Friday, 25 May 2012

IMF warns against stripping CBN of its autonomy

The International Monetary Fund (IMF) on Thursday added to views of many experts in advocating the complete autonomy of the Central Bank of Nigeria (CBN) without which the apex bank would lose effective control over the management of monetary policy.
The institution cautioned that the planned move by the National Assembly to strip the apex bank of its current independence would particularly mean inefficiency in discharging its responsibility of maintaining price stability and therefore not in the best interest of the Nigerian economy.
The lawmakers have commenced the amendment of some portions of the CBN Act 2007, which confers operational autonomy on the apex bank with the bill to this respect already scaling through the second reading at the House of Representatives.
But many experts have strongly opposed this move, arguing that removing the autonomy of the apex bank portends danger for the economy and falls short of global practices.
W. Scott Rogers, IMF Country Chief/Senior Resident Representative for Nigeria, cautioned on Thursday that Nigeria has been able to enjoy robust monetary policy due to the independence of the apex bank that allows it to respond quickly to managerial policy.
Rogers spoke at an interactive session with the media on the recently published IMFs regional economic outlook for sub-Sahara Africa which noted that the region has so far maintained strong growth in the face of a hesitant world recovery, albeit with differences in performances among country groups.
His words, The IMF has always argued for strong independence of the central bank. It provides them with the autonomy to depoliticise monetary policy actions. Without a strong central bank you will not have an independent monetary policy. Everything then depends upon the budget alone and as you can see now, without the central banks ability to do what it is doing, the results you are seeing wont be there. It is primarily because of the central banks ability to tighten monetary policy which is the right thing to do.
It is important for the central bank to have the autonomy to hire the people they need and to undertake modernisation that they need in order to manage payment system effectively. They should be able to do that without the fear of being penalised because they took an unpleasant decision on interest rate policy or because they decided they needed to close a bank. Those are decisions they need to take constantly.
On economic performance of sub-Sahara Africa region, he observed that the regional output rose by 5 percent in 2011 with an anticipated slight growth in 2012.
It noted that the rise in global food and fuel prices contributed to inflationary pressure in many countries, but added that food prices across the region were significantly affected by local supply conditions.
For Nigeria, IMF Country Representative advocated a combination of fiscal tightening and structural reforms to achieve the desired economic growth.
With fiscal tightening and structural reforms, Nigeria can simultaneously achieve low inflation, low nominal interest rate; rosy international reserves and fiscal exchange stability, he stressed.

FRC blasts Forte Oil over N24.7bn phantom shares, asks ICAN to postpone AGM

The Financial Reporting Council of Nigeria, the nations accounting and financial reporting standards custodian, yesterday refused to spare the rod against the Institute of Chartered Accountants of Nigeria (ICAN), Forte Oil plc, Alliance & General Insurance Limited and General Life Assurance Limited, for contravention of corporate governance rules.

Jim Obazee, executive secretary of the FRC who spoke with a select group of journalists in Lagos said ICAN was directed to postpone its annual general meeting (AGM) scheduled for May 25, 2012 because of issues from its corporate governance and financial reporting.
Obazee stated that the council of ICAN did not approve the institutes financial statement when it met on January 18, 2012 and that the report of the honourary treasurer also noted that the financial statement which is subject to ratification of the council was not done.
In addition to ordering the postponement of the AGM, the FRC directed that ICAN hold the event not earlier than 21 days after the ratification of the 2011 financial statement by its council, in accordance with section 217 (1) and 217 (2b) of the Companies and Allied Matters Act CAP C20 LFN, 2004.
He also noted that the actions of ICAN confronted legal requirements of the CAMA and Financial Reporting Council of Nigeria Act No.6, 2011.
The FRC, he said, had directed ICAN to explain why the management allowed their external auditors to report on the 2011 financial statements that were not ratified by the council.
Obazee said Forte Oil plc was also being indicted for allotting 102 million shares valued at N24.7 billion to certain shareholders during the companys hybrid offer (public and rights issues) in 2008.
He explained that the share holders did not only refuse to pay for the shares but also received dividends to the tune of N259 million as shareholders on the shares, which they later dumped.
The FRC boss said, quoting from the 2010 annual report of the oil firm: We draw attention to Note 9 to the consolidated financial statements on the hybrid offer (public offer and rights issue) in 2008 for which the majority of proceeds were received in 2009. The proceeds for 102 million ordinary shares allotted to certain shareholders of the group amounting to N24.7 billion have not been received by the company as at date of this report. Full provision for this amount has not been charged directly to shareholders funds in these consolidated financial statements.
He also noted dividends amounting to N530 million were released for payment to the registrar in respect of the unpaid shares, as part of the dividends declared for the year ended 31 December 2008, and approved by the shareholders on 22 July 2009. Of this amount, only N271 million unpresented cheques have been recovered from this amount, he added.
Obazee said the FRC had requested Forte to provide it with all the details of the hybrid offer, including but not limited to circumstances under which the company allotted shares to group directors and shareholders without payment for the shares; the accounting policies the board approved to address such allotment of shares that were not cash-backed and on dividends not recovered.
Due to this development, the companys issued share capital is less than 25 per cent of the authorised capital prescribed by section 99 of the Companies and Allied Matters Act, Cap C20 LFN 2004.
The FRC also want to know the circumstances in which share capital account was credited with un-received payment for the said allotted shares; the accounting policy the board adopted to address dividends paid on capital that was not raised; the reason the said dividends not recovered was treated as memorandum as against contingency.
Council also directed that as an interim measure, Forte Oil plc should write-off the yet to be recovered portion of the dividend paid on the said allotted shares, but furnish the FRC with the details of the beneficiaries of the dividends, and report the said beneficiaries to the Securities and Exchange Commission (SEC). A copy of the report should be forwarded to FRC, he said.
Alliance and General Insurance Limited and Alliance and General Life Assurance Limited are indicted for preparing two financial statements for the same year end.
The FRC, in collaboration with NAICOM, is currently investigating the 2010 audited financial statements of the two companies referenced above, wherein the companies prepared two sets of financial statements for the same year end . In the course of NAICOMs review of the 2010 audited accounts submitted to the commission by the above named companies, some errors /lapses were observed and communicated accordingly. Rather than deal with the issues raised in the accounts, the companies provided entirely different sets of accounts , incorporating items that were not originally included in the accounts under review. Curiously, the different sets of accounts were signed by the same auditor AAE Professionals, he said.
Obazee noted that NAICOM must review and approve the financial statements of these entities before it gets to the FRC.
The FRC has of recent come under fire for not taking serious action against corporate governance infractions, with the Federal Government threatening to withdraw its support for the council.

Nigerias non-store shopping up 25% to N62bn in 2011

The continuous growth of the formal retail sector in Nigeria, along with increasing internet penetration in the country, have given rise to a budding retail trend done outside the physical stores, the non-store retailing.
This retail trend, according to a recent report by Euromonitor International, a global market research organisation, recorded a 25percent growth in 2011 valued at N62.4billion, which is an additional N12.5billion to the N49.9billion recorded in 2010.
Pushing this retail segment most is internet retailing, which recorded 25percent growth during the period under review, while other non-store methods like direct selling and vending trailed behind. Non-store retailings growth of 25percent is boosted particularly by the fast growth, over the last five years, of internet retailing, which also saw 25percent value growth in 2011. Computer and internet use is growing fast in Nigeria from a very low base.
In particular, trust, which has been a challenge for internet retailing, is improving among the populace, who have been introduced to electronic payment methods in shopping through their banks, and so have started to believe they would not lose their money if they shop electronically, the report stated.
Despite this growth, the report noted that non-store retailing has not yet become popular in the country, compared to the size and spread of store-based retail outlets, adding non-store outlets account for just over one percent of total retailing in value terms.
The year in review, according to the report, recorded little innovations in non-store retailing in terms of channel and product offering. In the aspect of channel, vending (dispensing of merchandise by machine to buyers on insertion of money) was the fastest growing, recording about 28 percent growth, while packaged foods was introduced in product offering.
There has been little innovation in non-store retailing, either in terms of channel or product offering. Packaged foods internet retailing is fairly new as some newer players such as Ferriesmart have begun to offer food and drinks through internet retailing, whereas previously, perishables were not being offered through internet retailing, due to difficulty in transporting them on time, the report disclosed.
Commenting on the cost of goods sold through non-store method, the research revealed that they were more expensive than the ones sold in-store, but noted that the trend may change soon, as internet retailers are likely to forge partnerships and strategic alliances with major suppliers in order to become more competitive and offer lower prices for products online.
To retain its dominance in the anticipated competitive environment, existing store-based retailers are expected to also adopt online retailing which will give them a bigger edge over those doing only online.
Due to the increasing penetration of internet usage and the general interest in internet retailing, the report projects a steady Compound Annual Growth Rate (CAGR) of nine percent in Nigerias non-store retailing sector in the next five years.
However, it noted that this expected growth is still threatened by the lack of reliable and secure online payment system in the country, adding that unless this is properly addressed; internet retailing will remain insignificant compared to store-based retailing.
Meanwhile, the introduction of the cashless policy by the Central Bank of Nigeria (CBN) is expected to indirectly boost non-store retailing (online transactions) as the policy aggressively promotes the use of electronic payments as well as win back consumers confidence.
Another threat to the growth of the sector, according to the report, is the ignorance of distributors to the business model of direct selling, which is why they are yet to fully maximise the potentials in it.
While internet retailing topped all segments of non-store retailing to account for N55.9billion out of the total value of N62.4billion recorded in 2011, direct selling accounted for only N6.1billion, while vending accounted for N500million and home shopping recorded none.

NestOil, Oilserve win deal to build $400m gas pipeline

NestOil and Oilserve, two indigenous companies have been awarded the $400 million East-West evacuation gas pipeline project by the Federal Government.
This project is part of a network of gas pipelines underway around the country, expected to bring about the springing up of hundreds of new businesses, reduce the cost of doing business in the country by as much as 30 percent, and generate many thousands of jobs, within a few years.
BusinnesDay investigation reveals that budgetary provision for the project has already been approved. The project is estimated to cost $700million when completed.
The East West gas pipeline is about 120km x 48inches and will pass from Ob/Ob-Oben .
The contract is split into two equal parts for the two companies. This is the first time a project so large and strategic is being handled by indigenous companies. It is understood that the contract was awarded in the spirit of local content development. The construction would last for 24 months and is expected to generate over 1,000 jobs in the two years that it will last.
The NNPC/Total JV pipeline from Ubefan to Imo River via Obigbo, was recently awarded the 120km x 48inch Ob/Ob-Oben East West gas pipeline contract.
Other major gas pipeline projects that are on-going and progressing steadily, are the doubling of capacity to Two billion Cubic Feet / per day of the Escravos Lagos Pipeline System( ELPS) from Oben-Ore-Lagos, through the 320km x 36inch pipeline construction, NNPC/Total JV pipeline from Ubefan to Imo River via Obigbo.
The idea to construct the pipeline to provide the much needed gas for the power industry and other sectors has been on the drawing board for several years. It is estimated that the country will need about $4 billon to build the pipelines.
A source told BusinessDay that the things that could encourage investors to put down their money is that the government must give assurance that the price is right for transmission.
There certainly are a lot of investment opportunities that would be generated with the pipeline by the time it comes on stream. This is because the reserves are there, market is there, while the infrastructure for the delivery of gas is being articulated and is progressing, a source said.
When you create a 1.6 million crude barrel equivalent a day, clearly there are huge opportunities for both big and small players. About 2,500 kilometres of pipelines are going to be laid. The entire value chain around the pipeline is open for business opportunities. Everything around pipeline infrastructure is huge opportunities, he said.
The minister of Petroleum Resources , Diezani Alison Madueke said ``Specifically in the last one year, the government has invested close to $1bn in almost 1,000km of gas pipeline development, adding that the 136km x 36inch permanent gas pipeline from Oben to Geregu has been completed, creating a major sharp artery to the Geregu Independent Power Plants, and will feed Dangotes Obajana cement and other potential industrial customers. She further said that this line would provide arterial supply to the North once the Ajaokuta-Kano line is completed.
She added that two other critical pipelines that will be concluded shortly are the Itoki-Olorunshogo 31km x 24inch gas pipeline and the 104km x 24inch Escravos-Warri gas pipeline expansion.
According to her, by the time the two pipelines are completed in the next few months, they will create a permanent solution to the challenge of gas supply to the PHCN and NIPP power plants at Olorunshogo, as well as supply to Ewekoro, Abeokuta and environs, for industrial capacity growth and double the existing transmission capacity to 600 mmcf/d and immediately add about 80mmcf/d additional gas supply to the grid from Escravos.

Omatek lists benefits of divestment, bemoans challenges against ICT growth in Nigeria

THE Group Managing Director, Omatek Ventures, Mrs. Florence Seriki, has attributed the growth of the company in Nigeria in the last three years to various investments in alternative power solution.
Speaking at the combined 2010 and 2011 yearly general meetings of the company in Lagos, Seriki pointed out that Omateks turnover was mainly from the sale of hybrid solution with solar, UPS and inverters together with its new LED bulbs that last three to five years without replacement.
According to her, that had not allowed the company to really source funds from financial institutions in the country.
She explained that Omatek had benefited from buying from first class manufacturers, adding that the importation of the solution was a Semi Knocked Down process as opposed to the computers that were completely knocked down components and raw materials.
The Omatek boss said that these were easier to fund and a clear-cut evidence of the immense opportunity in Omatek.
If over a billion were equally done in this respect, then with funding available, the expected turnover of the company is expected to sky rocket.  The opportunity seen in this pioneering ICT factory is one that will place the group in the fore front of Africas ICT and a champion in the innovation of ICT in Africa.
She explained that some challenges including power, regulation and funding from financial institutions were paramount among the list of identified challenges hindering the growth of ICT firms, especially the indigenous ones in the country and called on government to intervene.
Meanwhile, shareholders at the AGM lauded the company for its doggedness and determination to keep it alive despite the challenges it had faced in the last three years.
According to them, it was a phenomena performance for Omatek to have sustained itself after all its working capital and facilities were suddenly truncated in the wake of the banking reforms in 2008.
The shareholders, expressed satisfaction with the boldness and determination of the management to ensure that the company maintained its activities despite all odds.
Omateks shareholders funds grew from N6, 012,616 in 2009, to N6, 449,331 in 2010, indicating an increase of seven per cent. The companys net assets and group net assets also appreciated by seven per cent, respectively.
The Group Chairman, Omatek, Dr. Timothy Farinre, thanked the shareholders for their patience, support and understanding of the peculiar situation it found itself in the last three years and apologised for the delay in conducting the two AGMS.
Farinre said that Omatek had to fund all its consumer schemes and factory initiatives on its own without support from any bank in the last three years.
He stressed that the companys banker, Afribank Plc (now Mainstreet Bank Limited), had expressed its inability to offer support due to its takeover.
The Omatek Consumer Scheme with many states was a joint product with Afribank and this was cancelled suddenly. Their 10-year old mortgage was cancelled and the offshore and local guarantee facilities could not be sustained as the bank had lost its offshore guarantee as well.
The company has commitments and loyalty to its customers and the states consumer schemes were still sustained by Omatek despite these sudden challenges from Afribank; a tough situation after just being listed or going public, Fanire explained.
Omatek, through a private placement undertaken by Afribank Capital Limited, eventually got listed as the first computer company on the Nigerian Stock Exchange in July 2008.
Seriki raised concern over the Federal Governments N500bn intervention fund for the manufacturing sector, stating that the benefits expected from it had not been forthcoming due to some banks refusal to process and submit duly completed application papers for their customers.
The Federal Government and Chinese investors have reached an agreement for the latter to build state-of-the-art terminals at four major airports in Nigeria, including Lagos, Kano, Abuja and Port Harcourt (in Rivers State).
The projects, THISDAY learnt, are planned to be completed before the end of this administration. The terminals would not only meet international standards but also rival the best in the world, according to a source, who disclosed this to THISDAY.
Although the terms of agreement reached between the FG and the investors are not yet made public, but a reliable source said that it would be on build, operate and transfer (BOT) basis, so they are going to provide all the funds needed for the project under private, public partnership (PPP).
The deal was said to have been signed by the Minister of Finance, Dr (Mrs.) Ngozi Okonjo-Iweala on behalf of the Federal Government, and the project is expected to kick off soon.
The four airports where the terminals are designated are the busiest in the country and with the growth of passenger movement in air transport in Nigeria, the existing terminals, industry experts say, would soon be too small for the teeming passengers especially on international destinations.
The source said, Chinese investors have indicated interest to invest in our airports and they are going to build four terminals at the airports in Kano, Lagos, Abuja and Port Harcourt. The Minister of Finance has signed the contract and it will take off soon. That is a good development for our airports.
They are providing the money so we will not bother about funding it and it is state-of-the-art terminals with advanced technology. We need such terminals in our airports now, at least to move on with the rest of the world, the source added.
The prototype of the terminal has already been obtained and the Federal Government has agreed to provide free land for the project at the four airports, and because of the expected expanse of the terminal at the Murtala Muhammed International Airport, Lagos, it would be built a distance away from the existing international terminal at the airport, but would share the same runway.
The Minister of Aviation, Princess Stella Oduah, said in her recent ministerial briefing in Abuja that government would build four new terminals and the projects would kick off soon.
In a recent interview she said that the present administration wants to provide modern airports that Nigerians would be proud of and that has started with the remodelling efforts and now, new terminals.
What we are doing is to ensure that passengers have value for their money and most importantly we want every Nigerian and stakeholders to be proud of our airport environment. Its a total transformation of the aviation sector, she added.

Dangote cement to produce 60m tonnes by 2015

Aliko Dangote, Chairman of Dangote Cement on Thursday said that the company's production capacity would be increased to 60 million tonnes by 2015, up from its present capacity of 11 million tonnes.
Dangote, who said this at the company's annual general meeting in Lagos, said that the company had mapped out strategies aimed at achieving the 2015 target to satisfy the demands of its customers.
The industrialist said that the Ibese cement plant capacity currently at six million tonnes, would be increased to 12 million tonnes in the next 26 months.
He said that additional three million tonnes would be added to Obajana cement plant, adding the Calabar plant capacity would be six million tonnes.
Dangote told the shareholders that the company would seek fresh funds from the capital market at the appropriate time for expansion of its projects.
He said that the company was also constructing 3,000 tonnes per day cement plants in other African countries such as Zambia, Tanzania, Ethiopia and Congo, among others.
Dangote assured the shareholders of robust dividend, saying that additional production capacity would lead to increase in turnover and profitability.
The shareholders approved the company's gross dividend of N34.9 billion, which translated to N1.25 per share and a bonus of one new share for every 10 shares already held.
Mr Peter Owolabi, a shareholder asked the management to ensure steady growth by exploring available opportunities in the industry to increase its market share.
Owolabi said that the company should ensure maximum returns to all its stakeholders for their support.
The company posted a turnover of N235.7 billion for the financial year ended Dec. 31, 2011, as against N202.6 billion recorded in the corresponding period of 2010.
The company's profit after tax was N125.5 million in contrast to 105.3 million declared in 2010.
Facebook Inc. (FB) may fall more than 42 percent below its initial public offering price by the end of the year, according to bets by structured-product investors.
The most actively traded structured products tied to Facebook since its IPO have been so-called put warrants, whose buyers profit if the shares drop below a pre-defined level, in some cases as low as $22, data compiled by Bloomberg show. UBS AG (UBSN), Commerzbank AG (CBK) and Julius Baer Group Ltd. (BAER) are among lenders that listed 1,504 warrants and certificates in Europe linked to shares of the social networking site that were offered at $38.
According to  Bloomberg, since raising $16 billion on May 17 in the biggest technology IPO of all time, Facebook has tumbled, closing at $32 yesterday. The U.S. Securities and Exchange Commission and the brokerage industrys watchdog both said they may review the deal, after a person familiar with the matter said Facebook and Morgan Stanley, the lead underwriter, increased the offering price to persuade the companys backers to sell more of their stock.
There has been strong demand on the put side, with the ratio between puts and calls at around 70/30 with some people expressing deep downside views, Heiko Geiger, the head of public distribution for Germany and Austria at Bank Vontobel AG in Frankfurt, said in an interview yesterday.
Ashley Zandy, a spokeswoman for the Menlo Park, California- based company, declined to comment.
Bank Vontobel
s best-selling Facebook-linked product is a put warrant that will reward investors if the shares are below $22, the so-called strike price, in December, said Geiger. Put warrants give investors a cash payment depending on how far a stock falls below a set level.
Julius Baer sold the securities with the largest trading volumes, two put warrants with strikes of $35 and $30 on the Scoach exchange in Zurich. Investors traded 402,000 contracts yesterday valued at $335,780 of the former and 603,000 warrants for $322,620 of the latter, data compiled by Bloomberg show.
Zurich-based structured products distributor EFG Financial Products AG added Facebook shares to a basket of 10 social media companies that are tracked by a certificate that has traded on Scoach since last month, it said in an e-mailed statement.
Facebook rose in German share trading today, climbing 1.6 percent to $32.50 as of 12:14 p.m. in Frankfurt.
The Massachusetts security division subpoenaed Morgan Stanley (MS) this week over its communications with clients. The firm said it handled the May 17 sale properly.
The cost to short-sell Facebook has surged to the most- expensive level in a 10-point scale developed by Data Explorers Ltd., which said bets against the social-media company amount to 4.3 percent of shares sold in the IPO.
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