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GTB mulls expansion in East Africa

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GTB mulls expansion in East Africa

Guaranty Trust Bank Plc will consider acquisitions outside its home market as Nigeria’s biggest lender by market value seeks to expand on the rest of the continent, Bloomberg reported yesterday.

The company, which already has offices in 10 countries outside Nigeria, is looking to East Africa for growth, Chief Executive Officer, Segun Agbaje,  said on a call with investors from Lagos on Tuesday.

Guaranty Trust Bank, or GTB, already has operations in Kenya, Uganda, Tanzania and Rwanda, and will also consider ways of expanding existing businesses, he said.

“We’ll start to look at other things, probably outside of what you are seeing us doing now, some of it might be to look at making acquisitions outside of Nigeria,” the CEO said. “In East Africa, we have to do one of two things: We either have to bring in capital or we have to think of acquisitions.”

Pre-tax contributions from units outside Nigeria rose to 16 per cent in the six months through June from 12 per cent a year earlier, and are expected to grow even further, Agbaje said.

GTB and other banks in the West African nation, including United Bank for Africa Plc, are looking to expand abroad following a recession in 2016 that triggered a surge in non-performing loans, from which the industry is still struggling to recover.

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Made in China: Samsung farms out more phones to fend off rivals

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Made in China: Samsung farms out more phones to fend off rivals

Samsung’s plan to outsource a fifth of its smartphone production to China next year may help it compete with low-cost rivals such as Huawei and Xiaomi but it’s a strategy fraught with risks, people with familiar with the move said.

Samsung Electronics, which shut its last in-house Chinese smartphone factory in October, is quietly moving production of some Galaxy A models to contractors such as Wingtech, which are little known outside China.

Samsung has been coy about the volumes involved but sources said the South Korean tech giant plans to ship some 60 million phones made in China by so-called original design manufacturers (ODMs) next year out of a total of about 300 million devices, reports Reuters.

Wingtech and other ODMs make phones for multiple brands – including Huawei [HWT.UL], Xiaomi and Oppo – giving them the economies of scale to keep costs down, and the nimble contractors can develop and produce new budget phones quickly.

Critics of Samsung’s strategy say it risks losing control of quality and undermining its manufacturing expertise by outsourcing, and may even help rivals by giving contractors the extra volume they need to lowers costs further for all.

Samsung can ill afford another quality crisis. It scrapped its flagship Galaxy Note 7 in 2016 after reports the expensive phones were catching fire and delayed the launch of its folding phone this year after screen defects were identified.

But with margins razor thin for budget smartphones, people familiar with Samsung’s strategy say it has little choice but to follow rivals and use Chinese ODMs to shave costs.

“This is an inevitable strategy rather than a good strategy,” a source with knowledge of Samsung’s Chinese operations said.

Samsung said in a statement to Reuters that it has been making limited lines of smartphones outside its own plants to broaden its existing portfolio and “ensure efficient management in the market”. It declined to say how many Samsung phones are made by ODMs and said future volumes had yet to be determined.

Wingtech did not respond to a request for comment.

CHEAPER COMPONENTS

Research firm Counterpoint says ODMs can procure all the components needed for $100-$250 smartphones for 10% to 15% less than major brands with their own factories in China.

One supply chain source said Wingtech can get some parts for up to 30% less than Samsung Electronics pays in Vietnam, where it has three factories churning out smartphones, TVs and home appliances.

Wingtech started making tablets and phones for Samsung in 2017, accounting for 3% of its smartphones. That’s expected to hit 8%, or 24 million units, this year, according to IHS Markit.

Samsung’s outsourcing plans involve its lower and mid-range Galaxy A series, with Wingtech having a hand in both design and production, sources said. The A6S, one of the models to be outsourced, costs from 1,299 yuan ($185) in China.

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Otunuga: Only healthy economy‘ll attract foreign investors

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Otunuga: Only healthy economy‘ll attract foreign investors

Lukman Otunuga, Senior Research Analyst, Forextime UK Limited (FXTM), in this interview with Chris Ugwu, speaks on knotty issues affecting Nigerian economy

 

 

How would you assess the Nigerian economy since the beginning of the new administration?

 

 

The Nigerian economy still remains on a bumpy road to recovery in the face of volatile oil prices, US-China trade developments, Brexit drama and concerns over slowing global growth. Although the nation expanded 1.94 per cent during the second quarter of 2019, it is unlikely to meet the government’s three per cent growth targets this year. This sentiment continues to be reflected in the International Monetary Fund (IMF) which has projected Nigeria to expand 2.3 per cent this year and 2.5 per cent in 2020. Despite the push for economic diversification, 90 per cent of foreign exchange earnings and 70 per cent of government revenues are still attained from oil sales. Growth in the non-oil sector has been sluggish with approximately 1.6 per cent and 2.6 per cent expansion respectively in the first and second quarter of 2019. Overall, economic fundamentals have been mixed with Business Confidence increasing to 28.60 Index Points in August from 28.10 in July of 2019. However, consumer confidence decreased to 1.20 in the second quarter of 2019 from 4.80 seen in Q1. Given how manufacturers across the globe are feeling the heat from trade disputes, it is understandable that the Central Bank of Nigeria Manufacturing PMI dropped to 57.7 in September of 2019 from 57.9 in the previous month. While the Central Bank of Nigeria can be commended on its effort to promote naira stability, this has come at the expense of falling reserves which decreased to $42.1 billion in September. Further signs of reserves declining amid weak oil prices and repeated intervention by the CBN is likely to weigh on the Nigerian economy. If the CBN is unable to defend the naira from external and domestic risks, the consequences will ripple through all corners of Nigeria. Africa’s largest economy still has the potential to rock the global stage despite the unfavourable global macro and domestic conditions. However, key steps in the form of more diversification, monetary policy easing and swift implementation of the 2020 budget could set the economy on the right path.

 

 

 

 

What factors do you think account for investors either staying or exiting the market?

 

 

A key factor that will magnetize investors to the Nigeria market is the health of the economy. Consistent signs of improving economic fundamentals in key sectors, easing inflationary pressures and foreign exchange stability and transparency will be warmly received by investors. Given the unfavourable global macroeconomic conditions and gloomy predictions from major institution, robust core economic metrics should make Nigeria stand out from the crowd. Although Nigeria remains exposed to external shocks in the form of oil, an appreciation in the commodity will most likely stimulate economic growth. However, it remains uncertain whether Oil prices will ever be able to reach triple digits in the face of slowing global growth. Oil markets remain influenced by demand side factors revolving around trade uncertainty. Another factor that will weigh on Oil and the Nigerian economy is the fact that China’s economic growth slowed to six per cent during the third quarter of 2019. China is the world’s largest energy consumer and one of Nigeria’s biggest trading partners with total trade reaching roughly $10.3 billion in 2018. A fall in demand for crude and trade flows with China could threaten Nigeria’s fragile recovery consequently repelling investors to the nation’s markets. It will be unwise to overlook external drivers in the trade developments and health of the global economy. The International Monetary Fund (IMF) has downgraded its forecast for global growth to three per cent this year while the World Trade Organisation (WTO) sees global trade volumes dropping to 1.2 per cent, down from three per cent in 2018. This gloomy outlook may encourage investors to avoid riskier assets. A scenario that will not only impact Nigeria, but other emerging markets across the globe. This is already being reflected in the Nigeria Stock Market with the NSE-All Share Index dropping over 15.5 per cent since the start of 2019.

 

 

Inflation in Nigeria remains above the 6 -9 per cent target range just as the latest report shows an increase. What are the implications of this on the economy and CBN monetary policy?

 

 

Rising inflationary pressures in Nigeria will certainly complicate the Central Bank of Nigeria’s efforts to cut interest rates to stimulate growth. The nation’s annual inflation edged up to 11.24 per cent in September 2019, its highest level in three months after falling to a three-and-a-half-year low of 11.02 per cent in August. Food prices jumped after the government partially closed its border with Benin to curb the smuggling of rice. Given how the CBN governor has already made it clear that inflation must hit single digits before a rate cut could be considered, it remains uncertain whether the central bank will cut interest rates before year end. A rate cut could inject the Nigerian economy with a welcome boost, as it stimulates consumption which accounts for roughly 80 per cent of GDP. But however, cutting the MPR when the inflation rate is at 11.22 percent risks further overheating prices. Like other economies, Nigeria may be risking thebe exposed to the impacts of a global slowdown but its economy is very different from the US’ which is currently experiencing anaemic price inflation. This may be why the Central Bank of Nigeria decided to prioritise reducing inflation to single digits and said it is in no hurry to reduce its key rate. In other effects, foreign investment and foreign currency reserves in Nigeria are likely to see benefits from the CBN’s decision to hold rates at 13.5 per cent. This is based on the argument that international investors may be looking for higher-yield securities than those in the mature markets, especially in the light of declin ing or negative interest rate environments in Europe and the US. In the absence of cutting interest rates, the CBN has raised the country’s loan to deposit ratio for banks to 65 per cent from 60 per cent. Making sure money is in circulation instead of being tied up in government bonds sounds like a logical way to keep the economy on the road to recovery. However, it remains to be seen whether this will be enough to promote growth.

 

Do you think the adoption of a more flexible exchange rate policy by the Monetary Policy Committee (MPC) will boost capital market and the economy?

 

A flexible exchange rate may provide international investors with a fresh layer of transparency. This could result in an increase in foreign direct investment and Diaspora flows consequently boosting the Nigerian economy. Foreign direct investment in Nigeria increased by roughly $909 million in the second quarter of 2019 with FDI averaging a total of $1.23 billion from 2007 until 2019. While such a move will benefit the Nigerian economy in the longer term, it may create negative shocks in the short to medium term. It must be kept in mind that a flexible rate will most likely result in a sharp depreciation of the naira as the natural forces of supply and demand find an equilibrium value for the local currency. A depreciating naira will result in explosive inflationary pressures, ultimately exposing the nation to downside shocks in the short term. Inflation may eclipse the 18.72 per cent witnessed in January 2019 as the local currency sinks to an all-time low. If Nigeria could weather the storm of a weakening naira and runaway inflation, the outcome could be similar to the Egyptian economy which allowed its currency to float in 2016 but later recovered after two years.

 

How do you think the current administration will help revive the nation’s financial market?

 

The first step will be the swift passing of the 2020 budget before we enter the new year. It must be kept in mind that the IMF has stated that Nigeria’s “over-optimistic revenue projections have led to higher financing needs than initially envisaged, resulting in over-reliance on the expensive borrowing from the central bank to finance the deficit.” This will be a key theme global investor will be watching in 2020. According to the IMF, Nigeria’s economic growth is too slow to reduce poverty and the government must diversify from whole dependence on crude. A stronger push in diversifying away from oil reliance will boost attraction towards the nation’s financial markets. With a booming population and fertile land, agricultural policies aimed at boosting domestic production should create a solid platform for Nigeria to break away from the chains of oil reliance. There could be massive scope for the agriculture sector to provide substantially government revenues while also stabilizing the nation if overall spending is increased and the correct policies are implemented swiftly. While domestic drivers in the form of strong macroeconomic metrics, foreign exchanges stability and monetary policy easing from the CBN could stimulate appetite for the domestic markets, external themes must not be overlooked. US-China trade developments, Brexit and its impacts on Nigeria trade and oil prices have the potential to influence the nation’s financial markets.

 

What does Brexit mean for the Nigerian economy?

 

 

 

After more than 1200 days after Britain voted to leave the European Union, the country still remains in the trading bloc, pondering exactly how to leave. Although the October 31 “do or die” Brexit deadline has been extended to January 2020, this is simply kicking the can further down the road. With the United Kingdom set for general elections on December 12, this will certainly not be a quiet Christmas for Britain and the pound. It will be unwise for investors to rule of the possibility of the United Kingdom crashing out of the European Union next year given the unpredictable nature of Brexit. The seismic tremors created from such an unfavorable development will ripple far beyond the borders of Britain, with everyone across the globe feeling the heat including those in Africa. Given how Brexit adds to the growing list of geopolitical risk factors straining investor confidence, appetite for emerging market may diminish if the UK leaves the European Union without a deal. It is not only appetite for emerging markets that will be under threat but trade and diplomatic relations with Britain and Europe following the divorce. It must be kept in mind that trade deals with the UK and African countries are negotiated through the EU which plays a middle man. With the agreement becoming void when Britain departs from Europe, this presents significant disruptions and economic risk to African nations who trade with the UK. Britain’s top trading partners like Nigeria, Kenya and Egypt will most likely be punished by a no-deal Brexit. The UK was Nigeria’s 6th largest trading partner last year with total trade roughly $5 billion. In 2018, Nigeria exported £2.23 billion worth of oil to the UK, an improvement over the level of £1.1 billion in 2017.  But with the UK’s economy exposed to downside risks, the outlook for Nigeria’s oil sales appears less promising. Nigeria’s oil sales in the UK and Europe face another challenge. Over and above the UK’s declining economic circumstances is increased competition from the US light sweet crude oil industry.  In August, oil sales slowed to their lowest level of the year because US Shale oil flooded European markets.  In July, Nigeria’s oil sales to the U.S. fell to zero as US president Donald Trump’s administration powered up its energy dominance policy. It is essential for Nigeria to regain market share in the UK and Europe, which accounts for 46 per cent of its crude oil sales. As demand and supply side challenges grow, Nigeria could benefit from closer relations with the UK government, which points out that it has extensive experience in building and managing oil industry infrastructure. A trade deal which secures the UK as a guaranteed buyer of Nigerian crude oil could certainly support demand in the long term.  As part of its post-Brexit strategy, the UK government hopes to revive its relationships with the Commonwealth markets and has already begun talks with Nigeria to improve bilateral ties. In one example, the UK provided credit and finance worth £1.25 Billion to facilitate British companies to export goods to Nigeria, resulting in £76.5 billion worth of trade in the last 10 years. During the second quarter of 2019, British Foreign Minister, Jeremy Hunt, visited Nigeria promising a big pool of funds which could be invested in infrastructure. In other developments, the two countries launched an economic forum to explore mutual investment interests. The governments are already discussing the introduction of naira-backed financial instruments in the UK and expanding cooperation in the insurance sector. To wrap up, Nigeria’s post-Brexit relations with the UK are faced with several headwinds which could blow off course the priority to maintain and increase investments in the development of its oil-and-gas industry infrastructure. On the upside, it is positive that trade talks with the UK are deepening and there are pre-existing diplomatic and trading relationships which go back many decades.

 

 

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Crude oil boost: FG, concessionaires garner $2.1bn in 15 days

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Crude oil boost: FG, concessionaires garner $2.1bn in 15 days

 

November production balloons to 33m barrels

 

 

T

he Federal Government and oil bloc concessionaires have made $2.1 billion in the first 15 days of November.

 

This, New Telegraph gathered at the weekend, came as Nigeria’s November production increased to 33 million barrels as at the middle of the month.

 

Nigeria, data of the Organisation of Petroleum Exporting Countries (OPEC) showed, pushed out 25.5 million barrels out of the 33 million output to OPEC market between Nov. 1 and 15.

 

 

The Chief Operating Officer, COO, of the Nigerian National Petroleum Corporation, NNPC, Roland Ewubare, confirmed this figure, maintaining that Nigeria currently produces between 1.6 million-1.7 million barrels per day (bpd) of crude oil.

The country, the COO said, would continue to comply with OPEC output cuts.

 

 

“The last quota put us at 1.7 million bpd and we are committed to that threshold, our current production with the cuts is between 1.6 and 1.7 million barrels per day for November,” Ewubare said on the sideline of an oil conference in the United Arab Emirates, adding that Nigeria’s output of crude and condensate is at 2.2 million bpd, he said.

 

 

The OPEC had granted Nigeria a higher output target under an OPEC-led deal to limit supply following efforts by Africa’s largest exporter to tweak the agreement to accommodate its expanding oil industry.

 

 

Nigeria started participating in the deal this year, having been granted an exemption from previous OPEC cuts due to militant attacks that reduced the country’s output.

 

 

The average price of OPEC basket of 14 crudes on November 9 stood at $62.74 per barrel.

 

 

The highest price so far is $63.00 a barrel, which oil traded on Thursday, November 7, compared with $62.48 the previous day, according to OPEC secretariat calculations.

Using the $62.74 per barrel price, the 2.2 million barrels production amounted to $2.07042 billion in 15 days.

 

 

The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Oriente (Ecuador), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), and Kuwait Export (Kuwait).

 

 

Others are Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

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Gas: Increased demand boosts Nigeria’s N635.2bn export

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Gas: Increased demand boosts Nigeria’s N635.2bn export

WINTER

Liquefied natural gas import by Asian countries increases ahead of winter

 

 

H

igh demand for liquefied natural gas by Asians countries has boosted export of the cargo in Nigeria.

Already, some 3.53 million metric tonnes of the natural gas valued at N635.2billion ($1.74billion) have been lifted out of the country.

New China’s price index for liquefied natural gas (LNG) import delivery has reached $493 per metric tonne because of the demand.

 

 

It was learnt that the demand for the cargo ahead of winter in Asian countries was responsible for an eight-month high in November 2019.

 

Nigeria accounts for over 50 per cent of the current LNG production capacity in Africa, following the $12billion expansion of the country’s liquefaction plant at Bonny Island in Rivers State.

The country is also the fourth largest producer of the gas in the world.

 

Data by the Nigerian Port Authority (NPA)’s shipping position indicated that between August and September, no fewer than 11 ships left Onne Port with 680,000 metric tonnes of the cargo shipped from the LNG’s Bonny Island liquefaction plants, Rivers State to various destinations.

 

The shipment was 19.3 per cent of the total liquefied gas that left the port in nine months.

It was learnt that China, Turkey, Spain, Pakistan and Indian were the major buyers of the product.

 

The shipping data revealed that in September 2019, four vessels ferried out 282,000 tonnes of gas with LNG Finima II leading with 77,000 tonnes; LNG Kita, 70, 000 tonnes and LNG Maran Gas, 70, 000 tonnes and LNG Adamawa, 65,000tonnes.

Also,   398,000 tonnes of the product were lifted in  August  by LNG Abuja II laden with  77,000 tonnes,  LNG Cabtillo De with 70,000 tonnes; LNG Oyo, 68,000 tonnes; LNG Maran Gas Chios, 70,000 tonnes; LNG Hoech Gannet, 70,000 tonnes; LPG Continental, 30,000tonnes and LPG Navigator, 13,000 tonnes.    

 

Record of the shipments revealed that a total of 1.35 million tonnes of natural gas were exported between June and August, 2019.

 

In June and July, 947, 000 metric tonnes of gas were also lifted by 14 vessels  to China and other countries.

The NPA shipping data indicated that nine vessels left the port in July with 585,000 tonnes with LNG Lagos II lifted 77,000 tonnes; LNG Bonny II, 77,000 tonnes; LNG Lokoja, 68,000 tonnes; LNG Borno,  68,000 tonnes; LNG Maran Gas , 70, 000 tonnes; LPG Navigator, 13, 000 tonnes; LNG Rivers, 65,000 tonnes;         LNG Adamawa, 65,000 tonnes  and LNG Abalamabie, 77, 000 tonnes.

 

Also in June, five vessels left the country with 362,000tonnes. Within the period, LNG Mag Dala ferried out 70,000 tonnes; LNG Finima II also lifted 77,000 tonnes; LNG Abuja II, 77,000 tonnes; LNG Borno, 68,000 tonnes and   LNG Sevilla, 70,000 tonnes.

In 2018, the country exported 19.68 million tonnes of LNG, according to the International Group of Liquified Natural Gas Exporters (IGLNGE),  representing a 6.3per cent  share of global output, behind Qatar’s 76.79 million tonnes, Australia’s 66.66 million tonnes, Malaysia’s  24.66 million tonnes and the United States’, 20.65 million tonnes.

 

It learnt that the country would soon become the fourth biggest LNG exporter in the world when Train 7 project is completed.

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Fortifying pact with policyholders

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Fortifying pact with policyholders

The need to boost confidence and reassure policyholders and general public of a new direction for insurance industry has compelled the regulator to parley with consumers. Sunday Ojeme reports

 

F

or any business to remain genuinely sustained, consumers of products from such an investment must be recognised as integral part of the process. It is for this reason that investors would do everything to retain their clients to remain steady and also record good profit.

Ultimately, the bottom line in all of this is confidence. Gaining and retaining the confidence of product consumers remain an arduous task. The moment clients lose confidence and trust in a particular item it becomes herculean to regain the assurance.

Lamentation

 

 

Overtime, the Nigerian insurance industry has suffered same fate where a huge number of individuals and corporate organisations lost confidence in the activities of the operators. The damning apathy is what the industry still suffers till date.

Today, even with the over 180 million population and widespread human and natural resources, insurance penetration in the country still hovers between 0.2 and one or two per cent, depending on where the figure is coming from.

For an industry that should ordinarily be the pillar of other sectors, it lamentably contributes about 0.6 per cent to the nation’s gross domestic product.

 

To correct the anomalies, the regulator, National Insurance Commission (NAICOM), as well as the operators had been making concerted efforts to reform the sector through policy initiative at the top level of government and introduction of attractive products by the players.

 

Although the impact has been a bit noticeable, it is, however, not as brilliant as expected considering the fact that the percentage of the uninsured in respect of individuals and businesses still remains a far cry from what is expected.

Consumers as kings

 

This has spurred the need for the industry to readdress its relationship with existing policyholders as a way of regaining their confidence as well as using them as a platform to attract more clients into the fold.

To get this done, NAICOM again consolidated its rapport with insurance consumers recently where it assured them of the need to see the industry from a new perspective from the old order where policyholders battle with underwriters to get their claims paid, even after being verified as genuine.

 

Speaking to the consumers, the Acting Commissioner for Insurance, Mr. Sunday Thomas, described the meeting as one of the very rare moments where all stakeholders come together to discuss challenges confronting both the demand and supply sides of the insurance sector in the country.

 

According to him, “customers’ satisfaction is central to the sustainability and success of every business, insurance inclusive. We are aware of some of the obvious challenges bedevilling the sector either on the side of operators, consumers, investors or regulator. These challenges could be very overwhelming, however we must not relent in looking for better ways to effectively and efficiently ensure delivery of quality services to policyholders.”

The occasion also provided an atmosphere for the insurance consumers, some of who are not satisfied with developments in the industry, to bare their minds and even threatened to cede their risks offshore.

 

Grievance

 

A case in point was that of members of Airline Operators of Nigeria (AON), who called on NAICOM to quickly intervene and address the enormous challenges they are having with local insurers.

The AON members noted that most insurance firms over the years continue to renege on payment of claims due to excuses that are not tenable.

 

Calling for an open market to enable airliners insure freely without hindrance, the Chairman of AON, Captain Ahmad Joji, noted that his members were really not having good times with local insurers.

The Chairman/Chief Executive Officer (CEO), Barbedos Group, Alhaji Kashim Shettima, narrated how his underwriter failed to respond to an accident complaint on one of his aircraft.

 

According to him, having reported the incident to the underwriting firm, the company instead of getting back to him went and reported the issue to their foreign partner (underwriter), who called him for an enquiry.

He called on NAICOM to grant airliners the liberty to insure abroad, where aviation business is properly handled, saying aviation business should not be handled with kids gloves, as any mistake can lead to great mishap.

 

Reassurance

 

However, the Commissioner for Insurance reassured the policyholders, saying “from the regulatory perspective, policyholders remains a key component of our primary constituency and therefore must ensure they are treated fairly and protected as enshrined in relevant laws; while at the same time balancing the supervisory role of ensuring financial soundness and reliability of insurance institutions in the country.

“Suffice it to say that consumers are faced with challenges that may vary from one individual or entity’s experience to another while the provider is faced with constraints that may also differ from one company to the other. But there is no doubt regular interaction such as this one will amongst others foster a better understanding and synergy that will result to better services to the consumer.”

 

Recalling the need for the parley, which is in its second phase, he said the commission took the step in 2018 to incept this platform to provide the most critical stakeholder in the sector, which is the consumer, the opportunity to be heard and be informed first-hand on the workings of the sector.

 

“Last year’s session was adjudged to be a huge success as critical issues affecting consumers of insurance products were brought to limelight. Some of the takeaways from the event were the need for insurance companies to improve the quality of their service delivery, need for operators to launch innovative, consumer – specific and problem-solving products, need to leverage on technology to deepen insurance penetration and above all, need to ensure prompt payment of claims.

“Let me inform you that these takeaways from the 2018 interaction with insurance consumers significantly contributed and shaped the commission’ policy formulation process and eventual issuance of guidelines and circulars to the industry this past one year, especially in the areas of quality service delivery and ease of doing business.

 

“It is imperative to note that NAICOM is well positioned to ensure adequate protection of policyholders at all times. As you may all be aware, the topic on consumer protection has become central to regulators around the globe and the insurance sector is not an exception. Continuing efforts and new reforms are being put in place by NAICOM to ensure prompt payment of genuine claims by insurers.”

Optimism

The commissioner pointed out that the complaints bureau unit of the commission had also been working assiduously to resolve policyholders’ issues relating to non-settlement of claims, contract agreement violation etc, adding that the unit had been further enhanced with the deployment of more staff at very senior level to effectively discharge assigned responsibilities.

 

“Its doors are widely open to receive and resolve, as much as it can, issues on non-settlement of genuine claims from the public.

“The commission has strong passion that insurance consumers are served right and feeling your pulse on the services offered you by your insurers will feed us with ingredients needed to strategise on repositioning the industry for better services. There is no doubt that we all desire a paradigm shift from the current state of our industry to a better state where we will not be grumbling on issues of prompt claims settlement, pricing of insurance products, value for money, innovative products etc.

“However, you will agree with me that none of these could be achieved if we don’t come together and discuss our successes and failures. I therefore implore you to feel free to express your views and speak on your experiences as consumers of insurance products in Nigeria.

 

“It may be worthy for you to note that recent developments and reforms in our sector particularly, the recapitalisation exercise is a move to ensure that the industry becomes more robust in its technical competence and financial base. The process is aimed at repositioning the sector for self-actualization in terms of growth and development; the end result of which will be to enhance the ability of insurers to provide better protection and improved services to the customers.

 

 

“Let me reassure you that the Commission shall continue to introduce new reforms and initiatives in line with international best practices for consumer protection and customer satisfaction. Henceforth, insurance companies will be assessed and ranked on the quality of their service delivery to customers and the ranking of companies in this regard will be made public in order to provoke healthy competition among insurers. This we believe will boost consumers’ choice and confidence in insurance,” he added.

The reassurance to the consumers came barely one week after the industry regulator also enlightened shareholders on the need for the ongoing recapitalisation.

 

According to the commission, not less than N16 trillion worth of risks were ceded offshore last year alone due to low capital and technical capacities in-country.

 

 

Last line

With developments tilting towards a positive perspective for the sector, the only far-reaching solution to sustain and better the situation is for the industry regulator to ensure that claims are paid promptly just as operators who default in this regard and are also into other form of infractions are penalised to the knowledge

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NCC board tackles NASS over communications law review

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NCC board tackles NASS over communications law review

DYNAMIC

Lawmakers want Nigerian communications rule book updated to reflect the dynamic nature of the industry

 

 

T

he National Assembly has called for a review of the Nigerian Communications Act (NCA), which guides operations and regulations in the country’s telecommunications sector.

A member of the House of Representatives, who proposed the review, Honourable Isiaka Ibrahim, said the Act, which came into force in 2003, was due for review in view of the dynamism in technology world.

 

Ibrahim, who is also a member of the House Committee on Communications, said the 16-year-old law had become archaic and not in tune with the realities of today’s telecommunications, hence, the need for a review.

 

“We are elected to make laws for the good of the people and we are waiting for the Nigerian Communications Commission (NCC) to bring a proposal for the amendment of the NCA because it has become old and needs to be fine-tuned in line with current realities,” he said.

 

However, reacting to the call, the Chairman of NCC, Senator Olabiyi Durojaiye, said the sector was more concerned about the Critical National Infrastructure (CNI) Bill, which has been before the National Assembly for over two years.

Durojaiye, once a lawmaker, said the review of the NCA may not be necessary now as laws are made to last long.

 

“The National Assembly needs to first of all look at the Critical National Infrastructure Bill, which has been before them for over two years now. We need to protect the telecommunications infrastructure first before talking about changing our law. The act of wilful vandalisation of telecommunications equipment must be criminalised and that is why we want the National Assembly to consider this first and pass the CNI Bill into law,” the NCC chairman said.

 

Several telecoms stakeholders had before now called on the government to come up with a policy to protect telecom infrastructure by declaring it critical national asset.

Among them was the Chairman of Association of Licensed Telecom Operators of Nigeria (ALTON), Engr Gbenga Adebayo.

 

According to him, telecommunication infrastructure should be seen as a social infrastructure that makes vandalisation of such infrastructure a security risk highly punishable by law. He recalled that there used to be a law against stealing of NITEL infrastructure and that helped in no small measure in protecting the assets of the company.

 

With the delay of the CNI bill, the ALTON chairman also called on President Muhammadu Buhari to issue an executive order proclaiming telecoms services as critical national security and economic infrastructure as prescribed by the Cybersecurity Act 2015.

Adebayo noted that the telecom industry supported many other sectors of the economy.

 

“We are also the first layer of critical infrastructure for socio-economic development and security. It is pertinent to state that unless telecoms facilities have first level of protection by government, it will be difficult to provide uninterrupted services to the citizenry,’’ he noted.

 

Also speaking, the President, Association of Telecommunications Companies of Nigeria (ATCON), Mr. Olusola Teniola, called on the Nigeria Police Force, National Security Adviser to the President and other security agents to assist the industry in protecting of critical Infrastructure that ICT infrastructure is now under.

 

 

“This will help improve QoS and reduce the costs of repairs in the industry to a nominal level,” he said.

The ATCON president noted that the infrastructure that was being rolled out for support broadband services needed to be fully protected from vandalism, theft, and destruction and therefore the enforcement of the CNI under the cybercrime bill needs to be enacted without any further delay.

 

 

According to Teniola, when base stations are shut down wilfully and telecom facilities are vandalised without bringing the culprits to book, not only quality of service is affected but investor confidence is eroded.

 

“We cannot achieve the national broadband target or improve quality of service with non-implementation of laws meant to protect facilities and infrastructures that are deemed to be national assets. This is another challenge that has impeded the growth of the sector in the sense that some miscreants have turned it to their businesses to destroy the telecom masts and towers.

“The cybercrime law treats telecoms infrastructure as a critical national infrastructure in Nigeria, but we are worried that nobody is implementing it,” he said.

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Consolidated Hallmark posts 46% rise in PAT

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Consolidated Hallmark posts 46% rise in PAT

C

onsolidated Hallmark Insurance Plc, one of the leading underwriting firms in Nigeria, has posted a profit after-tax (PAT) of N519.6 million in its third quarter 2019 results, as against the N355.9 million recorded in the corresponding period of 2018, representing a 46 per cent rise. This is as contained in its group unaudited financial results for the period ended September 30, 2019 presented to shareholders at the Nigerian Stock Exchange.

 

The result also revealed significant improvements in other indices. Gross premium written for the period grew by 23.7 per cent to N6.687 billion from N5.404 billion reported in September 2018. Also, Total assets of the group rose to N11.159 billion from N10.821 billion during the corresponding period.

 

Commenting on the financial result, the Managing Director/CEO of Consolidated Hallmark Insurance Plc, Mr. Eddie Efekoha, expressed delight with the company’s consistent impressive performance. He said the unwavering support of the board and management of the company was pivotal to the success being recorded.

 

According to him, “the strong performance reflects the board and management’s commitment towards rewarding our shareholders with good returns. There is no gainsaying that the consistent improvement is also being driven by the increased confidence by our customers.”

 

On plans by the company to increase minimum paid-up capital to N10 billion in line with the new requirements by the National Insurance Commission, Efekoha said arrangements had been finalised to get the approval of shareholders for the raising of additional N4.5 billion during an Extra-Ordinary General Meeting (EGM) scheduled for  this week in Lagos.

 

He expressed confidence that the company would successfully beef up its capital base further, ahead of the June 2020 deadline by NAICOM, in view of positive investor confidence displayed during the earlier proactive efforts by the board to raise N500 million through a rights issue and an additional N734 million through a private placement, both of which were fully subscribed even before the recent recapitalisation mandate by the NAICOM.

 

The growing level of confidence reposed in the company by investors is further attested to by the recent performance of the stock on the floor of the NSE as the highest gainer in percentage terms during the month of October, 2019, having garnered over 40 per cent during the month on the strength of positive sentiments.

 

Recently, CHI Plc improved its credit rating by Agusto & Co. from Bbb- to a Bbb. The rating symbolizes a ‘stable’ outlook and potential for growth with a definition as Insurer with satisfactory financial condition and adequate capacity to meet claim obligations. The rating which is an upgrade from the previous ‘Bbb-‘ reflects the company’s good liquidity, excellent asset quality, as well as a very experienced management team.

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Sovereign Trust: Harsh operating milieu retards earnings

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Sovereign Trust: Harsh operating milieu retards earnings

 

Sovereign Trust Insurance Plc is currently grappling with profit issues due to challenging operating environment. Chris Ugwu writes

 

 

D

espite the recapitalisation of insurance firms in 2007, the sector has continued to struggle with challenges such as dearth of appropriate human capital with professional skills, poor returns on investment, and poor asset quality.

Other challenges include unethical practices, significant corporate governance issues, insurance premium flight, poor business infrastructural facilities, especially in the area of ICT and lack of innovation in product development.

Also included are lack of awareness on the part of consumers on the use/suitability of insurance products, low gross domestic product (GDP), and per capita figures.

 

Notwithstanding that Nigeria is under daily threat from natural disasters such as flooding and rainstorms, fire theft and other form of insecurity, which compelling reasons insurance should grow, penetration still remains a huge challenge.

This negative perception that trailed the sub-sector has retarded the growth of insurance leading to the inability of majority of companies in the industry to pay dividend to shareholders for many years.

Market watchers attribute the inability of the sub-sector to rise above the nominal level to crisis of confidence. Besides, the few ones that raised high expectation for good results ended up reporting negative financial results.

Sovereign Trust Insurance Plc is one of such companies that have got their fair share from the dwindling fortune of the sub-sector as the movement of its share price has remained below 50 kobo, courtesy of new price methodology that was implemented early this year.

 

The group, which had ended the financial year 2018 on an impressive and promising note, began recording decline from first quarter of 2019 as the harsh operating environment continued to hurt earnings following increased expenses.

Hopes by market watchers that the company might sustain the good outings in 2018 were dashed as most key performance indices during the 2019 first, half and third quarter results for the year recorded decline.

 

However, the extensive economic crisis has seen the company along with other insurance participants badly beaten with Sovereign Trust Insurance’s share price remaining at 20 kobo at the close of trading on Friday.

Financials

 

Despite  the  challenging  business environment in the year 2018, Sovereign Trust Insurance Plc posted gross  premium  written of N10.5 billion, representing 23 per cent increase over the  N8.5 billion  recorded  in  2017.

The  net premium  income  equally  grew  by  31 per cent  to N5.5 billion  over  the  sum  of  N3.85 billion recorded in the corresponding year as it continue  to  improve  on  its  business retention strategy.

 

In the same vein, the company recorded a profit before tax of N540 million as against N202 million recorded in year 2017, representing over 167 per cent increase.

Profit after tax also stood at N344 million,  a  118 per cent increase when compared with the sum of N158 million recorded in 2017.

According to the company, this indicates the commitment to sustain the growth of both revenue and profitability.

 

Consequently, the Return on Capital Employed (ROCE) recorded a positive performance of 9.29 per cent as against 1.87 per cent achieved in the corresponding year of 2017.

 

Similarly, the earning  per  share improved by 118 per cent from 1.89 kobo in 2017 to 4.13 kobo in 2018.

The size and quality of the insurer’s balance sheet improved by this performance for the year.

While its total assets rose from N10.8 billion to N11.3 billion, representing five per cent increase, the shareholders’ fund increased by  six per cent  from N5.5 billion in 2017 to N5.8 billion in 2018.

However, the insurance firm started the year 2019 on a disappointing note; for the first quarter ended March 31, 2019, its revenue declined by -19.15  per cent to N4.21 billion from N5.20 billion in the previous quarter.

Profit before tax  declined by 44.91 per cent to N344.86 million from N625.970 million in 2018, while profit after tax declined by 44.91 per cent  to N308.65 million from N560.243 million.

Underwriting expenses rose by 11.1 per cent to close at N798.108 million from N718.364 million in 2017.

However, net assets grew by 5.31 per cent to N6.12 billion from N5.82 billion as at December 31, 2018.

The insurance firm sustained decline profile during the Q2’2019 following rising underwriting expenses.

The company reported 21 per cent decline in profit after tax for the half year ended June 30, 2019 to N480.493 million from N611.902 million in 2018.

Profit before tax equally decreased by 21 per cent from N683.689 million in 2018 to N536.863 million in 2019. Gross premium declined by four per cent to N3.062 billion in 2019 from N3.198 billion in 2018.

Total underwriting expenses grew by 13.18 per cent to N1.193 billion from N1.054 billion in 2018.

For the nine months ended September 30, 2019, Sovereign Trust Insurance posted a drop of eight per cent in profit after tax to N501.868 million in 2019 from N543.230 million reported in 2018.

Profit before tax stood at N560.746 million in 2019 from N601.374 million in 2018, accounting for a drop of seven per cent while gross premium written closed at N9.185 billion during the period under review, from N9.347 billion, accounting for a decline of two per cent.

Operational challenges/outlook

Sovereign Trust Insurance Plc had floated rights issues for existing shareholders, which commenced since June 24, 2019, and was extended to August 2019.

The Head of Corporate Communications and Brand Management of the underwriting firm, Segun Bankole, had said that the company was offering 4.17 billion ordinary shares of 50 kobo each at 50 kobo per share on the basis of one new ordinary share for every two ordinary shares held as at the close of register on Tuesday, January 15, 2019.

 

The company’s Managing Director/Chief Executive Officer, Olaotan Soyinka, said the management had set a growth agenda, which is aimed at positioning the underwriting firm as one of the top five in the insurance industry in Nigeria.

“In achieving this aspiration, we have identified that a very robust capital base is critical to the success of the set agenda; hence the need to call on our Shareholders to fully exercise their rights by subscribing fully to the Rights Issue and ultimately grow their investments in the company,” he said.

 

He said that Sovereign Trust was working assiduously towards being one of the most preferred insurance companies in the country for people to do business with, invest in as well as be the choice employer of labour.

Shareholders of Sovereign Trust had recently approved a new capital raising plan for the insurance company on the heels of the cancelled tier-based minimum solvency capital policy proposed by the National Insurance Commission (NAICOM).

Shareholders authorised the board of the company to create 5.0 billion new ordinary shares of 50 kobo each to increase its authorised share capital to N10 billion of 20.0 billion ordinary shares of 50 kobo each.  Shareholders also approved the proposal to raise “additional equity capital for the company up to the maximum of the authorised share capital” with additional mandate to the board to absorb excess money in the event of oversubscription of the initial offer.

 

Under its capital raising plan, Sovereign Trust could raise funds by issuing new shares to existing shareholders, new general retail investors, existing and new strategic investors or a combination of many means of capital raising.

 

While NAICOM has cancelled the tier-based capitalisation programme, market analysts believe that many insurance companies that had launched emergency capital raising plans may go ahead with their plans as proactive measures. Many analysts expected a considerable consolidation of the Nigerian insurance sector, with capitalisation as a major benchmark.

 

 

The Chairman of the company, Mr. Oluseun  Ajayi, while addressing shareholders at the 2018 Annual General Meeting (AGM), said “the increasing competition in our industry has consistently re-engineered the firm’s strategies and that we will not rest on our oars.

“Our commitment to continuously take leadership in all our product lines remains unperturbed. The efforts of the tenacious Sovereign Trust team in achieving aggressive revenue generation is saluted.

Our dear company has continued to affirm its commitment and capacity to honour all genuine claims as and when due. The company, in the past year settled claims totaling N4.2b to various insured spread across the country.

“The mandate to scale up our capital base is already at an advanced stage. Our program for capitalization will take off with the Issuance of Rights to existing shareholders of the company.

 

“However, other capital raising options as advised by our financial advisors will be considered in the course of the year. This is basically to ensure that our company is set on a very solid and competitive platform in the industry.

“The new minimum wage bill recently passed and accented to by the Federal Government will to a great extent increase demand and supply in the economy. Insurance service is expected to benefit by the law in terms of premium generation as disposable income improves. In this regard, a few bespoke products will be introduced to the market in the course of the year. The products are expected to be affordable and deepen the retail end of our product lines.”

 

Last line

Effective risk management, alongside a well-tailored product offering are vital to bringing more Nigerians into the market and boosting insurance, but unless more focus is given to training new actuaries, insurance firms will continue to bear the brunt of massive slow-down as revenue from premium income drops significantly.

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International Breweries reports N16bn loss

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International Breweries reports N16bn loss

I

nternational Breweries Plc has reported a loss after tax of N16.445 billion for the nine months ended September 30, 2019, from N7.137 billion it reported within the same period in September 2018.

Loss before tax stood at N24.076 billion for the Q3 as against loss of N9.014 billion posted in 2018.

 

However, revenue grew by 16.69 per cent to N97.260 billion in 2019 from N83.346 billion recorded earlier but cost of sales stood at N66.138 billion from N51.114 billion in 2018, accounting for 29.39 per cent increase.

The firm reported a loss after tax of N6.84 billion for the half year ended June 30, 2019, from N2.846 billion loss reported in June 2018.

Loss before tax stood at N10.526 billion for the half year as against loss of N5.242 billion posted in 2018.

 

However, revenue grew by 29.22 per cent to N68.630 billion in 2019 from N53.109 billion recorded earlier but cost of sales stood at N45.437 billion from N32.198 billion in 2018, accounting for 41.12 per cent increase.

The brewer reported a loss after tax of N3.987 billion during the first quarter ended March 2019, from N2.240 billion loss reported in March 2018.

Loss before tax stood at N5.085 billion for the first quarter as against loss of N2.557 billion posted in March 2018.

 

Revenue dropped by 39 per cent to N36.096 billion in 2019 from N25.966 billion recorded earlier while cost of sales stood at N22.609 billion from N15.857 billion in 2018, accounting for 42.58 per cent increase.

The company reported a loss after tax of N3.866 billion for the financial year ended December 31, 2018 as against loss of N1.395 billion posted during the period ended December 2017. Loss before tax equally stood at N8.049 billion during the period under review from N3.233 billion during the comparable period of 2017.

 

Revenue, however, grew to N120.610 billion during the period from N36.527 billion in 2017, amounting to 230 per cent increase, while cost of sales grew to 221 per cent to N73.270 billion from N22.819 billion in 2017.

International Breweries recently hosted its distribution partners across the country to a gala night in Lagos.

 

The event was an opportunity for the company’s distributors, trade partners and other key stakeholders within the distribution value chain to exchange ideas, as well as deepen business relationships. It also provided the company an opportunity to fete and commend the performance of the distributor partners, with those who had excelled in their performance in the recent financial year, winning delectable prizes.

 

Delivering her remarks, Managing Director, International Breweries Plc, Mrs. Annabelle Degroot, said the successes the company recorded in 2018 would not have been possible without their hard work and commitment.

 

While commending the stellar performance, however, Degroot reminded the distribution partners that standing still was not an option, but going forward, adding that as a very ambitious organisation keen on meeting the needs of consumers across the country, neither the International Breweries Plc nor its trade and distribution partners would rest on their oars.

Speaking on the role and relationship that exist between the company and its valued distributors, National Sales Director, Godwin Oche, said: “Our distributor-partners play a very critical role in our supply chain and I am particularly proud of the synergy that exists between them and our team.”

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Sterling Bank pledges more support for education

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Sterling Bank pledges more support for education

Sterling Bank Plc has pledged to continue its support of players in the education sector in a bid to lift the sector out of its current situation, which is unacceptable to most Nigerians.

 

 

Education Lead at Sterling Bank, Mrs. Eniola Obe, disclosed this at the sixth edition of the Lafarge Africa National Literacy Competition held in Lagos recently with the theme, “Bridging the Literacy Gap Together.”

 

 

According to her, Sterling Bank decided to support the programme because education is one of the five sectors of the economy where the bank is presently focusing its investments. She added that the bank also supported the programme as part of an effort to ensure that children in school are able to engage in proper learning.

 

 

“The number of children who are out of school is too high and unacceptable. So we are trying to see how we can help turn around the education sector because it is obvious that the government alone cannot fund it,” Obe said.

 

 

She reiterated that the bank would continue to partner with Lafarge Africa and others who are interested in the well-being of the education sector so that it can reach the same level as what obtains in developed economies.

 

 

At the end of the competition, Rivers State emerged the overall winner, followed by Ogun State while Enugu State came third.

 

 

Rivers State was represented by Master Ledee Barikpoa and Emmanuel David, both of Community Primary School in the Pue Khama Local Government Area of the state.

 

The two overall winners received N250,000 each, second place winners receivedN200,000 each and the third place winners got N150,000 each. A total of 12 pupils qualified from six geographical zones of Enugu, Kogi, Rivers, Gombe, Katsina and Ogun states for the final competition, which involved literacy assessment and creative writing.

 

Also speaking, Emir of Kano, Sanusi Lamido, lamented that the Federal Government had not made education a priority in its yearly budget, adding that if education, especially that of the girl-child, is given priority, the nation would find solutions to most of its problems.

 

Calling on other private organisations to emulate Lafarge Africa by investing in the education sector, he said government alone could not fund education.

 

The Emir also called on the World Bank and other multi-lateral institutions to support the development of the education sector in the country instead of focusing only on roads and other infrastructure because it is educated minds that can use and maintain those infrastructure.

 

 

 

In his address, Mr. Mobolaji Balogun, Chairman of Lafarge Africa Plc, said the literacy competition was very important to the company in many respect because the deficit in the education sector is very high.

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