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Canada’s First
Quantum said on Saturday that Kazakh mining group ENRC’s acquisition of
mining rights in Congo violated a tribunal order freezing the sale of a
contested mining project.

ENRC announced on
Friday that it agreed to buy a majority stake in Camrose Resources
Ltd., which through an off-shore company has secured a new permit to
take over the Kolwezi project after First Quantum put $750 million into
developing it.

Camrose is
controlled by Israeli investor, Dan Gertler, who has built up a wide
portfolio of interests in resource firms across Congo over the last 13
years.

First Quantum said
that a tribunal at the International Chamber of Commerce (ICC) in Paris
had issued an order the day before the ENRC announcement to prohibit
Congo “from taking any action to transfer or allow the transfer of the
Kolwezi tailings exploitation permit.”

“These
announcements (by ENRC) appear to indicate a clear contradiction of the
Tribunal’s orders,” said the statement from First Quantum, adding that
the company believes it has exclusive rights and a binding contract for
the project.

“(A)ny purported transfer of the tailings exploitation permit covering the Kolwezi Project is ineffective,” it added.

Officials from the ICC were not immediately available for comment.

First Quantum
sought international arbitration at the ICC in February after its
Kolwezi copper tailings project, KMT, was closed by Congo’s government
late last year following a protracted mining contracts review.

The company said on
Saturday a second order from the ICC prohibits Congo enforcing a local
court judgement that required First Quantum to pay $12 billion in
damages.

ENRC Ceo, Felix Vulis, said on Friday his company was not aware of any legal action regarding the deal.

“We have done a very, very good legal due diligence … We are in really good comfort,” he told Reuters by telephone.

“Everybody’s
putting the emphasis on arbitration, but we also have internal legal
proceedings in Congo, and arbitration does not overrule what the
Congolese court, a sovereign court, does,” Bene M’Poko, Congo’s
spokesman on the deal with ENRC and ambassador to South Africa, told
Reuters by telephone on Friday.

First Quantum said its frontier mining project, the biggest copper
producer in the country, had also been informed in a letter dated
August 5, that its production permit had been withdrawn, but said its
operations at the site were unaffected.

The
Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) says the
Sovereign Wealth Fund being proposed by the Federal Government is
illegal, as its foundations are not rooted in the provisions of the
country’s constitution.

The Fund is for the
accumulation of excess revenue from trade and crude oil exports for
investments and development of critical infrastructure that would
benefit both the country’s economy and the citizenry in general.

Olusegun Aganga,
the Minister of Finance, said the decision to establish the Fund is to
enable it serve as a catalyst for the nation’s economy development.

Mr. Aganga said the
apparent lack of discipline among managers of the nation’s finances
over the years has necessitated “a very strong structural vehicle,
properly managed by local and international advisers, to meet the
triple objectives as a stabilisation fund to support annual budget
deficits; savings for future generations, as well as funding for the
development of the nation’s basic infrastructural needs.”

Though
consultations are said to be ongoing on its operational structure,
management as well as other governance issues preparatory to its take
off, Ibrahim Dankwambo, the Accountant General of the Federation (AGF),
said last week that the government has already set aside $1billion
(about N150billion) as seed money for the Fund.

But, a RMAFC
Federal Commissioner, who spoke last Thursday on condition of
anonymity, said “government is treading the path of illegality in
pursuing a justifiable agenda”, pointing out that “no matter the good
intentions of government, the structure establishing the SWF would
render it defective, illegal, null and void, if its existence and
operation are not derived from the provisions of the country’s
constitution.”

He said that though
the revenue mobilisation agency is yet to formally write to the
Presidency on its position on the proposal, it, however, made its
concerns known during a meeting convened recently by the Federal
Ministry of Finance to discuss the issue of government treading the
same path of unconstitutionality when it established the Excess Crude
Account (ECA) and the Excess Revenue Account (ERA).

Erosion of Obasanjo’s legacy

The ECA was
established in 2003 by the Olusegun Obasanjo administration to
accumulate revenues earned from crude oil exports above approved
benchmark price indicated in the annual budgets, while the ERA was
opened recently for all monthly revenue accruals in excess of about
N365 billion pegged as ceiling for distributable allocations for
sharing by the Federation Accounts Allocation Committee (FAAC) to the
Federal and the 36 state governments as well as the Federal Capital
Territory (FCT), Abuja.

The ECA was also in
fulfilment of the conditions by Nigeria’s debtors for the external debt
pardon Mr. Obasanjo got the country. But the Act came into force in
July 2007 with the account reaching $20 billion in January 2007.

Sections 162 of the
1999 Constitution stipulates that all federally collected revenues,
namely oil and non-oil revenues earned from crude oil sales, royalties,
petroleum profit tax (PPT), gas revenue, rentals, penalties from gas
flaring and miscellaneous oil earnings as well as company income tax
(CIT), import duties, excise duties, and Customs penalty charges are to
be lodged in the federation account.

The RMAFC is the
only government agency mandated under Section 162 (2) and (3) to
recommend the distribution of the amount standing to the credit of the
Account among the federal, state and local governments in each state on
such terms, and in such manner as prescribed by the National Assembly.

The implication of
this, according to the commissioner, is that any disbursement,
withdrawal or appropriation of government revenue without strict
compliance with these provisions, as has been the case with
government’s management of the ECA and ERA, is unconstitutional.

“The RMAFC has
consistently criticised the practice by the Presidency and the Federal
Executive Council (FEC) to approve withdrawals from the ECA, which has
been depleted from over $22billion in 2008 to about $460million as at
last month. The FEC is made up of a group of politicians, whose
decisions should not set aside the supremacy of the constitution,
particularly on issues that have to do with the nation’s finances.

“Though the
minister has indicated that the ownership of the SWF would be devoid of
the control of either the federal or state governments, and managed
through a Council, whose members would be made up of representation
from all parts of the country, including women groups, student bodies,
civil society organizations, public and private sectors, its existence
still requires a constitutional backing to make it legal. The only way
that can be done is if the constitution is amended,” he said.

Meanwhile, Razia
Khan, a financial analyst and regional head of research, Africa for
Standard Chartered Bank, London said that “the sheer amount of
liquidity that has been pumped into the system, with spending ramped up
dramatically in this year’s budget, and an increased pace of disbursal
from the excess crude account, eroding much of Nigeria’s saved oil
windfall is a concern.”

“While the evidence
suggests that economic growth remains weak – for now, at least –
limiting the likelihood of significant demand-related price pressure,
the amount of liquidity out there still sits uncomfortably with many.”

Even
the coolest folks in the financial world sometimes lose their
composure. Arunma Oteh, director general of the Securities and Exchange
Commission (SEC) lost hers two Fridays ago when a reporter called for
her response on her agency’s efforts to cleanse the capital market.

Ms. Oteh, a public servant, was more interested in
how the reporter obtained her phone number than answering questions
about the agency that recently removed the Nigerian Stock Exchange
director general, Ndidi Okereke-Onyuike.

“I am telling you that I do not respond to calls
from people I don’t know and you are asking me when I would respond to
your text. This is invasion of privacy, even for security reason. It is
just not right. We have totally lost our culture in this country. You
just call somebody who does not know you and you expect a response,”
she said.

Ironically, the enquiry was supposed to highlight
the new bite that Ms Oteh has brought into the office especially as SEC
has been docile and nearly visionless for several years. But, six hours
later, perhaps after some reflective moments, her assistant called
apologising for his principal’s action and responded to the enquiries.

On August 5, when SEC removed Mrs. Okereke-Onyiuke
and suspended the president of the council, Aliko Dangote, quite a lot
of market operators and financial analysts applauded the move as one
that was long overdue. It came after initial opposition to the
appointment of Arunma Oteh as SEC director general on December 11,
2009. Some groups had taken the Federal Government to court for
appointing Oteh who they claimed does not have enough experience in
capital market which they considered requisite for the head of the
regulatory institution.

Profile

But Ms Oteh has over 16 years of capital market
experience including being the Vice-President (Corporate Management
Services) of the African Development Bank Group (AfDB). The portfolio
includes responsibility for overseeing the Language Services Unit, the
General Services and Procurement Department, the Human Resources
Management Department, and the Information Management and Methods
Department. She was appointed as part of a programme of institutional
reforms that are taking place within the Bank.

Previously, she was the Bank’s Group Treasurer for
five years in addition to working variously as Division Manager
Investments and Trading Room and Senior Investment Officer/Senior
Capital Markets Officer from 1993 to 1997.

Prior to joining the AfDB, she worked in corporate
finance, consulting, teaching and research for several institutions,
including the Harvard Institute for International Development, United
States, and Centre Point Investments Limited, a Lagos based
stockbroking and investment firm.

In the struggle against corruption, Oteh is known
to be an advocate of action not only at institutional and governmental
level, but also on the personal level. “We can only win the fight
against corruption if each and every one of us has zero-tolerance for
it. Each of us is a potential taker or a giver, and we need the courage
to say no,” she was quoted as saying in 2008 about her functions at the
AfDB.

It is this conviction that she has brought into
SEC, as her actions in the last few months have shown. Apart from the
intervention at the NSE, the commission has also concluded moves to
sanction about 260 stockbroking firms alleged to be involved in
unethical practices. An indication of her focus came last May in Abuja
at the International Conference on Good Governance and Regulatory
Leadership. In her keynote address, she observed that government’s
macroeconomic policies will come to naught if financial institutions
are not well governed. “Financial institutions which are poorly
governed pose a risk to themselves and also to others and could pull
down financial markets. Recent experience in the Nigerian financial
market attests to this fact.” She said capital markets and its
operators need to engender good corporate governance through their
disclosure, reporting and transparency requirements.

As part of moves to determine the true state of
affairs, SEC in April engaged a team from the US Securities and
Exchange Commission which compiled a confidential report detailing lax
oversight at the Nigerian Stock Exchange and the financial regulators.
The report detailed cases of bribery inside the Stock Exchange,
dysfunctional enforcement, “complicated and entrenched governance
problems”, “clear instances of insider trading and market manipulation
that resulted in no action”, and “woefully inadequate” surveillance, a
clear indictment of the NSE authorities. This prompted SEC to direct
the council to implement a clear succession plan and for the DG to
handover to a successor by June. But, a source at SEC said, “Remember
we had given the NSE till 30 June to complete this process. They
slipped, and asked for an extension till the end of July.”

Wielding the big stick

It was the failure of the NSE to carry out these
that prompted the SEC move, with Oteh revealing that the exchange has
not submitted its audited financial statement for 2009, a clear
violation of the SEC reporting rules. “The allegations regarding the
leadership and membership of the council of the exchange against the
NSE are very grave and that is why in our opinion, the SEC has decided
to take this step in exercising its powers under the Investment and
Securities and other applicable regulation.” This view was corroborated
by a senior stockbroker who spoke off record saying that the NSE
council which was supposed to call the NSE DG to order was unable to do
it.

Ope Banwo, a lawyer said the fact that two
principal officers of the stock exchange were heads of quoted companies
already showed that there was no transparency. “I think that beyond the
personalities recently removed, the public policy on the management of
the stock exchange should be formally changed to reflect the need for
transparency.”

“SEC is a responsible regulator. We cannot just
fold our hands and watch things go wrong,” said Lanre Oloyi, the
spokesperson for SEC in defence of its action. Mr. Oloyi said the
commission’s action was in line with its mandate to protect investors
and sustain confidence in the market.

To Mr. Banwo, SEC’s move was expected before now.
“The way Ndi conducted the listing and sales of shares in Transcorp
alone is enough for her to be removed if not prosecuted for misleading
the public. Yet, she continued to run the exchange for months after the
transcorp debacle.” He said the suspended president of the NSE council
had disobeyed the order of a competent court. “How do you even begin to
defend a man who was contemptuous of court orders on him before the
sack? It will be interesting if he willow expect the same court whose
previous orders he held in contempt to help him.”

He added that SEC as a responsible regulator must
be seen to have given the two individuals fair hearing.”I think the SEC
complied with the relevant provisions of the law and also afforded them
reasonable fair hearing. If they want to challenge that in court, I
believe that’s their right and we wait to see what the court has to say
on the points raised by Ndi.”

The SEC source explained that the former NSE DG
was given every opportunity to explain all allegations of infractions
levelled against her. “There is a clear provision in the ISA for giving
fair hearing and we did that with the DG and gave her an opportunity to
respond to allegations that have been leveled against her. We took that
response into consideration before the decision by SEC to remove her,”
the source added.

If Oteh continues in her strides, maybe there’s hope for Nigeria’s capital market eventually.

With
a population of over 150 million people, Nigeria is a marketers’ dream.
Both local and international companies must look for ways to increase
their market share by employing innovative marketing strategies. For
years, celebrities have thrown their fame and image to support brands
and consumer products and there has been a steady increase of celebrity
endorsement in Nigeria; this is good.

There must be a
mutually beneficial relationship for an endorsement and it should offer
huge possibilities for both entertainers and the companies with whom
they partner. The artist must be able to give the endorsing company the
right exposure to its target segment and in return the artist has an
opportunity to earn money and even greater visibility.

Name and image

The most valuable
asset a celebrity has is his or her name and image. Often artists are
totally consumed by their creativity and ignore the financial value of
their image. By building a strong and exclusive personal brand,
entertainers will be able attract the attention of companies who wish
to have them identify with a product. Such talent can increase
recognition and acceptance of a brand by tapping into the consumers’
passion for the persona and image of our celebrities, which could
translate to a boost in sales.

Once a celebrity’s
fame is firmly entrenched, companies may be willing to invest millions
of Naira to associate that image with their brand. Artists should take
deliberate steps to develop and effectively position a strong and
timeless personal brand to maximise their earnings whilst they are
still in the public consciousness; their image can be used to
supplement and diversify revenue streams. Indeed it is common for a
good part of a star’s wealth to be attributed to sponsorships and
endorsements outside their professional calling.

The impact of
celebrity endorsement on a brand can be significant and many corporate
and product marketers such as Glo, Etisalat, MTN, Guinness, Chivita,
Lux, Onga, GTBank and Lagos State Government have recognised its power.
It is gratifying to see Nigerian movie stars, musicians, comedians, TV,
Radio and sports personalities and other celebrities like Lagbaja,
D’Banj, Tu Face, Asa, Cobhams, Agbani Darego, Oluchi, Joke Silva,
Genevieve, Kate Henshaw-Nuttal, Ali Baba, and Basket Mouth, lending
their images to local and international brands.

The popularity and
success of celebrity endorsement has in other markets prompted stars to
expand their portfolios by launching their own clothing, perfume, and
other brands to keep their names out there and secure their financial
future.

The celebrity’s credibility

Celebrity’s attract
attention, and an artist should be able to convince and connect with
the consumer via credibility. A corporate brand with a core focus will
go out of its way to seek the right celebrity to match the brand as the
core idea of the campaign is as important for the brand as it is for
the celebrity. A good example of a celebrity successfully matched to a
product is former heavyweight champion boxer, George Foreman, a fit and
energetic boxer who is a good spokesman for healthy cooking and eating.
His positive image continues to impact sale of the “George Foreman
Grill” long after he is done with the boxing ring.

Guard your reputation jealously

As a celebrity
bestows special attributes on a brand, in the same way, his image and
public reputation can tarnish the brand’s image. Sometimes through
their behaviour or due to a scandal, celebrities betray the public
trust that has been endorsed by their selection.

It is debatable
whether or not celebrities should be held to a higher standard of
conduct but there are certainly issues to consider: If you are being
paid for your talent and skill as a musician, a sports personality or
an actress, you’re allowing your image, charisma and ability to draw
people to you and by association to the product is thus of huge
importance. If your behaviour causes you to no longer fulfil the
demands of the role, then a company must protect its product and must
consider whether the relationship is still beneficial.

Companies are aware
of the potential hazards of celebrities endorsing their products and
many contracts contain a moral clause that allows a company to exit
without penalty if the celebrity’s behaviour is seen to affect the
company’s reputation. Some of Tiger Woods endorsement deals were
discontinued and advertising appearances cancelled. However due to the
sheer magnitude of his celebrity, and his earning power for the
products that support him, Nike and a few others continued to stand by
him.

Celebrities usually
turn out to be the greater losers financially and in terms of good will
when their image is tainted in some way. Because of the sensitive
position they occupy in the public eye and often as role models to
their fans, it is thus important for Nigerian celebrities to guard
their reputation jealously.

Celebrity
endorsement is earned; it is in itself an endorsement of one who is
perceived to be fit to stand out in the public eye as a role model to
their fans, and to represent a brand. A celebrity who has successfully
built a personal brand is thus more likely to be sought after and can
capitalise on that image and earn significant supplementary income
through endorsements. The reach of endorsements can be tremendous and
goes much farther than the immediate cash benefit; there is the
attendant recognition through television, radio, newspapers, billboards
and other media.

Write to personalfinance@234next.com with your questions and
comments. We would love to hear from you. All letters will be
considered for publication, and if selected, may be edited.