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How FG’s Inaction Deepens Nigeria’s Declining Economic Fortunes

It’s easier finding a needle in a haystack than signs today that Nigeria will get its act together and fulfil a long-touted potential that has seemed farther away than ever in the last half a decade.

Nothing is working, according to the country’s most senior business leaders, who cite contracting GDP per capita, collapsing infrastructure from power to roads, falling consumer demand and rising insecurity.

These factors are deterring local and foreign investment, with Nigeria lagging smaller African countries in attracting investment.

While Nigeria’s relatively low FDI inflow compared to peers in the last three years has been well reported, a key dimension to the United Nations Conference on Trade and Development (UNCTAD) report has managed to fly under the radar – FDI outflows.

FDI outflows from Nigeria stood at $1.38 billion in 2018, the second highest since 2005. The highest outflows came in 2015, when $1.4 billion of FDI found its way out of the country. What this implies is that new investors are not only snubbing Nigeria, old ones are also packing their bags and leaving.

The dearth of new investments and the exit of some partly explain why Nigeria has been stuck in what credit ratings agency, Moody’s, calls a “low growth cycle” characterised by weak, non-inclusive and jobless growth, since exiting recession in 2017.

Unemployment hit an all-time high of 23 percent in the third quarter of 2018. That’s double the 10.8 percent rate in Q3 2015, in the space of just three years.

At the current rate, the number of unemployed and underemployed Nigerians (nearly 40 million in Q3 2018) could be the size of Germany, which is home to slightly more than 80 million people, by 2021.

“The investment climate is poor and every sector that can boost growth or create jobs seems hamstrung by one challenge or the other,” said Muda Yusuf, director-general of private sector advocacy group, Lagos Chamber of Commerce and Industry (LCCI).

LCCI draws membership from over 2,000 companies.

“A lot of investment in the oil sector is being held back by the lack of policy clarity,” Yusuf said, referencing the long-stalled passage of the Petroleum Industry and Governance Bill (PIGB) which investors say is a deterrent to new investment in the oil and gas sector.

“The manufacturing sector continues to suffer from decrepit infrastructure, same as the agricultural sector, which must now also grapple with insecurity,” Yusuf added.

Also worrying is that for all the public trillions that have been thrown at the economy to reflate it, a third of which was borrowed locally from pension funds and banks, and internationally from foreign investors, the Federal Government has little to show.

Despite doubling its debt stock in five years, economic growth has been stuck at around 2 percent when it hasn’t contracted.

Even high-flying agriculture sector that used to post growth of 7 percent has deteriorated to about 3 percent. Despite the government’s many interventions in the sector, growth has been capped, thanks to rising insecurity that has kept many farmers out of work.

Bankers and economists say the government has not spent wisely and risks a debt crisis if it keeps borrowing to fund consumption.

They argue that an expensive petrol subsidy that gulps in excess of N1 trillion a year and a federal budget that prioritises recurrent expenditure and debt servicing over capital expenditure are a recipe for ballooning debt yet low economic growth.

What’s worse than the government’s misplaced spending is that businesses have been crowded out of the debt market and are not investing as required. One South African fund manager calls it double jeopardy for the economy.

The lack of robust reforms to stimulate growth has been met with ire by investors and companies, particularly the listed ones, are paying a heavy toll for that.

The abysmal stock market performance has been a useful indication of that ire. Aided by a relative stable currency, the All Share Index (ASI) recorded a loss of 4.7 percent in dollar terms in the first half of 2019.

Even South Africa, with its many troubles this year, did much better in that period (+12.5 percent), while Egypt (+16.0 percent), and Kenya (+5.3 percent) as well as the MSCI Emerging (+11.9 percent) and Frontier Market (+9.2 percent) indices have also done better.

Stocks were down some 13 percent since the start of 2019, one of the world’s worst performers, according to Bloomberg data.

The much-awaited listing of the country’s largest telecommunications company, MTN Nigeria, brought some relief to the market. But it was short-lived, as investors longed for a catalyst to turn negative sentiments around. It never came, and so many have since stormed out, as evidenced by net portfolio outflows of N42.8 billion as at May 2019, compared to a net outflow of N28.6 billion in the corresponding period of 2018.

Listed corporates are finding it difficult to shake off the general lull in the economy, by posting lower revenues and trading at record low prices on the NSE.

“We note that around 50 percent of our coverage companies reported either a decline in profit after tax or a loss position in Q1’19,” a team of investment researchers at Cardinal Stone said in a note to clients.

 

“Post the election excitement, investors may have also redirected their attention to more fundamental concerns, so much so that even a positive wave of corporate listings failed to prevent the equity market decline,” the team, led by Phillip Anegbe, said.

Amid the gloom, policy analysts say President Muhammadu Buhari missed a glorious chance to provide a catalyst for stocks and the economy with ministerial appointments.

As if Nigeria’s situation isn’t worrying enough, oil prices have been sliding in recent days, hard hit by a trade spat between the US and China that has led to worries over lower global economic growth.

Lower oil prices, with Brent crude now below the Federal Government’s $60 per barrel 2019 budget benchmark for the first time since 2016, is also putting fresh pressure on the naira which the CBN has fought tooth and nail to defend.

Albeit marginal, the naira has weakened to the lowest level this year – N363.4 per US dollar in the market-reflective foreign exchange window, Friday, after pretty much holding steady at N360.

The CBN, with gross external reserves of around $44 billion, is tipped to have enough firepower to stave off any sharp depreciation in the short term.

But if oil prices fall below $40 per barrel, it becomes a different proposition.
Brent crude dropped Tuesday, as US President Donald Trump said planned trade talks with China next month could be called off, stoking concerns the deepening dispute will damage global growth. At $58 per barrel, oil prices are on course for the sixth straight day of trading below Nigeria’s budget peg.

Source: businessdayng

What Investors Need to Know For Profitable Investment in Commercial Real Estate Business

…as Greystone Tower opens for home buyers, investors, corporate tenants

Investing in real estate is an interesting, yet very intricate and challenging business. It is all the more challenging if the investment is in commercial segment of real estate, especially prime office space.

This explains why a prospective investor needs to know a few things this kind of investment needs in order for him to make profitable investment. There is need also to understand what both the external and interior parts of the space should be, or look like.

Professionals and marketers in this space advise that a commercial prime office building must have a flexible and technologically-advanced work environment that is safe, well-designed, well-built, and accessible. It should accommodate the specific space and equipment needs of its occupiers.

Udo Okonjo is the CEO, Fine and Country West Africa International-a real estate marketing, advisory and consultancy firm. The company has been operating consistently at the luxury end of the Nigerian real estate market and is reputed for successfully closing deals on many high end properties in Nigeria.

Okonjo explained to BusinessDay that in building a Grade A prime office space, special attention must be paid to the selection of interior finishes and art installations, particularly in the reception, meeting rooms and common areas. She added that well-maintained restrooms, lifts, provision of cafeteria, gym, crèche, smoking patio’s (terraces) should also be considered.

There are different methods of classifying Grade-A and Grade-B commercial office spaces. Okonjo points out that within the context of the Ikoyi and Victoria Island commercial office space offerings, Grade A buildings, such as the Greystone Tower, are unique in their location (accessibility) with a simple but iconic design and high construction quality.

Greystone Tower is an iconic mixed-use development strategically located at the intersection of two major business hubs in Victoria Island, Lagos. The building, designed by Majoroh Partnership and being built by Dori Construction and Engineering Limited, is standing on 18-floors.

According to the project managers, it has five floors of parking space; one of the floors consists of 4units of 3-bedroom residential apartments; there is a ‘concessionary floor’ with Restaurants, Creche, Clinic, Café & Gym. “Greystone promises to be one of the finest developments redefining the Lagos city skyline with its organic and responsive warm and clear glass façade,” the project managers assure.

Okonjo disclosed that at the building’s ‘Open House’ held a couple of weeks ago, developers, agents and investors were educated on the kinds of facilities that were made available, the selling points of the tower and why it was a great investment for both commercial and residential use.

The finishing of Grade A prime office buildings is always of the highest standards and, like Greystone Tower, they are equipped with technologically-advanced building safety, mechanical, electrical, and communications systems. Grade-A buildings are not only highly rated within their local communities, but are known to compete with similar developments in developed countries across the globe.

They also incorporate sustainability features and are value-engineered from the design stage to be Green/Leadership in Energy and Environmental Design (LEED)-certified developments.

Any standard prime office building must have features such as meeting/conference rooms; cafeteria, coffee shop; reception; with state-of-the art visitor management/access-control systems, as well as information central location for building directory, schedules, and general information.

The building should also have a common space and lounges for informal, multi-purpose recreation e.g the entertainment lounge at the Nestoil Tower and the water-front lounge at The Wings In Victoria Island, environment functionalities e.g. pressurized and fire-rated stairwells, railings at the staircases of the emergency-exits etc.

Provision of adequate alternative power-supply systems e.g. power generators and ups systems is also important just is necessary to incorporate water and sewage treatment plants; accessibility to the building at any time of the day – weekends inclusive

Other important features include provision of information technology dedicated server-room for each office unit, drivers lounge and maintenance room, dedicated kitchen; raised floor systems; energy efficiency – motion-sensored lights and water taps, and air-recycling systems Lagos’ state-of-the art security systems with closed circuit television cameras (CCTV).

There should be technologically advanced fire-alarm and fire-fighting systems – NFPA – 13 implemented; temperature monitoring in the critical areas e.g. Panel, ATS, control rooms etc; installation of health, safety and

Provision of adequate alternative power-supply systems e.g. Power Generators and UPS systems is important just as water and sewage treatment plants; accessibility to the building at any time of the day – weekends inclusive, and provision of information technology dedicated server-room for each office unit.

There is also need for drivers lounge and maintenance room, dedicated kitchen, raised floor systems, energy efficiency – motion-sensored lights and water taps and air-recycling systems.

Source: businessdayng

Africa’s Real Estate Market Upbeat in H1’19 with Over $500m Transactions

…as Nigerian investors close deals, anticipate increased activities in H2’19

African real estate market never had it so good in the previous 24 months as it did in the first six months of 2019 when the market recorded over half a billion dollars in 10 significant transactions across multiple jurisdictions and sectors.

In Nigeria, after 12 straight quarters of negative growth that ended in the first quarter of 2019, the market has started waking up with investors closing deals and hoping to record marginal increase in activities in the second half of this year.

The last six months of the year have been the most promising period in the market and this was reflected in the high number of calls and inspections which the investors reveal they have been receiving for both residential and commercial properties.

“We have seen movements in the market; we may not see what we had in 2008 nor the boom days of 2011 to 2013, but what we see happening now are increased activities and deal closures,” MKO Balogun, CEO, PFI Global, confirmed to BusinessDay on phone.

“Though the economy is passing through a slowdown, I don’t see that affecting real estate, unless something crazy happens which we don’t expect t,” Balogun said.

The growth and opportunity displayed by a diverse spread of international funds, Development Finance Institutions (DFIs), banks, institutional investors and others are evidence that despite apparent indifference to African opportunities in SA boardrooms, the continent’s real estate sector has evolved and become increasingly more liquid and provides value in key nodes and sectors.

Some of the most high-profile deals include well-known listed funds and global investors including Growthpoint Investec African Properties Investment Fund (GIAPF), Grit Real Estate Income Group, WeWork, Centum Real Estate, Nedbank, Standard Bank, the IFC and the UK’s CDC.

Due to subdued growth potential and earnings locally, Central and Eastern Europe become increasingly popular for South Africa’s property sector, but analysts are asking if such funds should not be investing closer to home.

Kfir Rusin, the host of Africa Property Investment (API) Summit, the most significant annual gathering of capital investors in African real estate, is particularly concerned about this growing trend.

API, already in its 10th edition, will be taking place on October 2 & 3, 2019 in Johannesburg. Its stakeholders have been more active in the first half of 2019 than in the previous 24 months.
“For investors and developers looking for data and partners experienced in African development or looking to sell prime assets, there are men and women responsible for structuring and executing these mega deals who will be at this year’s conference,” Rusin disclosed.

These include GIAPF’s managing director, Thomas Reilly; Grit’s CEO, Bronwyn Corbett; multiple senior investment officers from the IFC; Standard Bank’s head of Africa real estate, Niyi Adeleye; CDC’s Illaria Benucci; Centum’s RE MD, Samuel Kariuki, and many more in attendance.

“The market has moved forward in the past six months, and we’re thrilled that so many major dealmakers will be at the API Summit to transact and share their experiences with our delegates,” he said.

These high value transactions, while not a repudiation of the South African-listed sector’s muted view of the African opportunity, do provide a compelling narrative that the continent’s property markets are investable, but require nuance and insights. It’s not simply a copy and paste that what has worked here (SA) will work elsewhere, said Rusin.

According to real estate analyst Craig Smith of Anchor Stockbrokers, Africa’s top markets are “definitely a more attractive entry point than 18-24 months ago” but cautions that investors still need to exercise a “higher level of diligence” when investing.

And while deal many South African funds continue to look at Central and Eastern Europe for scale (sizeable transactions) and positive funding spreads, the transaction spread by API Summit’s investors point to a market that is expanding, which is in line with his view that “the opportunity set over the long term is immense”, said Smith.

“We’re witnessing sophisticated deal structuring in affordable housing; hospitality; logistics; office spaces and mixed use, across countries and regions,” said Rusin.

Top 10 real estate deals in the first half of the year into which billions of investable funds have gone include the Growthpoint Investec African Property Fund to acquire malls in Ghana and Zambia; Centum RE & Nedbank ±$75 million debt deal for their Two Rivers development project, and IFC investment in Hilton in Lusaka and Protea Hotel, both in Zambia.

Others are African Logistics Properties (ALP) which signed debt restructuring deal with Standard Bank; Shelter Afrique in Affordable Housing deal with Habitat International; Grit’s purchase of Senegal Club Med at $12.5 million with development plans of $28.8 million, and CDC’s commitment to mezzanine debt investment in Teyliom Hospitality with a deal size put at $30.7 million.

Within the period, WeWork opened its first of many African office locations in Johannesburg; Actis & Shapoorji launched affordable housing Joint Venture in Kenya with the deal size put at $120 million, while Westpark & Siemens are to build sustainable industrial park.

Regarded among local and international decision makers as Africa’s largest property gathering, the API Summit is recognised as a platform for investing, but it is also vital in developing deeper layers of transparency for investors looking to meet and understand the continent’s divergent and complex markets to avoid previous mistakes committed by SA developers.

“Africa’s markets are still relatively opaque, and it is vital that these markets continue with their efforts to improve transparency,” Smith said. “The experience of GIAPF is crucial in my view as this will provide evidence of performance to the SA market.”

Source: businessdayng

Amid Global Headwinds, does the Current Naira Policy Serve Nigeria well?

Rap star and Philadelphia native Beanie Sigel’s smash 2004 hit single “feel it in the air” about a man with dark foreboding signs of some negative event about to take place, reminds one of happenings in the global and Nigerian economy lately.

Escalating U.S.-China trade tensions threaten to worsen global growth after President Donald Trump threatened to impose additional tariffs against China, last week.

President Trump also added for good measure on Friday that planned talks with China next month could be called off.

As the showdown between the U.S. and China persists, investors and emerging to developed markets, are struggling to gauge the likely outcome on the global economy and potential impact on asset prices.

Oil prices have already entered a bear market (defined as a 20% drop from recent highs), while global stocks have also sold off. Gold often seen as a safe haven however, is being bid as well as its digital counterpart Bitcoin.

Some countries are choosing to shoot first and ask questions later.

Three central banks across Asia Pacific delivered surprise interest-rate cuts decisions last week as policy makers took aggressive action to counter a worsening global economy.

The Reserve Bank of India lowered its benchmark rate by 35 basis points to 5.4 percent, its fourth cut this year.

New Zealand reduced its rate by 50 basis points to 1 percent; economists had forecast a 25 basis-point reduction, while the Bank of Thailand’s cut rates by 25 basis-points to 1.50 percent, the first in more than four years.

The U.S Federal Reserve’s rate cut last week paved the way for much of the easing by Central Banks in Asia, even as markets are pricing in the chance of another cut by the Fed in September.

So why are these Asian countries so eager to have weaker currencies implied by the rate cuts?

For Thailand its surging currency brought about by a deluge of portfolio inflows, is hurting exports and tourism as the Thai baht (currency) has gained about 8 percent against the dollar in the past year.

In India, the fiscal authorities had earlier called for “significant” policy easing from the central bank to help revive growth, while New Zealand’s policy actions were in response to weakening domestic demand amid global trade tensions that threaten to curb exports and commodity prices.

Conventional monetary policy would suggest the Central Bank of Nigeria (CBN) would be in lock step with its Asian counterparts and begin an easing cycle in earnest given all the headwinds described so far.

However like with all things Nigerian, it is not quite so simple.

The CBN is strongly committed to a stable Naira policy, and as such has: kept its benchmark policy rate elevated at 13.5 percent, tightened liquidity through the cash reserve ratio (CRR) which is at 22.5 percent, and periodically sold Open Market Operation (OMO) bills at high yields to mop up excess liquidity and attract foreign portfolio flows.

In essence a mirror opposite of what the mentioned Asian countries are trying to engineer/achieve.

To understand the dilemma of the CBN it will help to pay attention to the structure of the 4 economies.

Exports of goods and services as a percentage of GDP in Thailand was reported at 68.9 percent in 2018, New Zealand 27.6 percent, India 19.7 percent and Nigeria 13.2 percent, according to the latest World Bank data.

In essence Nigeria had the lowest export base among all four countries and even at that its exports are the least diversified with a single commodity oil responsible for some 95 percent of all export dollars earned.

So in essence Nigeria is using the proceeds of a single export commodity (whose price is becoming increasingly unpredictable amid a supply glut), to prop up its currency (the naira), in a battle it surely will not win in the long run, but clearly cannot afford to lose.

Perhaps it may make more sense to begin to nudge the country into becoming an export base for global manufacturers, which would probably entail a free floating naira trading closer to its Real Effective Exchange Rate (REER).

If that were to be the case then the CBN would not find itself in the current situation where it has been stuck in a tight monetary policy stance for much of the past 5 years, even as Nigeria entered and exited a recession, while remaining trapped in a low growth trajectory.

Larry Summers, a Harvard professor, and former U.S. Treasury secretary and White House economic adviser during the global economic crises of 2007/2008 sees a less than 50/50 chance that the U.S. enters a recession in the next 12 months.

Such a scenario if it comes to pass would likely clobber commodity prices from copper to crude, with a negative fallout for emerging markets like Nigeria.

In the last verse of “Feel it in the Air” a clearly paranoid Sigel asks “Can you feel the grim reaper floating’?”

For Nigeria, which is perhaps in a worse fiscal and monetary shape since the last recession in 2016, perhaps it’s time for the authorities to get paranoid, and begin to pull out all the reform policy stops.

Source: businessdayng

Paint Makers Shed N94m in Revenue as Adulteration, High Cost, Bite Harder

Nigerian publicly quoted paint manufacturers felt the backlash of adulteration of products by smaller industry players and high production cost on their mid-year earnings numbers, evidenced by weaker sales and dwindling margins.

Between January and June 2019, Berger Paints, Chemical & Allied Paint (CAP), Premier Paints, Portland Paints and Meyer generated a combined sales revenue of N7.42 billion, which is some 1.3 percent or N94 million lower than N7.51 billion made a year earlier.

A report titled ‘The Nigerian Paints & Coating Market’ published by Frost & Sullivan, an American consulting firms with presence in six continents including Africa, cited high energy cost, government neglect, product debasement and high cost of raw materials as major woes that has been facing industry players over the years.

These challenges, they say, hurt margin of players and in some cases compel them to lower prices to the competitive nature of the market.

Of the five companies considered, only CAP, Nigeria’s biggest paint maker by market capitalization, saw positive revenue growth of 3 percent in the review period.

Sales of Berger Paints, Portland Paints and Meyer slumped by 1 percent 5 and 15 percent respectively, with Premier Paints bottoming with 24 percent contraction in top-line.

Generally, listed paint makers did not fare well in terms of profitability as two of five saw betterment in after-tax profit.

Berger Paints, the second biggest player by market value, led the pack with some 19 percent improvement in profit to N145.6 million, while CAP came a distant second with some 6 percent growth.

Post-tax profit of Portland Paints plunged 26 percent, while Premier Paints and Meyer saw losses reducing to N14.3 million and N29.6 million in the review period from N36.4 million and N93.9 million incurred last year.

To some analysts, cash flow generated from operating activities is the best metric to assess a firm’s ability to survive. This is because without positive cash flows, a firm may have to embark on borrowing, raise additional equity or quit operation.

A dive into the companies’ cash flow statement revealed that the five listed paint makers are cash-strapped as money earned from operations trended downward.

CAP generated N530 million from operations in H1 2019, to clinch the first spot, albeit this is 34 percent lower than N802 million realized last year.

Berger and Portland got N63 million and N14 million respectively from operations, representing a massive contraction from N106 million and N245 million earned a year earlier. While cash deficit of Meyer slowed to N40 million from N52 million, that of Premier Paint worsened to N3.3 million from N534, 000.

However, having negative cash flows for a time might not be a bad thing, if a firm is building another plant for example, could pay off in the end if the plant generates more cash.

Paint makers, for long, have been grappling with inability to source raw materials locally, as about 60 percent of inputs are imported and subjected to multiple levies, which further takes a toll on performance.

Despite this, three of five paint makers – CAP (52%), Berger (54%) and Portland (63%) were cost efficient in the first half of 2019 given their relatively low direct cost to revenue ratio.

Premier Paints saw cost margin trended slightly higher to 72 percent, with Meyer bottoming with 76 percent margin, a tangible upscale from 57 percent last year.

A cursory look at performance on the Nigeria Stock Exchange (NSE) revealed that leaders – CAP & Berger, have returned losses in excess of 20 percent year long.

The Nigerian paint industry can be broken down into two segments namely

Decorative Paints, Industrial paints and coatings.

The Decorative coatings comprises a majority of the Nigerian paints & coatings market representing an estimated 71percent of total volume and about 60percent of market value, while, the Industrial coatings accounted for about 29percent of total volumes in 2012 at an estimated $80 million.

Total sales volumes were an estimated 37 million litres. This segment can be broadly categorised into Industrial protective coatings, Marine coatings, Wood finishes, Coil coatings, Powder coatings, and Auto refinishes.

The Nigerian paint market is highly fragmented largely due to the low barrier of entry.

Major drivers of the industry are high demand for real estate properties, growing construction market, however, rising costs, growing competition coupled with activities of substandard and adulterated products has eroded the profit margins of most companies.

It is projected that sales value in the industry will reach an estimated $400 million in 2020, a Compound Annual Growth Rate of 9.01 percent.

If well protected, the paint industry looks very bright although this depends on economic recovery in the real estate sector which is still sluggish and big tickets projects. The Standard Organization of Nigeria must also ensure that only brands that meet standards are allowed in the Nigerian market.

Source: businessdayng

Pension Fund Assets Grow 10.28% to N9.33trn in Six Months

The National Pension Commission (PenCom) has revealed that the total pension fund assets as at June 30, 2019 stood at N9.33 trillion.

Business Post gathered from a report released by the agency that from the figure moved from N8.46 trillion in January 2019 to N9.33 trillion in June 2019, indicating an increase of 10.28 percent in the period under review.

From the data, the pension fund assets recorded an inflow of N21 billion from pension contributors in the second quarter of this year, with government securities making the highest contribution of 69.55 percent, largely dominated by 47.60 percent of FGN bonds and 20.77 percent of treasury bills.

Another big contributor to the pension fund assets were local money market securities with 11.21 percent and the domestic equities contributed 5.76 percent, while foreign shares made a meagre 0.70 percent.

Business Post observed from the data that in the second quarter of 2019, investment in FGN securities dropped to N6.49 trillion in June from N6.55 trillion in April, while investment in corporate debt securities increased in the same period to N505.82 billion from N474.32 billion, with investment in local money market securities rising from N947.34 billion in April to N1.10 trillion in June.

However, investment in mutual funds decreased to N23.67 billion in June 2019 from N24.52 billion recorded in April 2019.

Source: businesspost

Housing Microfinance Can Help Poor People Build Better Homes

But it comes with high interest rates

Whenever michael jjoga earns some money from his welding business, he buys a bag of cement. Brick by brick he has built a two-roomed house for his family on land he cleared himself in Wakiso district, in central Uganda. Another house stands half-finished nearby until he collects enough iron sheets to make a roof. Across the glade a chorus of bleats drifts from a crumbling hut, shaped from thatch and earth. He used to live in it; now it shelters his goats.

By 2025 some 1.6bn city dwellers will be living without decent, affordable housing, according to consultants at McKinsey. Many more people lack adequate shelter in the countryside. While governments and private developers fall short, people like Mr Jjoga are building houses themselves. They construct in stages, over years or even decades, preferring to buy a stack of bricks than to put money in a bank. Some move in well before completion. Lenders long overlooked this self-help model, but financed it unwittingly: perhaps a fifth of microloans to businesses are thought to be diverted into housing.

Now some lenders are starting to target this market directly. Conventional mortgages are rare in developing countries: in Uganda, which has 40m people, there are only 5,000. Instead, banks and microlenders offer smaller housing loans, paid back over shorter periods of 1-3 years. A family might borrow for a cement floor, and then for an extra room. Two-thirds of the firms offering housing microfinance entered the sector in the past decade, according to a global survey in 2017 by Habitat for Humanity, a non-profit organisation.

Many borrowers lack land titles to use as collateral. Swarna Pragati, an Indian microlender, gets around the problem by establishing de facto ownership through village meetings. Select Africa, which operates in east and southern Africa, offers unsecured housing loans to salaried workers, deducting repayments from their pay cheques. Centenary Bank in Uganda accepts untitled land as security. Robert Canwat, its microfinance manager, says attachment to home makes the whole family monitor repayment. “Everybody becomes your recovery officer,” he smiles. Most lenders report that housing loans are paid back more reliably than other products in their portfolio.

Houses built incrementally by local artisans are often shoddy. Some lenders try to improve them by providing technical support, such as sample plans or an engineer’s advice. Others help borrowers buy appliances such as solar panels and water filters. One promising innovation is iBuild, an Uber-like app in parts of Africa and Asia. It connects households to builders and suppliers, allowing them to compare quality and price as well as to apply for loans.

Finance also comes directly from suppliers. cemex, a Mexican cement giant, offers credit through its Patrimonio Hoy programme. Customers pay a weekly fee. In return they get technical advice and advance delivery of building materials. The scheme has reached 600,000 households and extended more than $300m of loans since 1998.

Unlike business loans, which can be paid back out of greater profits, lending for housing creates no obvious income stream. But home ownership frees borrowers from paying rent. And some borrowers use loans to build rental units, shops or even schools. “Think of the house as a place from where the household earns money,” says Kecia Rust of the Centre for Affordable Housing Finance in Africa, a think-tank.

 

Habitat for Humanity recently commissioned two evaluations of microfinance products it had developed with lenders in east Africa. In Uganda, the likelihood that a household had a separate kitchen rose by 22% after taking out a loan. In Kenya, borrowers upgraded their roofs and walls. In both cases satisfaction with housing rose, though stress levels and school attendance were unchanged. Repayment rates have been high. “We’ve proved there’s a business case,” says Kevin Chetty of Habitat.

Microcredit is expensive, because lenders must assess risk and monitor repayment on even the tiniest amount. Housing loans are usually larger than business ones, so processing them is proportionally cheaper. But they also have longer maturities, which means lenders must chase scarce long-term funding. Throw in ponderous law courts and weak competition, and annual interest rates typically reach 20-35%. Some homebuilders are certainly eager for credit. But until such structural problems are addressed, others will keep doing things the old way—even if that means waiting longer to put a decent roof over their heads.

Source: amp-economist

Nigeria’s Failing Economy takes its Toll on Industrial Estates

One of the starkest reminders of the misgovernance of the nation by past leaders was the seemingly deliberate effort to stifle the industrial sector that was expected to tackle unemployment.

As many analysts now agree, Nigerians’preference for imported goods has also weakened the few existing industries, making some of them exit the nation’s landscape for other West African countries.

One of the most stringent criticisms against Nigeria’s industrial policy is its inability to reform the sector and provide succour to the existing and dying industries. Hence, the ugly state of industrial estates created in the 70s to take care of rapid urbanisation, industrialisation and commercialisation in the country.

The industrial sector in Nigeria (comprising manufacturing, mining, and utilities) accounts for a tiny proportion of economic activities (six per cent) while the manufacturing sector contributed only four per cent to Gross Domestic Product (GDP) in 2011. This is despite policy efforts, over the last 50 years, and, in particular, more recently, that have attempted to facilitate industrialisation.

But available data from the Bureau of Statistics (NBS) 2017 revealed that national industrial utilisation is approximately 40 per cent, while in 2018, according to a real estate report by Ubosi Eleh and Company, many warehousing facilities were thrown into the market for outright disposal, few takers as firms and owners continue to seek creative ways to remain in business.

The development of new warehousing either as an investment or for additional storage space still remains limited. The major industrial areas in Ikeja, Oregun, Illupeju, Apapa, Amuwo-Odofin in Lagos, Idu in Abuja, Trans Amadi in Port Harcourt and Bompai in Kano have witnessed low warehousing activities as many of them have been converted to other commercial uses or completely abandoned. In the northern parts of the country particularly Kaduna, the demand for warehousing is virtually non-existent.

For instance, the headquarters of the Dunlop Nigeria Plc, once a beehive of business activities, has become a ghost of their old selves. The case of Dunlop property is a definition of the new role the Lagos industrial community has been given.

The same goes for Iganmu, another ancient industrial layout. Apart from the portion controlled by the Nigerian Breweries Plc, the area has lost its past glory.

With the collapse of the Central Bags Manufacturing Company Nigeria Limited and several other operators that clustered around it, the entire famous Akanbi Onitiri Street has become a shadow of itself.

While the faint industrial activities are still in some other areas, developers have converted most of them to other uses. The same decline could be seen at Ijora, Isolo and Mushin industrial settlements. Abimbola Street and its environs, were the hub of the Lagos plastic industry at a time between 1970 and 1990, when Aswani, a sub-industrial cluster in Isolo, was at the peak of its performance.

But, the industrial life at Abimbola Street and its surroundings has dimmed. Except for the resilience of Johnson Wax Nigeria Limited, an insecticide maker, and dozens of warehouses, Abimbola Street would have been described as a ghost neighbourhood.

With the likes of the comatose Femstar and Company (Limca and Gold Spot bottler) and several other ventures that made the street tick those days, the street has lost its boom.

These areas have suddenly given way to other uses.

The same goes for Abimbola House itself, which used to be a haven for many small-scale manufacturers. A large portion now houses a showroom belonging to the Tecncool Nigeria Limited, a distributor of LG products, and several other marketing companies that are serviced by a branch of Wema Bank Plc, which is situated on the ground floor.

At Matori, Iganmu, Oba Okran, Ijesha and several other industrial estates in Lagos, this is the new order.

For instance, on Kolawale Shonibare, a street on the industrial arm of the estate where the likes of Eleganza Group once commanded a huge influence, new residential buildings and hotels have sprung up.

In the 1990s, Eleganza, a company owned by a doyen of the Nigerian industrial sector, Razaq Okoya, was employing both skilled and unskilled labour from different parts of the country.

Its imposing property on the estate has been turned to other uses. Most of the collapsed companies, like what obtains in several other parts of Lagos, have been transformed to storage facilities for sundry imported goods.

In fact, the average wait time to conclude a lease of a warehouse has continued to increase basically as a result of low demand. Between 2015 and 2016, the average wait time was in the range of 60-90 days, towards the end of 2016, it had doubled to 150-180 days and in 2017, there were still many warehouses that remained in the market for upwards of 300 days or more.

Warehouse rates in Lagos are in the range of N1, 200 – N1, 800 per square metre and increases with proximity to the ports. In Trans Amadi Industrial estate, properties command rent in the range of N1, 500 per square metre per annum while Idu, Abuja attracts about N1, 800 per square metre.

Industry watchers attribute the collapse of the sector to electricity outages, transportation bottlenecks, crime and corruption. Nigerian manufacturing firms suffer acute shortages of infrastructure such as good roads, potable water, and, in particular, power supply.

Contrary to insinuations that urbanisation cut short industrial developments in urban centres, some built environment experts, and especially town planners pointed out that the encroachment by residential developments did not affect the growth of the industrial estates.

Town planners
Reacting, a former President of the Nigerian Institute of Town Planners (NITP), Remi Makinde told The Guardian that what had become the sorry state of most of the industrial estates could be blamed on the poor economic situation in the country.

He observed that since about 20 years ago, the situation has been going down and many of the established industries had to fold up their businesses.

“At Ikeja industrial estate, we used to have Michelin and Dunlop tyres and the Nigerian Textile Mills. Regrettably, most of them have been taken over by churches after they folded up completely whereas the churches can’t employ such a huge number of people accommodated by the manufacturers and industries. These are industries employing thousands of Nigerians and feeding many families. The industrial estate in Apapa still maintains its status but bad roads and accessibility problems have run it down and Apapa is now a slum”, he said.

On solutions to the problem, he said there had to be a conscious government policy and amelioration project to revitalise industrial estates in the country. According to him, there would be a need for a conscious urban renewal scheme to upscale infrastructure in the estates for industrialists to move back to the country.

Makinde said irrespective of a master plan designed for an area and no matter how intelligently built, the economic situation would determine whether it would be successful or otherwise.

“ That is why master plans are being revised from five to ten years in accordance with the economic direction. The economic situation has changed so many things. A conscious policy by the federal, state and local governments will help to rejig the situation,” he said.

Corroborating his views, the Chairman, Lagos branch, Nigeria Institution of Town Planners (NITP), Bisi Adedire, regretted the abuse of the master plans for areas zoned for industrial purposes.

He, however, noted that complementary uses might be allowed in any master plan. According to him, many of the industries have moved out of that environment while some of them are no longer functional.

He stressed that when government wants to do a review of the master plans, some owners of the industries along the area complained that they are no longer interested in using the place for industrial purposes.

While some cleverly changed the use, others sold out for religious activities and they turned them to places of worship. Others cleverly said they wanted residential apartments for their staff, thereby out of the land that is supposed to be for industrial use, they now have residential houses inside the industrial complex.

“We now have a couple of legal changes but the government lacks the instrument for monitoring. Had it been there was adequate monitoring, it could not have reached this level.”

According to him, there is a model city plan for Ikeja, Lagos State embarked on the preparation of a model city plan for areas like Ikoyi, Victoria Island, Apapa, Badagry, Epe, Ikorodu and Agege. Those of Ikorodu and Epe are still being worked out.

“Recently, I saw a filings station close to Vita foam, without approval, a lot of things like that.

“As a branch, we are embarking upon a project called ‘Change the City Project’, we are seeking the support of the government so that we have various groups.

“ Each of these groups will identify some of the challenges in the areas of housing, transportation and waste management so that we come out with a policy.

“We are asking the government to allow private individual consultants by engaging professionals in the monitoring of activities in the state.
“With that, all these haphazard developments will stop in these areas. The government cannot do it alone, that is what we are trying to put across”, he added.

Another town planner, former NITP Lagos branch chairman and past president, Association of Town Planning Consultants of Nigeria (ATOPCON), Moses Ogunleye, explained that there is always proper designation in zoning land uses, as such no land use is expected to encroach on another, except the plan of the area has been reviewed or rezoned.

According to him, property developers are not allowed to build residential apartments in industrial areas. But he admitted that some industrial plots were being leased temporarily for places of worship, event centres and banking services.

MAN speaks
But the Chairman, Ikeja branch, Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, said the reason for the displacement of industrial estates was not basically an encroachment by residential occupants but the fact that occupants vacated the zone to other areas because of the issues they had in terms of meeting up with their production and business demands.

He said pertinent issues, which the association had also been talking about overtime, include the overall poor business climate, the high-interest rate, monetary policy, poor electricity, bad road network and insecurity in the locations.

“The industrialists vacated the places because they were not good for their businesses and so they have to look for better areas and so you have a vacancy for people to buy their warehouses and so convert them to residential buildings. If you look at Dunlop, they left and anybody could occupy where it had been before. In Acme road, Ikeja, many companies there, left also. They either moved out or relocated from the country, ” he said.

“They are displaced because the places are vacant and when they see good money offered to them, they get swallowed up. If you have a factory and you are occupying one-third of it and somebody offers good money to relocate, owners may be tempted to oblige. Now industrial zones have become something else.

“It should really give concerns to the government that a place meant for an industrial estate is being displaced. I believed the government knows why they are being displaced and should map out solutions that will bring them back”, he said.

Meshioye said it’s not enough to have industrial revolution plans and others, but must be seen to work to bring economic prosperity.

He said, “The high exchange rate for dollar to naira in recent times is not good for business. Only those who have a strong backup could manage to survive. Businesses have been impacted adversely and those that could not take the shock moved out of business.”

He declares that the government should formulate policies that would support industrial growth because if the established industrial estates had been functioning well, the nation would have experienced a high employment rate.

“Lagos in general and Ikeja, in particular, are industrial hubs. If things have been working in full capacity, there would have been high statistics for employment, high production of products, low prices of goods, reduction in crime rate, peace, innovation and more investment because investors would be comfortable with the environment, more taxes to government from employees/companies and other positive effects”, he stated.

Going forward, Mr Meshioye charged the government to work hard on the existing industrial policy.

“Government is putting in place low interest, this could be fine if industrialists could access it easily. Access to special funds by manufacturers would be very helpful. More support and the provision of infrastructure like good road network, stable electricity is key. Water is needed for a gradual reversal of the displacement.”

The government must ensure that an industrial estate is used for nothing else but the purpose for which it has been planned and things that would sustain industrial parks must be put in place.

“We may not need to bother about new industrial zones if those in place are maintained. In Lagos, industrialists are moving now to Sango-Ota, Shagamu zone and basically Ogun State. Nestle and Nigerian Breweries have relocated there. For Nigeria, it is a good development but Lagos is losing out. The government needs to provide industrial parks for industrialists and not just Small and Medium Scale Enterprises. We need bigger parks for big companies.”

Lagos State government 
But the acting Head, Regional Master Plan, Lagos State Ministry of Physical Planning and Urban Development, Prince Ogunlewe Adebisi, said there were still industrial estates, stressing that residential estates could not come in industrial areas except where they shared boundaries.

He said: “We still retain Oregun, Ikeja and other industrial areas, but there are certain areas within Oregun dedicated for mixed-use. It is a new master plan. We took into consideration the existing development pattern, those sides we felt can be accommodated. In some cases, people bought residential areas and turned them to industrial use because they shared boundaries.

“But now that industrial development is not thriving again they want to revert. At times, it could have been a road that separated residential from industrial and some people because of the cost of land within the industrial area, they bought close to the industrial areas and use it for industrial purpose or lease, where there are warehouses or light industries.

“When activities are not thriving again, they want to revert and change the use. In the case of worship centres, there are other permissive uses within an industrial area. There are areas, where they allowed for a place of worship or institutional use. Personally, I will not like to see where an industrial area will be sold for a place of worship, because it is killing the economy.

“The government has not come up with a policy to forbid people from buying such property and when they want to buy they will not tell you that they want to use it for church and you give them the consent. Except you put the name of the church there that is when you will see the consent. But most institutional uses are permissible in an industrial estate.

“But the sale of an industrial area for church purposes should be discouraged because it is killing our employment opportunities. Because the number of employees a church could grant is lower than industries. We should wait for somebody else who wants to establish an industry to get. Right now, the government has no control over it, the land belongs to them, they got it from the government. There must be certain conditions too because there must be a distance.

“Most worship centres are industrial buildings or warehouses being converted legally because there is still no policy in place to check that. It is now a lucrative thing to build churches in industrial areas than residential areas because of the existence of infrastructures like roads and electricity”, he said.

Source: guardianng

Trade War is Raising the Risk of U.S. Recession, Goldman Sachs Warns

The trade war with China is having a greater effect on the U.S. economy than expected, and the risk of recession is rising, Goldman Sachs Group Inc. said Sunday.

In a note to clients, Goldman analysts led by chief U.S. economist Jan Hatzius said a trade deal between the U.S. and China is no longer expected before the 2020 presidential election.

Goldman GS, -0.05%   said it now expects a 0.6% drag on the U.S. economy due to trade-war developments, up from earlier estimates of 0.2%. “Fears that the trade war will trigger a recession are growing,” Hatzius said in the note.

Goldman also lowered its fourth-quarter U.S. growth forecast by 20 basis points to 1.8%, saying the trade war is weighing down the economy.

“Overall, we have increased our estimate of the growth impact of the trade war,” Hatzius wrote. “The drivers of this modest change are that we now include an estimate of the sentiment and uncertainty effects and that financial markets have responded notably to recent trade news.”

Uncertainty caused by the trade war could cause businesses to lower spending until tensions are resolved, the report said. “Relatedly, the business sentiment effect of increased pessimism about the outlook from trade war news may lead firms to invest, hire, or produce less,” wrote Hatzius.

The Goldman analysts said they expect President Donald Trump to carry out his threat to impose 10% tariffs on an additional $300 billion in Chinese exports starting Sept. 1.

Source: marketwatch

Corruption Hampering Buhari’s Multi-Billion Naira Social Empowerment Programme

• N-Power Suffering Ghost Participants Syndrome – Source
• Alleges Fund Diversion By Govt Officials
• Programme Has Over 700,000 Enrollees, Not Ghosts – Coordinator
• N-Power Volunteers In Ebonyi Narrate Success Story

One of President Muhammadu Buhari’s social empowerment programmes, N-Power, may soon be rested due to implementation setbacks said to have been caused by alleged corruption. N-Power is the job creation and empowerment programme of the National Social Investment Programme (NSIP) of the administration.

A reliable source close to the programme Said  that poor sustainability plan and gross mismanagement of resources by programme managers were threatening its continued implementation.The source, an economist and former Managing Director of a deposit money bank, highlighted what he termed “the ghost participants syndrome” as another key challenge plaguing the programme, describing the development as a situation where officials and those in the corridors of power send names of family members, spouses and friends to collect allowances meant for youths the programme intended to empower.

The source said: “Let me tell you in confidence, the NSIP Programme, particularly the N-Power, is doomed to crash very soon due to two major reasons. The first is the poor sustainability model of the programme, which proposes that the Federal Government would continue to finance the programme. Now, where is the money, when government itself is broke and borrowing money everywhere? That is why out of the sum of N500 billion budgeted for the programme since 2016 when it began, government has been dithering and has reimbursed only about 35 per cent of the amount cumulatively.

“The second reason is the ghost working syndrome besetting the programme, with officials fielding non-existing participants, just to collect money using their names. Privileged government officials are the real persons collecting the funds.”But reacting to the allegation of ghost participation in the N-Power Programme, the Senior Special Assistant on National Social Empowerment Programme to President Buhari and chief driver of the Programme, Mrs. Maryam Uwais, described the allegation as “untrue and very callous.”

She said that allowances under the programme were paid through the bank and only after a Bank Verification Number certification; hence it was impossible for ghost participation for purposes of defrauding the system.A development economist and presidential candidate in the last general election, Mr. Tope Fasua, however, echoed the concerns expressed by the earlier source, saying the N-Power programme was a jamboree and was susceptible to failure from the beginning.He explained that during the campaigns, which took him round the country, he made several enquiries as to the whereabouts of the N-Power beneficiaries but was always told they were not around.

This phenomenon, which, according to him, happened in quite a number of places, confirmed to him that the ghost beneficiary syndrome bogged the programme. Fasua said though the FG may have good intention, the programme appeared to be driven by corrupt operators. He advised that closer monitoring be undertaken by the government.Another development economist, Mr. Odilim Enwegbara, said the N-Power programme’s challenge stemmed from its conception, as it didn’t provide that it be designed and driven by economic experts for sustainable financing.

He bemoaned the situation where such lofty programme was handed over to friends of the President, not minding whether they had the capacity to drive it to achieve the core objectives.Enwegbara said, “For instance, the operators of the N-Power are yet to address the basic challenge of opening or securing access to markets for beneficiaries, as well as helping them in getting financing for start-up, which renders whatever training they may have obtained useless.

“Therefore, what we require is a complete review of the whole concept of the Social Investment Programme in the country. And this must be done and run by economists. Otherwise, let us be prepared for the doomsday of repercussion of unemployment.’’ Uwais, however, insisted that there were no ghost participants in N-Power, declaring that the programme had registered over 700,000 youths and only recently sacked some participants for absenteeism and negligence.She said: “Those disengaged were removed over time, not as a consequence of your report, but because we have monitors and encourage whistleblowers to report. There are no ghost N-Power beneficiaries.

“We run the successful applicants by NIBSS, to verify, before we submit the lists to each state for deployment. NIBSS is the custodian of the BVN register. N-Power beneficiaries submit their BVN with their applications. So, this assists in ensuring the authentication of their identities. NIBSS remains our enterprise project management office and are our first port of call for our beneficiary check, to-date. Please ask them directly if you disbelieve me.”

Uwais disclosed that the beneficiaries on the programme currently included 500,000 graduates, 26,000 non-graduates, and 3,000 independent N-Power monitors. She stressed that operators had a system in place to check irregularities or corrupt practices. “We have independent monitors in all the local council areas in the country and they all have devices with a monitoring template. They report to us each month, across all the programmes. We have men of the Department of State Service (DSS) that have been trained on our programme.

They give us regular reports on activities in the field. “We have Actionaid also, who have selected Civil Society Organisations (with proven CBO affiliates) in every state. They also collate reports and provide regular updates to us. We continue to welcome feedback and are open to constructive updates, as this has to be a continuous process, especially because quite a number voluntarily resign after securing permanent jobs or starting their own businesses.”

Uwais, however, confirmed that there have been delays in funding. She explained that the development relates to fund releases that affect all Ministries, Departments and Agencies (MDAs) and States, and not the NSIP alone.

MEANWHILE, beneficiaries of the scheme in Ebonyi State say the programme has made significant impact on their lives, and those who benefit from the services they render at their various Places of Primary Assignment (PPA).Speaking from their PPAs via individual video recordings made available to The Guardian in Abuja, the beneficiaries, many of whom were enlisted in 2016, expressed gratitude to the Federal Government for the scheme and implementation of the youth oriented job enhancement programme, which according to them, is making a difference in their lives.

Okuchi Okechukwu, an N-Power beneficiary deployed to Urban Community Primary School in Abakiliki, said beyond the knowledge and experience gained by being engaged to teach, she has also been able to deploy resources earned to improve her small scale business.I teach Primary Two pupils who are mostly from the Hausa Community. Since I resumed here, I have made a lot of positive impact on the lives of these pupils. I am most grateful for this opportunity. The program has changed my financial status and improved my bakery business. Thank you Mr President for this opportunity “, She said.

Ude Victoria, another N-Power beneficiary said the monthly stipends she receives as a beneficiary of the program have in no small measure boosted her soya beans trade.“I learnt how to make soya beans a long time ago, but due to lack of funds, I couldn’t do anything. Thank God for this N-Power job, which has helped me raise some money to invest in my business,”Victoria remarked.

For Igwe Jude, an N-Power Volunteer Batch A (2016) in Abakiliki, said the experience of being enlisted in the programme has been worthwhile, noting that the scheme provides a platform to sharpen his skills for higher responsibilities in future.“I teach Chemistry here in Urban Modern Secondary School in Abakiliki. This school is the biggest secondary school in Ebonyi State so they have a lot of students. When we came in, they didn’t have enough teachers, and so our deployment helped a great deal. It’s been a good experience because as we teach the students, we also learn from them as well,” Jude said.

Obodo Anthony, one of the N-build volunteers working in one of the automobile servicing companies in Ebonyi State, said within a short period of his internship as an automobile trainee, he has covered enough grounds, and is gradually becoming an expert in car maintenance services.

Source: guardianng

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