19082019 - Nigeria to spend N2.53bn on 43 ministers

FINANCIAL VANGUARD
Will the last inves<strong>to</strong>r on the NSE
please put out the lights?
Banks market capitalisation
drops by N657bn —August 12,
2019.
Inves<strong>to</strong>rs lose N157.7bn as 43
s<strong>to</strong>cks decline —August 13,
2019.
WHEN in 2016 the
forecast of a continuous
decline in s<strong>to</strong>ck prices was
made, a friend asked me when
it will end and a recovery gets
underway. The answers
provided were simple. The bad
news for inves<strong>to</strong>rs, whether in
the capital market or elsewhere,
will continue as long as <strong>Nigeria</strong>
has a Federal Government
whose leaders don’t understand
how modern economies work.
The unceasing competition
among nations of the world for
advantage will always work in
favour of countries blessed with
leaders with a great deal of
know-how. <strong>Nigeria</strong>,
unfortunately, is stuck with
economic illiterates managing
our fortunes for us. Furthermore
every quarter that produces
poor results will see us fall
farther behind other nations and
also make it more difficult <strong>to</strong>
catch up.
A deregulated capital market
such as ours presents
government and the governed
an objective report card of what
global inves<strong>to</strong>rs think of our
performance. No senior special
adviser on media or minister of
mis-information can claim that
we are doing very well on the
economy when the trend
remains downwards for almost
27 months. The reasons are not
<strong>to</strong>o difficult <strong>to</strong> understand for
those not wedded <strong>to</strong>
government propaganda.
Capital is a coward; it takes
flight at the first serious sign of
trouble. The first serious sign of
trouble came in 2016 when the
economy went in<strong>to</strong> a recession
for the first time in 38 years. The
results were made available in
the first quarter, Q1, of 2017.
Inves<strong>to</strong>rs expected a vigorous
response from the Federal
Government <strong>to</strong>wards strong and
quick recovery. What followed
was not reassuring and induced
pessimism about the Federal
Government’s ability <strong>to</strong>
understand and manage a
complex economy.
To begin with the president
had prolonged health
challenges - which led <strong>to</strong> a lot
of ugly speculations about the
captain of the <strong>Nigeria</strong>n ship of
state. The vice president
stepped in and filled some of
the political vacuum created; but
he failed <strong>to</strong> take any significant
measures <strong>to</strong> accelerate
economic growth.
Meanwhile, the 2017 budget
was hostage <strong>to</strong> divisive politics.
The leaders of the executive and
legislative branches of
government forgot (or never
realised) that bad politics will
drive out good money from any
economy any time. Collectively,
they behaved as if <strong>Nigeria</strong> was
isolated from the globalisation
of all markets.
A friend in need is no friend
of mine —American comedian.
The budget was eventually
passed in late May and signed
in early June. By then, the more
jittery foreign portfolio inves<strong>to</strong>rs
had started <strong>to</strong> check out. They
knew from experience about the
verdict of his<strong>to</strong>ry on such
matters.
A budget passed so late in the
year and, with no growth
stimulus of any sort, invariably
results in low Gross Domestic
Product, GDP, growth. They
were absolutely correct. The
year 2017 ended with 0.8 per
cent growth - barely noticeable.
With -1.4 recorded in the
previous year, the cumulative for
2016 and 2017 was still negative.
Given the depressing results
for the first two years, many
presidents invariably dissolve
the cabinet and attempt <strong>to</strong> bring
more experienced people in<strong>to</strong>
government <strong>to</strong> accelerate
development. Nothing like that
happened. Individuals
appointed on account of loyalty
or <strong>to</strong> pay political debts were
retained until the end. The
ministers of the most important
FINANCIAL VANGUARD
LAPO MfB raises share capital <strong>to</strong> N3.5bn
By Providence Emmanuel
LAPO Microfinance Bank,
MfB, Limited has
increased its authorised share
capital by 75 per cent <strong>to</strong> N3.5
billion from N2 billion. This was
done by the creation of three
billion additional ordinary
shares of 50 kobo each, which
ranks pari-passu in all respects
with the existing ordinary
shares.
This was one of the highlights
of the bank’s eighth annual
general meeting (AGM) held in
Lagos <strong>to</strong> approve the financial
results of the bank for the year
ended December 2018.
Speaking at the AGM,
Managing Direc<strong>to</strong>r, LAPO MfB,
Mr. Godwin Ehigiamusoe,
disclosed that the bank
disbursed N137 billion <strong>to</strong> micro
and small enterprises during the
financial year, with target of
N154 billion in 2019.
He, however, stressed that
there is a need for everyone <strong>to</strong>
ensure that the loans that go <strong>to</strong>
the MfB segment of the society
come cheaper than what it is
now.
He said: "Our shareholders’
fund is in excess of N19 billion
but the share capital is a
different thing entirely and so,
we are increasing it from N2
billion as it were <strong>to</strong> N3.5 billion
and that means we are
increasing the number of our
shares from four billion <strong>to</strong> seven
billion.
"The first step is for us <strong>to</strong>
obviously be able <strong>to</strong> open up <strong>to</strong>
private inves<strong>to</strong>rs especially
institutional inves<strong>to</strong>rs we believe
can add value <strong>to</strong> LAPO in
addition <strong>to</strong> bringing fund <strong>to</strong>
LAPO. Value in terms of their
experience in other jurisdiction,
being able <strong>to</strong> bring value <strong>to</strong> our
operations and governance
processes.
"There is a huge gap between
the demand for credit for people
Foreign inves<strong>to</strong>rs
take note of all
these signs of a
nation in almost
<strong>to</strong>tal disarray and
they have rightly
decided <strong>to</strong>
withdraw <strong>to</strong> safer
economies
ministries from the standpoint
of the economy – power, works,
transportation, finance, internal
affairs – became national
embarrassments <strong>to</strong> everybody
who could objectively assess
their performance. They
embarrassed everybody except
the team manager who either
did not know what a
performance appraisal is all
about or did not seem <strong>to</strong> care.
But, foreign inves<strong>to</strong>rs with their
funds locked up in the largest
country in the dark continent
were not so forgiving.
They noticed that the Lagos-
Ibadan double-guage rail line
which was promised before the
end of 2017 was not anywhere
near 20 per cent completion
when the year ended. This is
at the bot<strong>to</strong>m end, that is, the
owners of micro and small
businesses. So as a
microfinance bank committed <strong>to</strong>
supporting that end, our major
operation is providing credit,
we prioritize giving loan <strong>to</strong> those
businesses.
"We are also regulated, so we
can mobilize deposit, but our
commitment right from when we
were an NGO has been <strong>to</strong>
provide loan <strong>to</strong> owners of micro
and small businesses. Our
expectations are that we
continue <strong>to</strong> do what we do, first,
is <strong>to</strong> ensure we meet the
demand of our clients and
potential clients for loan, and
secondly <strong>to</strong> be able <strong>to</strong> deliver
some good returns in terms of
financial performance."
Ehigiamusoe said that
business environment in the
financial year under focus was
quite challenging not just for
the MfBs but for most
businesses in the country,
Vanguard, MONDAY, AUGUST 19, 2019 — 29
August 2019 and the line is still
far from being opened for
business. The Chinese, who
provided the loan for the rail
line know that there is a time
component <strong>to</strong> any loan deal.
With delay, interest payments
mount. That was how we got
in<strong>to</strong> the debt trap in the 1980s.
We are back on familiar road <strong>to</strong>
our detriment.
They also noticed that we
allowed the re-construction of
the busiest road in <strong>Nigeria</strong> –
Lagos-Sagamu-Ibadan – <strong>to</strong>
drag on for ever. It has taken us
all the years from Yar’Adua’s
government in 2007 <strong>to</strong> repair
and expand a road which
Gowon’s administration
delivered from virgin land in
less than three years. It will still
remain uncompleted by
December this year.
The paralysis of the nation’s
biggest ports for almost five
years could only occur in a
country which does not want
foreign direct investment in
large amounts.
The Apapa gridlock, which
has not been duplicated
anywhere in the world, is a
classic case study in How Not
To Run A Government. The
situation not only slows down
evacuation of imported
materials from the ports, it
actively discourages exports.
The impunity of the drivers of
trucks and trailers is simply
as<strong>to</strong>nishing. Osinbajo, as
acting President issued them an
order <strong>to</strong> vacate in 72 hours. He
was ignored; and the situation
got worse.
Two months ago, the President
issued the same “Quit Notice”.
They are still there till <strong>to</strong>day. No
official of government has
received a query for this slap in
the face of the nation’s highest
constituted authority. Yet,
saying: "The business
environment has been quite
challenging especially for most
businesses not just MfBs and
despite that, we did our best <strong>to</strong>
ensure we deliver our usual
Our expectations
are that we
continue <strong>to</strong> do what
we do, first, <strong>to</strong>
ensure we meet the
demand of our
clients and potential
clients for loan
superior performance. It is for
that reason we were able <strong>to</strong>
provide dividend for inves<strong>to</strong>rs.
"What is important is that the
bigger chunk of our profit after
tax has been ploughed back in<strong>to</strong>
the business and what is going
<strong>Nigeria</strong> loses billions each day
the trucks stay there.
Foreign inves<strong>to</strong>rs take note of
all these signs of a nation in
almost <strong>to</strong>tal disarray and they
have rightly decided <strong>to</strong> withdraw
<strong>to</strong> safer economies. Obviously,
the government of any country
which can <strong>to</strong>lerate the atrocities
we mentioned above, as well as
others left un<strong>to</strong>uched, cannot
possibly expect its economy <strong>to</strong>
grow at six, seven or eight per
cent as China, India and
Indonesia – the countries
mentioned on June 12 – had
done for several years. Can
anyone imagine China allowing
truckers <strong>to</strong> block a major road for
two weeks - not <strong>to</strong> talk of five
years?
Those still involved in the
<strong>Nigeria</strong>n S<strong>to</strong>ck Exchange must
be there now for other reasons
other than return on investment.
The <strong>Nigeria</strong>n economy is
heading for another low growth
year. The firms listed on the NSE
are struggling. Now, the Food
and Beverage sec<strong>to</strong>r will
experience a <strong>to</strong>ugh time starting
with those importing milk
products as component of their
manufacturing process.
The collateral damage which
the change of government policy
will have on non-food
manufacturers (packaging
materials, etc.) will be more
profound than anybody can
imagine at this time.
Decline in <strong>to</strong>tal capitalisation
since January would have been
alarming if not for new major
listings like MTN. But, even with
them, the future is bleak for
inves<strong>to</strong>rs. The <strong>Nigeria</strong>n
economy under current
management cannot deliver the
sort of robust growth which will
halt the continuous slide in share
prices.
MICROFINANCE
back <strong>to</strong> shareholders is minimal
and the fact that the number of
shares in LAPO is small.
"I strongly believe that in spite
of the challenges in the
economy, <strong>Nigeria</strong> has a big
potential for MfBs in the sense
that we have a very large
population of people and these
people are exceptionally very
enterprising, therefore there is
need <strong>to</strong> see how we can support
the sec<strong>to</strong>r.
“More importantly, it is the
desire of everyone <strong>to</strong> ensure that
the loans <strong>to</strong> this segment of the
society come cheaply or cheaper
than what it is now. Some
solution <strong>to</strong> that could be the
need <strong>to</strong> have a refinancing
structure or institution in
<strong>Nigeria</strong> that would be able <strong>to</strong>
provide low cost fund <strong>to</strong> MfBs
who would then use such fund
for on lending. The implication
therefore is that the ultimate
user, the borrower would access
cheaper loan than what they do
now.”