As the December 31, 2019 deadline set by the Central Bank of Nigeria (CBN) for banks to have a minimum Loan-to-Deposit Ratio (LDR) of 65 per cent draws closer, lenders are coming up with different types of innovative loan products to attract customers, writes Tony Chukwunyem
eposit money banks (DMBs) in the country do not seem fazed by concerns in some quarters that the Central Bank of Nigeria’s (CBN) decision to significantly raise the minimum Loan-to-Deposit Ratio (LDR) for the industry could push them into risky lending practices, thereby leading to an increase in Non-Performing Loans (NPLs).
Reason: Efforts by the DMBs to ensure they comply with the apex bank’s new minimum 65 per cent LDR policy before its December 31 2019 deadline have triggered a fierce competition for borrowers among the lenders.
New Telegraph’s findings show that many Nigerians are daily receiving unsolicited credit offers from lenders eagerly searching for people to extend credit to. Significantly, such offers are so attractive that they are being snapped up by bank customers.
For instance, a Lagos-based businessman, Mr. Fred Halim, told New Telegraph that in recent times he had been getting a loan of not less than N100,000 every month from a Tier 1 bank.
According to him, not only does the bank not ask for any collateral before granting him the credit, it is given to him at four per cent interest rate, which when added to the one per cent management fee charged by the lender as well as the insurance cost of 0.15 per cent, is still quite affordable for him.
However, Halim said the most attractive feature of the loan productwas the fact that he does not need to pay a visit to any of the bank’s branches to enjoy the credit facility.
He said: “Everything from start to finish is done from my mobile phone. All I need to do is to dial the required code and I will be told how much loan I’m entitled to for that month. The bank has its way of calculating the amount. The other condition is that I must pay back within one month.”
Another Lagos-based trader, Mr. Ikenna Obi, also said that given the widespread perception among Nigerians that banks are reluctant to extend credit to Micro Small and Medium Enterprises (MSMEs), he had initially ignored several messages from his bank that he was qualified to apply for a collateral-free loan.
But, according to him, after learning more about the product from his account officer, he was convinced about its benefits and has been a frequent borrower.
Access Bank’s announcement
Interestingly, about a month ago, Access Bank announced that its expanded digital lending portfolio, which gives Nigerians quick and 24/7 access to funds for emergencies without any collateral, had hit a record N1billion daily in loan value.
The Tier 1 lender said that since the launch of its digital loan portfolio with “PayDay Loan” as the flagship product, it had expanded its digital loan offerings to other multi-tenured variants.
Commenting on the success of the lender’s loan products, Executive Director, Retail Banking, Access Bank Plc, Victor Etuokwu, said: “We are at the forefront of digital lending across the continent. This is a deliberate choice we made when we introduced the first USSD based digital lending product in Nigeria based on our deep understanding of our operating environment.
“In the past two years, we have disbursed over 3.5 million loans to individuals. We acknowledge it is no mean feat when compared to where the market is coming from, but this is still a scratch in the overall potential of this market. This year alone we have disbursed over N45billion in over two million disbursements to individuals and have recently witnessed a spike in our volumes hitting N1billion daily. This achievement and our focus on retail lending reiterate our commitment to democratize access to financial services leveraging digital technology.”
Analysts point out that although DMBs have realised for some years now that they needed to aggressively pursue retail lending in order to remain profitable, the CBN should take the credit for the recent surge in lending to MSMEs.
Having used moral suasion as well as carrot and stick approach (without much success), over the last few years, to try to encourage lenders to extend credit to the real sector and thus boost economic growth, the CBN had in a letter dated July 3, 2019, directed all DMBs to maintain a minimum LDR of 60 per cent by the end of September 2019.
The LDR is the portion of customers’ deposit that is given out as loans.
The apex bank also warned that failure to meet the LDR requirement would lead to a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target LDR. This means 50 per cent of a bank’s deposit will be immediately sent to the CBN.
At the expiration of the September 30 deadline, the CBN debited the accounts of 12 DMBs to the tune of N499.18billion for failing to comply with its directive even as it announced that it was raising the LDR target upwards to 65 per cent and which lenders must achieve by December 31, 2019.
The banks sanctioned included four Tier 1 lenders-Zenith Bank, First Bank of Nigeria Ltd, UBA and GTB- and three international banks-Citibank, Standard Chartered Bank and Rand Merchant Bank.
Others were FBN Quest Merchant Bank, Jaiz Bank, FCMB, Keystone Bank and Sun Trust Bank.
A breakdown of the charges showed that Citibank was sanctioned N100.774 billion, Firstbank (N74.67billion), FBN Quest Merchant Bank (N270 billion), FCMB(N14.37 billion), GTBank (N25.15 billion) and Jaiz Bank (N7.53 billion).
Others are Keystone Bank (N4.16 billion), Rand Merchant Bank (N2.82 billion) Standard Chartered Bank (N30.03billion), SunTrust Bank (N1.70 billion), UBA (N99.68 billion) and Zenith Bank (N135.63 billion).
However, on October 17, the CBN indicated that it had released part of the deducted N499.18billion to some of the affected banks after they increased lending.
Bloomberg quoted the Head of Banking Supervision at the apex bank, Mr. Ahmad Abdullahi, as saying that “most of them that were involved got a refund,” after they met the requirement at the end of September. It is not a penalty where a bank is to forfeit money. ”
In fact, at the end of its meeting in Abuja early last month, the Bankers Committee had clarified that the deduction was neither a fine nor a levy, adding that the monies would be refunded once the banks met the LDR requirements.
Speaking on behalf of the committee, Chief Executive Officer of Zenith Bank, Mr. Ebenezer Onyeagwu, had stated that the monies would be refunded once the banks met the LDR requirements.
He said: “The CBN never stated that the debits were fines. If you go back to the circular, what it said was that at the cut-off point at the event that you do not meet the threshold, funds will be debited from you and added to your CRR. So, what you have there is not a fine rather is it a levy but it’s just a shortfall based on the parameters that the CBN has set.
“However, even if at the cut-off point of September 26 adopted by CBN, you were short in terms of what you were supposed to do, CBN is not a closed session, it continues. CBN would look at your figures subsequently and where you achieve a loan growth, you have a refund, if you also have a drop in your deposit compared to that cut-off, you will now have debit.
“So, it’s going to be a continued dynamic process where the whole essence is to see that we don’t just have a one-off growth but a continued process of creating an enabling credit in the system.”
Still, financial experts here in Nigeria and globally warn that the increase in LDR would hurt the nation’s banking industry as it could push lenders into granting risky credit, thereby swelling NPLs ratios.
In a statement it issued on July 5, Fitch Ratings said it believed the move “will push some banks to significantly increase lending to riskier borrowers, potentially with looser underwriting or underpricing of risk.”
The agency said that following announcement of the new LDR requirement, it had raised its 2019 loan growth forecast to an average of 10 per cent for Nigerian banks that it rates, compared with 1 per cent growth in 2018.
According to the agency, “achieving the new LDR requirement in such a short timescale will be very difficult for some banks given their lending levels, particularly if customer deposits continue to grow at present rates. The sector’s overall LDR was 57% at end-May, according to CBN data. This is low relative to many markets, and reflects banks’ concern about the risk to asset quality from Nigeria’s often volatile operating environment. Nigeria’s largest banks, with the exception of Access Bank, have LDRs below or close to 60% and will be among the most affected by the new requirement.
“It is unlikely that there is sufficient demand from good-quality borrowers for banks to meet the target without relaxing their underwriting or pricing standards. Banks continue to struggle with high impaired and other problem loans, which is partly the cause for muted lending since 2016. The present operating conditions are not conducive to loan growth, and rapid lending during the fragile economic recovery could increase asset-quality problems in the future. Chasing loan growth could also weaken banks’ profitability if they cut margins to attract customers, and because of the need to set aside expected credit loss provisions under IFRS 9 when loans are originated.”
CBN vows to sustain policy
But commenting on the policy during his presentation at the 2nd Nigeria-Canada Investment Summit in Abuja, last week, CBN Governor, Mr. Godwin Emefiele, vowed that the apex bank would sustain its implementation.
He said: “We will continue to compel banks to undertake their statutory licensed roles of financial intermediation. In this regard, the recently announced policy to raise the domestic loan-deposit ratio from 57 per cent to 60 per cent by end-September and to 65 per cent by end-December 2019 would be sustained, intensified and resolutely implemented. This we believe will help to support greater growth and improved investment into the Nigerian economy.”
Indeed, latest data obtained from the CBN indicates that the total value of banking sector credit to the private sector rose by 2.6 per cent or N646 billion to N25.466 trillion at the end of September 2019, up from the N24.819 trillion recorded at the end of August. The Regulator attributed the rise in lending to its aggressive push for banks to lend to the real sector of the economy.
Industry analysts, however, told New Telegraph at the weekend that while it may still be too early to tell whether the concerns that Fitch and other such analysts have about the policy are legitimate, the fact that it seems to be already changing the widespread perception among bank customers that getting loans from DMBs in these parts could be as difficult as getting blood from a stone, is progress in itself.
FG’s subsidy to GenCos hits N1.3trn
●Fresh bickering looms over distribution policy
Power minister says over 2,000MW of electricity not being distributed due to distribution chain failure
he Federal Government has subsidised the generation stratum of the power industry with N1.3 trillion in just 18 months.
This, a document of the Ministry of Power sighted by New Telegraph at the weekend showed, came as bickering looms between government and investors in distribution companies over a new policy, which tends to cut down DisCos’ intermediary role in the power value chain.
“In 2018, the Federal Government, the ministry’s document read, approved an intervention fund of N700 billion to GenCos. Just recently, another N600 billion was approved for the same purpose,” the document read.
Corroborating the report on power subsidy to GenCos, Minister of Power, Sale Mamman, stated that the funding necessitated the new willing-buyer-willing-seller policy of government.
The policy, he said, tends to whittle down the supply value chains where about 2,000 megawatts (MW) of power is stranded through failure in distribution chain.
“Over 2,000MW of electricity is not being distributed due to the failure of the distribution chain,” he said.
The huge subsidy is an overbearing burden on government.
Mamman added that DisCos owed the GenCos and other agencies in the sector over N1.3 trillion and that their collection and remittances have remained below 30 per cent despite several efforts to make them improve.
The Ministry of Power had, in a statement by Aaron Artimas, Special Adviser (Media and Communications) to the minister, noted that the new electricity distribution policy called “Willing Seller, Willing Buyer” was designed to bypass middlemen and sell power directly to consumers.
Under the differential power distribution policy, electricity will be wheeled directly from generation companies (GenCos) to willing consumers, who are ready to fully settle their bills.
The willing consumers may include community and commercial clusters, industrial areas and hospitality sectors, the statement said.
The power minister added that the policy was designed to save energy loss in the sector and assist GenCos, who have not been getting the full payment for the power generated.
Mamman said the policy had already taken off as a pilot scheme in two states.
The minister revealed that DisCos had not been distributing all the power wheeled to them on the pretext that consumers were not paying for power supplied.
This, he said, necessitated the huge subsidy intervention in the power sector by paying the GenCos for undistributed power.
While calling on Nigerians to be more responsible by paying their electricity bills, the minister assured that government was taking various measures, including completion of on-going power projects, to improve generation and distribution.
He noted that in neighbouring Niger Republic, electricity tariffs were higher, while payments were almost 100 per cent.
The minister also added that as part of efforts to improve power supply to the North, a new 330kva line would be installed for Kano and other cities to balance distribution in the country.
He, however, hinted that with the anticipated improvement in power supply in the country, the increase in electricity tariffs was inevitable, considering the cost of energy generation in Nigeria.
Cutix: Operational challenges weaken profit
The real sector of the economy has continued to battle operational challenges as increasing cost of operations impacts negatively on their profit margin including that of Cutix Plc. Chris Ugwu writes
he challenges posed by strong macro-economic headwinds, which include erratic supply of public electricity, falling naira to forex rates, weak logistics, insecurity and other high costs of operations attributable to poor infrastructure have continued to make business operating environment difficult, especially for the real sector of the economy.
With fiscal and monetary headwinds leading to marked reduction in domestic output, manufacturers have continued to groan under pressure of increased cost of operations.
Also, insecurity, infrastructural deficit, particularly poor electricity supply and bad road network have continued to hit hard on manufacturers, at times forcing some of them to fold up.
Given headwinds such as slim consumer wallets, most consumer and industrial good companies in Nigerian have continued to find it difficult to weather the storm.
One of the companies affected is Cutix Plc, which has for the last two quarters seen drop in earnings.
The company, which ended its financial year in April 2019 with profit after tax rising by eight per cent to N477.070 million from N440.296 million in 2018, finished the first two quarters of the year unimpressive with sustained decline in net earnings to what market watchers attributed to weak consumer demands, stiffer competition and lack of accessibility to key markets in some parts of the country, coupled with increased costs.
The share price, which closed at N1.80 per share in January 2019, recorded drop in growth that when the closing bell rang on Friday, the company’s share price stood at N1.54, representing a decrease of 26 kobo or 14.44 per cent year to date.
Cutix had ended its Q3 with a dip in bottom line to post 9.39 per cent decline in net earnings for the nine months ended January 31, 2019.
Its nine months profit after tax dropped from N332.064 million in 2018 to N300.867 million during the period under review, accounting for a drop of 9.39 per cent.
The company’s profit before tax equally decreased by 9.39 per cent to N462.873 million in 2019 as against N510.868 million reported in 2018.
However, revenue increased by 7.51 per cent to N4.131 billion during the third quarter ended January 2019 from N3.842 billion recorded during the comparable period of 2018.
Cost of sales stood at N2.932 billion for the period as against N2.672 billion, accounting for an increase of 9.73 per cent.
Cutix reported seven per cent growth in revenue for the full year ended April 2019 to N5.434 billion from N5.057 billion in 2018.
Profit after tax rose by eight per cent to N477.070 million in 2019 from N440.296 million in 2018 while profit before tax stood at N679.332 million from N661.563 million in 2018, representing a growth of three per cent.
Based on the result, Cutix declared a final dividend of N220.1 million for the financial period ended Tuesday, April 30, 2019. This translates to 12.50 kobo per 50 kobo ordinary share.
The dividends was paid electronically on Wednesday, October 30, 2019, to shareholders whose names appeared on the register of members as at Friday, October 11, 2019, and who completed the e-dividend registration and mandated the registrar to pay their dividends directly into their bank accounts.
However, Cutix began first quarter of 2019 unimpressive with a post of 15.42 per cent decline in net earnings for the period ended July 31, 2019.
According the company’s filing with the Nigerian Stock Exchange, its three months profit after tax dropped from N111.629 million in 2018 to N94.415 million during the period under review, accounting for a drop of 15.42 per cent.
The company’s profit before tax equally decreased by 15.42 per cent to N145.254 million in 2019 as against N171.737 million reported in 2018.
However, revenue decreased by 3.63 per cent to N1.274 billion during the first quarter ended July 2019 from N1.322 billion recorded during the comparable period of 2018.
The company’s cost of sales stood at N896.551 million from N901.955 million in 2018.
Cutix sustained the downward trend during the second quarter as it posted a 36 .94 per cent decline in profit after tax for the half year ended October 2019.
The company in a report obtained from the Nigerian Stock Exchange showed that its profit after tax stood at N141.282 million in 2019 from N224.058 million reported in 2018, representing a decrease of 36.94 per cent.
Profit before tax equally dropped by 36.94 per cent from N344.704 million in 2018 to N217.357 million in 2019. Revenue declined by 12.36 per cent to N2.439 billion in 2019 from N2.783 million in 2018. Cost sales stood at N1.757 billion in 2019 from N 1.932 billion in 2018.
The company had said that the operating environment in Nigeria remained very challenging despite some positive changes recorded during the 2018 financial year.
It noted, however, that the Central Bank of Nigeria took advantage of the increased foreign reserves to complement the availability of foreign exchange. With the availability of sufficient foreign exchange, the import of raw materials through Letters of Credit (LCs) increased, thereby reducing the attendant risks associated with the purchase of foreign exchange from parallel markets.
“Cutix Plc. could therefore purchase the bulk of its foreign exchange requirements through the more cost effective official and more stable import-export (I & E) window.
“We recorded significant increases in the sale of power/armored cables due to high demand from ‘Operation Light up Nigeria’ projects in Anambra State. Nigeria’s multi-decade long electricity problems persisted during the financial year compelling our Company to rely on relatively more expensive AGO powered generating sets,” the company said.
It had earlier stated that the issue of multiple taxation had not been fully addressed by the federal and state government.
“A few government agencies are still finding alternative ways of increasing taxes, which have created further hardship to local manufacturers and businesses,” it said.
The Chief Executive Officer, Mrs. Ijeoma Oduonye, had said her vision was to find success drivers and solidify on them, stressing that the company would maintain quality, which they are known for as well as good customer relationship.
According to her, the company took bold steps in the face of inflation and insisted on quality which speaks for their products pointing out that what they present to regulatory agencies is what they sell to their customers.
Oduonye, who lamented the poor power supply in the country and the influx of substandard products into Nigeria market as threat to quality goods manufactured locally, called on government to take necessary steps to protect local manufacturers.
Cutix recently announced plan to acquire Adswitch Plc, a related electrical switchgears company that was delisted on the Nigerian Stock Exchange (NSE) in 2016.
Adswitch, a Nigerian company, was incorporated in 1982 and it has a close relationship with Cutix Plc.
The board of Cutix stated that it the acquisition was intended to enhance business expansion and boost the profitability of the company.
Cutix recently invested about N300 million on a new extension of its factory as part of efforts to increase the installed production capacity of the cables-manufacturing company. The new factory extension was expected to impact positively on the production capacity and efficiency of the company and to enable it to further improve its performance notwithstanding the increasing competition in the cables industry.
Adswitch had delisted from the NSE due to what the directors of the company then broadly described as harsh operating environment. The company, which was listed as a second-tier stock in 1991, filed for voluntary delisting at the NSE.
Market analysts then described the harsh business climate as operational challenges due to influx of fake and substandard products and uncompetitive manufacturing costs in Nigeria as well as the costs and requirements of maintaining the listing.
Prior to its delisting, according to reports, Adswitch had struggled with dwindling margins and sales. Audited report and accounts of Adswitch for the year ended April 30, 2012 showed that turnover dropped from N32.72 million in 2011 to N30.7 million in 2012. It posted a loss before tax of N10.34 million in 2012, albeit a better position that loss of N19.04 million recorded in 2011. Loss after tax also stood at N10.73 million in 2012 as against N19.69 million in 2011.
The business climate for Cutix Plc like other manufacturing companies has been typically characterised by upsides and downsides. However, with strategic expansions, it is hoped that the company will be out of woods.
Takaful: Unlocking wealth for non-Muslims
The largely untold story behind Islamic insurance, otherwise known as Takaful, is the wealth creation angle that makes it stand out for the poor and its reachout to people of different faith. Sunday Ojeme reports
bout two years ago, a major opportunity presented itself for more Nigerians, especially Christians and those of other faith, to understand the concept of Islamic insurance, otherwise known as Takaful.
In a brief message announcing its Takaful programme in Nigeria, the Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics (CIBE), Muhammad Zubair Mughal, motivated industry players to play their roles in the development of Takaful in African region especially in Nigeria as the insurance model can, to a large extent, tackle poverty in the region and benefit both Muslims and non-Muslims. .
While most people have continued to see it as a financial tool exclusively meant for the Muslims, Takaful, over the years, has evolved to be an all-embracing insurance model aimed principally to benefit whoever is involved, whether a Christian, Muslim or traditional worshipper.
The difference between Takaful and conventional insurance is so clear and goes beyond the religious perspective from which most people see it.
As part of the success story, the National Insurance Commission [NAICOM] has licensed some Takaful players including Jaiz Takaful Insurance Plc, and Noor Takaful Plc apart from other insurance firms that have also provided WI dow for the insurance model to thrive.
Apart from enhancing Federal Government’s financial inclusion arrangement, the working of the Islamic model of insurance also makes it attractive as it appears to be more rewarding without discrimination.
In the case of the conventional insurance, it is a risk transfer mechanism, whereby risk is transferred from the policyholder (the insured) to the insurance company (the insurer) in consideration of the premium paid by the insured.
In this regard, if the insured suffers any loss, the insurance company is expected to compensate the policyholders in the form of claims payment of the sum stipulated in the policy document.
However, assuming there is no loss suffered whatever surplus or profit made by the insurer would all go to the firms’ shareholders as the insured is covered during the policy period but not entitled to any return at the end of such period.
On the other hand, Islamic insurance is based on mutuality; hence the risk is not transferred but shared by the participants who form a common pool. The insurance company only acts as the manager of the pool.
Unlike the conventional insurance, the surplus belongs to the participants and is accordingly returned to them (in proportion to their respective shares of contributions) at the end of the accounting period.
While the conventional insurance has some elements of gambling attached to it, Takaful is operated on the basis of brotherhood where no one is left out at the end whether there is a loss or not.
According to records, Takaful is one of the fastest growing segments of insurance at around 20 per cent per annum on average with its contributions conservatively estimated at around $3 billion, comprising 60 per cent General Takaful, and 40 per cent Family Takaful.
With three companies now wholly licensed by NAICOM and others promoting through smaller windows in Nigeria, there is no doubt that Nigerians of all religious belief now have the opportunity to embrace the insurance model.
The immediate past Commissioner for Insurance, Mohammed Kari, had promised at the launch of Jaiz Takaful in Kano that more of the operators would soon be unleashed in order to extend the benefit to all Nigerians beyond Islamic faithful.
He said the commission introduced Takaful and microinsurance products in the country as an attempt to reach the segment of the market that is either hitherto reached or not comfortable with the conventional insurance products. .
Kari said the commission introduced Takaful and microinsurance products as an attempt to reach the segment of the market that is either, hitherto, unreached or not comfortable with the conventional insurance products.
Advising Nigerians to embrace Takaful for their protection against risks and wealth creation, he said the insurance model was both ethical financing and cooperative risk protection methods that are superior alternatives as they reinvigorate human capital, human solidarity, emphasise dignity, community self-help and economic self-development, generating manifold benefits, which appeal not only to Muslims but all.
Speaking in support of the model, a university lecturer, Mr. Yekeen Abdul-Maliq, said Takaful has nothing to do with Islam, except that it is based on Islamic injunction.
According to him, “Islamic injunction is essentially the Law of Moses, and then when you talk about Sharia you are talking about the Law of Moses. When we hear Islamic banking or Islamic insurance we believe it must be Islamic, even Muslims believe so, Christians too believe so. But that is as a result of misinformation and most of us are not willing to read.
“Both northerners and southerners will accept Islamic insurance. There are a lot of Muslims in the south as a result of that they will even buy into the insurance business.
“Insurance in Islam is to make provisions for essentials either while you are alive or while you are no longer there. Insurance itself has an Islamic origin, when one suffers a loss, then people come together and uplift him out of the predicament.
This was also highlighted by the Chief Executive Officer, Metropolitan Skills, a capacity building institution, Hajiya Ummuhani Amin, who said that the prevalence of unbanked population in the northern part of the country is because there were no institutions to meet their investment belief.
She said: “In the north, everybody is looking forward to a financial institution where you can invest funds otherwise they will not take it to any bank or insurance company because the conventional financial institutions have elements of uncertainty, which is against Islamic principles.
No doubt, despite the predictable challenges surrounding Takaful operation for a secular country like Nigeria, since the benefits appear to have an overriding potential, the Federal Government, through the industry regulator, should provide an enhanced opportunity for Nigerians to key into the system as a way of tackling poverty extensively.
Essentially, the introduction of the Islamic model of insurance in the country has so far recorded success among the Islamic faithful. It is, however, important to note at this particular time that Nigerians of other faith should realise the goldmine before them and as well key into it.
Egube: How Lagosians dictated our budget design
Samuel Egube, Lagos State Commissioner for Economic Planning and Budget, in this interview with journalists, speaks on how the state government intends to tackle various challenges in the state through inter-governmental cooperation and putting the people at the centre of every decision. Sunday Ojeme reports
How will the state budget actually impact on people resident and doing business in Lagos?
If you notice during the campaign, it took a while for our agenda to come out. The reason it took that was because the governor felt you cannot give the people an agenda without consulting with them. There was need to understand them, and then craft an agenda that is consistent with what they are saying, otherwise, all you will do all year long is you craft your agenda and you keep convincing the people that your agenda is good for them. So when we came out with the agenda, the idea was that we had talked with the people and we knew that traffic and traffic management were important. The people felt that a Lagos without traffic congestion would be a brilliant place to live in. So we knew that was a pillar we needed to hold on to. We also felt that health and the environment needed to come together. Health from the perspective of curative but environment from the angle of preventive; every disease you get actually comes from the environment. So if our environment is ok, then clearly, healthcare requirement will be moderated. So we then combined health with the environment. The administration also looked at the healthcare system. For a mass of the people, their healthcare requirements are more primary than secondary. So in the plan, we needed to ensure that our primary healthcare systems are strong. But how do you intervene in primary healthcare? Primary healthcare is really in the ambit of the local government. So it was clear that if we needed to be successful, inter-governmental cooperation was going to be very important. If you say this is the state government, therefore you won’t intervene if there is gap at the primary and secondary levels, it is the same people that will go through that challenge. We then said we needed people to encounter health in their communities so as to remove the pressure from secondary and tertiary health institutions. What that meant was that we needed people to have confidence in the primary healthcare system. We needed people to be willing to go there, but we also felt that sometimes, access to healthcare systems is not only a matter of the location; people are concerned about how to pay for it. What we also found out with some people we interacted with is that the disease or sickness gets into a critical stage before they go to hospital. What they are avoiding like consultation fee actually becomes very tough, which is why we have in mind the need to push the health insurance system, and we have given ourselves a target to be able to get 2.5 million people enumerated. In that enumeration, we also have social impact initiative where government will subside quite a bit. We needed to be able to get that together.
Apart from the healthcare system, what plans do you have to improve education and also tackle the worsening traffic situation?
Education in Lagos had crumbled, despite emerging sixth in a recent ranking in the country. One of the things we looked at was that Lagos State was ranked sixth in WAEC pass, but that sixth was 42 per cent, and we felt we could not celebrate a sixth that is 42 per cent. So there was so much behind in technology. There were also representations to us from people in the education system basically saying that early child education was crucial, and it was failing very dramatically. So we knew we needed to intervene. Primary education belongs to local government, so you will see in our agenda, inter-governmental cooperation needed to be very strong, not only with the local government but with the Federal Government and other government around. We also looked at traffic; there is a lot of influx of people into Lagos, and that is quite understandable. People coming from other states and some from other countries sneaking into Lagos. Lagos is not a sovereign so you can’t control how people come in. Now if people are coming into Lagos, you know there is going to be a strain on the entire infrastructure, whether it is education, traffic, healthcare system, and we need to ramp it up in the best of our abilities. In doing that, we felt we need to strengthen our technology infrastructure because a stronger technology infrastructure helps leverage more people into a smaller system.
What is the position of the state finances in terms of debt service to revenue and total debt, can the state finances support more borrowing?
Of course, money always is a very important matter, which was why I said that the 2020 budget would be driven by our capacity to generate revenue. So, if you look at your past and you want to use your past to go forward, sometimes it doesn’t just work. If you fail very well in school, and you want a better future, you cannot say I want to draw a trend from my failure in school to determine how my future will be. So, what we decided to do was to say what is the tax collection potential of Lagos? And there are many ways to do this, and one of the ways is to say okay listen, there is a relationship between your tax revenue and your GDP. So you then look at countries that are like you, because if we say we are one of the largest economies in Africa, then you need to look at that. So, if you take Ghana for example, you will see that they do 15 per cent of their GDP in taxes, if you take Egypt, they do about 15 per cent, South Africa is probably around 20 per cent. But if you take Nigeria, we are at just six per cent and Lagos has only 1.06 per cent tax to GDP ratio. So, what that means conceptually is that Lagos today should be able to do, if it wants to be like Ghana, 15 times what it is collecting today in taxes. Of course, there are arguments to say, yes, but Lagos is not a national. Corporate income taxes go to the Federal Government and all of that. How do we adjust for that? Divide it into two, because at the end of the day everything that happens in the corporate ends in the individual and then it goes back with the flow. So divide it into two, and maybe you can do six times what you are doing now. So if you do that, then we probably should be collecting taxes in trillions and I am talking of high trillions. So how do we intend to move that? One of the things I said earlier was that if you want to collect taxes correctly, you cannot mix out in the commanding height of your economy because taxes come from business activities. Even though we say we are over 20 million people in Lagos, the amount of people and organisations actually paying taxes in Lagos is only about 400,000. So, when people say Lagos has a lot of money, it is true, but when you look at it per capita, that is, compared with the over 20 million we have in Lagos, then there is nothing. We want people to see taxation as their contribution to the development of the state. So, there would be a lot of advocacy around that. We shall build schemes to support taxpayers in the state. When you look at a state or a country, it is the way you are organised that helps you run. The difference between a developing and developed environment is in their organisation and you cannot say you have access the potential of your revenue if you are not controlling the commanding height of that economy in taxation So, if you think a little bit deeply, what taxes do transporters pay? I am talking of formal taxes now, whether as individuals or as businesses. The entire transport business is largely in the grey market and we have thousands of them. Fourteen million people are moving every day in Lagos. I was in a forum with David Cameron, the former British Prime Minister, and I asked him, ‘if you were to advise Nigeria, what will you advise Nigeria?’ And he said well, he is not an expert in advising on Nigerian affairs, but one of the things he can say is that governance is about two things. We thought he was going to come out with some profound idea, and he said governance is about the rule of law and taxes. And that means the way we moderate the behaviour of people using taxes. Shortly after that I travelled to the UK and I was angry coming back, because I looked at the roads in UK, they were narrow, patched. And I said why are they ahead of us? Then I remembered what he said – taxes and rule of law. Because I found out that I could not throw a piece of paper out of the window. I found out that if I beat the traffic light I will be caught somehow, and I will not only be caught, I will be designated as a risky driver, there will be point against my license to make my insurance go up. So it is just the rule of law and taxes.
What is the state doing to address unregulated agencies collecting illegal levies?
It is a challenge, but this is something that is deep in our culture. What we need to do again is to organise and put systems in place that prevents such behaviour. We can come out and say no more unregistered people, we didn’t register them in the first place and people have within the system become their own governors or local government operators. We even hear there is a receipt called governor’s receipt, which is unknown to us. How do we want to do it? Like I said, what we will begin to see is more organisation. We will register people that are required, we would digitalise the taxes that will be paid. There are various solutions which we are interrogating, so that when you pay, you have it in your system. When they tell you pay this, you can show them the only taxes that government says you should pay and that weakens them. But sometimes these people’s strength doesn’t come only from your compliant, it comes from actually criminality. In addition to that, of course citizens are going to be empowered also to complain. We have a citizen’s engagement special adviser as well, that is going to focus on citizen’s engagement and we are going to figure out ways of taking out people who break the laws. It is just clear that there is a problem here and they are not acting on behalf of the government, the monies they collect are not going back to any government, whether it is local government and so it is just thuggery. But you also need to be able to empower the people because sometimes the people pay because they really don’t know what they should pay for and what they shouldn’t pay for. And sometimes they also need support from enforcement agencies, which is why I said some of the decision are going to be tough. So, there are different types of programmes which we are going to introduce in the 2020 budget. Developing human capacity to drive productivity is very important. And the way we see it, human capacity is going to be developed from education, health and environment. No matter how you see it, there are people in the society that are vulnerable, so we need to support them. We also need to connect the education we have to the industry. Typically, when there are gaps in government, what I will call pseudo or unauthorised government tend to arise. So, we are going to be strong and definitive as to all of that. In terms of supporting SMEs, it is about the Ease of Doing business. Yes, we like Opay, we like all of those kind of businesses, we like them in their uniform and the fact that they stop when the traffic light opens. But it is not only the motorbike hailing companies that face that challenge, small businesses face it, transporters face it as well. So it is going to be holistic in the way we really want to engage it. We will not allow that to thrive, again it will come by way of registration, by way of organisation. I think where we are going, if we do allow some of these things to move on, then they must be registered and the operating standard or the modus of oparandi must be clear. We are working on that and soon there will be more definitive statement.
What are you doing to give infrastructure in the state a facelift?
The pressure which Lagos State goes through in infrastructure and the systems come from operations of entities and usage; now, we just discussed corporate taxes, and the corporate taxes don’t come to Lagos. And we say Lagos generate about 70 per cent of the businesses and transactions in the country. We run a federation where what you get sometimes is unconnected with what you produce. And so when that situation arises it creates a challenge and it stretches resources to its limits. So, when you take Apapa for example, you have what I call a three-system-overlapping operation. So you have a local government in Apapa, you have a state government and a Federal Government. So, when you see a port that was built about 50 years ago and under the federal government. So, when you asked if Apapa in Lagos State, I can firmly answer that Apapa is in Nigeria. What that means is we all need to figure out how to solve the problems that have all of those layers I mentioned earlier. So, when the people suffer, actually the people that suffers are Nigerians who live in Lagos and in certain local government area.
IMF approves $247m reform loan for Angola
he International Monetary Fund (IMF) has approved a second tranche of a $247 million loan to be paid to Angola under its Extended Fund Facility following a review of the southern African oil producer’s progress under the programme, Reuters reported at the weekend.
The multi-lateral lender originally approved the facility totalling $3.7 billion in December 2018 to help Angola manage twin budget and balance of payments crises after tanking global crude prices ripped a hole in its revenues.
Angola is Africa’s second biggest oil exporter (after Nigeria) and relies on sales of the fossil fuel for about 65% of total tax revenue, but a combination slack crude prices and years of mismanagement at state oil-producer Sonangol have left it struggling for funds.
The IMF’s Extended Fund Facility (EFF) is a loan pegged on deep structural, macroeconomic and governance reforms designed to help countries with weak economic growth and problems paying bills.
In a statement, the fund said Angola had made progress in reducing state spending and broadening economic activity outside of oil, but that the economic outlook was still uncertain and it had to do more to fight mismanagement and corruption.
“The authorities’ commitment to fiscal consolidation has been illustrated by the outperformance of the end-June 2019 non-oil primary fiscal deficit target by a wide margin,” said Tao Zhang, IMF deputy managing director and acting chairman.
“To … mitigate the elevated risks to debt sustainability, the authorities need to persevere with measures to mobilize non-oil revenue … and bolster transparency … of state-owned enterprises.”
AfDB’s facility board approves budget for 2020
he African Legal Support Facility (ALSF) Management Board, the legal support arm of the African Development Bank (AfDB), has approved the institution’s work plan and budget for 2020, the bank announced in a statement at the weekend.
According to the statement, the ALSF board, as part of next year’s work plan, endorsed the proposal to organise a regional member countries’ meeting in February 2020 to discuss both the future and sustainability of the facility and the expansion of its membership and modalities for RMCs’ contribution to the financial sustainability of the facility.
Established in 2008, the ALSF is an international organization, hosted by the African Development Bank. Its mandate is to support African countries by providing legal and technical advisory services and capacity building, as well as developing unique knowledge management tools, in sovereign debt litigation, extractives and natural resources, infrastructure and PPPs, and other sovereign related transactions.
18,663 abandoned housing units litter Lagos metropolis
Paucity of funds, high cost of materials, conflicts adduced for project delay
o fewer than 18,663 housing units belonging to the Lagos State government, which construction started over five years ago, are lying fallow at various sites in the metropolis.
According to New Telegraph’s investigation, some of these housing units, which cut across three senatorial districts, were either being executed directly by government or through joint ventures with the private sector.
It was further gathered that the housing estates were abandoned due to paucity of fund, conflicts and political issues, despite huge accommodation deficit in the state.
The housing units and their locations are the Chois Estate Agbowa – 400 units; Egan scheme -684 units; Igbogbo 11b -360 units; Odo onosa /Ayandelu -660 units; Sangotedo in Eti Osa 2 phases -1188 units and Ajara estate -420 units.
Those under joint ventures scheme encompass Ijora Badia- 771 units; Iponri Estate, Surulere -132 units; Imota, Ayobo, Idale -2000 units; Ilamoye,Abijo -2464 units; Tolu Ajegunle, Abule Ado -2126; Ikota Ogombo -3300; Ibeshe Owutu -3000; Igbogbo JV scheme -416 units and Ilubirin – 472 housing units.
Contracts for some of the housing projects were awarded between five and eight years ago by past administrators in the state.
Perturbed by the huge abandonment, the Commissioner of Housing in the state, Morouf Akinderu-Fatai, has ordered all the contractors and developers back to sites.
He charged the contract partners and private investors to ensure completion of all housing schemes, which have been contracted to them within the scheduled timeframe.
The commissioner lamented the breach of contract schedule by private partners, saying that was responsible for uncompleted housing schemes in the state.
Akinderu-Fatai described the breach by private nvestors and joint partners as unfortunate to government’s effort to address housing deficit, which is a challenge that require urgent attention.
Speaking on the effort so far, he said: “We are resuscitating some abandoned projects like Egan housing scheme and revisiting some joint ventures for compliance and quick completion of projects.”
According to him, the state government had witnessed the completion of 492 homes in Lateef Jakande Gardens in Igando, adding that Igbogbo and Sangotedo schemes are nearing completion.
Apart from working hard to deliver ongoing projects within the next 24 months, the commissioner disclosed that government was planning to initiate new schemes in all parts of the state.
Beyond this, he said there were solid plans to turn around some of the dilapidated estates in the state into liveable cities to achieve the SDG 11 of sustainable and liveable cities.
“We are geared towards making more Lagosians home owners. We are also looking into transit homes for those in emergency situations to reduce homelessness and destitution,” he said.
The commissioner for housing listed high costs of building materials and labour as well as funding issue as some of the factors militating against affordable housing in the state.
According to him, solution to land matters is having a synergy between government ministries, departments and agencies (MDAs) connected with land matters.
He stated that the ministry now had good relationship with the lands bureau, saying that many opportunities were opening up in Lekki and Epe areas.
To overcome the challenges posed by high cost of materials and labour, he disclosed that government would be sponsoring researches into development of technology that will reduce cost of building.
“We will also build human capacity with training programmes for artisans both to reduce unemployment and bring down cost of labour,” he said.
The commissioner pointed out that building was a highly capital-intensive project, saying that was the main reason government involved private partners in many of the housing projects.
He said: “We are also actively looking for cheap funds to translate our visions into reality.
“We are also opening a portal for greater relationships between government and operators and investors in estate development for the purpose of transparency and collaboration in the interest of the citizenry of the state.”
On mortgage finance, he said this depended on citizens having sustainable income over a period of time.
According to him, Lagos State Government, apart from working on reducing mortgage interest to the minimum on its own houses, is also promoting an environment that is conducive for increased economic activities so that people could meet the basic requirements of mortgage.
Lagos, Nigeria’s commercial capital, is home to 21 million people. It currently has a housing deficit of about three million.
Pilots, engineers may down tool over pay disparity
●Seek law to protect sector
Aviation professionals leaving country for jobs in Middle East, others
xcept a truce is reached, engineers and pilots of two domestic airlines (names withheld) may down tool over pay disparity between them and their expatriate counterparts.
The Nigerian workers are frustrated by the huge gap created by their employers at the detriment of more qualified indigenous pilots and engineers.
Experts are demanding the enactment of local content caw to protect indigenous workers.
National Vice President, National Association of Aircraft Pilots and Engineers (NAAPE), Capt. Yakubu Dukas, told New Telegraph in Lagos that “engineers in … are fighting for parity. The unfortunate situation is that owners of this business don’t see it that way. An expatriate engineer comes in and earns $10,000. His raw dollars are given to him and a national earns $6,000 but he is not paid the dollar component.”
He disclosed that the airline owners pay at a degraded naira to dollar rate, saying “I give you an example. Caverton Helicopters pays N305 to the dollar. Bristow pays N345 to the dollar. It is only Omni Blu that I know and stand to be corrected that pays N360 to the dollar.”
“For God’s sake, if you are paying someone at inter-bank rate or Central Bank of Nigeria rate of N305 and you are saying that your salary is $5,000, are you actually paying him $5,000? You are not paying him $5,000; you are exploiting him and these are people who work much more than the expatriates because during your leave, they can call you back, but they wouldn’t call somebody from Spain, Brazil,” he added.
Dukas maintained that the nation boasted of capable hands to be aircraft commanders and engineers, stressing many of them are far better and experienced than some expatriates that carriers hire, thereby leading to joblessness of indigenous professionals.
Faced with frustration back home, Dukas stated that there were many high-ranking pilots and engineers that have left the shores of the country in search of jobs in the Middle East and Europe, adding that they are doing well in their chosen careers.
The situation, he noted, had led to brain drain as many of the professionals are getting engaged by countries like China and Middle East that are in search of pilots to fill huge gaps in their aviation sector.
Dukas reiterated that the brain drain would eventually lead to a big crisis in the next two years if nothing is done to arrest the ugly situation.
“It is a serious challenge. I can bet with you that in the next two years, the older brigade of pilots are leaving. So, a huge gap will exist. Where do you get the replacement? That is the question.
“It is very sad, but that is the obvious truth. I tell you one story. About two months ago, I was going to Ikoyi and I called a Taxifier. We were driving on Third Mainland Bridge, my phone rang and I picked it, it was my managing director asking me a question about a flight that I did. I started discussing with him. Having finished the discussion, the cab man said sir, I don’t mean to intrude into your discussion, but I trained as pilot. It is very scary.”
He stated that the pilot union recently opened a NAAPE headquarters for all pilots and engineers, who are jobless to come and register.
Dukas further disclosed that after looking at the register, over 200 of them had written their names, lamenting that the bad thing about the profession is that it is age related.
“For example, an airline owner will prefer to employ an 18-year-old boy than carry a 36-year-old person. The reason they do that is to make them conform the boy to whatever standards they want. Because you are 36 and independent minded and know what is right and wrong, they wouldn’t want to employ him. Those are some of the challenges in the Nigerian aviation industry today,” he noted.
He also faulted the aviation regulatory body, the Nigerian Civil Aviation Authority (NCAA), for standing aloof without wielding its powers to correct some of the anomalies in the industry.
“I can’t go to Brazil. I am a pilot, a qualified one, but I can’t go to Brazil to get employment ahead of a national. It is not possible. Here is a country where everything goes. It is very pathetic like I have said, but the situation is real,” he added.
Growth: Niger Insurance reassures clients, investors
…pays N1.4 billion claims
he Managing Director/Chief Executive Officer, Niger Insurance Plc., one of the foremost composite insurance companies in Nigeria, Mr. Edwin Igbiti, has reassured policyholders and the business community that the management’s growth and transformation plan for the future will certainly breathe life into the firm.
The new management, he said, was putting strategies in place to reposition the well-known company for service excellence and competitiveness in a rapidly changing operating landscape.
Igbiti, who alongside his management team, briefed the press on Friday in Lagos, said as part of the plans, the company’s transformation blueprint over the next five years (2020 to 2024) would focus on operational and technological advancements in delivering bespoke insurance solutions to businesses, institutions and the growing populace of Nigeria.
The implementation of the transformation plan already began in the fourth quarter of 2019 following the appointment of the company’s new managing director, a vastly experienced and well- respected business leader who recently completed five meritorious years as MD of AIICO Insurance Plc.
The need for Niger Insurance Plc’s transformation is underscored by a combination of market and regulatory changes. Having been in operations for 57 years, it had become imperative to address legacy challenges as well as innovate to achieve service excellence, agility and competitiveness.
According to the Igbiti, the three pillars of the transformation plan are “strengthening our balance sheet (financial strength), strengthening our people (talent & innovation), and strengthening our business model (sustained growth & profitability).
“In order to ensure a successful execution of this plan, the company recently reconstituted a new board-of-directors, a new management team and an array of strategic partnerships.”
At its 49th AGM, which held last month, the company’s shareholders approved its recapitalisation plan to meet the new regulatory capital requirements through an equity capital raise via rights issue and/or private placement and a business combination by way of merger or acquisition, which must all be completed by 30 June, 2020.
In response to the situation regarding unpaid claims and outstanding customer benefits, the managing director expressed regret and attributed the delay to the company’s large asset portfolio, which is skewed towards fixed assets.
He, however, assured that the company’s assets were more than sufficient to settle all its liabilities and that it has made significant progress towards liquidating some fixed assets to unlock cash and pay down all outstanding obligations soon.
He stated that the company had paid over N1.4 billion to customers in the past nine months and used the opportunity to assure all others that their claims would be paid soonest.
He thanked all of its customers for their patience, trust and understanding during this challenging period in its long and otherwise stellar history while reaffirming the company’s renewed sense of responsibility and commitment to excellence.
“There is a growing sense of purpose at Niger Insurance Plc these days; it feels like a new dawn with management, staff and shareholders all working with passion and a common intent to write a great story in this new chapter of the company’s long and chequered history,” he noted.
While providing a progress update, the company’s new Chief Financial Officer (CFO), Mr. Ademola Salami, said: “Working with our financial advisers, the board and management of the company are already engaging with foreign and local investors that have shown interest in the company.
High-level negotiations are on-going and we expect to secure substantive offers for investment in the coming weeks.”
60,000 workers join CPS in three months
bout 60,000 workers from the public and private sectors joined the Contributory Pension Scheme (CPS) in three months thereby, pushing the number of Retirement Savings Account (RSA) holders from 8.79 million as at the end of the second quarter, June 2019 to 8.85 million as at the end of September, 2019.
The Acting Director-General, National Pension Commission (PenCom) Mrs. Aisha Dahir-Umar, who disclosed this, stressed that the pension fund assets had grown to N9.58 trillion.
However, the pension industry had earlier witnessed a 1.78 per cent growth in the scheme membership during the second quarter of 2019, moving from 8.63 million contributors at the end of the first quarter, that is, March 2019, to 8.79 million in June 2019.
She attributed the consistent growth in pension scheme subscribers to increased awareness on the advantages and enforcement of the new pension scheme by the pension industry regulator, that is, the National Pension Commission (PenCom) and pension fund operators.
Similarly, as at end of third quarter of the current year, pension fund assets have grown to N9.58 trillion, from 2004 when the new pension scheme debuted, a feat made possible by new pension contributions received, interest from fixed income securities and net realised on equities and mutual fund investments.
Investment income, according investigation, was instrumental to the continuous growth in pension funds, despite the fact that government at the state and federal levels are not paying the monthly pension contributions of their workers as and when due.
This growth, she said, justifies PenCom’s emphasis on the safety of pension funds as the bedrock of sustaining the CPS, assuring all stakeholders that the pension reform remains steadily on course. “These modest
milestones notwithstanding, the Commission and Pension Operators are committed to actualizing the growth potentials of the pension industry, ” she said.
On the theme of the workshop, which was, ‘Expanding Coverage of the Pension Industry’, she said, the Commission’s current strategic focus, is aimed at expanding access to pension as a veritable tool for economic development.
To her, “This aligns with the pension reform objective of old age poverty reduction and improvement in the welfare and general standard of living. The quest to expand coverage of pension is being pursued through some transformational initiatives especially the Micro Pension Plan.”
The Micro pension plan, she said, is targeted at the informal sector and self-employed who are not mandatorily covered under the CPS, noting that, it was designed with significant flexibility in recognition of the peculiarities of the targeted population.
On the other hand, she stated that the Enhanced Contributor Registration System (ECRS) is an in-house developed ICT application which was deployed in June 2019 to enhance the integrity of the contributors’ database.
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