Nigeria Content Online

To avoid taking
regrettable decisions in real estate investment, experts in property
management said it is necessary for real estate investors to do
critical asset analysis prior to any form of purchase.

When Adebisi
Akanni, a banker with one of the new generation banks, moved with his
family to his newly built three-bedroom apartment at Agboyi, Ketu area
of Lagos State three years ago, he never imagined he would go back to
tenancy level, or squat with a friend.

While admitting
that he paid less attention to warnings that the house he spent
millions of naira to build was located in an area prone to flooding,
Mr. Akanni said the recent flood that displaced over a 1,000 people in
Lagos, which also affected his property, took him by surprise.

“I really can’t
believe this happened to me. I bought that land years ago when it was
affordable. We waited to see if there will be any serious flood
occurrence before we built, but we never experienced any. That was why
I went ahead to build,” Mr. Akanni said, adding that after three years
of been called a landlord, “flood has turned my family to squatters
with a pastor family.”

Proper asset analysis

Experts said that
with proper asset analysis, prospective investors will know the most
common mistakes usually made and how to avoid them, adding that such
assessment will also help limit risk and ensure a good return on
investment.

Olusegun Oriade, a
business development executive at Pison Housing Company, a real estate
firm, said the persistence of the economic downturn calls for decisive
investment analysis before any business is done. He said a clear
understanding of market trends is essential to property investment.

“The credit crunch
persists and this calls for critical investment analysis prior to any
form of investing. This involves taking time to conduct market needed
analysis. It is about understanding government’s master plan for
specific area of interest.

“Location or
geographical considerations which deal with political happenstances,
policies, land administration, ecological matters, development control,
and physical planning are issues to be considered,” Mr. Oriade said.

He said most of the
flooded areas of Lagos State are government acquisition lands which
mean that these lands are without certificate of occupancy.

“The irony is that
some of these lands have building plan approval, and a larger
percentage of these are informal development,” he said.

He added that while nothing is wrong with informal development, many risks are attached to such development.

Mr. Oriade said an
investor must patiently conduct an in-depth search on any property. The
search must go beyond land registry and it must include physical
planning by the ministry of environment to determine its viability.

“It is profitable to commit resources to these searches than to suffer losses that are preventable,” he said.

‘Engage professionals’

A building
consultant at TeeA Investment, a real estate management company, Toyin
Adedoyin, said not doing due groundwork “can cost an investor a lot of
money or loss of lives at time.”

Mr. Adedoyin said a
proper inspection and evaluation of the property must be carried out by
professionals before, during, and after raining season to assure safety
for the owners.

“We often tell our
clients to be patient before paying for any property, particularly
those who like highbrow areas that are prone to flooding,” he said.

Nduese Essien, the
minister of lands, housing and urban development, also said prospective
investors should engage qualified professionals in the building
industry.

“If real estate
investors adhere to established procedures, there would be drastic
reduction in the recurrent cases of collapsed buildings in the
country,” Mr. Essien said.

The Central Bank of
Nigeria (CBN) has signed a Memorandum of Understanding (MoU) with the
24 banks in the country on the establishment of the Banking Sector
Resolution Cost Sinking Fund.

At the signing
ceremony in Lagos at the weekend, deputy governor, financial system
stability, Kingsley Moghalu, said the fund is to cover the cost of the
bailout of the banking sector.

“The CBN and the 24
Nigerian banks (Participating Banks) realised that funds from the
management and realisation of the eligible bank assets to be acquired
by the Asset Management Corporation of Nigeria (AMCON) might turn out
to be insufficient to meet the resolution cost of restoring financial
stability.

“In furtherance of
this, the CBN shall contribute N50 billion annually to the fund, and
each participating bank shall contribute an amount equivalent to 30
basis points (0.3 per cent) of its total assets as at the date of its
audited financial statements for the immediately preceding financial
year,” Mr. Moghalu said.

N45 billion annual contribution Mr. Moghalu was silent on the total amount the CBN hopes to galvanise through this process.

“I don’t want to go
into specific figures because 0.3 per cent contribution from the banks
and banks have different asset level from each other. So that cannot be
calculated by me now,” he said.

But with the total
assets of Nigerian banks currently put at between N14 trillion to N16
trillion, it is estimated that the banks will make an annual
contribution of about N45 billion.

According to him,
the gesture is part of the support of the institutions involved in
stabilising the economy. This is in order to block any shortfall in the
funds that would be realised from the management of eligible bank
assets to be acquired by the Asset Management Corporation of Nigeria
(AMCON).

“Therefore, the
(banks) resolved, in the national interest, to establish a Banking
Sector Resolution Cost Fund to meet any shortfalls and to ensure
financial stability and the soundness of the banking system,” he said.

The fund would be managed by AMCON.

Ingenuity of government

He said the fund is
part of ingenuity of government to reduce the burden of the banks’
bailout on Nigerian tax payers. Through this fund, a substantial part
of the cost will be borne by banks. He said Nigerian banks deserve
commendation for agreeing to be part of the fund.

“This is because in
most jurisdictions, it is the national governments alone, through their
treasuries, that bear the cost of stabilising the banks and preventing
bank failures. In other words, the tax payers in those countries almost
exclusively bore these costs,” he said.

He said in
Nigeria’s case, the burden on the national treasury is significantly
reduced as it will be borne by the commercial banks themselves in
addition to the CBN and AMCON.

International shea
industry stakeholders will come to Accra, the capital of Ghana, for the
sector’s fifth annual conference, April 6-7, 2011.

The Global Shea
Alliance announced that ‘Shea 2011: Sustainable Solutions’ will feature
the launch of the world’s first international private sector shea
alliance and expert information on virtually every aspect of the
business.

“The conference
facilitates connections,information exchange and business among
stakeholders from across West Africa and around the world,” said Peter
Lovett, shea sector advisor at the USAID West Africa Trade Hub, which
organises the event with sponsorship from across the industry.

From the women’s
groups that collect shea nuts to the world’s major buyers of nuts and
butter, the conference is the only event of its kind for the industry.
Researchers, civil society, public sector officials, service providers,
financial institutions and transport companies will also participate.

“This event is the
most significant of its kind to date, for the global shea industry,”
said Peter Stedman, Senior Buyer at The Body Shop International.

Operators will formally launch the Global Shea Alliance at the conference, which they formed in October.

“An international
alliance will allow stakeholders to work together to promote shea in
international markets,” said Kadijatou Lah of Mali’s National Shea
Federation and CEO of Lawal International, a shea exporter.

The quality
management system NIS ISO 9001:2008 award certificate will be presented
to Dangote Cement, Obajana plant; and Dangote Cement, Benue plant at a
ceremony in Lagos on January 20, 2011.

Dangote Cement,
Apapa plant will also receive the occupational health and safety
management system NIS BS OHSAS 18001:2007 in recognition of its good
manufacturing practice (GMP) and significant contributions to the
economic advancement of Nigeria.

The awards are
coming after a verification of Dangote Cement plants at Obajana, Gboko
and Apapa by a team of auditors from the Standards Organization of
Nigeria (SON).

Conveying the news
of the awards to Dangote Cement, director general, Standards
Organization of Nigeria (SON), John Akanya, wrote:

“I have the
pleasure to inform you that the quality management system (QMS) of
Dangote Cement is hereby adjudged by the Standards Organization of
Nigeria to conform to the requirements of NIS ISO 9001:2008 standard
and your facility is consequently certified.” Dangote Cement has,
however, emerged the biggest out of the 55 rated companies in Nigeria
at N1.86 trillion capitalisation, according to a report of ‘Stakes 55 –
Largest Companies in Nigeria’ just released by International Corporate
Research (ICR).

The report, which
measured companies by market capitalization for the 4th quarter of
2010, indicated that with the emergence of Dangote Cement, the Stakes
55 gained 43.19 per cent rising from N5.14 trillion to N7.36 trillion,
its highest value since inception.

The African Network
for Drugs and Diagnostics Innovation (ANDI), at its inaugural meeting
in Addis Ababa, Ethiopia, announced the joint emergence of Beth Mugo,
minister for public health and sanitation in Kenya, and Naledi Pandor,
minister for science and technology in South Africa, as co-Chairs of
the Board of ANDI.

The innovative
co-Chair governance structure was created in recognition of the
critical need to integrate public health research and policy with
Science and technology in order to develop a holistic approach to
sustainably address Africa’s health challenges through the discovery,
development and delivery of drug, diagnostics, vaccines and other
health products within Africa.

Board members
representing North, South, East, West and Central African regions,
leading health experts, the African Diaspora and key institutional
partners – the United Nations Economic Commission for Africa (UNECA);
legal hosts for ANDI, the World Health Organization (WHO); and the
African Development Bank (AfDB) discussed the strategic plans for ANDI.
The European Commission has also provided support for the establishment
of ANDI.

Speaking at the opening of the Board meeting, Jennifer Kargbo, the
deputy executive secretary of UNECA, stressed the importance of the
private sector participation in ANDI activities, especially in
translating R&D outputs into useful products and services that
benefit the people. She emphasised that “ANDI’s success should be
measured in terms of numbers of lives saved, jobs created, and firms
created.”

Of late, prices
have dominated discussions amongst our talking heads. One price in
particular has been most knotty: electricity tariff. Before the
“clarification” by the Nigerian Electricity Regulatory Commission
(NERC) last Wednesday, the Presidential Task Force on Power (PTFP) had
complicated this major domestic worry.

According to the
PTFP statement, after a new tariff regime, which the NERC will announce
in April this year, “average cost-based tariff (for electric power)
will fall (to) between N21 and N23 per kilowatt-hour (kWh), that is,
about a third of what Nigerians actually pay for electricity”.

Now, for most of
us, the effective electricity tariff is the one we pay to NEPA (sorry,
PHCN). And this is currently between N6 and N8 per kilowatt-hour (kWh).
So, it is a tad disingenuous for the PTFP to have forecast a fall in
tariff later this year, if the new tariff is in multiples of the old
rate. However, when you recall that electricity supply from the mains
is more absent than “live and current”, then, the nominal rate we pay
for this cannot be the effective rate.

Other sources of
power there are aplenty in these parts: the kerosene-powered bush
lantern, fuel wood, candles, and assorted generating capacity. All of
these at some cost to the individuals using them. Add these costs to
the nominal rate we pay to the monopoly supplier, and it’s self-evident
that the effective electricity tariff in the country is a lot more than
the PHCN charges.

But is it in the
range indicated by the PTFP? For industry, the answer to this is a
straightforward “Yes”. For urban middle class households, an
“undoubtedly” will do just fine. We could bicker endlessly about what
the effective tariff is for the poor and the vulnerable in the rural
areas; and we could build a case around these burdens for first
improving the infrastructure for electricity supply before a tariff
hike.

This is what most
newspaper leader writers on this subject have done. But this misses
another important point; and this is where scepticism over the NERC’s
rebuttal of the PTFP’s statement must be admitted into the discourse.

As a monopoly
supplier of electricity, government could charge anything it liked. As
government, responsible for economic development and social progress,
it was likewise minded to charge below cost. However, this means that
over the investment horizon cost of maintenance and new investment
would have to come out of other sources.

These models are
needed for government to have been seen as very responsible: to have
assessed the growth drivers that required such subsidies, to have
estimated the net gain from these growth drivers in excess of the
opportunity cost of the income losses arising from non-commercial
tariffs, and to have been sure how long these growth drivers will need
the support from low input costs.

All of this is
history now. Instead, we are going through a business model transition
that would see government hand off the supply of electricity in the
country. Private suppliers are insisting on being paid at least N18 per
kilowatt-hour (kWh) if they are to cover their costs. Therefore,
despite the NERC’s claim, the nominal tariff for electricity supplied
from the mains must go up at some time. If this brings about regular
supply of electricity, it should make our current other supply sources
unnecessary. In which case, the average cost-based tariff and the
nominal tariff will become the same.

On the assumption
that this should lead to a lowering of the effective rate on power
consumed by the average urban household, one question remains. How do
we address the peculiar cases of the poor in our rural areas, and urban
households below the average? Definitely not by putting the horse
behind the cart.

Rather than
advocate a delay in the price hike until all necessary infrastructure
for supplying power properly are in place, we should aim to strengthen
the industry’s competitive dynamics, so that a price increase by any
supply type should lead to a migration of custom to alternative power
sources.

In other words, we should not, for instance, tolerate a ban on the
importation of generating sets as part of an argument that independent
power providers need this “moratorium” to start up. For the biggest
threat to the poor and the vulnerable amongst us is the creation of new
monopoly suppliers.

The
federal government at the weekend received the interim report on the
audit it ordered last year on the accounts of the Nigerian National
Petroleum Corporation. Chairman, Finance Commissioners’ Forum, Rebo
Usman, who disclosed this in Abuja on Friday at the end of the January
meeting of the Federation Accounts Allocation Committee (FAAC), said
the report was submitted to the Federal Ministry of Finance late on
Thursday.

The
report came just as the committee, consisting of commissioners of
finance and accountant generals of the 36 states of the federation and
the Federal Capital Territory resolved to share the sum of
N410.78billion (including VAT) from the federation account to the three
tiers of government.

Details
allocation shows distributable statutory revenue for the month of
N349.166billion, a decrease of N15.474billion, or 4.24 percent,
compared to the allocation for November, 2010, while the gross revenue
available from the Value Added Tax (VAT) was N47.461billion. Besides,
there is a proposal for the payment of augmentation of N16.051billion
as a result of shortfall in distributable revenue, though there was no
exchange gain because of the prevailing exchange rate of N147 per
dollar, which is lower than the N150 per dollar set as exchange
benchmark in the budget.

The
gross revenue of N581.561billion for the month is higher than
N557.839billion from the previous month by N23.722billion, attributable
to higher crude oil prices in the international markets above the $60
per barrel used in year 2010 budget. The allocation is coming barely
one week after the committee held a secret emergency meeting in the wee
hours of last December to approve the release of $1billion (about
N150billion) from the excess crude account for distribution among the
same tiers of government.

Most
observers had said the withdrawal was meant as an a new year bonus to
state governors for their acceptance to trade their support for
President Goodluck Jonathan, who emerged the ruling People’s Democratic
Party flagbearer in the forthcoming April presidential elections.

Mr
Usman, who is also the Taraba State commissioner for finance, said the
audit report would, however, not be made public until the ministry has
studied and digested the various recommendations contained in it to
guide government’s next line of action.

He
disclosed that the committee however resolved during the meeting not to
wait any longer for the formal release of the report before reiterating
its demand for the management of NNPC to move quickly to settle the
N450billion outstanding debt to the Federation Accounts.

“During
the meeting, we discussed extensively about the N450billion debt to the
Federation Accounts by the NNPC. We have taken a position that the FAAC
does not have anything to do with the interim audit report, since
agreement has since been reached that the NNPC is owing the N450billion.

“It
was also resolved that what should come to the Committee at its next
meeting should be the payment schedule by the NNPC. If the NNPC has an
issue with the federal government on reconciliation of its accounts,
they should find a way to sort themselves out, as the states and local
governments are not going to listen to any stories anymore,” Mr Uman
said.

The
issue of the corporation’s indebtedness to the Federation Account has
remained contentious since last year when the then Minister of state
for finance, Remi Babalola, alleged that the NNPC was not only broke,
but incapable to meet its current liabilities. Its group managing
director, Austen Oniwon, had said in a letter he sent to the committee
explaining why the corporation would not be able to pay the debt,
saying: “the corporation is insolvent, as its current liabilities
exceeded its current assets by N754billion as at December 31, 2008,”
adding that it would be able to pay the money only when the federal
government agreed to reimburse it the N1.156trillion spent on subsidy
expenses incurred for petroleum products supplies and distribution
since 2003.

Though controversy later culminated in the sack of Mr Babalola, the
government decided to order the comprehensive forensic audit of the
accounts of the corporation.

A senator from
Bauchi Central, Mohammed Muhammed, has said that the National Assembly
will approve 60 per cent of the 2011 budget for capital expenditure.

Mr. Muhammed of
ANPP made this known at the weekend in Darazo, headquarters of Darazo
local government Area of Bauchi State, in an interview with the News
Agency of Nigeria.

He said that the
National Assembly was taking the measure to reduce the huge funds that
were spent on recurrent expenditure. Mr. Muhammed noted that in
previous budgets, meagre funds were allocated for capital expenditure,
adding that the development made the execution of some vital projects
difficult.

He said that the
recurrent expenditure in the nation’s budget was always more than the
capital expenditure, adding that this had affected the implementation
of many projects.

“There is the need
to either balance the budget to the ratio of 50:50 for both capital and
recurrent expenditure, or 60:40 in favour of capital expenditure,” Mr.
Muhammed said.

The Miners
Association of Nigeria (MAN) has said that its members’ inability to
access loans was a major challenge to the growth and development of
sector.

The national
president of the association, Sani Shehu, in Abuja on Sunday, said that
none of the association’s members had accessed the one billion naira
solid mineral credit facility offered by three commercial banks in the
country.

It will be recalled
that Oceanic, First Bank, and Wema had in 2006, established Solid
Minerals Desks with an initial capital of one billion naira, to boost
mining activities.

Mr. Shehu said the conditionalities stipulated for the loans were stringent for interested miners.

According to him,
the requirements include huge collaterals, short period for repayment,
and huge interest rates. He noted that mining was a capital intensive
activity with long gestation period, pointing out that the
conditionalities had defeated the aim of setting up the loan.