettably,
most of the funds were paid
as severance to the workers
of the defunct Power Holding
Company of Nigeria (PHCN).
The power distribution
companies have continued
to seek fund in spite of the
encumbered balance sheets
due to NEMSF Fund that went
to legacy gas debts.
How would you react to
criticism that your members
have continued to seek
intervention fund to run
their business in post –privatisation
era?
Power distribution companies
didn’t take intervention
fund, but took intervention
loan, which they are paying
back and parts of their headache
today. The CBN collects
the loan repayment as first
line charge every month.
That intervention was
money that was used to settle
legacy gap debts (Debts that
were incurred before privatization
to the gas suppliers).
They factored the money into
tariff over time.
What other practical steps
can be taken to wrestle
Nigeria out of the jaws of
power epilepsy?
All those in charge of power
should be barred from using
generators including minister
of power, permanent
secretary, ministry of power,
chief executive officers of all
power generation companies
(Gencos) and distribution
companies (Discos). All of us
must be barred from using
alternative source of power.
If we are all on the grid and
have no access to generators,
we would act immediately
we discover power outage in
our areas. We all know whom
to call when there is no light
and I believe that we would
act accordingly if there were
no alternative sources for us
to bank on.
What is your take on the
submission that the power
sector is currently challenged
due to failure of your
members to remit revenue?
The current cost of electricity
is in excess of N68 per kilowatt.
When we get the N68
invoice from NBET, we are
instructed to sell the same
product for N31.58k. If I buy
the product for N68 and I
am legally allowed to sell at
31.58k, how can I give prepaid
meters?
How do we also factor
in the running cost? We are
saying that the tariff is nonreflective.
It does not reflect
the whole cost of producing
“If I buy a
product for
N68 and I
am legally
bound to sell
at 31.58k, how
can I give prepaid
meters”
electricity down to the end
users.
I am being made to buy at
real cost but not being made
to sell to consumers at real
cost and people complain
about estimated billing.
Also, the approval of payment
of N26 billion MDA
debts by government out of
N67 billion total debts is yet
to vetted.
However, it is noteworthy
to point out that, not a dime
is coming to the DISCOS as
government has proposed to
do a net-off aggregate debt
to NBET .
We have been hovering
round this issue since November
2013 because we
have not gotten it right. Once
we don’t get the figure right,
the business cannot be sustainable
How has the N50 billion
CAPEX fixed by government
impacted on your members?
If the allowable capex for
all capital expenditure is only
N50 billion, it means that you
limited; you cannot spend
outside the allowable capex.
We are saying that the allowable
capex is not even enough
to buy meters alone, talk less
of fixing transformers.
Remember we don’t fix the
price of what we sell, but the
NERC. What we are saying is
that the calculation is wrong.
We can’t run the system like
this. You can’t fail to factor in
all that is required to make
the sector open.
What is your take on the
government’s proposal
to divest 40 percent of its
shares in Discos?
My opinion is that they have
every right to their shares;
they can sell it.
I am just waiting for the
kind of investors that would
come and buy it. There is
nothing wrong with that.
How do ANED members
cope with the lingering
forex challenges afflicting
the sector?
We are bleeding and unless
something is done, and
whatever would be done
should be done sincerely not
some people misleading the
government.
What they are saying is
that the current operators are
not good enough. So let them
go and bring other ones from
anywhere; they will fail given
the current scenario.
How come you don’t see
the white investors here?.
How many foreign investors
do we have among the
11 Discos?
When we talk of performance
of Discos, we should
use Yola as the yardstick,
which is currently being run
by the Federal Government.
It has been returned to the
federal government so on
that account Yola should be
performing very well.
How many meters has
Yola rolled out since it was
returned to the government?.
Why can’t government
metered all the customers
under Yola Disco? Why can’t
we see meteoric performance
of Yola to show that privatization
is an evil act?.
I am now interested in
Yola because it is a Disco and
wants it to progress.
I am happy that Yola is
in the hand of government.
If Yola is making progress,
then something is wrong
with other investors, but if
Yola is not making progress,
then something is wrong
with government’s policy or
way of handling the power
sector.
If the federal government
can’t fix Yola, no angels can
fix other Discos in the country.

26
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
ENERGY, POWER & RENEWABLE
Opportunities
seen in
diversifying
Nigeria’s
renewable
energy sources
Bukola Odufade
The major differences
between fossil fuel and
renewables as sources
of energy can be found
in two words: reliability
and exhaustibility. Fossil fuels are
controllable and readily available,
but not inexhaustible. However,
renewable energy, such as biomass,
sun, wind and water, is somewhat
unreliable because we don’t control
the energy to be generated, but they
are inexhaustible.
Nigeria’s power generation is
currently dominated by fossil fuels
– petroleum products, coal and gas.
According to the country’s Department
for Petroleum Resources
(DPR), more than 81 percent of the
total energy consumed in Nigeria is
produced using petroleum products
and gas, while hydropower generates
just 17.59 percent.
The country, despite its abundant
renewable energy resources,
still generates less than 5,000 mega
watts of electricity for its more than
180 million population. Yet, Nigeria
is not totally running on unclean
energy, as the country currently has
four hydroelectric power plants generating
power alongside fossil fuel
plants. However, energy experts are
of the view that in order for developing
economies, like Nigeria, to meet
their ever growing energy needs,
they must diversify their renewable
energy sources to encompass solar,
water, wind, and even biomass as
their developed economies counterparts
have done.
The advantages of utilizing the
different forms of renewable energy
cannot be overemphasised, especially
where population growth far
outstrips the country’s capacity to
generate power and its industrial
sector needs are rising; with the attendant
consequences of environmental
pollution.
The most common form of renewable
energy used in Nigeria is
biomass, but it is used unconventionally.
With about 70 percent of
Nigerians living in rural areas with
little or no access to conventional
energy resource, biomass, which
includes trees, are cut down and
used as fuel wood.
According to experts, this is more
harmful to the environment as it
causes deforestation and air pollution,
which is exactly the opposite
of what the promotion of renewable
energy is about. It continues to be
grossly underutilized, especially
waste materials.
Samuel Adaju, Project Manager
of Bank of Industry (BOI)/
United Nations Development Project
(UNDP), Access to Renewable
Energy Project, said that “we have
adequate biomass resources for
biomass energy in Nigeria because
there are waste like saw dust, wood
chips, rice husk and corn stalks,
which should not waste away. We
can convert them into energy and
at the same
Solar energy:
High production
cost holding
down progress
Bukola Odufade
Despite a decline in the
cost of solar energy
generation globally,
the average Nigerian
household still spends
up to ₦1.7 million in 2018 for solar
energy generation. With households
requiring about 1-2 kilowatts to
power all appliances and gadgets,
and companies needing 2-10 kilowatts,
the price range for various
sized companies varies between
₦3.6 million to ₦7.6 million.
Pacific Gas and Electric, a leading
United States utility company
said that a megawatt can light up
360 homes, which means a 100-MW
solar plant will generate enough
electricity to power 36,000 homes.
Also, the usual benchmark for
energy generated from 1 MW solar
power plant is considered as
1.5 Million units with the 100 MW
expected to generate 150 million
units, although location matters in
the calculation.
The deregulation of the electricity
sector in 2005 and the introduction
of the Federal Government’s
30:30:30 electricity vision, propelled
activities in the solar energy industry.
However, the high cost of
importation of all the components
required for solar energy generation,
which includes solar panels,
batteries, inverters and charge con-
Power availability could add 2% to
Nigeria’s annual growth – FBNQuest
Bukola Odufade
For Nigeria to achieve a
smooth industrial take
off, power shortages need
to be addressed as they
remain a primary challenge
for businesses across the
country, according to analysts at
FBNQuest, the merchant banking
and asset management arm of FBN
Holdings Plc.
In their Good Morning Note
Friday, the analysts contend that if
‘full power’ was attained and made
routinely available to businesses
and households, it could add two
percentage points to annual growth.
“We understand that at least 40
percent of most manufacturers’
operating costs is allocated to selfgeneration
of energy. Additionally,
it gulps a considerable amount from
As private investors
continue to lead
investment in the
solar industry,
analysts say it begs
the question what
role the Nigerian
government wants
to play
trollers, is slowing down growth in
the industry.
Nwosu, an expert who works with
Solar Energy Nigeria.
As the solar companies continue
to face importation challenges and
little funding, consumers are bearing
the brunt of the problems.
However, a major solar energy
initiative led by private investment
is the $150 million solar power plant
to be built in Kano by Africa’s richest
man, Aliko Dangote, to produce 100
megawatts or electricity.
The solar power plant, when
completed is expected to convert
the abundant energy of the sun into
quality clean electricity with no deleterious
impact on the environment.
Mansur Ahmed, Dangote’s group
executive director said of the project:
“ This project, which will, on
completion, add 100MW to the
state`s electricity supply, is therefore,
fully in line with our group`s
strong commitment to contribute
to the re-invigoration of the state’s
The Federal
Government of Nigeria
estimates national
energy demand at
20,550 megawatts
(MW). However, the
generation capacity
from the national grid
is only 7,993MW
household pockets. Based on our
estimates,” they said.
The Federal Government of
Nigeria estimates national energy
demand at 20,550 megawatts (MW).
However, the generation capacity
from the national grid is only
7,993MW. This is just as the most
recent data from the federal ministry
of power, works and housing,
peak generation was 4,765MW on
economic potential and overall national
development.”
It is currently the largest solar
project that has been planned for execution
in Nigeria and is being done
in collaboration with Dangote’s
strategic global partner, The Black
Rhino Group. It is part of a project
to be executed with the support of
the Kano State government. Ahmed
said the project would be completed
in 2020.
But in terms of execution, the
largest solar project that has taken
off and is ongoing in Nigeria is that
being undertaken by Wärtsilä Energy
Solutions, designed to develop 95
megawatts solar photovoltaic power
plant in the Northeastern part of the
country. This project was one of the
14 solar PV projects by IPPs (Independent
Power Producers) signed
in July 2016 by the Nigerian Bulk
Electricity Trader (NBET). However,
no new information has surfaced
since the project was awarded and
no time duration was given on how
long it would take to be completed.
Another solar initiative is the K1
Solar Project by GreenWish Partners.
The company is currently developing
a 50 kilowatts solar power
Monday (last week) while the lowest
generation on the same day was
3,653MW.
“There has been growing interest
around off-grid solutions. Official
thinking on power now includes developing
alternative energy sources.
Based on data from the Rural Electrification
Agency, utilisation of minigrids
and solar PV systems would
cost US$9.2bn/year compared with
the current estimate of US$14bn/
year from self-generation via diesel
generators,” they noted.
They equally noted some positive
developments in the sector, which
include the Nigerian Energy Support
Programme (a EUR25m technical
assistance programme launched to
promote investments in renewable
energy).
Through the programme, the
FGN, in collaboration with the EU,
will commence the construction
of solar-powered mini-grids to improve
electricity supply to residents
of five states, namely: Ogun, Niger,
Plateau, Sokoto and Cross River.
Already, an 80 kilo watt peak (kWp)
solar mini-grid has been completed
in Sokoto State and is expected
to benefit at least 4,000 residents
plant in Kaduna which the company
says is at advanced stage.
As private investors continue to
lead investment in the solar industry,
analysts say it begs the question
what role the Nigerian government
wants to play as it continues to be
passive while other nations are
spending record breaking amounts
on clean energy.
China spent $85.6 billion on solar
energy in 2017 alone and its African
counterpart, Kenya lights 30 percent of
its off-grid rural areas with solar power.
A recently discovered cheaper
alternative to the traditional silicon
cells is perovskites solar cells whose
progress has left many scientists
optimistic about its future. Certain
perovskites are very good at absorbing
light, and have been shown to
have a power conversion efficiency
of 22.7 percent, making it the fastestadvancing
solar technology to date.
When commercially produced,
this technology is expected to further
bring down the cost of going
solar. But for Nigeria, the main problem,
which is the cost of importing
the solar components rather than
producing some or all the parts locally,
remains to be addressed.
within the state.
“We also note that there has
been some forward movement in
hydro-power. The construction of
the 3,050MW Mambilla hydroelectric
plant is expected to kick off this
year; the financing was disclosed
in August 2017, with Chinese lenders
committing to 85% of the total
project cost.
“The plant will be built by the
China Civil Engineering Corporation
over a five-year period. Once
completed, this should result in
improved productivity from SMEs.”
The FGN recently issued its first
sovereign green bond to raise N10.7
billion. The issue was well received
by investors, with an oversubscription
of N101 million. It is to be
project-tied in collaboration with
the federal ministry of the environment;
renewable energy projects are
to be included.
“Given that gas pipelines and
assets are susceptible to attacks, the
FGN’s steps towards diversifying the
country’s energy sources are laudable.
We note that the FGN targets
30% of national energy to come from
renewables by 2030,” they stated.

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
MANUFACTURING & INDUSTRY
27
Under siege! Epileptic power, poor infrastructure,
high inflation, make positive PMI mere statistics
With the Manufacturing Purchasing Managers’ Index at 59.3 index points in December, 2017, which indicated
an expansion in the manufacturing sector for the ninth consecutive months, according to the Purchasing
Managers’ Index (PMI) survey report by the statistics department of the Central Bank of Nigeria (CBN),
Nigeria’s government’s assertion that business is booming seems justified. But according to manufacturers,
the statistics are still what they are - statistics. They said epileptic power supply, lack of infrastructure, low
purchasing power, limited access to credit facilities, insecurity and inconsistent policies will send them out of
the country. AJOSE SEHINDEMI reports.
Ajose Sehindemi
The PMI, which is an indicator
of the economic
health of the manufacturing
sector has shown
expansion for the last
nine months of the preceding year.
This implied that the manufacturing
sector of the country is healthy
and sound, a justification that the
various interventions by the government
to revamp the economy
are already bearing fruits.
Exiting recession, fifteen out of
the 16 sub-sectors of the Nigerian
economy reported growth in December.
They are in the following
order: petroleum and coal products;
textile, apparel, leather and
footwear; cement; transportation
equipment; paper products;
and, food, beverage and tobacco
products. Others are: furniture and
related products; plastics and rubber
products; non-metallic mineral
products; printing and related
support activities; appliances and
components; chemical and pharmaceutical
products; fabricated
metal products; primary
metal and electrical equipment.
The index showed only the
computer and electronic product
sector to have contracted. With
this results, industry analysts say
they expect manufacturers to be
smiling to the bank.
The composite PMI is a weighted
average of the following diffusion
indices: production level,
new orders, supplier deliveries,
employment level and inventories.
The manufacturing sector inventories
index also grew for the
ninth consecutive month in December
2017. At 61.1 points, the
index grew at a faster rate when
compared to its level in the previous
month of 57.1 basis points
in November, as 11 out of the 16
sub-sectors recorded growth; three
remained unchanged while two
sub-sectors recorded decline in
raw material inventories.
At 63.2 points, 59.3 in November,
the production level index for
the manufacturing sector grew for
the tenth consecutive months in
December 2017. The index indicated
an increase in production
in December when compared to
its level in the preceding month.
Eleven of the 16 manufacturing
sub-sectors recorded increases in
production level, three remained
unchanged while the remaining
two recorded declines in production
level during the review
month.
All these growth indices, say
analysts should wake up investors
across the world to start heading
to Nigeria to set up manufacturing
plants. Unfortunately, this has not
Emenalah Jacobs Njonjo
happened as the reverse has been
the case.
Erisco Foods Limited, an indigenous
tomato paste manufacturer,
relocated its $150 million tomato
paste processing plant to China
due to foreign exchange crisis
that engulfed the country mid last
year. It had a production capacity
of 450,000 metric tons of tomato
paste annually and had 22 brands
with over 2,000 workers in Nigeria.
Eric Umeofia, the chief executive
officer, Erisco Foods, said the
company relocated to friendlier
business environment after losing
over N3.5 billion in Nigeria.
Though the forex issue that
closed down many businesses due
to the inability to import raw materials
caused by high exchange rate,
has been solved through various
policies, some tethering challenges
still remain, giving concerns
daily to manufacturers about their
investments, with many operating
on reduced capacity.
Data from the Manufacturers
Association of Nigeria (MAN),
Frank Jacobs,
MAN President
said member
companies spent
N20.8 billion
monthly on power
generation to run
their production
processes.
stated that capacity utilisation
moved up from 44.3 per cent in
2016 to 55 per cent in 2017 which
shows an improvement in production
but with a caveat - that all the
benefits could be wiped off due to
power scarcity.
Babatunde Fashola, Nigeria’s
minister of Power,Works and
Housing, in a recent interview said
7,000 megawatts was being generated
from the national grid but the
distribution companies (Discos)
distributed only 2,981 megawatts.
Frank Jacobs, MAN President
said member companies spent
N20.8 billion monthly on power
generation to run their production
processes.
Jacobs said the ripple effects of
the power shortages and constant
outages were numerous, ranging
from cut down in production,
job losses to outright closure or
relocation to other countries by industries.
He added that companies
had to bear so much losses as the
outage often occurs when goods
are in the middle of production.
Members of MAN have resorted
to generating power privately and
completely cut off their operations
from the national grid, Jacobs said.
“Most companies, such as Coca
Cola, Wempco, Nigeria Flour Mills
and especially the multi-nationals
self-generate their power. They
don’t rely on the national grid,”
he added.
Coca Cola is facing the challenge
brought about by low purchasing
power of consumers due
to dwindling income that has not
been helped because inflation
remains high. High inflation has
also increased production costs,
as consumers had less money
to spend due to half payment or
non-payment of salaries to workers
by some state governments,
explained Peter Njonjo, the president
of Coca Cola’s West Africa
operations said recently.
Njonjo said it was a big issue
for Coca-Cola, a company that
has been present in Nigeria since
1951 under the management of the
Nigerian Bottling Company (NBC).
He said: “As disposable incomes
start getting under pressure, products
like ours start becoming inaccessible
to most consumers.”
In response to the challenges in
Nigeria, Coca-Cola increased prices,
introduced new product sizes
and sought more inputs locally.
To reduce its foreign exchange
exposure, the company also plans
to raise to 75 per cent the share of
raw materials produced locally by
2020, from 70 per cent currently.
“The only way that you can
ensure that the business is sustainable
is by taking prices up.
Some of it we have passed to the
consumers,” Njonjo stated. “It’s all
about looking at how much money
consumers have and how do I become
relevant to the consumers,”
he added.
Coca-Cola Nigeria, which has
3,600 direct employees, 11 bottling
plants and 30 distribution depots
across the country, is not listed
on the country’s stock market and
Njonjo declined to share details on
production capacity or earnings.
Duro Kuteyi, managing director
and chief executive officer of Spectra
Industries Limited, told business
a.m that though there was an
improvement in sectors that deal
with imported raw materials due to
a favourable forex regime, there is
no improvement for industries that
source raw materials locally, citing
increased harvest of agricultural
produces.
He said: “When there was an
improvement in harvest, the harvest
were all imported, soy beans,
maize and yam were all imported;
so those who are actually using this
raw materials for production know
that prices of the raw materials
available skyrocketed due to the
scarcity of the materials.
“What it means is that what
used to be about 80 thousand
[naira] is already about 130,150
thousand [naira]. Definitely it
does affect capacity utilization
as production is affected and one
cant remove money from the pocket
of the consumer,” he explained.
Kuteyi further told business
a.m. that agriculture production is
made difficult by these challenges,
adding that now that the country is
faced with herdsmen roaming about
disturbing farmers from planting,
as either the cows will destroy the
agricultural produce or the farmer
killed, this is preventing many farmers
from going to their farms.
“We need government effort in
securing the farms as food scarcity,
which will lead to food inflation,
will be the country’s portion sooner
than we imagine,” he added.

28
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
MANUFACTURING & INDUSTRY
La Casera: Can the ‘refresh’
launch take it back on the block?
Since its foray into the market in 2001, La Casera has managed to leverage
its brand equity to carve a niche in the carbonated soft drinks (CSD) sector
of Nigeria’s food and beverage industry. It’s renewed push to reclaim market
leadership through the re-launch of its premier brand, La Casera apple
drink has been touted to spark another round of competition in the market.
AJOSE SEHINDEMI looks at the probable outcome of the branding exercise.
Ajose Sehindemi
For investors in the Carbonated
Soft Drinks
(CSD) segment of the
food and beverage industry,
Nigeria’s estimated
180 million consumers as well as
market known for its high return on
investment (RoI) are too tempting
to ignore. This may have prompted
the entry of La Casera apple drink
into the market in 2001. And it was
an instant success.
The popular beverage, under the
Classic beverage stable, effectively
challenged the dominance of that
segment of the market by the likes
of Coca-Cola, Pepsi, and 7up. The
La Casera apple drink was the toast
of most CSD consumers until lately.
Packaged in easy-to-drink
polyethylene terephthalate (PET)
bottles, the non-alcoholic, pocketfriendly
beverage was available in
most cities across the country.
Although, the drink’s ease of purchase
and convenience of consumption
as an on-the-go CSD make it the
first choice for consumers, it was not
long before hitherto existing beverage
companies started challenging
La Casera’s unparalleled foray in
the market.
For instance, the Coca Cola
quickly rose to the occasion, first
poached a top manager from the
La Casera Company and thereafter
in October 2014, introduced its own
apple flavor brand, Fanta Apple, into
the market.
Although, La Casera was rattled
by the advent of Fanta apple flavour,
the beverage maker re-strategized to
push back competition and reclaim
its market share. Apart from investing
heavily in machineries to increase
its production line, the company in
2017 re-launched its flagship brand,
La Casera apple drink.
The move was seen by industry
operators and stakeholders as a bold
step to regain market leadership
while also stoking another round of
competition in the industry.
At the re-launch in Lagos, Roland
Ebelt, La Casera managing director,
assured all that the company has
come to stay. He said the need to
offer Nigerian consumers a fresh
new look of the product prompted
its re-introduction into the market
with more innovations.
He was emphatic that the company
wanted to reclaim its market
dominance hence it called its
friends, dealers, trade partners and
distributors together to showcase
the innovations.
At the re-launch, Vishal Kaveti,
its regional sales manager, said although,
2016 was a bad year for the
company, it has re-strategized to call
the shots in the CSD segment of the
beverage sector.
The challenges
Despite the re-launch of La
Casera, opinions of some brand
analysts who spoke with Business
A.M, called for caution in celebrating
the re-launch. They said then
that the company’s move to reclaim
2016
was a bad year for
the company, it has
re-strategized to call
the shots in the CSD
segment of the
beverage sector
them
deeper
into
the red
ocean
as the
expected
challenge
to the major
brands -
Coca Cola and
Pepsi- was infinitesimal
that the battle is between the two
major brands, teasing the consumers
in price mechanism superiority.
A survey of some of the dealers
reveal that the ‘King of the road’ title
once proudly held by La Casera is
now between the N100 Coca-Cola
and Pepsi.
That is not all. Business A.M
learnt further that part of the chalmarket
leadership might not
be a smooth ride.
They pointed out, for instance,
that the company
still has a lot to do to persuade
its consumers, especially
considering the
fact that no new details
were conveyed with the
re-launch.
“It’s the same product,
same quantity,
same PET bottle, but
different wrapper,” one
of the analysts, who declined
to be mentioned,
said.
Sikira Adenike, a dealer later expressed
concern on the possibility
of the re-launch reconnecting the
brand to its consumers and distributors.
She said that for the brand to
achieve its aim, there is need for
more assurances to its distributors.
It appears that the re-launch fun
fare and discount given to distributors
by the company to put them into
the blue ocean has actually sunk
lenges that faced the company
was the face-off between
workers and management
of the company over the
non unionisation of its workforce.
In September 2015,
over 700 workers and 600
casual staff of La Casera
Company Limited were
laid off. The labour union
forced the company to
shut down as a result.
The workers’ sack was
reportedly caused by the alleged
disruption of the company’s
operations by members
of the National Union of
Food, Beverages and Tobacco
Employees (NUFBTE), who
called for the unionisation of the
workforce.
While the management blamed
the mass dismissal on NUFBTE’s interference
and invasion, the workers
said they fell out with the company’s
management following attempts to
frustrate their decision to join the
labour union.
However, the workers were later
reinstated after a legal battle and the
company reopened.
As if these were not enough upset
for a company struggling to reclaim
its lost market position, there were
also claims that the product was unfit
for consumption as it contained
some harmful ingredients.
But the management of the company
swiftly denied the claim, as it led
officials of the National Agency for
Food, Drug and Administration and
Control (NAFDAC), the Standards Organisation
of Nigeria (SON) and the
Manufacturers Association of Nigeria
(MAN) into its ultra modern facility,
along Apapa–Oshodi expressway.
After necessary scrutiny, all the
regulatory bodies gave the company’s
product a clean bill of health.
They certified the drinks safe for
consumption and urged Nigerians
to dispel the rumours.
Will La Casera be able to remain
relevant in the CSD market and
claim market leadership as before?
Only time and a probable slip from
competition could tell.
Dangote, LafargeHolcim, join seven other cement
companies to form global industry association
Ajose Sehindemi
Dangote and LafargeHolcim,
two cement
companies with
operations in Nigeria
are among nine cement
companies around the world
that have come together to
form a new global association
called Global Cement and
Concrete Association (GCCA),
business a.m. has learnt from
information made available
to it over the weekend. The
association is described as a
progressive group dedicated
to developing and strengthening
the sector’s contribution to
sustainable construction.
The association said it
would focus on driving advancements
in sustainable
construction, working to en-
hance the cement and concrete
industry’s contribution to
a variety of global social and
developmental challenges. To
achieve this objective, GCCA
will promote the development
of durable, resilient and
environmentally sensitive
buildings and infrastructure at
global level.
With concrete now the
world’s second most consumed
product after water,
issues at the forefront of the
organisation’s agenda include
sustainable development and
urbanisation, as well as climate
change mitigation and
adaptation.
In addition, GCCA aims
hance the cement and concrete
industry’s contribution
to a variety of global social and
developmental challenges. To
achieve this objective, GCCA
will promote the development
of durable, resilient and
environmentally sensitive
buildings and infrastructure
at global level.
With concrete now the
world’s second most consumed
product after water,
issues at the forefront of the
organisation’s agenda include
sustainable development and
urbanisation, as well as climate
change mitigation and
adaptation.
In addition, GCCA aims to
foster innovation throughout
the construction value chain,
in collaboration with both
industry associations and inspiring
architects, engineers
and innovators.
With concrete
now the world’s
second most
consumed
product after
water
to existing associations at national
and regional level and
membership of GCCA is open
to cement manufacturers from
all over the world that share
the organisation’s values, and
partnerships will be developed
with organisations that share
its vision.
The nine members of the association
represent 1,046MTof
cement production capacity,
according to the Global Cement
Top 100 Report.
The association also aspires
to demonstrate how concrete
solutions can meet global construction
challenges and sustainable
development goals,
while simultaneously showcasing
responsible industrial
leadership in the manufacture
and use of cement and concrete.
GCCA’s seven other founding
members are CEMEX,
CNBM, CRH, Eurocement,
HeidelbergCement, Taiheiyo
and Votorantim.
The association will be led
by international cement companies
and headquartered in
London, complementing and
supporting the work done by
existing associations at national
and regional level and
membership of GCCA is open
to cement manufacturers from
all over the world that share
the organisation’s values, and

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
MARKETS DATA
29
The Nigerian Stock Exchange

30
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
MARKETS DATA

BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
COMMODITIES & AGRICULTURE
31
Miners, investors bet, fret over
latest commodities cycle
A
combination of accelerating global
growth and supply constraints has
driven raw materials — as measured
by the Bloomberg Commodity Index
— to their highest level in more than
three years, boosting the profitability and cash
positions of the world’s biggest mining houses.
As a result, the sector is enjoying its best
run since 2010 as investors look forward to
bumper payouts. Morgan Stanley estimates the
industry generated $23 billion of excess cash
last year and will generate a further $21 billion
in 2018, if current commodity prices hold.
That should give delegates plenty to celebrate
at the meetings, private dinners and
cocktail receptions that are an integral part of
Investing in African Mining Indaba.
But after two consecutive years of gains —
the FTSE 350 mining index, which counts Anglo
American, BHP Billiton, Glencore and Rio
Tinto as constituents has surged 186 per cent
since 2016 — the question those at Indaba will
be asking is, can the party continue?
For many the answer is yes, as long as the industry
maintains shareholder friendly policies
that place profits and dividends above megamergers
or building expensive new mines,
and demand in China — the world’s biggest
consumer of commodities — holds up.
“Valuations are low, balance sheets are
strong, and fundamentals are positive. This is
the sweet spot of the cycle, and mining shares
should outperform again in 2018,” says Christopher
LaFemina, analyst at Jefferies.
But for others, wary of the industry’s history
of violent boom and bust cycles, there will be
a temptation to lock in profits.
During the commodities boom of the 2000s,
the mining industry invested more than $900
billion of shareholder money on new projects
and deals to feed China’s seemingly insatiable
appetite for raw materials.
However, much of this new supply hit the
market just as growth in China started to slow,
sending prices — and with them the profits
of the biggest miners — into a tailspin during
2014 and 2015.
Chastened by the experience, the mining
industry spent the next couple of years cutting
costs, paying down debt and refusing to sign off
on new projects. But with commodity prices rising
as global growth accelerates, investors are worried
the industry could fall back into the old habits of
overspending and chasing market share.
“Miners need to convince investors that
returns are sustainable and avoid splurging
on excessive capital expenditure,” says Tal
Lomnitzer, deputy head of global resources at
First State Investments. “They need to find the
right balance between growth and returns to
shareholders.”
To that end, the sector’s reporting season,
which gets under way this week with annual
results from Rio Tinto on Wednesday, will have
a material bearing on the performance of the
sector this year.
Valuations are low, balance sheets are
strong, and fundamentals are positive. This is
the sweet spot of the cycle, and mining shares
should outperform again in 2018
Aided by higher commodity prices, the
Anglo-Australian miner is tipped to announce
the biggest dividend payment in its history
and top up its share buyback programme. But
equally as important will be the message Jean-
Sébastien Jacques, its chief executive, delivers
to shareholders.
Since he took the helm 18 months ago, Rio
has focused on generating cash and delivering
as much of it as possible to investors through
dividends and share buybacks. In the past year
alone, it has announced $8.2bn of cash returns,
putting the company ahead of many of its peers.
“We will allocate cash with discipline,”
Jacques told analysts and investors in December.
“As you know it’s a balanced allocation between
the strength of the balance sheet, long-term
growth — because we need to grow at some point
in time — and returns for the shareholders.”
Cementing in investors’ minds the idea
that miners can deliver consistent returns
while at the same time growing responsibly
will be key to driving a re-rating of the sector,
says Lomnitzer.
In spite of recent strong run, miners still
trade at a big discount. According to RBC
Capital Markets, the enterprise value of the
FTSE 350 mining index is 6.5 times prospective
earnings before interest, tax, depreciation and
amortisation. The wider MSCI World Index by
contrast trades on 10.
Another reason the sector could outperform
is the outlook for commodity prices.
Even though they have risen sharply over
the past year — copper has gained 20 per cent,
zinc 25 per cent and thermal coal 27 per cent —
there will not be a quick supply response with
miners suddenly able to ramp up production.
This is because the industry’s project pipeline
has been depleted by several years of costcutting
and austerity.
[Miners] need to find the right balance
between growth and returns to shareholders.
Ivan Glasenberg, chief executive of Glencore,
has stated he will not invest in new ‘greenfield’
mining projects, while BHP Billiton, the
world’s biggest mining company, has slashed
its capital and exploration spending from more
than $20 billion in 2013 to just $5.2bn last year.
Across the industry capex has fallen from a
peak of $160 billion six years ago to about $50
billion in 2017, according to Jefferies.
As higher commodity prices are reflected
by analysts in their profit estimates, this should
help push share prices higher, says Neil Gregson,
portfolio manager at JPMorgan Asset
Management.
“It’s probably going to be a year when the
sell side [analysts] are continually upgrading
earnings forecasts,” he says.
George Cheveley, portfolio manager at
Investec Asset Management, agrees. “If you
look at consensus forecasts and compare them
with current commodity prices you actually
have to factor in some pretty major falls not
to have earnings upgrades for a lot of the miners,”
he says.
The big risk to this optimistic outlook is the
ever-present fear of slowing growth in China.
However, analysts believe Beijing’s supply-side
reforms and war on pollution will help put a
floor under prices even if demand weakens.
In an effort to clean up its skies and improve
the profitability of bloated state-controlled
companies, Beijing has imposed supply constraints
on steel and aluminium production
and restrictions on copper scrap imports.
The environmental crackdown
has also hit domestic mine output.
Collectively, these actions
have helped support the price of
aluminium, steelmaking ingredient
iron ore, as well as zinc and
copper.
“The single most important
question for commodities is the
new environmental religion that
Chinese policymakers appear
to have caught and whether it
is structural or not,” says Nick
Stansbury, fund manager at Legal
& General.
“If it is, the implications are
massive and we are nowhere
near to pricing them in. They are
so much more far-reaching than
anyone realises,” he said.
Aside from China, perhaps the
other risk to further outperformance
will come from the urge to bank
profits, especially if costs start to pick
up because of higher oil prices and
the weakness of the US dollar. But
even here there are reasons to think
investors will stay the course.
“For those who have been in
from the bottom, psychologically
it’s difficult to believe share prices
are going to do more,” says Cheveley.
“But I think you have to look
past the gains in 2016 because it
was just a recovery from irrational
falls in the second half of 2015
and focus on the stronger balance
sheets and free cash flow that appear
sustainable through 2018.”
Shares in Anglo American,
which has a significant footprint
in South Africa, have risen 20
per cent since Cyril Ramaphosa’s
victory, outperforming the wider
market and its peers.
Ramaphosa, deputy president,
has already promised to review
a controversial industry charter
published by Zuma’s government
last year, which required at least 30
per cent of the sector to be owned
by black investors under measures
to redress sharp economic
inequality.
“If the mining charter is holding
us back, we must deal with
that,” Ramaphosa told this year’s
Davos gathering — addressing
concerns that the charter could
freeze investment by threatening
dilution for existing mining shareholders
in order to add new black
investors. Under the new charter,
previous black economic empowerment
deals are not given credit.
Ramaphosa added that he did
not want South Africa to miss a
commodities boom. Even during
the last one, South African miners
struggled to benefit because
of high labour costs and the difficulty
of overhauling ageing and
deep underground mines.
But while Ramaphosa is wellknown
to the industry — he
formed the country’s biggest
mineworkers’ union as an antiapartheid
activist, and later grew
wealthy on mining deals after the
ANC won power — much depends
on how quickly he could remove
allies of Zuma from control of
mining policy.
The architect of the charter,
Mosebenzi Zwane, Zuma’s mining
minister, will still be delivering the
welcoming address at the Investing
in African Mining Indaba, and
is unlikely to back down from calls
for it to be rewritten.
However, Zwane is implicated in
an investigation into the alleged influence
of the Gupta business family,
who are accused of using a friendship
with Zuma to control government
appointments and contracts.

February, Monday 05 - Sunday 11, 2018
business
a.m.
Still not for sale:
Aiteo’s prolific
Niger-Delta OML 29
Phillip Isakpa
Last November, formidable
indigenous but global Nigerian
oil producer, Aiteo,
was forced to go public
to deny a claim that had
then been making the round in the
closed international oil investment
community, that it was putting up
its oil mining lease 29 (OML 29)
for sale.
For Aiteo to have even bothered to
issue a statement in London, showed
how serious the scam had been taken,
for who would have thought anyone
would believe that a company, seriously
involved in the business of oil
exploration would think of letting its
cash cow go! It could only mean that
company was getting to ready to close
shop and move on to other things. But
Aiteo was having none of it.
The company had made a stake
to play in the business in Nigeria and
internationally, especially in Africa,
where its footprint is beginning to
be etched. Aiteo is holds 85 percent
interest in a consortium that successfully
bid for and won when OML
29 was offered for sale in 2014 by
Anglo-Dutch Shell, the international
oil company, a behemoth in Nigeria
since colonial times.
There had been confusion at time
about the ownership structure of the
consortium following the successful
Benedict-Peters, Founder, Aiteo Group
bid process, but it was clarified that
Aiteo Group led the consortium
to the bid data room as majority
stakeholder with the remaining 15
percent equity held jointly by Tempo
Energy Resources (10 percent) and
Taleveras (5 percent).
OML 29 was offered jointly with
the equally lucrative 60-mile Nembe
Creek trunk line by Shell and its partners,
France’s Total and Italy’s Eni and
Aiteo’s consortium succeeded after it
posted a bid of $2.562 billion. While
Shell, the operator of OML 29 sold its
30 percent holding in both the oil field
The sweetness of OML 29
lies in what it has under
its belly. Take a reading:
Proven and probable
reserves of OML 29 has
been estimated to be in
the region of 2.2 billion
barrels of oil equivalent
and pipeline, Total sold its 10 percent
and Eni SPA sold its 5 percent equity
holding. While $2.562 billion represented
actual cost for the acquisition
of the oil bloc and the pipeline, the
total cost of the transaction was put
at $2.7 billion when additional money
for working capital was factored into
the deal.
So why would well oiled investment
want to sell three just three
years after making such commitment
through the acquisition? It was
not clear why such misinformation
circulated at the time, but Aiteo had
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Production Data Information
OML29 consists of 9 fields including the iconic Oloibiri Oilfield (the first commercial oil discovery in Nigeria). It
stretches over an area of 983 square kilometers and also includes the Nembe Oil Field, Santa Barbara Oil Field
and Okoroba Oil Fields, and includes related facilities like the Nembe Creek Trunk Line NCTL, a 100 kilometres
long pipeline with a capacity of 600 thousand barrels per day. It holds 2.2 billion barrels of oil equivalent, BOE,
while its hydrocarbon fields could deliver as much as 160,000 barrels of oil per day, and 300 million standard cubic
feet of gas per day (mmsc/d) at peak output. It has 240,000 barrels of oil per day and 50 MMscf/d of installed
production capacity most of which have been impacted by sabotage, vandalism and theft within the Niger Delta
Region. OML29 is currently producing from three fields (Nembe, Santa Barbara and Odeama Creeks) with over
120 kbopd production potential.
OML29 produced around 43,000 barrels of oil equivalent per day (100 per cent) in 2014. And according
to Wood Mackenzie, a global leader in commercial intelligence for the energy, metals and mining industries,
OML29 is “the biggest producing onshore oil field in the formerly ‘SPDC/ NNPC’ JV”, and produced on average,
around the equivalent of 43,000 barrels of oil per day during 2014. According to the Africa Oil & Gas Report,
OML29 “averaged about 50,000bopd, (22,500bopd net to AITEO) until mid 2015,” but later went down to
35,000bopd. However, in March 2017, Aiteo Group announced that production levels at OML 29 had peaked at
90,000 barrels per day, tripling existing production records for the onshore block. Announcing the news, Aiteo’s
CEO, Benedict Peters, highlighted several existing and developing projects engineered to raise asset production
at OML 29 to over 150,000 barrels per day.
suggested that the group was “some
fraudsters running a reports-for-cash
syndicate.” The asset itself has done
pretty well since it was acquired as
the company said in November “since
the takeover of the asset, we have
successfully quadrupled production
that it would be commercially inept to
consider a disposal of any sort, now.
Second, there are several legitimate
entities that constitute ownership of
the oil block, such that it would be
practically impossible for us to unilaterally
consider disposing of the asset.”
What is it about OML29 that continues
to attract attention? Well, it’s the
most lucrative of the assets put up for
sale in 2014, which many wanted to
have being the most coveted. At the
time Shell had offered and sold four
blocs simultaneously with the following
winners emerging: Midwestern
Oil & Gas Plc/Mart Resources/Suntrust
Oil, under the Erotron Consortium
offered $1.2 billion to win the
bid for OML 18; Pan Ocean Oil Corporation
Nigeria Limited, operator of
the NNPC/Pan Ocean Joint Venture,
clinched OML 24 with its $900 million
bid offer; Crestar won OML 25,
while the Aiteo-led consortium won
the prolific OML 29 with the Nembe
pipeline.
The sweetness of OML 29 lies in
what it has under its belly. Take a reading:
Proven and probable reserves
of OML 29 has been estimated to be
in the region of 2.2 billion barrels of
oil equivalent, with its hydrocarbon
fields estimated to have a capacity to
deliver 160,000 barrels of oil per day
and 300 million standard cubic feet of
gas per day (mmsc/d) at peak output.
This would require focused and aggressive
work programme, to deliver,
say analysts. And that’s what Aiteo
has been doing, given the achievement
so far recorded with a current
production of 90,000 barrels per day.
There’s still more under the belly, so it
is understandable why some people
are imagining that it could be for sale.
Besides: “The Nembe Creek Trunk
Line is also an extremely valuable
asset as many other oil exploration
companies in Nigeria pay to use it
to transport their oil to international
markets.”
A financial crisis in 2018? The danger signs are starting to emerge
It is 10 years since the last financial
crisis, and it has taken that
long for normality to return.
For the first time since the
crisis, major economies are
expanding together. Unemployment
rates in the US and UK economies
have halved.
However, productivity and investment
growth has been on a declining
trend in major economies.
This productivity puzzle may
simply reflect the fact that, in a digital
age, we’re mis-measuring actual, real
productivity, but it is disturbing that
debt levels in the major economies
are now higher than pre-crisis levels.
The debt overhang may itself weigh
on longer-term potential growth, and
could also be problematic should
interest rate rises continue.
A potentially bigger problem is
financial market bubbles, alongside
what some commentators have called
“irrational complacency”.
Major central banks never take
responsibility for creating asset price
bubbles, but it is often cheap money
that is to blame. A decade of unconventional
monetary policy has
amounted to a $20 trillion monetary
stimulus, which now threatens the
return of financial instability.
There is a risk of market crashes in
equities, bonds, and credit markets.
Wage inflation might have been absent,
but financial asset price inflation
most certainly has not been.
In the process, this has created
substantial income and wealth inequalities.
Central bankers are realising that
their policies might backfire, creating
financial instability, though they
are publicly careful to play down the
risk of market crashes and systemic
financial failure.
The Fed has just implemented
a third rate hike for this year at the
December meeting. However, given
the stimulus implied by record highs
in US equities and dollar decline, US
financial conditions are looser than
last year.
There is little ammunition to combat
either another recession, or another
financial crisis – unless you
think ever-lasting quantitative easing
or helicopter money is the way to go.
There are more danger signs.
US equity markets are at record
highs and the S&P 500 is up around
20 per cent this year. The tech-heavy
Nasdaq is up over 25 per cent – reminiscent
of the 2000 dot-com crash.
Government bond yields are near
rock-bottom. The Bank of England
has found that the global risk-free
rate has touched a low not seen since
the 1300s.
At the same time, the ECB has created
a credit bubble, with European
junk bond yields actually below US
Treasuries. It is unsurprising that
the ECB is reluctant to withdraw
monetary stimulus due to concerns it
may trigger another Eurozone banking
crisis.
Strategists suggest we are nearing
the longest bull market in equities and
bonds for 100 years. Risk-adjusted
returns have been the strongest on record
since the 1980s. Equities, bonds
and credit are not usually simultaneously
strong, apart from during the
Roaring Twenties. It’s no secret what
happened then.
And it’s not just traditional markets
that have stretched valuations. Other
asset classes and instruments are in
a bubble.
Bitcoin and fine art are displaying
“Eiffel Tower” chart formations,
where the fall is just as steep as the
rise once you crest the top.
Sotheby’s share price has been a
historic indicator of financial crises
on the way. A peak in the share price
coincides with speculation and record
art prices. Guess what it’s pointing
at now.
We’re also seeing a return of socalled
toxic debt instruments.
Pay-in-kind toggle notes, which
allow companies to make interest
payments with either cash or more
debt, are coming back. When companies
have a cash-flow problem, these
instruments allow them to “toggle”
interest payments. This can catch
investors and companies in a deadly
embrace when a default wipes them
both out.
Ultra-easy central bank policies
have created ultra-low volatility. Equity
market corrections are now rarely
more than five per cent. Investors trust
central banks to back the markets so
look to buy the dip and not go short.
This explains why equity markets
seem impervious to geopolitical risk.
These same policies can contribute
to herd behaviour, sadly with the result
that everyone goes over the cliff in
the event of a crash. A big trade at the
moment would be to short the CBOE
VIX volatility index, based on a belief
that low volatility is here to stay.
NEIL
MACKINNON
Global Macro Strategist, VTB Capital