12 BUSINESS DAY C002D5556 Tuesday 06 March 2018 EDITORIAL PUBLISHER/CEO Frank Aigbogun EDITOR-IN-CHIEF Prof. Onwuchekwa Jemie EDITOR Anthony Osae-Brown DEPUTY EDITORS John Osadolor, Abuja Bill Okonedo NEWS EDITOR Patrick Atuanya EXECUTIVE DIRECTOR, SALES AND MARKETING Kola Garuba EXECUTIVE DIRECTOR, OPERATIONS Fabian Akagha EXECUTIVE DIRECTOR, DIGITAL SERVICES Oghenevwoke Ighure ADVERT MANAGER Adeola Ajewole MANAGER, SYSTEMS & CONTROL Emeka Ifeanyi HEAD OF SALES, CONFERENCES Rerhe Idonije SUBSCRIPTIONS MANAGER Patrick Ijegbai CIRCULATION MANAGER John Okpaire GM, BUSINESS DEVELOPMENT (North) Bashir Ibrahim Hassan GM, BUSINESS DEVELOPMENT (South) Ignatius Chukwu HEAD, HUMAN RESOURCES Adeola Obisesan EDITORIAL ADVISORY BOARD Dick Kramer - Chairman Imo Itsueli Mohammed Hayatudeen Albert Alos Funke Osibodu Afolabi Oladele Dayo Lawuyi Vincent Maduka Wole Obayomi Maneesh Garg Keith Richards Opeyemi Agbaje Amina Oyagbola Bolanle Onagoruwa Fola Laoye Chuka Mordi Sim Shagaya Mezuo Nwuneli Emeka Emuwa Charles Anudu Tunji Adegbesan Eyo Ekpo ENQUIRIES NEWS ROOM 08022238495 08034009034}Lagos 08033160837 Abuja ADVERTISING 01-2799110 08116759801 08082496194 Ogbeh and Thailand’s rice export Last week Friday at the meeting of the Presidential Fertilizer Initiative (PFI) and the Fertiliser Producers and Suppliers of Nigeria (FEPSAN) presided over by president Muhammadu Buhari at the presidential villa, Abuja, minister of agriculture, claimed Nigeria’s reduced rice import from Thailand has decline by about 95 percent and has led to the collapse of seven rice mills in Thailand and raised unemployment rate to four percent in the country. Ogbeh was quoted as saying: “... two weeks ago, the Ambassador of Thailand came to my office and said to me that we have really dealt with them...But I asked what did we do wrong and he said unemployment in Thailand was one of the lowest in the world, 1.2 per cent, it has gone up to four per cent because seven giant rice mills have shut down because Nigeria’s import has fallen by 95 per cent on rice alone. “So, Mr President we thank you for the support and we thank all the agencies and those of you in the private sector for your resilience...” Even the president recently claimed that Nigeria’s rice import was down by 90 percent and that rice import will be completely stopped this year to encourage local production. However, a simple check reveals that both the president and minister of agriculture were greatly mistaken and the figures they advertised are not true. First, Thailand’s rice export has been on a continuous growth trajectory, reaching a record high of 11.2 million tonnes last year. Data shows rice exports grew at 37.2 percent year-on-year. Information available on the Rice Exporters Association of Thailand website shows Nigeria’s import of rice for the last three years has been negligible - 58, 260, 644, 131 and 23, 192 metric tonnes in 2015, 2016 and 2017 respectively. Second, the unemployment figure in Thailand stands at 1.3 percent as at January 2018. So, it is neither true that rice mills have been shut down due to Nigeria’s low imports nor that unemployment figure has gone up to four percent in Thailand. Even if we are to believe the minister that Thailand’s ambassador made that claim, he has a responsibility to cross-check and not make claims that are obviously false and which makes a mockery of us as a country. Although the government has been claiming success and taking the glory for reducing rice imports, the reality is more nuanced and doesn’t cover us in glory like the minister and president want us to believe. Rice importation through the land borders have been banned since 2015 and can only be brought in legally through the ports at a discouragingly high tariff of 70 percent. So, technically Nigeria has banned rice importation. However, as legal importation to Nigeria drops drastically, neighbouring countries such as Benin, Cameroun, Niger and others have greatly increased their import of parboiled rice, which ironically, is consumed only in Nigeria. Data by the Thai Rice Exporters Association shows that Benin Republic’s imports from Thailand from January to November 2017 stood at 1.64 million metric tonnes, a 32 percent increase from 1.24 million metric tonnes within the same period in 2016, and an increment of 104.45 percent from 805,765 metric tonnes exported to Benin republic in 2015. Cameroun also imported 663, 667 metric tonnes of parboiled rice from Thailand between January and November 2017, a 47.64 percent increase from 449, 513 within the same period in 2016, and 449, 297 metric tonnes in 2015. It is safe to say that most of the imports to these countries end up in the Nigerian market through smuggling. An investigation carried out by BusinessDay some months ago also shows that smuggling is rife along the official border points and despite the claim that rice importation is banned through the borders, traders continue to import the commodity through official border points usually after settling customs officials. To add to our woes, the price of the smuggled rice are way lower than those of locally produced rice, which means the problem will remain with us for a long time to come. It is noteworthy that the government wants to ensure self-sufficiency in rice production. But this must be done in the right way and with regards to the realities on the ground. The bandying of false data and official import figures the reality will continue to make a mockery of us as a country. SUBSCRIPTIONS 01-2799101 07032496069 07054563299 www.businessdayonline.com The Brook, 6 Point Road, GRA, Apapa, Lagos, Nigeria. 01-2799100 LEGAL ADVISERS The Law Union MISSION STATEMENT To be a diversified provider of superior business, financial and management intelligence across platforms accessible to our customers anywhere in the world. 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Tuesday 06 March 2018 BUSINESS DAY 13 COMPANIES & MARKETS Company news analysis and insight Banks’ capital adequacy could worsen on IFRS 9 Pg. 14 Nestle Nigeria generates earning well above levels seen 5 years ago BALA AUGIE Nestle Nigeria Plc generated Naira earnings well above the levels of the past five years as the company continues to surmount the headwinds brought on by weak consumer spending, rising input costs and currency volatility. According to the company’s 2017 audited financial statement, net income hit N33.72 billion, which represents a 325.25 surge from N7.92 billion figures recorded in the corresponding period of 2016, which is still higher than the 5.50 percent growth recorded in 2013, when profit was N22.25 billion, as the chart shows. A price hike across key product line, the introduction of market penetrating products, and the introduction of the flexible exchange by the apex bank helped underpin Nestle’s performance as sales spiked by 34.21 percent to N244.15 billion in December 2017 from N181.91 million as at December 2016. This compares with the 14.03 percent year on year growth in sales for recorded in 2013, 7.69 percent uptick in 2014,5.54 percent increase in 2015 sales and 20.15 percent year on year increase in sales in 2016. The precipitous drop in operating performance in the years 2014, 2015 and 2016 was due to rising inflation, severe dollar shortages, currency devaluation as raging Islamists insurgency in north limited the company’s product distribution channel. A sharp drop in oil price combined with severe dollar shortages of mid 2014 hindered manufactur- frowned at. “Because of the low rate they demanded on their insurance policies in most cases, they outbid their competitors for businesses and consumers always want to go for policies with lower rates. “However, in the event of claims, the overzealous underwriters do default because the premium they charged is not the actual value of the products. ” she said. Adegbayi advised policy holders to fight for rate-cutting by requesting for claims on their insurance policies. She said that would discourers from importing raw materials and equipment to meet production. Firms had to buy currency at the inaccessible black market rate, which resulted in imported inflation as raw materials costs spiked. The de facto devaluation of the currency in 2015 to N198/$ damped consumer spending hence undermining the revenue and margins of Nestle’ and its peers. In 2016, the economy capitulated to the vagaries of macroeconomic shocks and tumbled into its first recession in 25 years while inflation rate were at all-time high of 17.21 percent in the month of October. However, the gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017. An increase in crude prices and the introduction of a new foreignexchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while paving the way for consumer goods firms to have access to dollars. The above economic recovery showed face in the numbers of Nestle as net margins, a measure of efficiency, surged by 2300 basis point to 22.98 percent in December 2017 from 4.35 percent as at December 2016, the strongest growth in 5 years since Business- Day started gathering data. Nestle’s closed at N1400 as of Friday’s trading session on the Nigerian Stock Exchange, valuing it at N1.11 trillion, the stock is down 10.06 percent. Nigeria may lose quest for regional port hub as Antwerp, Dakar sign agreement on collaboration – expert Obinna Okoafor, a maritime expert, says Nigeria’s desire of becoming a regional port hub for freight in the West and Central Africa Region may no longer be achieved. Okoafor, a Licensed Customs Broker, made the observation while reacting to the Port of Dakar Senegal-Belgium partnership agreement signed on Friday. He said that with the agreement, Nigeria’s desire of becoming a regional maritime hub was under threat. The maritime expert told the News Agency of Nigeria (NAN) in Lagos on Sunday that the two ports were working to collaborate closely in the years ahead. According to him, the Port of Antwerp, the second-largest port in Europe, seeks to reinforce its historic position as leader on the coast of West Africa by partnering Dakar Port. “The Dakar port, on its part, is leveraging on the collaboration as a way to position itself as the main regional hub for freight for the region, a position Nigeria is eyeing. “By the time all necessary formalities are put in place by the two countries while Nigeria ports are still contending with lack of desired infrastructure, the port of Dakar will take the status of the regional maritime hub. “It is not in Nigeria’s interest to lose the regional maritime hub status to another country going by its efforts and contributions to peace process in the region,’’ Okoafor said. He said it would amount to exporting the much needed jobs Insurance expert implores Nigerians to demand genuine claims from Insurers The Executive Director, Leadway Assurance Limited, Adetola Adegbayi on Saturday advised Nigerians who bought insurance policies to demand claims from their insurers whenever they incurred risk on what they had insured. Adegbayi said this at a media training session by the company in Lagos. She said some Nigerians with insurance policies were ignorant of when and how to make claims. She advised policy holders to always endeavor to meet their insurers to make claims, instead of deciding to bear the financial burden themselves. She said the move would attract more Nigerians to key-in into insurance and support the National Insurance Commission’s (NAICOM) market development initiatives. She said that because some holders were not demanding claims, some operators had cashed on this loophole. “What they do is to rate-cut policies to unreasonable price, with the assumption that the insured will not demand for compensation, a pathetic situation NAICOM always age underwriters from exploiting policy holders, would sit up and charge the normal rates that could sustain them when request for claims arises. Adegbayi also advised Nigerians to report defaulting underwriting firms to NAICOM and the law enforcement agents. She said that necessary steps would be taken to pay commensurate claims to the aggrieved insured. “Any insurance company found to have erred will by defaulting in claims obligations will be heavily sanctioned by NAICOM, ” she said. to Senegal, while Nigerian youths walloped in joblessness. He called on port managers to fast track policies aimed at port development to make the Nigerian ports attractive to shippers. NAN reports that with an annual freight volume of 17 million tonnes, Dakar is one of the largest ports on the coast of West Africa. The port city occupies a uniquely strong position on the world. The signing ceremony was attended by Belgian First Minister, Charles Michel and its Deputy First Minister and Minister of Development Cooperation, Alexander De Croo, both on a working visit to Senegal.