BusinessDay 23 Aug 2018

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Thursday 23 August 2018 10 BUSINESS DAY C002D5556 COMMENT UCHE UWALEKE Uche Uwaleke is a Professor of Capital market and the Chair of Banking and Finance Department at the Nasarawa State University Keffi The numbers are in and the concerns are mounting. In its latest report on the country’s public debt stock, the Debt Management Office puts the total debt of the federal government, the thirty six states and the FCT as of June 30, 2018 at N22.38 trillion (or USD73.2 billion) representing about 19 per cent of GDP. This comprises external debt of about N6.75 trillion (or USD22.08 billion) and domestic debt of about N15.629 (or USD51.12 billion). There are divergent opinions regarding the sustainability of the present public debt levels. Leading the proponents of ‘’no cause for alarm’’ is the DMO whose Director-General Ms. Pat Oniha has been quoted as asserting that “ Nigeria’s borrowing remains sustainable in the short, medium to long term levels, guided by the DMO objective of prudence”. Relying on a low total Public Debtto-GDP ratio which is far below the 56 per cent World Bank’s debt sustainability threshold for countries in Nigeria’s peer group, comment is free Send 800word comments to comment@businessdayonline.com On the growing concerns over debt sustainability the DMO has gone ahead to upwardly review the self-imposed country-specific debt limit from 19.39 per cent to 25 per cent in the medium-term of 2018-2020 thus providing scope for more government borrowing. However, not a few, including the IMF, have faulted this move pointing to the already high cost of servicing public debt which is undermining government spending plans. Although the increased financing requirements needed to fast track economic recovery and address the huge infrastructural deficit would entail enormous funding resources including borrowing, rising debt service payment relative to revenues, it is argued, places a squeeze on government’s ability to fund its expenditure programmes. To buttress this point, data from the Office of the Accountant General of the Federation and the Budget Office for the period January to June 2017 indicate that on a pro-rata basis the budgeted FGN 48.5 per cent share of federally retained revenue was N1.75 trillion while actual revenue over the same period was N1.3 trillion resulting in an adverse variance of about N438 billion. Similarly, debt service for the first half of the year was budgeted at N920.67 billion while the actual was higher at N927.74 billion. Therefore, the actual debt service to revenue ratio between January and June 2017 works out at about 70 per cent - quite high by historical standards. This figure speaks for itself, underscoring the magnitude of the debt burden. ‘ ...that to deal with the public debt challenge fiscal discipline is required at all levels of government. Alternative funding sources should be explored including privatisation through the Nigerian Stock Exchange to engender inclusive growth as well as through Public- Private Partnership (PPP) arrangements ’ As a corollary, the partial approach to the determination of public debt stock helps to reinforce the false notion of debt sustainability. If public debt is the totality of government’s obligations, a more comprehensive approach would sweep into the debt basket outstanding debts owed to contractors and pensioners. A conservative approach would equally capture judgment debts as well as those of the Assets Management Corporation of Nigeria especially against the backdrop of the fact that it will one day embrace its sunset clause and cease to be a going concern. The federal government’s strategy of increasingly resorting to external borrowing to fund budget deficit finds explanation in the increasing cost of servicing domestic debt. This disposition accounts for the growing quantum of foreign debts contracted on commercial terms in recent times with much emphasis placed on tapping the Eurobond markets. This strategy is yielding results with the debt mix gradually trending towards to the 40:60 DMO target from 15:85 previously to 30:70 currently in terms of external and domestic debts respectively. Nevertheless, the preponderance of fragilities in the Nigerian economy warrant a cautious approach to new external borrowing- one that is shy of nonconcessional loans contracted purely on commercial terms such as Eurobonds. Indeed, the country can only hope that there are no more currency shocks in the near future. The International Monetary Fund (IMF) in its most recent article IV Consultation report had raised a red flag regarding the debt level which was “creating some form of vulnerabilities.” Even the result of the 2017 Debt Sustainability Analysis exercise by the DMO admitted that ‘’the ratios of External Debt Service-to-Exports and External Debt-Service-to-Revenue also deteriorated throughout the projection period thus, indicating that Nigeria’s Total Debt portfolio is highly susceptible to Revenue shocks’’. Indeed, high external debt itself can be an obstacle to growth as argued in the debt overhang literature. External borrowing can be detrimental if it fails to generate a commensurate increase in a country’s capacity to repay as the Nigeria’s case seems to demonstrate. Data obtained from the DMO website reveal that Nigeria’s external debt stock as at 30th June 2018 of about USD22.08 billion comprises USD10.88 billion from Multilateral sources (representing 49.28 per cent), USD2.40 billion Bilateral (or 10.87 per cent) and USD8.80 billion Commercial (chiefly Eurobonds) which translates to 39.85 per cent. Although commercial debt represents less than 40 per cent of the total external debt stock, it took up the highest share of the actual external debt service payments in the second quarter of 2018 at 56.52 per cent with Multilateral at 26.28 per cent and Bilateral at 7.92 per cent. The country’s ratio of external debt service to revenue may be relatively low, but the pre-2005 experience —when the country’s external debts reached unsustainable levels which hampered for many years efforts to achieve inclusive growth —serves as a sober reminder of what can go wrong. This underscores the importance of prioritizing concessional external loans over commercial debts consistent with the standard framework for debt sustainability. Note: The rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com TUNDE AJIBIKE Tunde Ajibike is a staff of Oyo State Ministry of Information, Culture and Tourism, Ibadan It is saddening to hear about the sudden and untimely death of nine corps members currently serving in Taraba State of Nigeria. It was reported in the media that nine out of twenty two corps members got drowned while picnicking at River Mayo – Selbe in Gashaka Local Government Area of Taraba State. It is unfortunate that the upsurge in volume of water carried the young graduates away and their corpses were later found in the river. The trend is becoming worrisome and there is need to urgently address it. How do we explain the calamity which is traceable to youthful exuberance on the part of this young graduates who are suppose to be the great leaders of tomorrow? It is disheartening that they cut their lives short abruptly and threw their parents into deep mourning. While it is humanistic to commiserate and condole with the parents, relations, friends, and the National Youth Service Corps (NYSC), it is also expedient to checkmate the excesses of these corps members and re-orientate them to eschew acts of violence, vices and misdenamour that are Incessant death of corpers: Who is to blame? inimical to their health and well being. No doubt, the NYSC scheme is a laudable programme conceptualized and designed by the Federal Government of Nigeria on 22nd May, 1973 with the aim of using it as a tool of reconciliation, reconstruction and rebuilding of the nation after the civil war. It was primarily established based on decree 24. It is obvious that the scheme was created to encourage and develop a common ties among the youths of Nigeria and promote national unity but the events unfolding these days is sending wrong signal to the members of the public. There is no gainsaying the fact that Nigerians are becoming skeptical about the veracity of the claims made by the NYSC that the welfare of corps members is paramount to the scheme. The Director General of the NYSC, Brigadier General Suleiman Kazaure confirmed that 95 percent of death recorded by the corps members was due to road accident. It is baffling to observe that corps member embarked on unnecessary and frivolous journey in spite of the words of admonition to take permission before travelling out of their respective areas of primary assignment. Not only this, corps members were brazenly maimed by hoodlums during elections, a typical example is an orphan, Okonta Samuel Dumebi, who was gruesomely murdered during Rives State’s re-run election. A corps member was also shot dead by a policeman on Wednesday, 4th July, 2018, a SARS officer identified as Benjamin Peters on the day of her Passing out Parade (POP) at the Federal Capital Territory. The case of Ojesola Taofeek, a young graduate serving in Bayelsa State that got drowned 3 months ago in Nembe River is still fresh in the memory of Nigerians. The corps member was reportedly visited Ogbolomabiri Jetty to take pictures of the waterside as part of memories during service year when he accidently fell in to the river. All attempt to rescue him proved futile, he lost his life in the process. Another pathetic incident was reported in the media which involved three corps members that lost their lives during the 2016 Batch B, Stream 1, Orientation Course in Bayelsa, Kano and Zamfara States. The death of the trio, Chinyerun Nweneda Elechi; Ifedapo Oladapo and Monday Asquo Ukeme followed brief illness and the NYSC claimed that medical teams in the camps battle to save their lives in line with established procedures, hence, some critics are insinuating that NYSC is fond of spurious claims that cannot be sub- stantiated with verifiable evidences. The in exhaustive list of corps members that passed on during the orientation programme generated a lot of controversy. Another good example is Miss Hilda Amadi who was reportedly died during the orientation camp in Kwara State. The incessant killing of corps members and the avoidable deaths of these young graduates is adversely affecting the corporate image of the NYSC in recent time. The death of corps members during the orientation camps across the nation was purportedly alleged to be caused by the negligence of the medical team of the NYSC, who are either incompetent or manifesting carefree attitude which consequently, led to the death of the corps members. To this end, a school of thought advocated for the scrapping of the scheme, they premised their argument on the fact that the scheme has outlived its relevance and the purpose of establishing it is almost defeated, however, it will be unfair to blame the NYSC for the death of all the corps members in Nigeria. While it is apparent that some deaths are natural, which could be referred to as acts of God, some others are self inflicted. Apparently some corps members are disobedient and live sedentary lifestyle that predisposes them to dangers and untimely death. We cannot blame the NYSC for the death of Corps members that involved in vehicular accident while embarking on frivolous and unauthorised journeys. Also, corps members that patronize club houses and take delight in “crawling” in the midnight. The law enforcement agents could mistaken them for robbers or maraunders. Most often, they may be arrested and locked up or shot in the midnight. These young men and ladies involved in a lot of sharp practices and vices ranging from cyber crimes; prostitution; kidnapping; highway robbery; abduction; drug abuse; raping; ritual killing; advance fees fraud and so on. The parents have significant roles to play to reduce the persistent killing of the corps members and minimise the untimely death of these young graduates. It is behoves on parents to enforce discipline especially at the formative stage of the lives of their children. It is disheartening to observe that some parents are running permissive home at the expense of their children. Therefore, to ensure the safety of the lives of the corps member it is a responsibility of all the stakeholders. Send reactions to: comment@businessdayonline.com
Thursday 23 August 2018 COMMENT OLUFEMI AWOYEMI Awoyemi lives in Lagos and wrote via (femiproshare@gmail.com) “Ethics is knowing the difference between what you have a right to do and what is right to do.”- Potter Stewart The mandate given to the newly constituted executive management of the NSE post-Ndi Okereke-Onyuike was to develop, grow and implement an exchange driven by, and able to hold itself to the best possible standards of governance and to exercise extreme caution where any appearance of or circumstance may present itself. The exchange has been executing this mandate without incident till Friday, August 17, 2018 when it supervised the launch of a private foundation of the CEO at its office, including organizing a bell ringing session; an activity hitherto reserved for departing CEOs. This is an isolated case but one that indicates acquiescence, if not support from the NSE Council - the mandate keepers. Mr. Oscar Onyema is thoughtful, professional and a gentleman who has every right to pursue socially uplifting causes. It is a good thing to do but not sufficient to meet the highest standards of corporate governance; in so far as he holds the position of the CEO of the exchange. I believe that this was an honest mistake devoid of ulterior motives yet has however thrown up obvious conflicts arising from the use of the exchange in the launch and promotion of the foundation. The related issues, impact and implications arising therefrom and related to now forms the subject of this memo to the market. That said, when it comes to how and what Oscar Onyema, the NSE Council and indeed the foundation should decide next on this matter, sovereignty over decision-making does not rest with commentators and independent analysts like me; they rarely do. It will be one in which the parties will have to make in the best interest of the market – as they wish to be remembered. It is my expectation that pedigree, intent and value orientation(s) will kick in and corrective action will be taken to make this a non-issue. Context matters Market operators know the story of Ndi Okereke-Onyiuke’s 2008 outing under the aegis of “Africans for Obama Campaign”, the fund-raising that followed, and the ensuing governance issues raised concerning the director-general’s role and that of the Nigerian Stock Exchange (NSE) as an institution. Students of Nigerian corporate governance history will equally recall that Ndi’s mistake here was to repeat the May 2005 act by then President Obasanjo to invite and receive donations into the Olusegun Obasanjo Presidential Library (OOPL) project which was launched in Abeokuta with the goal of raising N7 billion for the project, while he was still in office. It would appear that the Nigerian Stock Exchange hasn’t grasped C002D5556 Memo to the market – The NSE, Oscar Onyema foundation and corporate governance that history lesson fully. Instead, the exchange seems to be acting out the same script, the consequence of which would indicate sadly that there is no institutional memory or sustained desire to elevate the governance environment in our markets beyond where it bottomed out. To “mobilise and sensitise Africans about the Obama policies and message”, Ndi Okereke-Onyuike, OON, then Director-General/ CEO of the Nigeria Stock Exchange in 2008 organized and caused to be held an August 11, 2008 glamorous fundraiser where business leaders and high-society elites paid up for tables. This generated a whole lot of heat and enquiry for which she was cleared of any wrongdoing because no Nigerian laws were broken. That said, the fact that US laws prohibited overseas donations ab-initio made the purpose, positioning and promotion of the fundraiser and the associated role of the exchange a continuing corporate governance concern, especially on matters bothering on conflict of interest and of roles. To demonstrate and deepen democracy in Nigeria, then President Obasanjo initiated and caused to be incorporated on November 12, 2002 the Olusegun Obasanjo Presidential Library Foundation and subsequently held a fundraiser on Saturday, May 14, 2005 for the said presidential library. Donors to this project included oil companies, financial institutions, business leaders and high-society elite. Good intentions actualized should matter & be encouraged in our society The referenced saga above exemplifies Oscar’s predicament with the launch on Friday, August 17, 2018 at the Exchange, of the ONO Foundation, which for all intents and purpose speaks to our common humanity and response to the plea for private sector leaders to play a structured role in helping to build a better society. Babatunde Folawiyo, a wellregarded business leader and chairman, board of trustees, ONO Foundation, echoed the message from Oscar Onyema when he said “the foundation is borne out of an understanding that the society of our dreams cannot materialize if its future (the children and the youth) are not properly trained, inspired and equipped to be the catalyst and springboard of change and growth”. Good intentions, bad optics for governance The reasoning for the foundation is not a problem and should not be a subject of a debate. The issue however is with the launch signaling, timing, linkage to the exchange and role of the principal progenitor in current status. It is all about corporate governance which according to Advocate Johan Myburgh “is not a matter of right or wrong; it is more nuanced than that.” The nuance is exemplified in the optics. This was an Oscar Onyema who was the CEO of the NSE but decided to seat for the exams of the Chartered Institute of Stock- ‘ I believe that this was an honest mistake devoid of ulterior motives yet has however thrown up obvious conflicts arising from the use of the exchange in the launch and promotion of the foundation ’ brokers (CIS), passed and thus conferred esteem upon the practice members. He is, and has always been committed to market best practice and this is the threshold with which the current optics is being viewed. The deployment of socially uplifting projects in pursuit of the common good seldom succeed when deployed under a cloud of ethical and governance challenges. Instead of saluting Oscar however for the launch as he did it, we may unfortunately end up seeing him as a conspicuous victim here of his own good track record to date on the subject of best practice and higher standards corporate governance. There must be a more cogent explanation for the role of the exchange beyond rules, conventions and privileges given what we know of the man and his service pedigree. I am not aware of any known case of any wrongdoing against the CEO but believe that the elimination of ‘incestuous relationships’ is critical to the functioning of the exchange CEO in the discharge of the CEO’s responsibilities. Oscar N. Onyema is the CEO of the Nigerian Stock Exchange (NSE), a position he was employed to on 4 April 2011; and for which he is currently serving a second fiveyear term. He has over twenty years working experience in the United States of America‘s financial markets and the Nigerian information technology sector. Onyema is also the Chairman of the Central Securities Clearing System (CSCS) Plc, a fellow and member of the Governing Council of the Chartered Institute of Stockbrokers of Nigeria (CIS), the President of the African Securities Exchanges Association (ASEA), a Global Agenda Council member of the World Economic Forum (WEF), member of the Board of Trustees of the Investors’ Protection Fund (IPF), and he serves on the boards of all subsidiaries of The Exchange, National Pension Commission of Nigeria, FMDQ OTC PLC. In his work coverage, he had served as the senior vice president and chief administrative officer at American Stock Exchange (Amex), BUSINESS DAY 11 comment is free Send 800word comments to comment@businessdayonline.com which he joined in 2001 and has the unique distinction of being the first person of colour to hold that position, and was instrumental in integrating the Amex equity business into the New York Stock Exchange (NYSE) Euronext equity business after the latter’s acquisition of Amex in 2008. He then managed the NYSE Amex equity trading business, which he helped position as a premier market for small and mid-cap securities. Oscar, an alumnus of Harvard Business School where he completed the Advanced Management Program, is no slouch and he knows his onions. It is this level of responsibility, engagement and exposure that defines minimum expectations and professional conduct which makes it all the more baffling why he would allow his name to be associated with, or involved in the implied, if not apparent conflict of role situation, the launch of the Oscar N. Onyema Foundation (ONO) at the premises of the exchange presents. The Nigerian Stock Exchange (as a self-regulatory organization), has done a lot of work in the areas of corporate governance and has adopted best practices as a key element in achieving its vision and mission. This is well articulated and demonstrated by its governing board - the National Council of the Exchange - who regards corporate governance as fundamentally important to the discharge of its responsibilities and its conduct in all its dealings with its stakeholders. It would thus stand to reason therefore that any appearance of conflict will be an issue to be addressed under risks associated with the executive committee’s mandate. Identifying risks and concerns The Friday escapade and the questions it threw up, ought to have been an issue which the governing council ought to have addressed its minds to prior to the event; and immediately afterwards vis-à-vis the obvious corporate governance implications arising therefrom, in a clime like ours and at a time like this; especially when juxtaposed against our recent history of an incestuous relationship-biased regulatory environment, and the steps needed to restore confidence in the financial market system, nay the capital market. The fact that, three or more years after, the board of the Securities & Exchange Commission (SEC) of Nigeria has not been officially constituted illuminates actions taken by a SRO operating in a governance challenged environment more clearly. Taking together, a common view of the ONO foundation profile the existence or implied infusion of a real or perceived conflict of interest or/and role situation on face value; at the minimum. An attempt to articulate and decouple the two roles the CEO of the exchange seeks to play here is both a matter of precedence and corporate governance ethos at the exchange. The primary concerns relate to the determination of the following: 1. As an employee of the exchange, was there a need for, and was a request made, and an approval granted by the Council of the Exchange. a. Was there an approval for the CEO to serve as a trustee and board member of a privately funded foundation named after him? b. Would having a foundation bearing his name and having some aspects of its objects similar to undertaking by the exchange’s CSRplan have led to a consequential review of best efforts (including for example the mentoring program)? c. Would conducting such a launch in the exchange and deploying its resources in the public engagements require an approval? and d. Did the council consider it fit and proper to approve the hosting of a bell ringing session for the CEO, an otherwise revered activity reserved as a sending-off gesture by the exchange for deserving executives; especially when such administrative approvals were vested in the CEO (the beneficiary in this case)? 2. Is it an allowable practice for a serving CEO to hold a board/ trustee position in a private entity (including an NGO with related parties on board) while in office? 3. Are there provisions for handling co-board positions with directly related party(ies) of a listed entity in the code and are there waivers for this? 4. Are there disclosure of a conflict of interest or role requirements for: a. The exchange’s CEO where such a proposition presents itself? b. Any member with direct or indirect dealings with the exchange? c. The elimination of safeguards or wall between the exchange and the foundation? 5. What advisory will the NSE provide to firms who approach it seeking guidance in deciding which social cause (CSR) is priority to the exchange between NSE’s CSR activities (corporate cancer funding, schools program etc) and the ONO foundation’s programs? 6. Would the duplicitous representation not serve to convey and deliver an “unintended consequence” on stakeholders involved with the exchange, who would feel the pressure and compulsion to “support” the CEO’s foundation as part of ‘good relationship management? 7. Would such support contributions not qualify as in-kind benefits or/and possibly a vehicle for the inducement of a principal officer of the exchange? 8. Under what circumstance is such a practice allowable for other executive committee members who may also be so motivated to pursue such socially beneficial cause(s)? A review of these possible scenarios and best practice cases guided us to reaching a position, if not a conclusion – that this was a bad precedence and one that the market and principals need to work together on by elevating thought to resolve along the lines of institution building. Note: The rest of this article continues in the online edition of Business Day @https://businessdayonline.com/ Send reactions to: comment@businessdayonline.com
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