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Tackling insecurity to safeguard investment

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At the 2018 edition of the Lagos Chamber of Commerce and Industry (LCCI) security meet business dialogue in Lagos, the stakeholders admitted that on-going insecurity challenges in the country posed threat to the growth and developmentt of Nigeria’s business environment. Taiwo Hassan reports.

 

Business is any commercial or economic activity that tends towards making profit. The primary objective of organisations is to make profit, grow and survive in the environment in which they operate.
The environment being complex and multi-focus has a far reaching effect on any investment.
Ideally, the environment tends to shape the outlook and goal of organisations by placing constraints on them.
The stability of any environment guarantees conducive enabling environment for businesses to grow optimally.
In Nigeria, lately, the business environment where private sector firms operates has been compromised.
Particularly, Nigeria’s business environment has been undergoing lots of challenges bordering on economic and security risks, which have adversely affected growth and development as operators groan over the safety of their investments.

LCCI’s stance on insecurity
However, at the LCCI summit on impact of security risk on Nigeria’s business environment in Lagos recently, private sector operators believed that no meaningful business can take place in an environment that is insecure.
Particularly, they noted that security of life and property was a very clear factor in the investment environment and a major consideration in investment decisions.
Speaking at the event, President, Lagos Chamber of Commerce and Industry, Babatunde Ruwase, said that the event was a platform for discussions and exchange of ideas between the private sector, diplomatic corps and the security agencies on the security situation in the country.
He said the essence of the security summit was to deliberate on how the chamber could collaborate to make the environment more secure for business to thrive at a time the country is passing through concomitant security challenges.
The LCCI president said that security of life and property was a very critical, and a major consideration in investment decisions.
“In recent years, the country has been grappling with serious challenges bothering on terrorism, religious and ethnic crisis, attacks on oil installations, kidnapping, armed robbery and attacks by herdsmen,” he said.
“The impact of these security challenges on business and investors confidence is phenomenal.
“Not much investment activities are taking place in the northeastern part of the country, for instance. The same is true, perhaps to a lesser degree, in some other parts of the country. Nigeria’s position in the Transparency International Security Ranking has plunged to 143 out of 169 countries.”

Cost of doing business
The LCCI revealed that there was now a sharp increase of 10 per cent in insurance premium on security-related risks over the last one year on private sector investment.
Ruwase explained that private firms were spending billions of naira on security to protect their investment and that this had added to their operating cost in recent times.
He said that there was an increase in the cost of providing additional security by some key sectors in the economy, including oil and gas and banking.
According to him, these additional security measures include private security guards, convoy operations, additional air transportation by oil sector workers, instead of land and marine transportation for security reasons.
Ruwase said that there were also additional costs in the protection of facilities and equipment of oil producing companies operating in Nigeria.
According to him, the cost of firm’s protection of their facilities locally is becoming worrisome to their parent companies in abroad.
The LCCI boss noted that the oil and gas sector was facing fresh threats of attacks on oil installations, adding that attacks by herdsmen on farming communities across the country was not abating, resulting in increased loss of lives.
He revealed that an estimated N78 billion was spent by ICT/telecoms companies in replacing stolen or vandalised equipment in the last one year.
This, he said, disrupted the effective communication gadgets of telecoms operators, which consequently affected mobile phone communication in the country.
He said: “Let me acknowledge the efforts of security agencies and government towards addressing the problem of insecurity in the country. Some progress has been made in restoring peace and normalcy to the North East, but a great deal stills to be done.”

Diplomatic concerns
The United States (US) Consul-General, Lagos, Mr. John Bray, said that investment by US citizens in Nigeria was now $8.1 billion.
He urged the Federal Government to speedily tackle the ongoing menace of insecurity in the country to avoid exodus of foreign investors.
He said that the President Donald Trump-led administration was concerned with the spate of insecurity going on nationwide in Nigeria, adding that it was not good for foreign direct investment (FDI) into Nigeria.
According to him, the safety of US investments in Nigeria is critical to the survival of Nigeria’s economy, adding that taming the ongoing security risk in the country will guarantee investors’ confidence in Nigerian economy.

Nigerian Army’s submission
In his remarks, the Chief of Army Staff, Lt Gen TY Buratai, admitted that no doubt, insecurity had posed threat to Nigeria’s business environment, which if not handled properly, could degenerate into economic war.
He noted that in time past, development and security constituted separate discourses.
However, in the contemporary world, matters of security and development are increasingly being discussed in concert, both in relation to discourse and policy, giving rise to what is commonly referred to as the security-development nexus.
He said it was in consonance with this reality that the former Secretary-General to the United Nations, Dr Koffi Anan, asserted that security and development are inextricably linked.
According to him, “In the spirit of the security-development nexus, contemporary intra-state conflicts and threats such as we have in Nigeria cannot be prevented, resolved, or managed exclusively through preventive diplomacy, political negotiations and the use of force.
“This is so because they have complex causes ranging from social inequality, unemployment and under-employment, illiteracy, poverty, hunger and deprivation, environmental issues, amongst others, which require holistic correlated approaches to resolving them.”
The Chief of Army Staff acknowledged the fact that security and development were interdependent.
His words: “It is my pleasure to once again learn my voice to the avowed efficacy of this platform especially in providing a suitable avenue for discussing security issues, challenges, and their impact on the economy as well as the way forward with a view to developing appropriate strategies to be employed by the various instruments of national power.
“There is no gainsaying the fact that this discourse is equally judicious, coming at a time when our country’s security and development continue to be troubled by a plethora of threats namely, Boko Haram insurgency mainly in the North East, armed banditry, cattle rustling, armed robbery, sea robbery/piracy, militancy, cultism/cult-related violence, kidnapping among others.”

Last line
With the alarming rate of insecurity in the country, the future of Nigeria business environment looks bleak and this could deter FDI inflows if the situation is not checked by government.

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Business

Stock market opens week bearish

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Trading activities on the floor of the Nigerian Stock Exchange (NSE) market yesterday opened this week on  the negative territory as the overall performance measures, NSE ASI and market capitalisation, both fell by 1.53 per cent.

 

The downswing according to market watchers, was due to profit taking by investors after recent bullish rally.

 

Consequently, the All-Share Index dropped by 651.09 basis points or 1.53 per cent from 42,638.83 index points last Friday to close at 41,987.74, while the market capitalisation of equities depreciated by N234 billion or 1.53 per cent to close at N15.067 trillion from N15.301 trillion.

 

Further analysis of the day’s trading showed that Linkage Assurance Plc topped the day’s gainers’ table with 9.09 per cent to close at 96 kobo per share, while Livestock Feeds Plc followed with five per cent to close at N1.05 per share. Fidson Healthcare Plc added 4.92 per cent to close at N4.69 per share.

 

On the flip side, PZ Cussons Nigeria Plc led the losers’ chart with a dip of 8 per cent to close at N23.00 per share. Lasaco Insurance Plc shed 6.06 per cent to close at 31 kobo per share. Enamelwa Nigeria Plc followed with 4.95 per cent to close at 22 kobo per share.

 

Market turnover closed negative as volume moved down by -64.80 per cent as against +32.62 per cent uptick recorded in the previous session. Skye Bank Plc, Diamond Bank Plc and FCMB Plc were the most active stocks that boosted market turnover while Zenith Bank Plc and Guinness Nigeria Plc topped market value list.

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Nigeria mulls 700,000 barrels daily oil output surge

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…envisages 250,000 barrels from local producers

 

Nigeria is planning an increase of 700,000 barrels a day in her oil production. Data from the Ministry of Petroleum Resources sighted by New Telegraph showed that indigenous producers from the country aim to pump almost 250,000 barrels per day additional crude by 2020 as part of a wider plan for the nation to lift output to 2.5 million a day.

“We are on course,” Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who confirmed the data, said in Abuja last weekend, just as he intimated newsmen of the goal to pump 2.5 million barrels a day by 2020. “Capacity-wise, the volumes are there. Infrastructure-wise we suffer a little bit in terms of being able to deliver.”

There are at least a dozen small to mid-sized Nigerian producers pumping between 5,000 and 100,000 barrels each day. Together, they plan to add incremental supply of at least 150,000 barrels a day this year. Aiteo E & P Ltd., Nigeria’s largest independent, didn’t immediately comment about its expansion plans. Shoreline Group, the third-biggest independent, the data showed, wants to double output by December with Seplat Petroleum Development Company, the second-largest, also intending to produce more.

” In all, the country’s total planned increase, a report adapted from the data showed, is 700,000 barrels a day. “Just over a third will come from the state-run Nigeria Petroleum Development Co., a third from independents, and the remainder from oil majors.

The expansion depends, among other things, on peace being maintained in the Niger Delta. A militant group said last month it would attack oil and gas facilities,” the data adapted by Bloomberg showed. “One probability is at least some of the extra Nigerian supply will end up feeding the Dangote oil refinery, the continent’s largest, which is due to start operating next year. While doing that would help rid Nigeria of its dependence on fuels produced overseas, it wouldn’t extricate the country from its commitments to OPEC.

“Back in 2016, Shoreline had to cancel a planned $500 million Eurobond. With oil prices rallying, the company is making a comeback. It agreed a $530 million deal with financiers led by Vitol Group, the world’s biggest independent oil trader, as it seeks to double crude output to 100,000 barrels a day by year end.

“It represents a massive vote of confidence in the future growth of our operations and of Nigerian upstream producers,” Kola Karim, chief executive officer of Shoreline, said in an interview.

“Shoreline’s progress mirrors that of other Nigerian independents.Seplat, said to be among companies bidding for Petroleo Brasileiro SA’s African oilfields, expects to ramp up drilling this year after output recovered from militant attacks and low prices, according to company statements,” the report said. Half a decade ago, these producers were hailed as the future of Nigeria’s production because of their potential to pump 40 percent of the OPEC member’s output. They had bought oilfields that hold at least a third of the West African nation’s 37.5 billion barrels of crude reserves from companies including Royal Dutch Shell Plc, Total SA, and Eni SpA. Their day may still come.

The OPEC deal is currently in place until the end of this year and global demand is rising fast. The International Energy Agency this month revised up its growth estimate for world oil consumption by 100,000 barrels a day, taking it up to 1.4 million.

“As the oil market rebalances in the years ahead, OPEC will have to lift its production cap,” Pabina Yinkere, an energy analyst at Lagos-based Vetiva Capital Management, said by phone, adding that a lot of extra Nigerian crude could be used to feed the Dangote refinery.

“Moves to raise production are in view of expected demand growth.” The oil producers in Nigeria are planning to add barrels at the same time as Nigeria participates in a global pact to restrict oil supply that’s being led by the Organization of Petroleum Exporting Countries and non-member nations including Russia. If any one country relents – and similar internal pressures are bubbling up elsewhere – then the entire deal could come under strain.

“If they can pump more in Nigeria, I don’t see why they wouldn’t,” Warren Patterson, a commodity strategist at ING Bank NV, said. “If you get Nigeria exceeding the cap, then you’re going to get others who pump a little bit more. The longer the deal goes on for, the more likely it’s going to fall apart.”

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2018: Experts predict vibrant real estate

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As oil prices stabilise at 17 per cent higher than 2017 average and direct foreign investment increases, experts see surge in real estate activities in 2018. DAYO AYEYEMI reports

 

Following improvement in the economy, things are beginning to look up in Nigeria’s real estate sector with market operators getting set to tap into the opportunities, which exist in various segments of the market.

They were, however, particular about the low and middle income residential, millennial and student accommodation sections. Apparently equipped with the dynamism of happenings in the economy, they stated that investors (both local and foreign) were prepared to launch into pockets of opportunities in real estate market. Investors’ hope has been further boosted by the latest Bismack Rewane-led Financial Derivative Company (FDC)’s report on review of third quarter of 2017, which showed that Foreign Capital Inflows (FCI) to Nigeria increased by 148 per cent to $4.15 billion.

This positive trend, analysts said, happened as a result of renewed investor confidence in the economy. Also, the experts noted that oil prices had climbed to 17 per cent higher than 2017 average, expressing confidence that if the situation persists, oil revenues might help mitigate consequences of capital flight.

Current development

This newspaper gathered that while some developers are entering into Joint Ventures (JV) with the government to provide affordable housing units for citizens, others are currently repackaging their products to attract financiers and buyers.

In exclusive neighbourhoods such as Ikoyi, Victoria Island and Lekki, where landlords can no longer wait without getting tenants and buyers for their dormant properties, they have been converting their vacant houses to smaller apartments such as one-bedroom, studio and condos to attract people in need of smaller accommodation. This innovation by landlords, according to experts, has caught the attention of working-class singles who want to live very close to their workplaces.

Experts’ view

Taking a look at what 2018 holds for the sector, experts, which comprised developers, institutional investors, mortgage providers, media practitioners, property consultants and brokers at Fine and Country West Africa’s investors series, agreed that the outlook was bright and promising for real estate, hinging their prediction on improved economic climate. According to them, the economy has started looking up with pockets of opportunities emerging in the residential segment of the market.

They observed that low to middle income market remained strong all through the recession period while the upper market struggled. “But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business,” they said.

Setting the pace, Sales Consultant, Fine and Country in Lagos, Mr. David Mba, said that he saw a more vibrant residential market coming as a result of an improved economy in 2018, adding that what were considered challenges in the past have become opportunities. According to him, developers in their bid to share risk and also raise more capital were going into joint ventures, citing Brains and Hammers Limited’s example.

“Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State Government,” he said. This move, he explained, is believed to be the company’s response to pressing demands from its clients who wanted to acquire property in Lagos.

He said: “The move will see the company developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu area of Lagos.

“The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of one bedroom, 24 units of two bedroom, and 24 units of 3-bedroom maisonette.”

Other market trends, Mba said, included increase in demand for good value three or four bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units. Publisher/CEO, BusinessDay, Frank Aigbogun, is of the view that improvement in the economy means increased business activities that will in turn trigger more demand for real estate products such as commercial office, retail and residential buildings.

Fine & Country’s CEO/Vice Chair, Udo Okonjo, stated that the sector’s positive outlook would come with opportunities for only investors who are ready to understand that the market had changed.

From market survey, she stated that there would be opportunities across various segments of the real estate’s market including residential, commercial office and retail. “Lifestyle communities are the new face of residential real estate.

These communities have the advantages of economies of scale and security,” the Fine and Country’s CEO said. She hinted that opportunity currently existed in millennial and student housing, adding that many investors were tapping into these areas.

Dean, Faculty of Environmental Sciences, University of Lagos, Professor Timothy Nubi, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.

In a bid to maximise the value of their property, a recent Northcourt Real Estate report 2018 outlook, noted that land owners looked more favourable to joint ventures with developers.

This newspaper also discovered that many developers and investors have been taking advantage of the ongoing construction of Dangote Refinery in Ibeju-Lekki, Lagos to acquire more lands in the axis for housing estate development.

Last line

As the business investment climate gets betters, necessary actions must be taken by the government to improve ease of doing business in the country.

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