How SMEs Can Access Debt, Equity Financing Seamlessly, by Stanbic IBTC Bank

How SMEs Can Access Debt, Equity Financing Seamlessly, by Stanbic IBTC Bank

Capital is the single most important factor necessary for the sustainable growth of small and medium scale enterprises, head, SME Banking, Stanbic IBTC Bank, Mr. Obinna Ukachukwu, has said.

He gave this clarification at the 2016 Global Possibilities Summit of Inspired Woman of Worth (iWOW) network which held in Lagos, recently.

Ukachukwu, who was a guest speaker and panelist at the summit, spoke on ‘How to Find, Create, Manage, Grow and Keep Real Money for your Business’. 

He said without capital it would be difficult for any business to attract finance or investment. He defined capital as the value of and the history behind a business. According to him, if a promoter of a business does not know the value of the business, it is very unlikely that any investor or financier will be comfortable committing their money because the equity or debt investor is bringing in money in exchange for value.

“If you don’t know the value of your business then you do not expect a debt investor to put in his money,” Ukachukwu said. He, however, assured that Stanbic IBTC Bank continues to work with operators in the SME sector, particularly through capacity building and information sharing, to ensure they build capital. He explained that the value of a business can be determined if the proper structures, such as proper book keeping, annual reports, tax returns, auditor’s report, and record of banking transactions, which form the history of the business, have been put in place. 

He therefore encouraged business owners and entrepreneurs to engage the services of professionals to ensure the right structures are in place. “When you have generated capital, you have determined your business’ worth, you then need someone to attest to that in form of documentations, whether it is your banker, your auditor or your tax man. Having these in place will make it easier for you to attract debt or equity financing,” Ukachukwu stated.

He expressed confidence that Stanbic IBTC Bank will continue to assist the growth of micro, small and medium scale enterprises through targeted product and service offerings. According to him, the Stanbic IBTC SME seminars and the Virtual Business Centre (BizDirect) are two of the bank’s interventions to help build capacity and share needed information. 

Stanbic IBTC Bank is a subsidiary of Stanbic IBTC Holdings PLC, a full service financial services group with a clear focus on three main business pillars - Corporate and Investment Banking, Personal and Business Banking and Wealth Management. 

Standard Bank Group, to which Stanbic IBTC Holdings belongs, is rooted in Africa with strategic representation in 20 key sub-Saharan countries and other emerging markets; Standard Bank has been in operation for over 151 years and is focused on building first-class on-the-ground financial services organisations in chosen countries in Africa and connecting other selected emerging markets to Africa and to each other.

Nigerian startups should be thinking of solving global problems

Nigerian startups should be thinking of solving global problems

*Ononobi says Startups that are solving global problems can easily scale globally
Simeon Ononobi, Nigerian tech entrepreneur and Founder/CEO of MyAds, has urged startups in Nigeria to start focusing on solving global problems instead of just thinking locally. According to him, this is the best way for the country to have startups that would grow to become unicorn companies like Google, Facebook and Twitter.

While noting that the startup ecosystem in Nigeria has grown over the years, and there are several startups that are performing satisfactorily in the market, he believes that the existence of numerous challenges that Nigerians and citizens of other countries face, presents local startups with access to a global market.

He said: “Nigeria currently has social startups that are doing very well and helping the economy grow; there are also some small startups that are striving to solve problems. What I’ve learnt so far is because we don’t think global, we think local first and I think it’s causing a lot of problems for us. We should start looking at the future.

“At a recent tech conference, guys from Russia and the USA talked about how they can expand globally first before expanding their local presence. I think we should start thinking in that direction where we don’t just solve local problems but we solve a global problem.”

Time to stop blaming government for everything
Even though a lot could be achieved in the startup sector with government’s support, Ononobi said startup founders in the country should stop blaming government for everything and strive to grow their startups even with the various challenges. Furthermore, he said startups can identify the numerous challenges and develop their own solutions for them.

“Policies are always going to be there; it’s always going to be an issue but my theme has always been don’t blame everybody else for our problems. The government is not going to be doing everything for us – we’ve been at the same spot since forever, our problems remain the same and we will always talk about the same problems when we have conversations. We do have more problems than many developed countries of the world and these problems are what startups can pick and develop solutions for them. You don’t want to solve problems that Facebook and Twitter had already solved. Instead, you can talk about electricity and the rest,” he said.

“We are seen as the giant of Africa. We should take our position as giants and take Africa by storm and take the world." 

Nigerian startups should help the average man on the street

Using MyAds as an example, Ononobi said it was a solution to a problem he personally had – a problem that several other people across the world are facing on a daily basis.

“It’s something that is going to solve a lot of problems. It’s a solution I developed for myself, it was meant to solve my advertising needs. I found a way to help people on the street and to help myself to advertise. It’s like helping businesses and helping the people on the street. The bus conductor can make money from his phone and I discovered that I don’t need to start just in Nigeria – it’s the same problem in India, Pakistan, and Philippines where people on the street don’t get to earn big bucks,” he said.

Startups that can scale globally 
Ononobi observed that the startups that can easily scale globally are those that are solving a problem being faced in their local market and elsewhere.

“If a startup is solving a problem here, that same startup can solve the same problem in Uganda, Rwanda, Ethiopia and elsewhere. Such potentially scaleable services include products for transportation, and aggregation platforms for menial jobs,” he said. 

Experience launching a startup outside Nigeria
Ononobi-founded startup, MyAds, recently launched in India and plans are underway to launch in more countries across the world. Recounting how the experience has been so far, Ononobi said a startup that has the potential to succeed in other countries are those that solve the problems faced by the people in those countries.

“If your startup is not doing what the Indian environment needs, it is not really necessary to expand to India. MyAds allows you to earn money every time you see ads when you receive calls. It is the same everywhere in the world – everyone in Nigeria, India, and Malaysia wants to earn money. But it’s a different thing when you want to start ecommerce platform or a blog for instance,” Ononobi said. 

Advice for Nigerian startups
While admitting that Nigerian startups are battling numerous challenges, Ononobi said they can still make progress and achieve phenomenal results if they take the right steps.

“Stop thinking about it, hit it at the head, go straight out in the market and start selling your product. Don’t worry about the problems because there is always going to be challenges. If you’re a startup, you will face challenges. Let us all help ourselves. Owners of Facebook, Twitter, and Google are already billionaires, they are unicorns. Let’s help local guys succeed. Let the 180 million Nigerians help us to also become unicorns so that we can also help grow this economy. If 7 Nigerian startups go globally, we will be talking about helping other countries grow,” Ononobi concluded.

About MyAds: With minimum budget, MyAds allows advertisers to reach target users; it helps businesses to grow business by connecting them directly to users. For the app users, MyAds app rewards them when they use it to connect to great brands and products. MyAds is an app that rewards everyone. The user gets rewards, and the advertisers are able to reach their targeted users. With MyAds, everyone is a winner.

Oil price: Why OPEC won’t cut production – David-West

Oil price: Why OPEC won’t cut production – David-West

AMIDST declining price of crude in the global market, a former minister of Petro­leum Resources, Prof.Tam David-West, has declared that despite intense pressure, the oil cartel-Organisation of Petroleum Exporting Countries (OPEC) will not cut down crude production quota.

OPEC is an association of oil-producing countries which was established in Baghdad Iraq,in 1961. It generates about 45 percent of the world’s total crude oil production, and more than 20 percent of the world’s natural gas production.

In an exclusive interview with Daily Sun, David-West said those calling for crude oil production cut by OPEC in order to shore up crude oil price, lack the understanding and dynamics of the work­ings of the oil industry.

He explained that activi­ties of non-OPEC member countries, which included: Brazil, Russia, Mexico, Nor­way and a host of others, will make the idea of oil produc­tion cut an impossible task because production statistics are shrouded in secrecy.

‘‘You cannot control what you don’t have information about. These countries, be­ing non-OPEC members are difficult to regulate. If they give you a particular volume of their daily production, go back and verify their claims; it can never be the same,’’ he said. The former oil minister argued that if OPEC decided to cut production by about 20percent among OPEC member countries, the same percentage, if not more, would find its way back into the oil market as a result of the massive production of non-OPEC members.

In this instance, he said the motive behind the oil cut would have been defeated, because non-OPEC mem­ber countries and even some OPEC members would not agree to crude oil cut.

‘‘Is it a country like Iran that just got its sanction lifted after several years that will agree to oil produc­tion cut? They are eager to make up for lost years and will do everything to ensure that they push their oil to the international market at what­ever cost,’’ he noted.

David-West equally took a swipe at the managers of Nigeria’s oil sector, saying there was no need for panic over the slide in crude oil price. He maintained that, it has happened before and was not an entirtely new de­velopment.

Rather, he said manag­ers of the economy should come up with measures to benefit from low crude oil price, rather than lament and create a panicky situation for the country.

“When I was the oil min­ister in 1984, crude oil sold for $30 a barrel, just as it is selling for now. But, we were able to manage the economy even with that. We came up with policies to cushion the effect. At that time, Nigeria never import­ed a single litre of oil, rather we exported.

“Now that oil price is low is the best time for Nige­ria to increase its reserve and do more of exploration because it is cheaper now. When that is done, we can reap the benefits on the lon­ger term. But, to sit down and begin to lament about low oil price is a last ap­proach. I don’t subscribe to that,’’ he said.

EXPOSED: Banks In Multi-Million-Dollar Racketeering

EXPOSED: Banks In Multi-Million-Dollar Racketeering

Commercial banks in the country are raking in millions of dollars from a foreign exchange racketeering which has been fuelled by the acute shortage of hard currency in the economy, investigation by PUNCH has revealed.

The Central Bank of Nigeria has been rationing forex to prospective importers in the past 16 months, after the global fall in the prices of crude oil, the nation’s main forex earner.

The situation is getting worse as tens of thousands of applications for forex by intending importers have been kept on hold by the CBN for months.

Sources close to the forex racketeering said

the dollar shortage had led to a situation where prospective importers apply to the CBN through their banks for forex for months without getting it.

The continued acute scarcity, it was learnt, had been capitalised upon by the commercial banks who are now selling several millions of dollars obtained from the CBN on their clients’ names at huge premiums above the N199 to $1 official rate approved by the central bank.

According to sources familiar with the situation, thousands of helpless importers who are in desperate need of forex to import products ranging from raw materials to equipment are milked on weekly basis by the greedy banks.

Findings showed that the scheme, which has been on for several months as the forex scarcity worsens by the day, has made many top bank executives multi-millionaires overnight.

Out of $10m to $25m (depending on the volume of demand by its customers) sold by the CBN to commercial banks in some weeks, illegal profit to the tune of $5m could be made by each of the banks involved in the forex racketeering.

A prospective importer, who was recently approached by a major bank in the country involved in the forex racketeering, told our correspondent that many importers had no choice but to buy the scarce forex from the banks despite the huge and illegal premiums being made by them.

Narrating his ordeal to PUNCH, the importer, who spoke on the condition of anonymity, for fear of being victimised by the bank, said, “We need $295,000 to import some equipment. We have been on the so-called CBN queue since October. The bank said no forex. Recently, the bank called us that there was forex but not at the official rate. They wanted to sell to us at N275 to $1. Out of about N81m we are to pay, only about N59m goes to the CBN, which is the official rate. The balance goes to the bank officials who get this allocation from the CBN. This is the type of stupid money they make now, God saves Nigeria.”

Explaining further, the visibly angry importer said, “The bank’s officials said they had $5m as of January 29. So calculate how much they made for that week alone.”

The forex racketeering victim said the bank officials had told him that the difference between the CBN rate of N199/$1 and the N275 to the dollar rate they were offering him would be paid through a cheque written on a name to be provided by the officials.

He added, “The bank will debit my account at the CBN rate and then I will give them a cheque for the balance.”

Another importer, who shared a similar experience, said his own bank offered a deal of N285 per dollar.

Further findings revealed that commercial banks were carrying out the forex racketeering through various means depending on the method through which a prospective importer is planning to make payment to its prospective supplier overseas.

Normally, payments are made for imported goods through open accounts, Letters of Credit, and Bills for Collection.

For items that are not valid for forex (i.e items the CBN has excluded from the list of items it provides forex for), payments are usually made through open accounts.

Letters of Credit (a kind of guarantee for payment) are usually written by Nigerian banks to their correspondent banks overseas on behalf of an importer, while Bills for Collection involve a situation where the supplier releases the goods to the importer and payments are made later. In any of the latter two cases, importers or companies are required to get forex from the CBN which will be transferred into the bank accounts of their suppliers overseas by their commercial banks in Nigeria.

It was learnt that a whole lot of forex racketeering involving opening bank accounts overseas by bank officials and importers alike was now in place.

When contacted, the CBN Director of Corporate Communications, Mr. Ibrahim Mu’azu, said there was the need for aggrieved customers and importers to lodge a formal complaints with the CBN over the matter, adding that this would enable the central bank to commence thorough investigation into the matter.

“The regulatory authority can only know when there are complaints. If there are complaints, the CBN will investigate and rescue the situation,” Mu’azu said.

But economic, financial experts and ex-bankers said the CBN and commercial banks were culpable, noting there was the need for the duo to introduce mechanism to arrest the huge fraud.

An economist and Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, said the CBN could be held responsible for the sharp practices.

Chukwu, who is a former banker, said, “Human beings are economic agents and they will always be tempted to follow the easy path. But the regulatory authority must not create the loophole for such. The premium between the official exchange rate and the parallel market rate is too much.”

An Economist and Head, Investment and Research, Afrinvest West Africa Limited, an investment bank and research firm, Mr. Ayodeji Ebo, also said there was the need for the CBN to come up with a policy to close the huge gap between the naira-dollar exchange rate on the parallel and official forex markets, adding that the difference would continue to breed round-tripping and all manner of unethical practices.

He added, “Commercial banks also need to strengthen their internal controls both at the head office level and branch levels. Most of these forex racketeerings are carried out only in some bank branches without the knowledge of the head office or even top officials at the branch level. So, the banks need to do something quickly about this.”

The Head, Investment Advisory, Sterling Capital, an investment bank, Mr. Sewa Wusu, believes the CBN is making efforts to stabilise the forex market, noting that issues coming in recent times would be addressed soon.

Meanwhile, the CBN has asked banks to start publishing their returns on the utilisation of the forex in the newspapers as part of the measures to check sharp practices in the forex market.

By Thursday, only seven banks had published their returns on utilisation of funds purchased from the CBN. So, what happened to all the Dollars and other currencies in possession of other banks?

Good for her but ! Oprah Winfrey made $12 million from one tweet about eating bread and loosing weight

Good for her but ! Oprah Winfrey made $12 million from one tweet about eating bread and loosing weight

Oprah Winfrey just made more news, saying she lost 26 pounds on her Weight Watchers diet. Even better, her wallet got a lot fatter. According to Market Watch, Winfrey racked in a whopping $12 million for merely writing about how she was able to lose weight and still eat bread.

"I lost 26 pounds, and I have eaten bread every single day," she said in her testimonial clip.
An hour after O sent her story into the Twitterverse, Weight Watchers shares climbed slightly over $2 a share, and since Winfrey owns roughly 6 million shares, the surge in share prices made the celeb $12 million just like that.

Oprah as a board member and large share owner of the company. She's made a fortune since her October investment. Using a price of $13 a share from Tuesday afternoon, that means she's made $61 million on her total investment.

On a per-pound basis, that's $2.36 million of profits gained for each pound lost.

She has the best of both worlds: getting richer while getting slimmer.

Oprah's October investment came at a price of $6.79 per share. She bought about 6.36 million shares, which cost her $43.2 million.

She was also granted 3.51 million options to buy shares at that same $6.79 price. Combining shares and options, her total stake is worth almost 10 million shares — 9.88 million shares to be more specific. The stock has practically doubled in that time, even including the rapid decline in the past several weeks.

STAMP DUTIES: Policy will stunt financial institutions patronage — Expert

STAMP DUTIES: Policy will stunt financial institutions patronage — Expert

As the Federal Government continues to put measures in place to prevent Nigeria’s economy from sliding into a recession in 2016, the system faces numerous challenges with a telling effect on the citizens. The Central Bank of Nigeria (CBN) has directed all commercial banks to charge customers N50 on deposits from N1,000 and above, as part of Nigeria’s stamp duties law on financial transactions.  The Nigerian Electricity Regulatory Commission (NERC) wants to increase electricity tariff by next month. The CBN said no more sale of dollars to Bureau De Change (BDC) due to scarcity of forex. The naira is depreciating beyond the control of the apex bank, despite monetary policies formulated to shore up the  currency. A financial expert and the National President, Constance Shareholders Association of Nigeria, Mr. Shehu Mikail, speaks on issues in the economy and how government can prevent Nigeria’s economy from going bankrupt.

The CBN has directed banks to charge N50 for deposits of N1.000 and above, in  line with the Nigeria’s stamp duties law on financial transactions. What is your take on this?

I do not like this type of policy because it will discourage people from keeping money in the banks. At present, Nigeria is largely un-banked, especially the rural areas. So, this type of policy will worsen the situation, in particular for traders doing business in the rural areas. It will have negative effect on the cashless monetary policy that is already in place. It is also another way of imposing extra tax on the poor masses. The CBN should jettison this method of taxation and come up with a monetary policy that will strengthen the naira to grow the economy, instead of putting another tax burden on the people.

NERC wants to increase electricity tariff by next month. How does this affect low income earners in the country?

NERC must not increase power tariff without giving consumers pre-paid meters. Currently, about 80 percent Nigerians do not have pr-paid meters. Aside from that, what is the justification for increase in power tariff? Is it that power supply has improved better that before, and for that reason they want to increase the tariff? These are things NERC should make clear to us before talking about increase in tariff. Is NERC trying to make us pay more for what we are not consuming? Is this another way of taxing the people? If at all, NERC wants to increase power tariff, the amount must not be more than N4 per unit, because now we are paying over N2 per unit.

What is the economic implication of the purported  missing  budget 2016?

In the history of Nigeria, this is the first time we heard that a budget was missing. This is not  good for our economy, because investors will look at us as people who are not serious. If government altered the budget after it was presented to the Senate, it means they do not have a good economic team. Before the budget came out, they ought to have mapped out a good economic plan on how to  implement it, in order to rejuvenate the economy.  A budget is very important, because that is what investors look at in making decision on whether to put their money in any economy or not. So, for us to hear that the budget was missing, is ridiculous.

The International Monetary Fund (IMF), advised government to restructure the tax system to curtail excessive borrowing from external source. Do you share such opinion?

Borrowing is a way of accumulating more debts for our economy, and at the same time, we spend so much to service debts. For instance, about N1.47trillion is allocated for debts servicing in the purported missing appropriation bill for 2016. But if we have good reasons to borrow to develop our infrastructure, I think we can borrow. The implication is that, continuous borrowing will make our currency to depreciate the more.

The exchange rate now is about N309 per dollar, which is the first time in the last 43years that the naira depreciated so low.

What is the way out?

Government should come up with a good economic blue print on how to restructure the economy. The immediate past minister of agriculture during the administration of President Goodluck Jonathan, did a lot to develop the sector. Let President Muhammadu Buhari look at some of his policies and see how he can build on them.  We need to revamp agriculture and the manufacturing sectors, so that we can start producing goods for domestic consumption and export.  Continuous depreciation of the naira shows that the economy generally is in serious stress. If nothing is done to strengthen the system, our economy will slide into a recession. Look at the capital market, since the second quarter of last year till 2016, the market has been experiencing huge investments outflow.

The CBN said no more forex for Bureau de Change from its official window.   Do you think the forex policy of the apex bank will strengthen  the naira?

The CBN is trying to manage the financial system, but the implication of restricting BDC from getting forex can give way to black market situation, because importers will look for other means of getting forex. At the end, the masses will suffer the outcome, because  prices of goods and services will increase due to high cost of foreign exchange. As such, there will be inflation in the system.

What can be done to reposition the economy at this point?

As I said earlier, let us come up with a good economic blue print on how to resuscitate the economy to prevent the economy from going bankrupt. Let us look inward to revamp the industrial sector for businesses to thrive and create wealth. The living condition of the people should be improved upon. Let President Buhari get experienced economic team to work with him. He is doing well on tackling insecurity, but he is not doing enough to revamp the economy.

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Buhari should listen more to Nigerians than the IMF — Prof. Ekpo

Buhari should listen more to Nigerians than the IMF — Prof. Ekpo

2016 Budget: We need  realistic forecast of revenue

By Udeme Clement

Akpan Ekpo, a professor of Economics, is the Director General, West African Institute for Financial and Economic Management (WAIFEM). He speaks on issues in 2016 budget, the need for the Federal Government to prevent currency crisis in Nigeria, the decline in Nigeria’s foreign trade by N2.5trillion and depreciation of the naira.

What is your comment on issues in the N6trillion 2016 budget presented by President Muhammadu Buhari to the National Assembly?

In the 2016 budget, the deficit GDP ratio is within acceptable range. Normally, it should be around 4 or 5 percent, but in the current budget, it is over 2 percent. The problem is not the ratio. The point is, what component is for capital expenditure? You can increase your deficit GDP ratio, but if the money is used for capital projects like infrastructure, there is no problem. We have evidence of China and other countries that exceeded the bench mark for deficit GDP ratio, but have viable economies, because they used it for capital projects. So, people should not worry about the deficit, if it is utilised for viable projects. To me, if they increase it slightly to 4 or 5 percent and use it for infrastructure, it will help our economy.

In the budget 2016, government wants to borrow more money. How long are we going to accumulate debts?

If government has to borrow, it should be to finance capital projects and not recurrent expenditure. The budget itself is about N6trillion and they will borrow about N900billion from external and domestic sources to fill that deficit. The issue is not about borrowing, but borrowing wisely, and whether we can pay the debts. Over the years, we have been borrowing. For instance, the last government used a lot of borrowed funds to finance recurrent expenditure in the budget, which was totally wrong. We hope this government will not follow the same path. We must not say because debt –  GDP ratio is about 14 percent, within acceptable benchmark, that we have space, so we continue to borrow.

The fact is that GDP does not pay debts. What pays debts is revenue. So, the interest should be, what is the debt –  revenue ratio and not debt –  GDP ratio. This is where the problem comes. Revenue pays debts and your revenue is estimated; if for some reasons your revenue declines sharply, you can’t pay the debts. In 2016 budget, N1.47trillion is allocated for debt servicing, which is quite high. You can’t blame this government for that, because governance is continuous; whatever the previous government committed itself into, the current government must fulfil that obligation. Going forward, allocation for debt servicing should reduce, and we must look at revenue before we borrow, and not GDP.

You said if the revenue is estimated, and once it declines sharply, government cannot pay debt. Do you see that happening to Nigeria, especially with the declining oil price?

Ekpo

Well, nobody knows, but it can happen because our economy depends on oil and oil revenue has declined sharply. That is why we are facing this problem. What if by tomorrow the oil price is close to zero, what do we do? Therefore, we must have a more realistic forecast of revenue to drive the economy. We must not keep on borrowing because we have space.

Let me give this government credit, because since 1972, this is the first time the projected oil revenue in the budget is less than non-oil revenue, meaning, revenue from other sources aside from oil. We have been depending on oil revenue for years, but for the first time, oil revenue is taking a second position. They are expecting about N800billion from oil and over N1trillion from non-oil, which is the best way to go. These non-oil sources include company tax, surpluses from government agencies like Central Bank of Nigeria (CBN), Customs, and Nigerian Ports Authority (NPA) among others. Previously, it was oil revenue that dominated the budget, but the negative shock in the decline of oil revenue makes government to start thinking differently, and they should continue in this path, even if in future oil price goes up. It is common sense that oil is non-renewable resource because it will finish one day.    It is called a wasting asset. How can you plan entire economy with a revenue source you have no control over the price or the out put? This is a good step that government is taking, and I believe in future, they will demystify the oil sector.

Considering the fluctuating oil price, is the oil bench mark of $38 per barrel realistic in 2016 budget?

It is not a matter of being realistic, but government has taken a position and they are being pessimistic, which to me is good, because they cannot go zero. I hope that $38 they arrived at was based on good forecasting, on consistent macro-economic framework and macro-econometric model.    I am only impressed because for the first time as I said earlier, oil revenue projection has taken a second position in our budget, which is a good development.

The exchange rate now is over N270 per dollar, even as depreciation of naira is having a telling effect on the economy. What can government do to address the situation?

Let us get it clear, because what we have now is depreciation and not deliberate intervention by the CBN, which is devaluation, but the impact is the same. The naira is depreciating because we are not producing anything for export.  What we export is crude oil and not manufactured goods and services. Nigeria is still import dependent. So, the scarce forex is being used to import goods and services. The way we can turn it around, is to change the structure of our economy and produce goods for export. Government must put infrastructure in place and give people incentives to produce, if not, our currency will continue to depreciate. Our source of forex is crude oil, and the oil is not doing well. So, the demand for forex now outstrips supply, which is the problem we are facing. CBN is trying to manage it, but as they are managing it, the only source they can get to increase the forex is oil, and the price is declining. Let us pray that we don’t get into currency crisis.

What CBN is doing now is called a ‘Managed Float’ with more weight on the float aspect. Whenever the naira gyrates, it is the float that is playing the trick.    That is why you see the naira today N240 and tomorrow N250, it is reacting to the float component of the market.    The dollar belongs to US and they way they react is not the same way Nigeria reacts. So, it is not as easy as people are saying. Also, another managed component, which is outside pure economics means your currency must reflect your sovereignty as a nation, and you have to defend it.

Can you give us more insight into what currency crisis means?

Currency crisis is a situation where the CBN can no longer honour its commitments, such as letters of credit, debt instruments, when Treasury bill is due and they can’t pay.

What is the economic implication of currency crisis?

It means the economy is bankrupt. The CBN’s part is the monetary aspect while the budget is the fiscal policy. At a point, there should be coordination between monetary and fiscal policies. The way the economy is now, the Minister of Finance and the Governor of CBN must meet regularly to coordinate and work on the same page, because the economy is not on a normal growth path.

Unemployment is part of the problems and the way government is tackling it has challenges also. When unemployment is a crisis like what we have now, at 28 percent when combined with under-employment, the private sector cannot solve the problem. Only public sector can provide short-run solution. The President in presenting the budget practically alluded to that phenomenon without extension. For example, he said, the federal would collaborate with states and local governments to employ 500.000 teachers, which is a large number they want to    take out of unemployment. Imagine the same government employing large number of people in Police, Customs, Immigration, Federal Road Safety, Army and Navy. Imagine government stimulating the residential housing market for federal and sub-national governments to build estates for low and high income earners, because residential housing construction is the most potent component of investment.

No matter the incentives given to private sector, they cannot employ people on a massive scale in the short-run, because their fundamental motive is profit.    Not just profit, but targeted rate of profit. When the economy has recovered and is on its normal trajectory, then private sector comes in. After all, private sector is the cause of most economic recessions. How can they come to rescue it? It is always government that can rescue it.

How can private sector be the cause of economic recession?

This is because when there is decline in economic activities they retrench. For instance, banks are sacking workers but they are declaring profits. They are making profits and at the same time sacking, because they are watching their rate of profits. Many workers in the banking sector are on contracts because they do not want to pay allowances. Also, foreign companies owned by Nigerians, Indians and Lebanese treat Nigerian workers like slaves and they are making huge profits. So, the private sector in any economic system has its objective of profit making. The public sector may not be efficient but it has objective of social welfare.      Recent researches from International Monetary Fund (IMF) have shown that public sector investments can enhance growth and be efficient.

The CBN said they want to allocate forex only to end users, what is your position on this?

CBN wants to give forex to those who will really use it for manufacturing and not to people who will use it to import sardine from China. They will give forex to those who will import capital goods for production, so that in the long-run, those capital goods can be manufactured in Nigeria, because our economy is not producing anything. We are a consuming economy, even the caps our chiefs wear in Nigeria are imported from China. The CBN wants to give the scarce forex to those who can produce goods for export, not necessarily finished goods, but some items within the value chain. The forex is scarce because it is not our currency. So, it must be allocated to those who will utilise it properly for production.

Nigeria’s foreign trade dropped by N2.5trillion, what are the economic implications?

It means we have a trade deficit because we import more than we export. What we should worry about is to look at the current account in GDP ratio. This also brings deficit.    Meaning, the current account in GDP ratio is in deficit and our primary balance is also in deficit.    It implies that, we have what is called twin deficits,    and it is not healthy for the economy. This means the external sector is in crisis and the domestic economy is also in crisis. The fact that trade enhances growth is imperial, because if for instance, Nigeria is trading with US, the trade is not on equal terms, as the two countries are not the same. America used to buy our oil and they stopped. Is our tax system the same with US? Will US accept Nigerian goods, or will they say such goods are substandard?

The Managing Director of IMF, Christine Lagarde, advised government to ensure fiscal discipline and the need to restructure the tax system for more revenue generation. What is your take on this?

President Muhammadu Buhari receiving IMF Managing Director, Christine Lagarde in Abuja.

I think it is time we  tell IMF and World Bank what we want as a country. Before now IMF said Nigeria’s economy was doing badly, but Nigerian experts said the same thing and we have the data. Let government use Nigerian experts who have been trained to drive the economy because they live here and they understand the country well. Not only in economic matters, but in security issues, even in building roads. For instance, let local engineers be used in road construction, but let government tell them the quality of roads we need. Let us practice what is called Economic Nationalism where government allows certain parts of the economy to be controlled by Nigerians and Africans. For example, why should a Lebanese own a barber’s shop? Our Small and Medium Enterprises (SMEs) sub-sector can create jobs, but the inputs they need to produce are imported, but in US, SME operator can get his inputs from another SME. The early Nigerian leaders were very strategic in thinking. They built refineries, machine tool industry in Osogbo, Ajaokuta steel company, Paper mill industry and others. Now we import everything.

What is your expectation for 2016?

I want to see adequate implementation of the budget.

In talking about non-oil, how about manufacturing and the industrial sectors that are in comatose?

These sectors are not doing well for several reasons. They do not have access to loans, and interest rate is very high, no infrastructure to enhance their growth and the inputs they need are imported.  Even, when there was forex, they did not import machines, instead they imported finished goods from America, Europe and China. So, as government said the budget will finance infrastructure, I hope they will do that. But to be honest, they cannot do everything in just one year. If they start, it will be good, and there will be a roll over. May be within three years they would have built infrastructure and put in place certain things to enable us produce manufactured goods for export.

When we say export, not that they will export the finished goods, but they can export some items in that chain. Agriculture is a renewable resource that government can also target. We also have solid minerals, though not renewable, but we have not harnessed them, so it looks like this government is ready for that. When the budget is approved, in six months we should begin to see result, and there should be quarterly or half year report to monitor progress on how the budget is being implemented. This implies that the National Planning must have a very strong monitoring and evaluation department.

How will you assess Buhari now?

He came in, in May 2015 and it is still early to assess him on some economic issues, because there is no data for assessment now. I need data to analyse the economy in concrete terms before assessment. On the economy, he is putting things in place, and I need a year to assess him, because this is his first budget. He promised to fight corruption and he is doing that. He is tackling insecurity, and the rate of bombings and attacks have reduced, even as government has reclaimed territories taken over by Boko Haram. So, government has made progress in tackling insecurity and we must be honest about that. Now, the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and Other Related Offences Commission (ICPC)are working, arrests have been made, but we want to see convictions.

Nigeria losing N80bn daily to petroleum products smuggling — NISA boss

Nigeria losing N80bn daily to petroleum products smuggling — NISA boss

Chairman of the Nigeria Shipowners Association, NISA, Capt. Niyi Labinjo,  has said that the country is losing N80 billion daily to petroleum products smuggled into the country.

Petroleum Tankers

In an exclusive interview with Vanguard, Labinjo explained that half the 1.8 million litres daily national need of Premium Motor Spirit, PMS, is smuggled into the country.

The NISA boss noted that the Nigerian National Petroleum Corporation, NNPC, said the daily PMS need of the country is 1.8 million litres and that it (NNPC) only supplies half the quantity while the other half is smuggled into the country.

He pointed out that this is done through the off-shore Lome and off-shore-Benin. Giving a breakdown of the loss, Labinjo pointed out that a 5,000 ton vessel laden with Automotive Gas Oil, AGO, costs N600 million.

He said half of the 1.8 million litres comes to down to 900,000 and if divided by 5,000 equal 108 (5,000). Should this be multiplied by N600 million, it comes down to N108 billion and a large chunk of this amount is lost daily through smuggling of the product, he said.

He advised that the smuggling of petroleum products through the off-shore Lome and off-shore-Benin must be stopped because of the effect on the nation’s economy.

This is outside the revenue that should have been collected by the various government agencies like the NPA, NIMASA, NCS etc should these ships have berthed at the nation’s ports.

He said that the sector is more than capable of providing the N2 trillion needed to fund the budget.

He said the economic crime against the nation is being committed by foreign vessels that ship in these product informing their countries that they are headed for Nigeria, only for them to stop on the high seas where these products are discharged into smaller vessels and moved into Nigeria.

He noted that 68 percent of these products get into the country unaccounted for and this costs the nation huge revenue losses in terms of capital flight, since the transaction is done in cash, (not captured in the economy), creation of employment for foreign countries, crew of each of the ships and negative effects of balance of trade.

He said that Nigeria presently has no control over about 200 vessels involved in this illegal trade outside the nation’s territorial waterways and that alone poses a security risk to the nation, especially with the security situation in the country presently.

The retired Navy officer, stressed that government must as a matter of urgency stop the smuggling of petroleum products into the country, as well as ensure that the Cabotage Law is enforced fully.

Unstable govt policies destroy entrepreneurial process —Coscharis boss

Unstable govt policies destroy entrepreneurial process —Coscharis boss

Dr. Cosmas Maduka is the chairman/CEO of Coscharis Group of Companies and sole distributor for BMW in Nigeria. He is an achieving entrepreneur that has made remarkable impact in the auto industry.

In this interview with Saturday Vanguard, he spoke on the company’s partnership with Ford, at same time appeals to government and other stakeholders to support manufacturing outfits for Nigeria to develop its economy. Excerpts:

Dr Cosmas Maduka

What informed your decision of partnering with Ford?
It’s about business opportunity. Every business person is looking for opportunity to expand his business and gain a market share. We have worked with Ford for about 17 years, so we didn’t just start today. So when the auto policy came on board we spoke to them, as you know Ford is a big organisation, moving them is like moving a big vessel. The good thing is that eventually they got their head office to accept to partner with us to start production of Ford in Nigeria. Ford has been in South Africa since 1923 and in the last 50 years they have not had any other manufacturing outfit in Africa except what they have just done now. So, Nigeria is like the second manufacturing outfit for its setting, and is something both Ford family has understood and are very excited about it because a lot of companies got it wrong with China when Volkswagen moved in there and they hesitated, and there is always a first time opportunity benefit. Company like Ford doesn’t want you to repeat again. So, if you truly know whom we consider our competitors, Toyota, they are yet to start production even though they have built a factory. That is why when we said we are ahead, those are things we are saying without breaking it down. There are very many we don’t consider competitors even though they are in manufacturing. Those are people who have similar products like us and we think we all drag and share market, if you look at our Pick Ups and theirs. Whatever they have, Ford have something similar in that range.

Ford once had the challenge of pushing enough volume into the market, what is the assurance it will not repeat now that a plant is built here?
I would be surprised to say that we run out of stock because as I speak to you now, we have over 1,400 units of Ford Ranger in addition to what we started producing. We never ran out of stock. We have enough capacity and capability to make product available. Unlike our competitors who have been in the market, people were testing our capability but today we have working customers who have driven our products in the last three years and they have come back to repurchase again and again. Take for instance I always asked people go to UK, Europe, Volkswagen is number one, Ford is number two. So where are the Toyotas and the Japanese in that place. Just because they walked away from you, many of us forget about them and interception became more than real. No matter what, Ford is a strong brand that is respected around the world, an American icon.

Looking at the investment climate in Nigeria, and with the recent auto policy, where would you want government to help out?
It is important there should not be a policy somersault in the auto industry. If it ever happens in this modern age, the international communities are watching and they are very observant. There has always been this African kind of thing, ‘be careful they are not sure, whether they meant what they are saying’, and these are not good signals to investors who want to come into a country to invest. I listened to Olamade, former governor of Central Bank when they held an event recently. He said, we should not be looking at investors as criminals, people who are bringing in their money to create job in your country and take a benefit. Of course that is what a capitalist is all about; to bridge the gap of service, offer you service and get benefit out of it, but ultimately you are the one benefiting most. That was how China opened their market for the rest of the world. All great brands of auto mobile today is available in China, partnering with Chinese local partners. In fact, no factory in China is hundred percent owned by foreigners – maximum is 50%. Looking at what Ford has done in South Africa, South Africa started auto policy 20 years ago, they shut their door to other markets. This is what we talk about, are you willing to pay the price? No woman gave birth to a child that never cried. Women go through pains, that is how children are born. But when that child is born, the joy of a new born covers labour pains. You can say you are going to be auto manufacturer without going through some pain in the process. So if we are willing to industrialise, every other country in the world including South Africa started building vehicles the way we have started to build them now.

How could you still drive volume when importation of second hand (Tokunbo) vehicles are not restricted by government?
For us, it is left for government to make up their mind. Again, it is bad leadership when you lead with indecision. You must decide, whether you made a wrong decision, make a decision. Don’t keep people in rainbow, that is the worse way to handle things. If government is willing to go with auto policy, they should make a clear statement and do the needful for it to be a success because there is no way the manufacturers can make this a success until the market is created. And how do you create the market, you need to support local manufacturers by driving volume, then you can see upper component spring up to support those manufacturers, because manufacturing is the key to economic growth. It supplies work to all categories of people, unlike buying and selling and others. Any country that wants to grow its economy must support manufacturing and that is the way to go