January 2015 www.cedmagazineng.com S E E S P E C I A L V A C A N C Y P A G E 48-49 Infrastructure development is the basis of measuring the performance of democratic leaders and it is the foundation of good democratic governance. As Nigeria decides on the next leader, what are the leaders saying about the current state of dilapidated infrastructure? ISSN 116 - 074 THE BIG DEBATE IS ON INFRASTRUCTURE 2015 Incorporating INTERNATIONAL OIL AND GAS REPORT SPECIAL FOCUS DEKEY GROUP The 8 page profile on the global Engineering, Architecture, Finishing and Fitting Company You wonder if your business strategy and innovative ideas can stand the tough Nigerian conditions. Our team of experts on business strategy and innovation are trained to deliver on your terms. We’ve been thinking of you Natafamdavid Consulting Nigeria Limited And it shows. In a tough and highly skilled Natafamdavid Consulting Nigeria Limited ConstructSkills Conversation Platform that deliver tailor- made and innovative strategies for business growth and corporate positioning to companies. A platform that places your corporate vision for growth at the fingertips of all employees and the CEOs to ensure sustainable growth. Our content which include Talent Management, Wining with Government Contracting, Energising People for Performance, Creating Strategic Value Through Procurement Standard, Driving Organic Growth Through Innovation, Fundamentals of Offshore Systems Design and Construction, Contracts and Tenders Fundamentals, Effective Materials Management, Inside Procurement in Oil and Gas, Strategic Procurement &Supply Management in the O&G Business, Supplier Relationship Management, Cost/Price Analysis and Total Cost Concepts in Supply Management are innovatively designed with your success in mind. Consulting + Outsourcing www.natafamdavidconsulting.com
Transcript
January 2015 www.cedmagazineng.com
S E E S P E C I A L V A C A N C Y P A G E 48-49
Infrastructure development is the basis of measuring the performance of democratic leaders and it isthe foundation of good democratic governance.
As Nigeria decides on the next leader, what are the leaders saying about the current state of
dilapidated infrastructure?
ISSN 116 - 074
THE BIG DEBATE IS ON INFRASTRUCTURE
2015
Incorporating INTERNATIONAL OIL AND GAS REPORT
SPECIAL FOCUS
DEKEY GROUPThe 8 page profile on the global Engineering, Architecture, Finishing and Fitting Company
You wonder if your business strategy and innovative ideas can stand the
tough Nigerian conditions. Our team of experts on business strategy and
innovation are trained to deliver on your terms.
We’ve been thinking of you
Natafamdavid Consulting Nigeria Limited
And it shows. In a tough and highly skilled Natafamdavid Consulting Nigeria Limited ConstructSkills Conversation Platform that deliver tailor-made and innovative strategies for business growth and corporate positioning to companies. A platform that places your corporate vision for growth at the fingertips of all employees and the CEOs to ensure sustainable growth. Our content which include Talent Management, Wining with Government Contracting, Energising People for Performance, Creating Strategic Value Through Procurement Standard, Driving Organic Growth Through Innovation, Fundamentals of Offshore Systems Design and Construction, Contracts and Tenders Fundamentals, Effective Materials Management, Inside Procurement in Oil and Gas, Strategic Procurement &Supply Management in the O&G Business, Supplier Relationship Management, Cost/Price Analysis and Total Cost Concepts in Supply Management are innovatively designed with your success in mind.
CED Magazine celebrates 23 years of creating over 272 industry headlines
For two decades, over 272 editions with instructive headlines and reporting issues acrossthe industry, from construction, engineering, manufacturing, oil and gas, energy,
environment to practice among others, CED magazine remains part of the industry andthe practitioners’ Compendium.
Building synergy among practitioners, governments, professionals and investors alike makes our achievements speak for themselves. Indeed, the success has been made
more possible only through the support of all stakeholders.Here’s to many more such magical moment and headlines of togetherness, love and
comfort. Thank you for the amazing 23 years.
Century 21Systems Comm. Ltd.
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MANUFACTURING BUILDING TRANSPORTATION INFRASTRUCTURE ENERGY
Pr f sio al ofo es n
Y ar eAWARDS
CONSTRUCTION AND ENGINEERING INDUSTRY PROFESSIONAL OF THE YEAR
THE ANNUAL ALL BUILT ENVIRONMENT PROFESSIONALS’ LEADERS AWARD IS SET
TO HONOUR THE WINNER OF THE 2014 PROFESSIONAL OF THE YEAR
APPRECIATING PROFESSIONALISM. HONOURING PROFESSIONAL LEADERS
Engr. YUSUF OLANREWAJU
FNSE, FAeng, FNAE, MFR, OFR
(Zanna of Ilorin)Chairman,
Yola Consultants Limited
SAGAYA
InsideBusinessAfricaiba
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DATE: MARCH 12, 2015 VENUE: IKEJA SHERATON HOTELS,
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50 | CED Magazine January 2015 CED Magazine January 2015 | 3
EDITORIAL BOARDKenneth Odusola-Stevenson
Publisher/Managing EditorOnii Nwangwu-Stervenson
Founding Editor-In-Chief
BUSINESS DEVELOPMENT & MARKETINGKunle Odusola-Stevenson
Executive Director, Business Dev., Strategy/Project
Bayo Adebayo-EgbayeloHead, Special Projects
MARKETING & BUSINESS DEVELOPMENTFestus Njiwe Oseji, Assistant Manager Marketing
& Business Development
MARKETING & BUSINESS DEVELOPMENTNelson Tuedor, SNR Marketing & Business Dev.
ExecutiveJudith Ehirim, Marketing & Business Dev.
ExecutiveDeborah Jatto, Marketing & Business Dev.
ExecutiveOlatunbosun Oladipo, Marketing & Business Dev.
ExcutiveOluwatoyin Ayeni, Marketing & Business Dev.
Infrastructure development is the basis of measuring the performance of democratic leaders and it is the foundation of good democratic governance. Infrastructure is the medium, the tools and techniques of a project or programme or strategy. Demand for infrastructural development is higher and resources used in provision of infrastructure are limited. Ethnic-interest agitation and lobbying are
common things in democratic governance. The military era in Nigeria was for the most part of the economic boom and only succeeded in widening the gap in infrastructure demand and provision.
Infrastructures are now decayed and need repair or replacement. Government is the system that organizes and sensitizes the people of an area in other for all to have an acceptable community. Government have the power to put in place all measures that it deems fit will make an environment conducive for living for everybody. Infrastructure development in democratic governance involves identifying the right project, carrying out feasibility and viability studies and carrying out physical development of the project. The challenges are numerous and include finance, technology for development, maintenance and design. The challenges also include international requirements of project to be sustainably developed. Projects must meet the carbon emission standard set by international organizations, communities must be bio-diversified and emit as little greenhouse gases (GHGs) as possible, natural environment must be preserved and so on. The challenges are many but any serious government can overcome them as a result of incessant research and development in infrastructure development worldwide.
2015 is a special year indeed for Nigeria as the year provides the citizens the ample opportunity to make the most important choice of choosing continuity in the person of the President Goodluck Jonathan or the advocate of Change, Gen. Mohammadu Buhari (Rtd.). Incidentally, this two frontliners are not the only candidates running for the office of the president, we still have others to choose from. However, the two are the most vibrant and purposeful in terms of campaigns and visibility.
Our concern here is who is talking about, probably, the most important issue aside from security - Infrastructure which is currently at the critical state in the country.
Infrastructure is the basic physical and organisational structures needed for the operation of a society like industries, buildings, roads, bridges, health services, governance and so on. It is the enterprise or the products, services and facilities necessary for an economy to function (Sulivan and Sheffrin, 2003). Infrastructure can be described generally as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is the means of achieving an objective or set of objectives and also includes the objectives. It is an important term for judging a country, region or state's and individual's developments/status.
The term typically refers to the technical structures that support a society, such as roads, water supply, sewers, electrical national grids, telecommunications, and so forth, and can be defined as "the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions" (Fulmer, 2009).
I wish someone would tell the candidates to tell us how we can have 24 hours electricity, motorable roads, functional rail system and efficient ports and airport infrastructure. The state of infrastructure of any state is directly related with the quality of life. “According to recent statistics, the quality of life for most people in Africa appears to have either not improved or only done so marginally. This situation arose from the misrule of early leaders most of whom spearheaded the struggle for independence” (Eregha, 2007).
Happy New Year and the may the BEST Candidate wins the elections
Kenneth Odusola-Stevenson
The Gathering Storm and the Place of Infrastructure
What we would expect from the applicant
" Negotiate national and international requirements and unsure key vendors
understanding service and level requirements
" Establish long term sustainable business relationships
" Plan and negotiate delivery requirements to point of use with key suppliers
" Reduce all stock holdings
" Work with national supply chains
" Materials will be available when required at all national sites
" Manage a team of purchaser and logistic
Dekey Group is currently seeking an enthusiastic, energetic and experienced artisans.
Reporting directly to the foreman, the successful applicant will possess attention to detail
and the ability to see the project/s through to completion.
The successful candidate will have:
" Exceptional interpersonal skills and the ability to relate to a diverse range of people
" A strong work ethic and the ability to work with a diverse team
" Self-confident and positive attitude
" Natural problem solving skills
" All industry required qualifications
Ideally, you will be professional, reliable and self-motivated along with the ability to work as
part of a team and provide high level support to others. You will have previous experience in
commercial, industrial and domestic construction from formwork to final fit-out. You will
have a minimum of 5 years' experience in the trade.
You will be joining an established company that values its employees and rewards those that
are able to find solutions to problems that do not place others at risk or sacrifice the
quality of the final project.
Working on large scale high end hospitality projects, you will ideally have experience within
this sector
Application Process
We are interviewing now for this role so if you have the skills and experience coupled with
the ambition to run projects, we'd love to hear from you. C
Applicants are advised to send your current Resume and Cover Letter (PDF or Word
Compatible)
Only applications with Cover Letters attached will be considered for this role.
" Qualifications and experience in high end products will be looked on favourably!
HIGH END HOSPITALITY PROJECTS - INTERNATIONAL PLAYER IN THE MARKET
" Work with dedicated individuals that push the boundaries of design
" Career defining opportunity
" International and National projects
Dekey Group, Architectural and Interior Design practice is currently seeking a talented
Senior Interior Designer to lead on substantial high end hospitality projects. This practice
are renowned for their large scale and Iconic work and is known to be a practice of choice.
If you find yourself frustrated in your current position due to lack of opportunity to
progress and lead in design. this position could well be ideal. As an all-rounder, this position
will see you involved in all stages of a project. Working in dedicated project teams, you will
be involved from concept design, design development, joinery detailing and documentation.
Working on large scale high end hospitality projects, you will ideally have experience within
this sector. The ideal candidate will possess at least 7 years' experience and have good
working knowledge of AutoCAD and/or Revit.
DGC requires an experienced buyer with at least 3-5 years experience, you will be involved
in purchasing and suppling part's made to order items working to a tight schedule within a
busy construction environment.
This position does come with a high level of organisation skills and technical proficiency,
understanding logistics and maintain inventory items ready for planned work orders. You will
need excellent communication skills with relevant departments and maintain up to date
consumable stock levels, and ensure all capital expenditure is approved by the general
manager within company guidelines.
Ideally the potential candidate will have a proven track record in negotiations and possess a
flair for detail with the ability to identify and implement system changes, previous
experience in using computer systems such as MRP, ERP and a high degree or computer
literacy would be a must for this position.
Senior interior designer - Fulltime
Buyer - Purchaser Manager - Fulltime
CONTINUED NEXT PAGE....
January 2015 www.cedmagazineng.com
S E E S P E C I A L V A C A N C Y P A G E 48-49
Infrastructure development is the basis of measuring the performance of democratic leaders and it isthe foundation of good democratic governance.
As Nigeria decides on the next leader, what are the leaders saying about the current state of
dilapidated infrastructure?
ISSN 116 - 074
THE BIG DEBATE IS ON INFRASTRUCTURE
2015
Incorporating INTERNATIONAL OIL AND GAS REPORT
SPECIAL FOCUS
DEKEY GROUPThe 8 page profile on the global Engineering, Architecture, Finishing and Fitting Company
Infrastructure development is the basis of measuring the performance of democratic leaders and it is the foundation of good democratic governance. As Nigeria decides on the next leader, what are the leaders saying about the current state of dilapidated infrastructure?
SOLVING THE HOUSING CHALLENGE
Mortgage financing as panacea to Nigeria’s housing deficit
SUSTAINABLE INFRASTRUCTUREZuma outlines progress on African infrastructure projects
GAS DEVELOPMENTOil prices affecting progress of gas in Africa
WEF 2015 DAVOS9
A Word On Innovation From WEF2015 Around 400 million people in the last year got a smartphone. If you think that’s a big deal, imagine the impact on that person in the developing world.” – Eric Schmidt, Executive Chairman, Google, USA
FALLING OIL PRICES: WINNERS AND LOSERS
GLOBAL OIL CRISIS
Energy companies are being forced to adapt to the new oil price environment
48 | CED Magazine January 2015 CED Magazine January 2015 | 5
We could go onand on about business
reporting or give you the one word that makes meaning.
Success.
Inside Business Africa is not merely a magazine. It’s the hallmark of development journalism and business reporting in Nigeria and Africa. It represents the philosophy of reporting issues that grow organisation and national economy. Which is why in addition to the publication, the television programme provides unlimited opportunities for businesses, entrepreneurs and professionals. Inside Business Africa is supported by a team of highly trained professionals with an ever expanding network that follows you everywhere you go, across the length and breath of Africa. Because our reputation is important to us.
T H E M A G A Z I N E O F T H E C O R P O R A T E W O R L D
KNOWING HOW TO BUILD A TEAM
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More than just a Magazinewww.insidebusineafricang.com
Building business bridges across the continent
Project Architect - Fulltime
Professional Interior Decorator - Fulltime
Architect - experienced
* Mid-Sized Design Practice
* Multi Unit Residential/Commercial
A busy and growing mid-sized practice are looking for talented Project Architects, who have
experience delivering Residential Projects. With a strong pipeline of work, the business is well placed
to continue on the path of growth.
They are looking for a talented Architect who has the drive and experience to lead a client, document
and ultimately deliver.
Essentially, we'd be keen to chat with you if you;
* 5 years + local experience.
* Multi-Unit Residential experience.
* Have a good level of AutoCAD.
* Strong technical background
This is an opportunity to join a well-established practice with offices nationally.
They have a solid team in place and have a very flat management structure.
You will be given freedom to express yourself whilst have involvement at key stages of the projects
life-cycle.
Company Profile ,
Dekey boutique Interior Decorating is currently seeking a passionate professional to join the team.
With over 30 years combined experience in decorating industry, this company is ideally looking for
someone willing to take the next step in their career on a casual basis, with prospects for a
permanent position. You will work alongside a highly motivated, loyal and enthusiastic team of staff,
all with individual strengths in creativity.
Position Description
The successful applicant will demonstrate experience in the interior decorating industry, with
extensive knowledge in shop design. The role will require someone proactive, who can use their
initiative in multi-tasking customer service in the showroom, consultations and be skilled in the job
quotation process from concept to completion.
Key Responsibilities and Skills
This position will include, but not be limited to:
" High Customer Service Skills
" Effective Communication Skills
" Thrives off team environmentsCONTINUED NEXT PAGE....
EMPLOYMENT OPPORTUNITIES
CED Magazine January 2015 | 47
DEVELOPING STORY
6 | CED Magazine January 2015
INVESTMENT
Directors for a meeting and I said: look Mr. President frowns seriously at augmentation requirement from the Federal Ministry of Works and that I have been mandated to do something about it. As a matter of policy, I will no longer accept any request for augmentation particularly those that seek to augment a project cost as a result of this issue of washout. I followed it up with a policy that earthwork will now be protected if not it will not be included in interim certification for contractors. The implication of that policy is that if you like do the entire earthwork in the world, if it is not protected I will no longer approve payment for them. Of course it jolted the contractors and even some of the engineers. The contractors protested. Some of the engineers joined them; they were prodding them to keep protesting. But of course I would not listen. They tried to gain the ears of certain quarters. They thought they could be helped. Even some of them went to the National Assembly. But I explained to the Committee on Works of the National Assembly. They saw reason with what I was trying to do to bring discipline into the business of road construction in Nigeria and to also save hard earned tax payers money, help use the little resources
available to government to deliver services for the people of this country. They (contractors) resisted but I stood my ground on that. At a point, I had to threaten them; if they feel they could no longer stick to that policy they are free to leave the project. I use to joke with them that the Chinese were waiting and I will be very willing to give it to the Chinese who have accepted the new policy. When they saw that I was not bulging they accepted. The minister who wants a total reformation of the road sector in this country says it should be fully reformed to be self-sustaining 'because we cannot continue with the budgetary handout of the Federal Government to the Ministry. We have to ensure that we have in place a National Policy to follow projects through Public Private Partnership (PPP). And also to help in financing road projects that is obtainable all over the world. I am happy that we have started work on the reform, the Road Reform Bill, and the Federal Executive Council has approved them. I am aware they are being transmitted to the National Assembly now. Once they are passed, it will lay the foundation for the development and maintenance of roads in our country. That is my dream and I know that Nigeria by the grace of God,
we will get there. In doing in some of our pro jects today, we are a l ready implementing paradigm shift at the Federal Ministry of Works. Today many of our projects are being executed through Private Public Partnership scheme. The Second Niger Bridge is being financed through the scheme; the Murtala Muhammed International Airport road in Lagos is now being financed through PPP. In fact, the ground breaking ceremony will be performed very soon. I am sure that in the next 31 days the successful concessioning will be completed for construction work. Then of course the Lagos-Ibadan express way through a private finance initiative handled by the Infrastructure Bank, then the Obajana -Kabba road is being financed/undertaken by the Dangote Industries in form of a private finance initiative which we have negotiated with them. We are talking with the Lafarge Group and they are willing to do same on some roads in Cross River State where they have the Unicem cement linking the Calabar-Itu-Ikot Ekpene road. And we are encouraging quite a number to key in. That precisely is the future of road development in Nigeria. That is the way our road development should go for sustainability.”
A
with our services to government, developers, investors and lenders on PPP projects and project finance transactions,
we create value through infrastructure partnerships
with our experience and track record enabling major infrastructure projects from concept to financial close and implementation,
we guide our clients quickly and effectively through the transaction process
enabling infrastructure partnerships
11 New Yidi Road Suite 308, The Midel Centre PO Box 1413 Plot 14, Off Oladipo Diya Way Ilorin Sector Centre D, Gudu Kwara State PO Box 8124, Wuse 240001 Abuja Nigeria Nigeria
ef fect , the bank has of f ic ia l l y commissioned 400 housing units of the Adasolide Estate in Adamawa State while 95 housing units and 240 units are being developed by Alhaji Adamu Duhu and Sons Limited and Isa Gates Industries respectively are at various stages of completion. The bank has commissioned the Elim Estate in lbagwa Nike, Enugu state, in July this year it has also commissioned the phase 1 of Yusra Housing Estate, Katsina while the foundation laying ceremony of the phase 2 has been done. The bank has also gone on Advocacy visits to all states of the federation to sensitize the public on the advantages of keying into the Housing scheme. Nigerians in Diaspora are also not left out as the bank is currently in the process of structuring a means of integrating Nigerians in Diaspora into the National Housing Fund scheme which will give them the opportunity to access NHF
Mortgage loans and own their own houses in the country. With a high migration level, a large professional Diaspora in the UK and United States, Nigeria benefits from high rates of formal remittances. In fact, remittances to Nigeria are believed to be the second largest source of foreign income for Nigeria after oil exports. This underpins the financial strength of Nigerians in the Diaspora. A strategy is currently being worked out whereby Nigerians outside the country could open accounts with any of the Primary Mortgage Institutions in the country and make their monthly contributions to the Scheme. Already, the Nigerians in Diaspora Housing Development Group have paid the MD a courtesy visit and a process is already in the pipeline. The Bank is fully equipped and very capable of bringing to reality the Transformation Agenda in the housing sector. In terms of the human resources, the managing Director is quoted to have
said “we have fully put that in place, and on-the-job training is carried out regularly in order to keep staff abreast of recent trends in the industry worldwide. Since his appointment as the Managing Director, Federal Mortgage Bank of Nigeria (FMBN) Gimba Ya’u Kumo has been actively engaged in ensuring that Nigerians derive optimum benefits from the mortgage institutions in the country. It was in furtherance of this that he was at the National Assembly, Abuja where he implored the lower House to enact necessary legislations and laws that would facilitate the creation of mortgages that could consequently increase the rate of housing delivery in the country, which is aimed at repositioning and restructuring of the Bank, an exercise which commenced in 2003. The aim of this reconstruction was to regain the confidence of the Nigerian workers who contribute to the National Housing Fund (NHF) scheme and, by extension, the Federal Mortgage Bank of Nigeria.
HOUSING CHALLENGE Continued from page 39
46 | CED Magazine January 2015 CED Magazine January 2015 | 7
NEWS EXTRADEVELOPING STORY
just approve. More often than not, they were approving what they did not know. Because of the distance, there were a lot of sharp practices. It was not possible for the Director to be everywhere but dissolving that into six directorates, it now brought the authority close to the theatre of construction and the Director was now able to effectively supervise and manage the projects that were going on in the zones. Not only that, I also created six Independent Ministerial Monitoring teams for each of the zones to also provide independent report and inform me on what the directorates were doing. In that case, I gave myself the opportunity to get independent opinion of what my engineers and directors were doing because the Independent Ministerial Monitoring Teams were populated only with people from the private sector who are engineers and very experienced. That provided the check and balance to the Ministry staff in those zones. Now coming to planning and design, we know that we did not have good quality assurance at the Ministry because the Director of Planning and Design was the one person and he was just like a lord unto himself. Again he had no way of checking or doing anything in detail because he was also responsible for the management of right of way of the Ministry along the 35,000 kilometres of federal roads in the country. So we created the Department for Highway Design, Road, Highway Design and Bridges. By the time we came, so many things were not going right but beyond these, we also did the Public Private Partnership Unit in the Ministry and upgraded it to a full-fledged Department. We also upgraded the Material Geotechnical and Quality Control to a full department. This department is responsible for the three major laboratories we have: Niger-Kaduna, Lagos and Kuje-FCT. So we now have a proper structure. We recognised authority with responsibility, many of the Ministry people who were dor mant , peop le who had no respons ib i l i t y were now g iven responsibilities and they rose to the occasion. Immediately it turned out that when we did this reorganisation, the Ministry was set for effective work delivery.
From then on, we now had to take a look at the on-going projects in the Ministry and they were so many we decided to prioritise the major arterial roads that Nigerians use every day. I am not talking about projects that start from nowhere and end nowhere. I mean real economic routes. For instance, if you are talking about Lagos-Ibadan roads everybody knows what you are talking about or you are talking about Benin-Ore road , people also know what you are talking about. Or Onitsha-Enugu road, Enugu-Port Harcourt. So what we did with the projects we inherited, we now had to ensure that those that were abandoned and were important were brought back to life and made active. Whatever issues the project had, we went in and resolved then. If they were technical, we provided the technical solution, if they were financial; we tried to improve on the funding. The whole country was virtually turned into a huge construction site. Since then we have never looked back and that is why today we are singing a new song in the road sector." Accordingly, the Minister disclosed that when he assumed office at the Mabushi Head office of the Ministry, the Road Sector Development Team, RSDT was
being handled by the collaboration between the World Bank and the Federal Ministry of Works. The major projects under that was the Nigeria-Cameroun highway facilitation project. Before I took over, the Ministry was barely able to access 5-7 per cent of the funds. When I came in and took over, by the end of 2012, when I was just one year in office, we had accessed over 37% of that fund because of better project delivery strategy. And by the end of 2013 we had hit about 80% utilisation. As we speak, I have completed the projects I
inherited under that programme: the Enugu-Abakaliki road, the Abakaliki-Ogoja road, the Ogoja junction to Ikom road and Ikom to MfomHaving completed that section of the road last year, I now started the outstanding corridors which are the Mokwa-Bida road and of course, the Akure-Ilesha road. Those projects were awarded between October-November 2013 and they properly commenced about January this year. Both projects have recorded about 65% completion. We are upbeat that by April next year we must have completed them and that will bring to an end the First Phase of the Federal Roads Development Projects. Onolememen also disclosed that it may not be easy to put a figure because Government year in year out award contracts to the contractors who are mobilised to site. 'They are paid some money and they go to site, but they are very clever. They do earth work, they bulldoze, they clear the place, they have a Borough pit, they bring the soil and fill the place and some of them do not even compact. By the time you have earthwork in place you are able to move large sums of money because it will be certificated. I now found out that when I came, I had so many files here for augmentation of road contracts. After going through the files, I realised that the basis of augmentation has been washed out by rain. It means that the earthwork that has been paid for the previous year, they will now tell you that it has been washed out and you start from square one. You have to make allowance for additional earthwork and all that. If you understand road construction, it is one of the areas the contractors use to go for the kill. So I sat down and called all my
Arc. Mike Onolememen
Mr. President frowns seriously at augmentation requirement from
the Federal Ministry of Works and that I have been mandated to do something about it. As a matter of policy, I will no longer accept
any request for augmentation particularly those that seek to
augment a project cost as a result of this issue of washout.
Radisson Blu Anchorage Hotel, Lagos, closed off operations to carry out thorough renovation
of its facility located in Victoria Island. This i s in fu l f i lment of the management’s pledge to sustain the standards of the international hotel chain to meet the demand of
customers. Using an average rate of N70, 000 per night, the disruption could see this 170 room hotel losing an estimated N12 million ($63,000) each day, excluding other hotel expenses. This means that if the hotel remains shutdown for up to a month it would amount to a loss of
about N360 million ($1.9 million). Anchorage Leisures Limited, owners of the facility, said in a statement that the renovation process will “cover areas such as power generation, cooling system as well as other critical equipment.” The renovation has led to the extrication of staff due to the renovation process. However, the firm stressed that it would keep to all obligatory terms by ensuring full allocation of payment to the affected staff. “The magnitude of the renovat ion work has however necessitated shutting down of business operations for the duration of the renovation”, the statement further explained. The management assured its many visitors in Nigeria and all over the globe that the hotel will re-open with improved focus on delivery of higher quality service. In November 2014, the international hotel chain announced plans to launch its first Kenyan hotel in Nairobi. It already holds significant presence within Africa, with hotels in top markets including Ethiopia, South Africa, Rwanda, Cote D’ivore and Nigeria.
Lagos’s Radisson Blu Could Lose Over N12m Daily To Renovation
INVESTMENT EXPANSION
TAV Construction has become the world’s largest company in the airport construction
sector with a turnover of $1.25 billion, according to the latest report of the Engineering News Record (ENR), the Turkish company said in a written statement Dec. 19. “One of the respectable pub l i ca t ions o f the sec tor, Engineering News Record (ENR) has announced the world’s largest construction companies based on the projects undertaken in 2014. TAV Construction ranked top in the ‘Airport Construction’ category,” said the statement. TAV Construction has become a professional player in a challenging and
complex sector and has become a leader in airport design, construction and financing thanks to rapid growth, it added. “We have undertaken projects like the Abu Dhabi Midfield Terminal, the Madinah Airport, Jeddah Airport's Saudi
Airlines hangars, and the Riyadh Airport, and have achieved considerable success in the Gulf region over the last three years. We
are proud to represent our country and rank top in the ENR list,” TAV Group President and CEO Sani Sener was quoted as saying. Starting with Istanbul Atatürk Airport, the total contract value of the projects TAV Construction has undertaken in the last three years exceeds $16.2 billion. The company has been constructing the Abu Dhabi Airport Midfield Terminal Complex in the United Arab Emirates; the Riyadh King Khaled Airport Terminal 5, Jeddah King Abdulaziz
Airport Aircraft Maintenance Hangars and Madinah Pr ince Muhammed Bin Abdulaziz Airport in Saudi Arabia, as well as Muscat Airport Infrastructure Works in Oman.
TAV top of global airport construction sector
One of TAV's flagship projects is the Abu Dhabi Airport Midfield Terminal Complex.
8 | CED Magazine January 2015 CED Magazine January 2015 | 45
NEWS EXTRA DEVELOPING STORY
A A
the federal road network. When I was being sworn-in, the President did not mince words, he said to me: "The deplorable state of federal roads is unacceptable, you need to change the narrative of federal roads. " In fact, he made it clear that he was giving me the marching orders and that he was going to support me in that quest. But when I got here, I knew after going through my hand-over note here, I knew as a professional that something was terribly wrong with the state of our roads. From the point of view of a professional architect and construction management, I knew something was fundamentally wrong after going through the organogram of the Federal Ministry of Works and the hand-over notes. My problem was how do we reclaim the federal road network? It was so bad that every day I was being greeted by a front page photograph of one bad road or the other in different parts of the country. In almost all the newspapers, every day, you had the picture of Apapa-Oshodi Expressway, the Benin-Ore road, particularly the failed section where Nigerians were spending sleepless nights, were being splashed on the front pages of the national dailies. We had a problem of daily accidents on the Abuja-Lokoja road. When you cross the River Niger in Onitsha, it was like you were in a war ravaged zone, you could not really move. I took personal trips early in the life of the administration to these hotspots. The very first place I visited was the Apapa-Oshodi Expressway to the ports, which was closely followed by a visit to the Lagos-Ibadan E xpressway. "Then I visited the Niger Bridge at Onitsha, and from then on I drove to
Owerri. I got back and drove from Onitsha to Enugu and I knew we were really in big trouble in this country. Not only that, I also inherited major on-going dual carriage way s w h i ch we r e a w a r d e d b y t h e President Olusegun O b a s a n j o administration. At the time I took over, work had literally stopped in
all these projects like the dualisation of the Kano-Maiduguri road, the dualisation of the Abuja-Lokoja road, the dualisation of the Onitsha-Enugu road and the rehabilitation of the Benin-Ore road. The contractors had abandoned the sites so it was a very difficult situation at the time I took over. I recall that some of my colleagues at the Federal Executive Council, every Wednesday when we meet, some of them use to come to me and tell me: "I do not envy you at all, every day the pictures we see on the front pages of the newspapers are very discouraging." Some of them would just tell me to do the little I can and move on. But, however, I was not that kind of person who will be intimidated by the kind of pictures that were being painted on federal roads. Rather, those ugly scenes and the deplorable roads for me were motivations to be difficult and excel at the Ministry of Works. What I did was to study the organogram and found that the structure of the Federal Ministry of Works was not geared towards effective project delivery. I will tell you why. I found out that we had one man who was the Director of Federal Highways who had responsibility for all federal roads across the country totalling
about 35,000 kilometres."ON how he has been able to make the Ministry more effective in Service Delivery the Minister explains that "For one to be effective, you must be a superman. But I knew there were no supermen here. Something had to give in. I approached Mr. President and presented a memo and gave him the picture of what was on ground at the Federal Ministry of Works. I recommended that we needed to restructure the ministry and organise the place in such a way so that it can better deliver service to the people of Nigeria. The president gave his nod for me to do what I think is in the best interest of the Nigerian people. In doing that, I worked very closely with the president. During this period on a daily basis, I will report to the President, we will sit down to look at how we were going to create a new structure for the Ministry of Works. The then Head of Service, Prof. Afolabi, was part of this meeting, just the three of us, every day. That is why I tell people that Mr. President is a transformational president. He gave me audience daily and the three of us will sit down and start from where we stopped the previous day, it went on and on for more than 31 days. After all the meetings, the Project Department of the Ministry, which was just two Departments, we had two Directors for Planning and Design and the other for Construction and Rehabilitation. They were now broken down into twelve (12) Departments. Because of poor planning and design in this Ministry, government was wasting a lot of resources; there was no value for money. Then we had one Director of H i g h w a y , C o n s t r u c t i o n a n d Rehabilitation. There was no way that the Director could effectively monitor all the projects in every nook and cranny of this country. We decided to create six d i r e c t o r a t e s o f t h e H i g h w a y Construction and Rehabilitation, one in each geo political zone and appointed a Director to man the zones in those areas. That made for better supervision in each zone because the Director at the time could now better connect with the projects that were on-going. Not one contractor, engineering company or representative writing some reports and brings it to you in Abuja, you sit down and
This road needs attention
I recall that some of my colleagues at the Federal Executive Council, every Wednesday when we meet, some of them use to come to me and tell me: "I do not envy you at all, every day the pictures we see
on the front pages of the newspapers are very
discouraging." Some of them would just tell me to do the little I
can and move on.
The plunge in oil prices may take more of the froth off Dubai's booming real estate market, but
broad-based demand for property is likely to prevent any crash.As the global financial crisis slashed oil and equity prices in 2008, Dubai's real estate market began a collapse that roughly halved residential prices in 12 months and forced the restructuring of tens of billions of dollars of corporate debt.So oil's current slide is being watched closely in Dubai. During the last slump, a sharp downturn in the Dubai stock market preceded the beginning of the property crash by about nine months; the stock index is now down 37 percent from its May 2014 peak. This time around, however, there are major differences. The United Arab Emirates has built up huge fiscal reserves which are expected to let the government keep spending heavily, insulating the economy from the reduction in oil revenues. Also, Dubai's real estate market looks healthier and less vulnerable to a crash than it did in 2008, when frenzied buying by speculators and overextended property developers created a bubble that was waiting to burst. "I wouldn't say lower oil will have much effect on Dubai's property market in the long run because demand is there - if not from the Gulf, then from India, China and
Europe," said Harshjit Oza, assistant director of research at Naeem brokerage in Cairo. He said Dubai real estate would not be able to escape a temporary impact from cheaper oil, but noted the UAE as a whole was not as dependent on oil as the other big Gulf economies, and that Dubai - with little oil itself and big tourism, travel and trading sectors - was even less exposed.Dubai's real estate industry began rebounding from its last slump in 2012. Residential prices soared by roughly a third in the 12 months to mid-2014, bringing them near their 2008 peaks. In the last several months the market has begun slowing. Consultants CBRE estimate residential prices rose just 3 percent in the third quarter of this year and 2 percent in the fourth; Knight Frank calculates mainstream prices - for properties under AED10 million ($1.4 million) - fell 5.2 percent in the third quarter. The big threat to the market is that lower oil revenues in the Gulf could slash the amount of money available to buy Dubai property, just as the supply of new units increases next year as projects launched at the start of the boom are completed. But many analysts think such fears are misplaced. Oil revenues do not flow directly into Gulf real estate markets; they go into state coffers, and governments then decide how much they want to inject into their
economies via state spending. The UAE, Saudi Arabia, Kuwait and Qatar have spent the last five years building up fiscal reserves that will let them keep spending actively even if Brent oil, at $115 a barrel as recently as June, stays around $60 or goes even lower. "There is no need now for a very steep and quick reduction of spending, which would not necessarily be desirable," Harald Finger, the International Monetary Fund's head of mission for the UAE, said last week. Gulf economic officials, including the Saudi finance minister and the UAE economics minister, have made similar statements. So the impact of cheaper oil on property prices is likely to be more psychological than economic. And the market is less jittery than it was at the start of the last downturn, because many of the excesses of the last boom have been avoided. New regulations have limited short-term speculation in property - the central bank increased the size of deposits required from mortgage borrowers, and Dubai doubled its land transaction fee. Despite their bullish rhetoric, developers have launched projects more carefully than they did a decade ago. Even if demand from the Gulf does ease, it may not matter much because interest in Dubai property is diversified.Figures from the Dubai Land Department show that while UAE nationals bought a quarter of property in the emirate in the first half of this year and Saudis 7 percent, over a fifth was bought by Indians and 12 percent by Britons. "In the early part of 2015, weaker sentiment as a result of lower oil prices and the ongoing uncertainty in the euro zone is likely to dampen residential investment activity from the Gulf and Europe," Knight Frank wrote of the Dubaimarket."Emiratis and Indians, however, are likely to remain important investors in real estate." Even if a long period of cheap oil slows economic growth in the Gulf, it may increase wealth in the rest of the world - and some of that money is likely to find its way to international cities such as Dubai. This is a big difference from 2008, when the global crisis reduced wealth globally. "Purely from a real estate point of view, while there are potentially negatives - say if the oil and gas sector slows in terms of new office openings etcetera - there are also a lot of potential positives, given what it could do to the global economy," said Matthew Green, CBRE's regional head of research
Healthy Dubai real estate market can ride out cheap oil
REACTIONS
44 | CED Magazine January 2015 CED Magazine January 2015 | 9
VIEWPOINT WEF 2015 DAVOS
But we are separating the boys from the men and that was why we terminated some jobs being handled by both foreign and local companies. We had cause to terminate contracts that are not being done well." He continued: "In fact, every day you have to attend to a whole lot of files coming from all the 184 project sites. Either as a project report or challenges on sites and you are expected to give directives as minister or to do one approval or the other. That is not to talk of the many unsolicited bids that come here. Everybody believes that the Ministry of Works is a gold mine that somebody can walk in and walk out a millionaire. I do not know if it was like that in the past, but not now. I try to educate people about that. So you find yourself busy and you need to be truly careful because every project file has financial implications. You go through the details and try to identify where the bones have been hidden so that you can uproot them. I have truly gone through a lot of files where pieces of bones were hidden. I had to identify them. In fact, the ministry staff know me; they know that I am not the kind of minister that just takes the file and just signs. You remember the one of the bridges in Lagos where billions were quoted and it was done with far less than what was quoted''. The minister also cleared the dust over the accusation that the Ministry of Works is not satisfying all parts of the country in sharing the funds for road network. He said: "I think we need a better understanding of the federal road network before we can discuss the issue of funding the road network. There is no road that starts and ends in one section of the country because federal roads are arterial highways running from the north to the south, connecting a number of states across the country. There are three major arterial north-south roads. The first one is Arterial Road A1 which starts from Lagos Ports; it goes through Ibadan to Ilorin through Niger State: Jebba, Mokwa all the way to Kaduna. Then of course,
from Kaduna it goes straight to Kano and all that and to the borders with Niger Republic. Then of course we have Arterial Road A2 which starts from Warri through Auchi-Okene-Lokoja-Abuja-Kaduna-Katsina up to the borders with Niger Republic. Then the route A3 also starts from Port Harcourt Ports and it goes from Port Harcourt to Enugu, Makurdi and it now veers off and links with Jos, then links with Abuja. But eventually it leads to Kano all the way to Maiduguri and all that. So these were three major arterial roads in the country. Then of course, we had the longitudinal ones that start from Shagamu and goes through Ore to Benin-City to Onitsha, Enugu, Abakaliki, Ogoja, Ikon and then it goes to the Cameroon. "That's one longitudinal road that we have. We also have another one that starts from Sokoto area to Katsina, Kano, Maiduguri to the Chad Republic. "You also have the middle one that
starts from Ilorin, Kabba , Obajana, Lokoja, Oturkpo and goes across till somewhere in Taraba State and that axis. So these are the major arterial roads in our country. Then you also have a number of sub-roads connected to them. When you are talking about road development in Nigeria, you are looking at a big picture, so we don't think about states when we are looking at Federal roads because federal roads lead from one state through several states to the end of Nigeria border and the reasons are not farfetched. During the colonial era, when these roads were first initiated and when they were delineated, the purpose was to transfer economic crops; cash crops from the hinterland to the seaports to enable the colonial masters ship them to their home countries. That was the basis. If you look at the development of rail lines, it was also the same way: the Western lines and the
Eastern lines. That was wha t in fo r med the development. "As a Minister of Works, you could readily recall the state of these roads in 2011 when Pres ident Goodluck Ebele Jonathan assumed the reign of leadership of this country. The roads were in very deplorable conditions. For us, there was an urgency to recover
Nigeria’s Minister of Works, Mike OnolememenA
The movie “The Last Samurai” comes to mind. The armies of the forefathers were far more
equipped strategically to deal with matters of war. It certainly did not rest on the battalion numbers and equipment. One of the lessons from that movie – be careful who you think you can govern. Heritage takes precedence over everything. Turn on CNN and you’ll find the news as it is….sometimes a bit exaggerated, but there is very little good news at the moment. In the current state the world is at a point of strained cadence. Globally, geographically the world may have seemed f lat, but economies are overwrought. This is accentuated by the fact that companies and g o v e r n m e n t s a l i k e s e e k sustainable solutions to “do more with less.” Certain natural resources are no longer plentiful for various reasons, food is simply because most of it is wasted, and some are at risk of exhaustion. Population and urbanization con t inue to r i s e due to employment centralization and due to the snail’s pace of infrastructure development to accelerate economic activity in
stagnant areas. Particularly, this is a resident nuance in Africa. Today, the world is looking to emerging markets, particularly Africa. They have their eyes set on us. Let us remember that that while CEO’s at the WEF2015 state technology is great for learning in Africa, who of them report this as part of their annual results linked to profit margins. Technology companies are profit driven and merely investing in profit driven growth. In droves they come, setting up shop as multinational companies. Included in their suitcase is an array of experience and skills that have been tried and tested
in developed economies. Very soon they realise that more challenges and risks may exist out there other than opportunities – if not managed well. “Innovation for us is coming from emerging markets… All the great ideas R coming from the outside” – Coca cola CEO If these investors do not have ‘pack’ a case full of effective methods and behaviour that satisfy the needs of local markets, that liquesce into local communities, environments and cultures, they will not achieve success in emerging markets.
Without thinking, German engineer Karl Benz invented the first petroleum-powered automobile, without knowing that he did not just create an engine with wheels. For generations to come, he set the chain-ring in motion for an industry that revolutionized the way society today is structured, and has evolved since. Similarly, English computer scientist Tim Berners-Lee had not built the world’s first Web site. He became alexander the great for what we know today as the World Wide Web. As with many inventors they unselfishly and not through ignorance ignored the impact for that which we enjoy today.
There are four critical elements of note to guide us going forward.The first is ethical compass: the world is riding a wave of super waves of economic growth in places like Africa. Frankly we still retain a large uneducated population, who seek the ability to “consumerise” and not make financial decisions that impact
sustainable livelihoods. This is the continued theme of the Progress Panel to slow and ultimately halt cor ruption through i l l ic i t outflows. Then we have the multinational CEO’s who see opportunity to take advantage of the scenario. This is how it plays out. The corruption is pointedly carried out in the sovereign country by respective officials. It is then only money that is shifted to tax havens by multinationals.
A Word On Innovation
Around 400 million people in the last year got a smartphone. If you think that’s a big deal, imagine the impact on that person in the developing world.” – Eric Schmidt, Executive Chairman, Google, USA
From WEF2015
AContinued on page 38Mr. Tony O. Elumelu, CON speaking at the 2015 World Economic Forum, in Davos, Switzerland
10 | CED Magazine January 2015 CED Magazine January 2015 | 43
DEVELOPING STORYPROFILE
igeria's extensive infrastructure needs are well known. D e c a d e s o f under inves tment Nhave left the country
with dire deficits in such critical areas as
railways, roads, ports, airports, telecommunications and electricity generation. In the World Economic Forum's Global Competitiveness Report for 2014-2015, Nigeria ranked
th127 , a drop from 120 it ranked in 2013, out of 162 countr ies for i ts
infrastructure. The report criticized the country's weakened public finances as a result of lower oil exports, transport, power and energy infrastructure as “largely insufficient and ill-adapted to the needs of business,” adding: “The Niger i an bus iness communi ty
2015 BIG DEBATE:INFRASTRUCTURE
NIGERIA DECIDES
Infrastructure development is the basis of measuring the performance of democratic leaders and it is the foundation of good democratic governance. As Nigeria decides on the next leader, what are the leaders saying about the current state of dilapidated infrastructure?
WITH Over 25,000 kilometres of roads now motorable in Nigeria and given the s i z e o f p r o j e c t
portfolio in the Ministry of Works, the Minister of Works, Architect Mike Onolememen has explained that the Federal Government would require between N400 and N500 billion yearly if "Nigeria is to drive our projects the way we should embark on projects in this country." "I mean given the construction period for those projects if you wanted to actually implement a pragmatic cash flow that will enable us meet up with those construction projects, we should be able to have about N500 billion yearly for road construction. But the reality is that what we have is an average of N100 billion a year at least in the first three years I served here, on the average. "However, that changed with the advent of SURE-P where four major arterial road projects were selected for dualisation: the Abuja-Lokoja Road, the Kano-Maiduguri Road and of course the rehabilitation of the Onitsha-Enugu
Road and also the rehabilitation of Benin-Ore Road. Those four projects that I have just listed now had additional funding from the SURE-P. That brought to average for the Ministry to about N170 billion or there about for 2012 and 2013." The minister was impressed that the outgoing National Assembly has been cooperative because they have come to the realisation that not enough resources were being devoted to road construction when they had their conference on road infrastructure sometime in 2012. They actually called for a declaration of emergency on the state of our road sector at the time, considering the deplorable state of federal roads. On Nigerian contractors and engineers, he explained that though he believes in them he, however, pointed out that "some of them are good, if you look at our books, some of them that operate here, a few of them compete favourably with the very best in the industry, the very best of the multi-nationals. But on the average so many of them I would say are not ready for business. Our little companies are, however, operating around one
personality. "I have challenged the Nigerian Society of Engineers to encourage their members to come together and form conglomerate so that they can better compete for projects with multinationals. But that is not happening right now. Nevertheless, there are few Nigerian companies that are doing well based on the report we get and progress of the jobs. We are very proud of them. There are also some that are not doing well. In fact as Minister of Works, I have had to terminate a few contracts because the contractors were not doing well. At least 90 per cent of them are local contractors and may be a little fraction of them are foreigners." While not trying to dismiss the abilities of Nigerian construction companies and contractors, he praised the Chinese who many believed may not deliver quality jobs. Onolememem disclosed that before most people never believed the Chinese to deliver quality jobs, but that is changing. He claimed that the Chinese companies that do business with our ministry from, CCEC, CGC to CRCC do quality jobs on most of our project sites. "In fact, let me give you an example. In 2012, we gave out a project to a Chinese company for the Vandekya-Obudu Ranch road. The job was awarded November/December. I personally f l a g g e d o f f t h e p r o j e c t i n January/February but by December 2013 the Chinese company had reached 90% completion. By the first quarter of 2014 they completed the job. On the same day, I flagged off two other projects being handled by Nigerians in the same Benue State, one of them till this moment is yet to attain 35% completion. That was why I said some Nigerians do well while some do not impress at all. MOULDS Nigeria limited is a wholly owned Nigerian company and they are doing very well. They have a number of projects in their portfolio with us. There was a project I challenged them to complete: the Otukpa-Oturkpo road. I gave them December last year and they completed it. So there are some Nigerian companies that can compete favourably with some multi-nationals. There are some multi-nationals who are also doing very well.
SUSTAINABLE ROADS
'Nigeria needs partnerships to drive roads development’ - Mike Onolememen
President Goodluck Jonathan (m) being assisted by Mr Hartlied Harald, Asphalt Supervisor, Julius Berger (left) and Gov Ibikunle Amosun of Ogun state, operating construction equipment during the flag off ceremony of Lagos Ibadan Expressway Reconstruction in Sagamu
Tin Can Island Port Rehabilitation, Lagos:New Jetty
YOLAS CONSULTANTS LTD
Consulting with experience & Integrity
continues to cite infrastructure as the single biggest hindrance to doing business in the country.” Indeed, the nation's infrastructure challenges are a major drag on economic growth. During the halcyon years of Nigeria's boom, it was easier to overlook this threat. Lately, however Nigeria's Gross Domestic Product (GDP) expanded 8.67 percent in the third quarter of 2014 over the previous quarter. GDP Growth Rate in Nigeria averaged 1.50 Percent from 2013 until 2014, reaching an all time high of 8.99 Percent in the third quarter of 2013 and
a r e c o r d low of -9 . 8 8 Percent in t h e f i r s t quarter of 2014. GDP G r o w t h R a t e i n Nigeria is reported by the Central B a n k o f N i g e r i a . T h e e c o n o m y has been hobbled by h i g h i n t e r e s t r a t e s , i n f l a t i o n and a lack o f purposeful r e f o r m . Meanwhile, t h e government is mired in a s l o w -m o v i n g system of c o a l i t i o n politics, and it's further constrained by a hefty fiscal deficit
and a deepening current account deficit. Given this environment of fading growth, political gridlock and the high cost of capital, it's not surprising that infrastructure spending has slowed in the past year or so. Yet Nigeria's vast infrastructure needs are expanding all the time, and this presents enormous opportunities. The population has already surpassed 170 million, and it continues to grow at a heady rate. Global trade is placing acute pressure on Nigeria's inefficient ports. Rapid industrialization is intensifying the strain on the nation's
unreliable networks for electricity and water.The railway system — already infamously overlooked — faces rising demand for freight capacity. And the government has fallen far short of its plans to build additional kilometers of roads each month — an urgent requirement in a nation where 75% of all freight is transported by road, and where traffic is so severe that the maximum highway speed for trucks and buses is only 30-40 km per hour. The need to upgrade Nigeria's infrastructure is especially acute in huge cities such as Lagos, Port Harcourt, Abuja, Kano, Kaduna, Niger Delta region.Nigeria's urban population of around 85 million is projected to reach 200 million by 2020.
By 2030, the country is expected to have about 10 cities with over 10 million residents.
This torrid rate of urbanization means that massive investment will be required in everything from metro systems to clean water supplies, power generation to affordable housing.
Recogniz ing these a lmost l imit l ess requirements, the government in 2014 launched the bold and aggressive N655.2trn infrastructure master plan spending in the ten years through 2024.
The priorities include airports, ports, an elevated rail-corridor across the country, and several miles of new roads. Dr. Abubakar Sulaiman, minister/deputy chairman, National P lann ing Commiss ion (NPC) , described the National Integrated Infrastructure Master Plan (NIIMP) as investors' guide and a robust framework for Infrastructure Development in the country.Sulaiman, made the remark in Abuja recently at the inauguration of the Inter-Ministerial Committee (IMC) on the Presidential Launch of the National
Nigeria will see the fastest urban population growth in the next 40 years, with its cities expected to add 200 million people.
Nigeria population is expected to hit 367 million in 2050 according to United Nations Report
NIGERIA SALES OFFICE CEO/Publisher, CED Magazine Century 21 Systems Comm. Limited Mr. Kenneth Odusola-Stevenson 14, Shofidiya Close, off Ilesanmi Street, Masha Surulere, Lagos Nigeria Tel: 234 1 774 3404 Mobile: 234 805 5243 516 E-mail: [email protected]; [email protected]
12 | CED Magazine January 2015 CED Magazine January 2015 | 41
BOOKS IN BRIEFSCOVER
From left: Arc. Mike Onolememen, Minister of Works; Arc Namadi Sanbo, Vice President, Federal Republic of Nigeria; Governor Emmanuel Uduaghan of Delta State; Hon. Ndudi Elumelu, member, House of Rep. and others at the commissioning of Utor Bridge, on Asaba, Ebu/ Urhomi Road.
A
Integrated Infrastructure Master Plan, also said this would also provide job opportunities. He explained that the NIIMP, which is aimed at bridging the current infrastructure gap in the country, will through targeted investment, cut across the geo political zones in the country, provide infrastructure requirements to various sectors of the economy. While noting that the National Planning Commission has put the Infrastructure Delivery Coordinating Unit (ICDU) in place, to serve as interface between the Commission and Stakeholders in the implementation of the plan, Sulaiman said they are to work with other structures that may be put in place for seamless implementation of the NIIMP. Given the scale of this infrastructure gap, it's small wonder that Nigeria is one of the world's most attractive markets for companies in the infrastructure business. A recent report by Natafamdavid Consulting Nigeria Limited predicted that Nigeria's infrastructure sector will grow by 5.9% in the 2014 fiscal year — down from a previous estimate of 7.4%, but still a formidable rate of growth. The opportunities are so extensive that money has poured in from overseas, including investments in 2012 from leading private equity firms across the world.But Nigeria's difficult business env i ronment ha s s apped the enthusiasm of many foreign investors. Among other things, they complain about unpredictable regulations; bureaucratic delays in approving projects; endless struggles to secure land rights; and the government's stalled attempts at reform, high level of insecurity. The country's reputation for corruption is also a major deterrent: in 2011, Nigeria in 2013 ranked 144th most corrupt country as Afghanistan, North Korea and Somalia are seen as the world's most corrupt countries while Denmark and New Zealand are nearly squeaky-clean, graft watchdog Transparency International said in a survey.
Worldwide, almost 70 percent of nations are thought to have a “serious problem” with public servants on the take, and none of the 177 countries surveyed this year got a perfect score, said the Berlin-based non-profit group. Nigeria ranked 144th out of 182 c o u n t r i e s i n T r a n s p a r e n c y International's Corruption Perceptions Index. Not surprisingly, some investors have retreated. According to Reuters, private equity investments in Nigerian infrastructure sank in the third quarter of 2014, probably due to national elections. There is also a rising tide of domestic disillusionment about the government's unwillingness to tackle the nation's economic challenges. “There is a complete absence of decision-making among leaders in the government.” To shed further light on these issues, we interviewed two of Nigeria's prominent thinkers whose penetrating insights we share in this special cover report.Engr. Otis Anyaeji, a legendary engineering professional and business leader who transformed the power sector as the lead consultant to the Nigerian Integrated Power Project (NIPP). His firm O. T. Otis Engineering Nigeria Limited remains the powerhouse in the engineering industry. He talks of the “huge pressure” on everything from
electricity to roads. To meet these challenges, he stresses the need for greater involvement by the private sector, and calls for entrepreneurs to be freed from “the tyranny of petty bureaucracy.” Pat Una, Chief Executive Officer, Una Associates, a leading estate surveyor and valuer and capital market consultant, one of Nigeria's most renowned estate surveyor, weighs in with a candid discussion of some of the biggest threats Nigeria's economic progress: political inertia, ominous infrastructure decay, bureaucracy, and corruption — which, he says, “create space for the incompetent to buy their way into the most important sectors of Nigeria's economy.”
Otis and Una are both deeply concerned about Nigeria's future. Yet they are also remarkably optimistic, given the country's extraordinary dynamism. As Una points out, Nigeria has already made astonishing progress, and he sees no reason why this should not continue either with the current government that may have learned it lessons that power is transient with the pressure from the now formidable opposition or with the emergence of a new government that will have to deal with the highly hyper-active Nigerians who will be looking for quick fix. “There will be problems along the way,” he concedes. “But even if we
In his later years, when asked how he invented the shipping container, freight magnate
Malcom McLean would offer an anecdote. One day in the 1930s, the former truck driver was waiting at a pier to deliver bales of cotton. Watching dockers load thousands of cartons and barrels aboard the ship, young McLean wondered why the cargo was not assembled in containers to speed up the process. From that brainstorm, McLean said, the modern shipping container was born two decades later. This story, so far as I can tell, was fabricated from whole cloth in response to a question—“How did you invent the container?”—whose very premise, that the container had a single inventor, was false. Yet people love McLean's anecdote, because it confirms common preconceptions. Call it the Isaac Newton theory of innovation: You sit under a tree, an apple falls on your head, and voilà, you discover gravity. I'm hopeful that Walter Isaacson's latest book will lay the Isaac Newton theory to rest for good.
is a history of the computer and the Internet that unfolds as a series of profiles of mostly well-known individuals who played key roles in the development of modern information technology. Whether Isaacson is discussing Ada Lovelace, who sketched out the concept of the multipurpose computer in 1843, or Larry Page and Sergey Brin, whose doctoral research at Stanford University turned into Google, he focuses on a single question: What causes one idea to take root, with world-changing consequences, while another idea is
The Innovators
abandoned?Isaacson, the author of
and Albert Einstein, finds that brilliant ideas invariably have a history, and that brilliant innovators are people who know how to build on the work of others to turn ideas into reality. As he puts it, “Only in storybooks do inventions come like a thunderbolt.” The Innovators repeatedly shows that coming up with breakthrough ideas is the easy part of innovation. The hard part? Turning those ideas into advances that are practical to implement—practical not only technically, but also commercially. Doing so, Isaacson emphasizes, requires not just an idea, but an ecosystem. Nowhere is this clearer than in Isaacson's exploration of two men pursuing the dream of a digital computer. Between 1939 and 1942, John Atanasoff, a physicist who taught at Iowa State University—an institution known for cutting-edge work in electrical engineering—developed a prototype designed to solve linear equations. Lacking colleagues who could help him resolve problems with memory units and punch-card readers, he usually toiled alone. Nor did Iowa
definitive biographies of Steve Jobs
State make sure his inventions were patented. Atanasoff's small model, stored in a basement when he was called up to war, was forgotten, shortly to be dismantled for parts. Around the same time, a physicist named John Mauchly was working along similar lines. Mauchly, like Atanasoff, was not affiliated with a big-time school. (Mauchly taught at Ursinus College.) Unlike Atanasoff, though, he was a networker, a regular at academic conferences who discussed his ideas widely. When he learned of Atanasoff's work, he traveled to Iowa to see the computer Atanasoff was building. Mauchly and an engineer, J. Presper Eckert, drew on Atanasoff's work, and that of many others, to develop the famed ENIAC at the University of Pennsylvania, a 30-ton multipurpose computer that was 100 times faster than any previous machine. A quarter century later, Atanasoff sued, claiming they had stolen his ideas. In 1973, a court declared Atanasoff the inventor of the digital computer and nullified patents granted to Mauchly and Eckert. This ruling, Isaacson insists, misunderstands the nature of innovation: ENIAC was built on the work of Atanasoff and many others, and properly so. “Great innovations are usually the result of ideas that flow from a large number of sources,” he writes. “An invention, especially one as complex as the computer, usually comes not from an individual brainstorm but from a collaboratively woven tapestry of creativity.” Isaacson might have put greater emphasis on the way that collaboration can occur in different ways. The boss who forces employees to work at a shared table to promote collaboration may only be stoking resentment. Although it is true, as Isaacson writes, that “innovation is not a loner's endeavor,” it is also true that each of us has individual preferences for interacting with others. Even with hard work, The Innovators shows, breakthroughs may not arrive on a corporate bean counter's schedule.
The Hard Work of Invention Walter Isaacson, CEO of the Aspen Institute and author of Steve Jobs, plumbs the history of digitization to get to the roots of successful innovation.by Marc Levinson
The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolutionby Walter Isaacson, Simon & Schuster, 2014
Gen. Mohammadu Buhari (Rtd.) President Goodluck Jonathan
just equal over the next 16 years what has happened over the last 16 years, what has happened in the last 16 years, you are going to see a country which is at the very edge of the second world, not the first, but definitely the second.” For Nigeria, it seems, both the challenges and the opportunities are immense.
Nigeria's economy is growing rapidly, its population is expanding at an extraordinary rate, and there's massive migration from the countryside to overcrowded cities like Lagos and Port Harcourt and Kano. How concerned are you about the stress all of this places on urban infrastructure such as roads, the water supply, and the electricity system? It's a big challenge, there's no doubt at all. The country is progressing very fast. After the rebasing we are not the biggest economy in Africa and 2th in the World. When the economy grows and attains this status at this rate, it's only natural that there's huge pressure on infrastructure. Even though we've
been building infrastructure, we're not able to keep pace with demand. That results in huge productivity losses and delays, mainly in urban areas.
Where do you see the most acute strains on Nigeria's infrastructure?Transportation from place to place takes an enormous amount of time. You see it when you're commuting from home to office and office to home. Our roads have not been developed as quickly as our logistical demands require. Also, the average speed of our freight which is done by road, mainly, and they travel at slow speed because of the bad state of the road at which four hour journey take a whole day. The rail system which is expected to add value is nothing to write home about, “Federal
Government is now adding more c o a c h e s w i t h t h e o n - g o i n g rehabilitation. We're not expanding roads or improving the quality of our roads. So the movement of goods takes a long time. Similarly, our port infrastructure is not as developed as we'd like. The average time for clearance at our ports is several days, whereas it's several hours in many other countries. For Nigeria's economy to make sustained progress we have to build better roads so that the transportation of goods becomes efficient; we have to build ports; we have to enhance our power capacity; and we also have to improve access to coal and other raw materials. These are all very important requirement
For Nigeria's economy to make sustained progress, we have to build better roads so that the transportation of goods becomes efficient; we have to build ports; we have to
enhance our power capacity; and we have to improve access to coal and other raw materials. These are all very important requirements.
Jeff Sutherland, codeveloper of scrum, explains how to raise the success rate of your company's initiatives using the software development method.by Scrum: The Art of Doing Twice the Work in Half the Timeby Jeff Sutherland, Crown Business, 2014
Edward H. Baker
A Sprinter's Guide to Project Management
What can software developers teach business executives about how to get work
done? A lot, says Jeff Sutherland, author of Scrum. And even though the breathy promise of the book's subtitle makes it sound like a self-improvement book, Sutherland backs up his claim with a 20-year-old methodology for streamlining software creation that executives frustrated with the slow pace of any kind of project should find worthy of consideration. Sutherland, an ex–fighter pilot, academic, and software architect, co-created scrum—which is a version of agile software development—as an alternative to the traditional “waterfall” method of software design. Based on Gantt charts that were first used in World War I, the waterfall method requires development teams to spend months, even years, diagramming all the requirements of a software project and laying out every step on the way to completion before actually writing any code. As anyone who's had any experience working on—or waiting for—such projects knows, even the most painstakingly mapped plans run into unanticipated problems in the real world. And when that happens, projects almost invariably come in late and over budget; that is, if they don't fail. The sheer waste this approach involves—in time, in money, and in people's lives—offends Sutherland deeply. He is fond of quoting Taiichi Ohno, the father of the famed Toyota production system, who insisted, “Waste is a crime against society more than a business loss.”
The goal of scrum—the name is taken from the formation used to determine which team gets control of loose balls in the game of rugby—is to create value for the customer as quickly as possible. To that end, its main focus is getting project teams and team members to work together as efficiently as possible. In Sutherland's view, teams should function like complex adaptive systems: They should be self-organizing and cross-functional, and they should work toward a single purpose, letting nothing stand in their way. The focus of the book is on the ins and outs of scrum, giving company leaders a detailed how-to. The main idea is to break a project down into a succession of manageable pieces, with specific goals, called sprints. No planning on the scale of the waterfall method takes place; instead, Sutherland says, “Plan in just enough detail to deliver the next increment of value, and estimate the remainder of the project in larger chunks.” Each sprint is guided by the answers to three questions: Who is the customer for this task? What task needs to be done to satisfy the customer? And why does the customer want it? Sprints are perhaps a week or two in length, during which the team works together to achieve its goals. Every day during the sprint, the team members meet to discuss their progress, asking and answering three more questions: What did each member do yesterday to further the team's objective? What will each do today? And what if anything is slowing the team down? The goal, like Toyota's goal, is continuous improvement in the team's performance and thus its output. At the conclusion of each sprint, the team presents the completed product feature to its customer, then moves on to the next sprint. It's that simple, Sutherland insists. He offers plenty of examples of projects that
were saved through this method—most notably the FBI's failed decade-long effort to update its intelligence systems following 9/11. After adopting scrum, the bureau completed the project in a little more than a year, with a fifth of the workers employed on the earlier effort. If done right, Sutherland claims, the method can improve the productivity of any project team by 300 to 400 percent.Sutherland claims scrum can improve the productivity of any project team by 300 to 400 percent. Too good to be true? That, unfortunately, is hard to determine from reading this book. In Sutherland's telling, scrum never fails, and every company that has tried it and then gone back to the old ways of doing things has seen productivity drop precipitously. But we all know that the devil is in the details, and although the scrum process is laid out clearly, the book's examples are focused more on results than on the nuts and bolts of how scrum was implemented and adapted. Further, most of the detailed examples come from the world of software development, so it remains somewhat unclear just how to translate the method to other kinds of business projects. Still, this is one of the relatively rare business books I actually enjoyed reading. The writing is clear, the stories are well told, and the process is intriguing—who knew that the optimal number on any team is seven? And Sutherland is a true believer: He devotes the last chapter to how scrum might change the world, in areas such as improving education, alleviating poverty, even fixing government. It's easy to get caught up—his conviction is contagious. But the idea that showing people how to execute effectively will solve all our problems is a familiar one. And it remains to be seen whether scrum is the answer to problems outside the software development arena.
For Nigeria's economy to make sustained progress, we have to build better roads so that the transportation of goods becomes efficient; we have to build roads; we have to enhance our power capacity; and we have to improve access to coal and other raw materials. These are a l l ver y impor tant requirements.
How does the inadequacy of Nigeria's electricity system affect companies, many of which contend with frequent power outages?To give you an example, I know several manufacturing companies in states Lagos and Kaduna that don't get power for several hours a day. Therefore, they've installed their own generators. But that power is about twice as expensive —or sometimes 2.5 times as expensive. When you have to pay 2.5 times the normal rate for power, you become less and less competitive in the marketplace; you're not able to sell your products, so your corporation becomes weaker, which means that it pays lower taxes and can't employ as many people.
How does the inadequacy of Nigeria's electricity system affect companies, many of which contend with frequent power outages?To give you an example, I know several manufacturing companies in states Lagos and Kaduna that don't get power for several hours a day. Therefore, they've installed their own generators. But that power is about twice as expensive —or sometimes 2.5 times as expensive. When you have to pay 2.5 times the normal rate for power, you become less and less competitive in the marketplace; you're not able to sell your products, so your corporation becomes weaker, which means that it pays lower taxes and can't employ as many people.
How economically disruptive is the logjam on Nigeria's roads?We are adding many vehicles every year and many two-wheelers, but the roads are not expanding. When you leave your home, say in Ikeja, in Lagos at 7 a.m., it takes you only 2 hours to drive to Lagos. These traffic conditions reduce your productivity and waste your time, and you're not in a very good mood when
you get to the office or come home if you've just spent two and a half hours in traffic.
One of Nigeria's most renowned Engineer, Engr. Otis Anyaeji is the Chairman, O.T. Otis Engineering Limited. He is the recipient of several awards, including the Construction and Engineering Digest Forum Award, a fellow of the Nigerian Academy of Engineering, a fellow of the Nigerian Society of Engineers and has been inducted into the Construction Industry Hall of Fame. Here, Anyaeji, whose firm is the lead consultant to the National Integrated Power Project explains the flaws and virtues of Nigeria's political system, and he discusses the urgent need to confront such issues as power shortages, infrastructure, and a lack of clean water.Learning along Nigeria's tumultuous path to democracy and economic progress
Nigeria has made extraordinary advances over the past 16 years, but it still lags behind other developed democracies like India and United States of America and, even South Africa. One reason is that the South Africa government is far more effective at making things happen — whether it's urban planning, completing infrastructure projects, or confronting threats like urbanisation. Do you worry that Nigeria's cherished democratic system, for all its virtues, hinders its economic growth?There is no tradeoff as far as Nigeria is concerned. Nigeria is not going to trade
its freedom for any other reward. It's as simple as that. Nigeria cannot live except as a free country. We cannot survive except as a free country. We are a federal people. We have a federal history. We didn't remove the British in order to bring domestic tyrants who will then have to be removed by some Nigerian Spring. Whatever the disadvantages of democracy will be, we will have to live with them. Nobody in Nigeria thinks of bread versus freedom as a debate. The key to Nigeria is that its future is being determined by democratic pressures. For example, Nigeria's poorest find the whole idea of the trickledown theory to be absurd. What is the trickle-down theory? Does it mean that those few who have swimming pools will get a waterfall and those who are dying of thirst at the bottom will get a trickle? In a democracy, you can't sustain that sort of thing. The core reality here is that if governments do not deliver in terms of growth, then they become vulnerable.When you look at what's holding Nigeria back, obviously one of the b i g g e s t i s s u e s i s i n a d e q u a t e infrastructure. How big an impediment to Nigeria's economic progress is this infrastructure deficit, which you see everywhere from railways and roads to an insufficient supply of water and electricity? It's a huge impediment. How can you be honest and not understand that? But there are models within Nigeria that prove that things can be done, despite the impediments of democracy. Good governance can begin to make a difference, which we've seen in places like America and South Africa. What we should not expect from Nigeria is either horizontal or vertical evenness. There will be curlicues and knots in the graph. There will be problems along the way. There will even be accidents. We see it on the Nigerian highways, which are littered with overturned trucks because Nigerian drivers lose control and don't respect rules. But even if we just equal over the next 16 years what has happened over the last 16 years, you are going to see a country
Flexi Arch bridge spans are shown here in an earlier project, the Pleasington Flexi Arch at Pleasington Golf Club Overbridge, Blackburn. Engineers have now developed the world's longest 'flat pack' arch bridge which will be installed soon.Credit: Image courtesy of Emma Martin at Story Contracting Ld
Civil Engineers at Queen's University Belfast in collaboration with pre-cast concrete specialists Macrete Ireland
have developed the world's longest 'flat pack' arch bridge. Based on the 'FlexiArch' system, the bridge is unique in that it will be transported to site in flat-pack form but when lifted, will transform under gravity into an arch. The bridge is due to be installed near Portsmouth in coming months and will span 16 metres (53 feet) over the Wallington River in Waterlooville, Hampshire. Made up of 17 units (1m wide) of pre-cast concrete, each weighing
16 tons, the bridge will take less than a day to install using a 200-300 ton crane in association with a lifting beam also designed and built in Northern Ireland. If the alternative of a conventional arch had been utilised it would have taken months to construct and would have been much more costly. A FlexiArch bridge requires little maintenance and should last 300 years, compared to the projected lifespan of up to 120 years that accompanies a conventional bridge. It is the result of 10 years of research from the early 1990s in the School of Civil Engineering at Queen's University Belfast. Queen's was recently placed in
the Top 10 of research intensive universities in the UK, and Civil and Construction Engineering at Queen's was ranked third in the UK for research intensity. There are over 50 FlexiArch bridges now in the UK and Ireland, including the th r ee foo tb r idg e s i n pa rk l and surrounding Newtownabbey Council building. Professor Adrian Long, from the School of Planning, Architecture and Civil Engineering at Queen's University, who patented the FlexiArch concept in 2004, said: "This is a real milestone which has been reached as a result of the hard work, effective collaboration and the combined expertise of the Queen's and Macrete team. We are delighted with this latest development and of how successful the FlexiArch system has become. Over 50 FlexiArch bridges have now been installed in the UK and Ireland where it has been found to be even more versatile than anticipated. Macrete project manager, Abhey Gupta said: "This innovative system is exceptional as it is easily transported in flat pack form and then rapidly installed on site. It is also unique as its strength does not depend on corrodible reinforcement, thus it should have a lifetime of at least 300 years whereas conventional bridges seldom achieve their design life of 120 years." The FlexiArch system has seen continuous investment by Macrete since they were granted exclusive licensing rights for the UK/Ireland in 2006. This plus the additional investment by Invest Northern Ireland has allowed Macrete to provide 70 person years of employment at the company's headquarters in Toomebridge.
cooperative societies as platform. The bank has also recently introduced the Informal Sector Co-operative Housing Loan Scheme that would facilitate access to affordable housing by many low-income earners in the informal sector. It was designed by the FMBN to assist people in the sector to own homes in their lifetime through their respective cooperative societies. The scheme was developed in recognition of the immense benefits inherent in the housing sector and the need to unleash its potential
towards promoting a virile mortgage market in support of mass housing delivery. Under the scheme, cooperative societies that have acquired parcels of land to develop houses for their members will be given mortgage loans at 10 per cent interest over a 24- month period with a moratorium of 12 months. After meeting all the requirements, FMBN will then finance the construction of the houses in the estates 100 per cent and fund the development of infrastructure to the tune of 90 per cent.
According to Kumo: “If we can jumpstart the housing sector in Nigeria and attain its GDP contribution target of 15 per cent under the Vision 20:2020 Project, incidences of corruption, w i d e s p r e a d p ove r t y a n d m a s s unemployment that we are battling with today will reduce significantly.” To ensure the availability of affordable houses in all the states of the federation, the Bank has also gone into partnership with state governments to support the National Housing Fund Scheme. To that
Engr. Otis Anyaeji
HOUSING CHALLENGE Continued from page 36
AContinued on page 47
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WEF 2015 DAVOS COVER
>
which is very definitely at the top edge of the second world. Not the first world, but definitely the second.
One long-term challenge is a lack of clean water, given the vast scale of urban development across Nigeria, the depletion of the nation's underground water supplies, and the growing problem of pollution. How concerned are you about this need to secure adequate water for Nigeria's rapidly-growing population?That's a huge problem. In fact, that's one of the great failures of Nigerian governance — this inability to have even a rational plan for water resources. It's extraordinary, but I don't think .
Is there a sense that environmental issues like this are becoming a more mainstream concern in India? Do you see, for example, a greater focus on building more resilient urban infrastructure to deal with the growing dangers of climate change?Nigerians love to argue. So there's always a big debate going on about the environment. It's one of the many issues that create turmoil. What I can't see is any resolution to the debate or any major policy emerging from the debate. At the moment, over the last one or two years, the government is so distracted by trying to save its skin and survive that it just doesn't pay any attention to the issue — at least, not as much attention as it requires. The issue is there. Everybody recognizes the issue. But then what should be done about it? That becomes a separate issue. But these things that I'm saying are rooted in time: in the future, we might have a government with rational priorities.
For Nigeria to sustain the remarkable economic growth that it's racked up in recent years, it will need to generate a massive amount of electricity. Yet the inadequacies of the country's electricity
system have created a serious economic bottleneck. Is anything being done to address this need for a more dependable supply of energy?The only thing the government has done is involve the private sector in e l e c t r i c i t y g e n e r a t i o n a n d distribution — and then left the private sector to try and manage the social realities without the influence of the state. That doesn't sound very intelligent. Can you see such a situation working effectively? The point is that we are neither white nor black: we neither have free market f r eedoms nor s t a t e s ec to r monopolies. These private sector companies are expected to deliver in terms of their corporate business plans, but they don't have the cushions available that state-owned monopolies enjoy. One of the great problems that industry faces is a completely opaque government, which then goes on changing the rules after decisions have been made. The government has to know what it wants to do and then stick to that. The government must be a guarantor of law, if nothing else, and provide rules and regulations which have clarity. I think time will clarify these things. Experience will. The people's worry will. Let's see.
Foreign visitors are often struck by the disarray they encounter in Nigeria — from the electricity blackouts to the chaos on overcrowded road, non-availability of effective rail system. Why is it that basic infrastructure like this remains so
dysfunctional?In many of these cases, the government doesn't have the ability to subsidize large corporations of this nature because its own resources are obviously limited. But more than resources being limited, the problem is that the forces that bring modernization will not arrive b e c a u s e t h i n g s a r e u n d e r government control, and the government lives by bureaucratic r u les. Modernizat ion needs entrepreneurship.
How big a problem is inadequate infrastructure for Nigeria's poor — whether it's insufficient electricity, say, or a lack of clean water? Are they the ones who suffer most from these problems?The real problem is that the poor still don't think they're getting their share of economic growth. They need much g r e a t e r c o m p e n s a t i o n f r o m employment to create economic uplift.
One area where Nigeria has made tremendous progress is in telecommunications. How important has the liberalization of the telecom sector been, and how significant an impact have you seen from the growth of Nigeria's major telecom companies?Telecom is one of Nigeria's great success s tor i e s. Look a t the empowerment of of millions of Nigerians. Today, the postcard is dead. The letter is dead. Communication is cheap, and that's had a huge positive in villages and at the lowest economic levels. The quality of life for the poor has improved so dramatically because they can communicate with their loved ones. Otherwise, if you came from Maiduguri and lived in Lagos, you were cut off. How much could you convey in a letter without a mobile phone? So it's been a huge benefit.
What needs to be done in terms of reform to encourage more entrepreneurship and to bring greater investment where it's most urgently required?We would have to do the same thing in other areas that we did to roads, which is
Corruption doesn’t simplycreate a transaction that
has to be factored into thebusiness plan officiallyor unofficially. What
corruption does is it createsspace for the incompetentto buy their way into themost important sectors
of India’s economy
This stunts innovation. Simply through lack of investment in local economies and research for African solutions, Africa is losing out on investing in their own continent. So innovation must have a moral compass. Innovation must rectify and advance life in Africa first and foremost and must serve as an economic export. The CEO of Coca-Cola recognises this, and if it is African, Africa must reap the financial rewards and hold the rights to the intellectual property. Secondly, sustainable innovation: according to the WEF2015 report; “Most consumers in emerging markets desire and prefer products with cost e f f e c t i v e n e s s a n d i n n o v a t i v e functionalities. Therefore, how to find the most optimal balance between innovation and cost is one of the most significant elements, which is also an essential capability to gain customers and achieve sustainable growth in emerging markets.” There has to be some level of d i s ag reement he re . Innova t ion functionality must solve a problem from the African consumer. No more based on the limited resources can we only just invest in consumerism? Innovation resources must have a source. If this source is in Africa, what are the sustainable impacts given the lagging
stages of development on the continent? We have to take the thinking much deeper. Thirdly, speed to market via infrastructure: at an average growth rate of over 5 percent. Sustainability is a acute question. If we measure the cost to benefit ratio of a smartphone to the majority of consumers in Africa, cost will top actual productive use and household affordability. “If we can extend [the internet] to more people, we increase voice… we increase economic opportunity… and we increase equality.” – Sheryl Sandberg, Chief Operating Officer and Member of the Board, Facebook, USA If we investigate the number of internet users from the 400 million smartphone users, can we honestly say that there is an impact of improved quality of life? Again, understanding or misunderstanding the playing fields in new markets, despite growth can be dangerous for investment and population poverty to economic mainstream conversion and migration alike. Then we consider that in the current form, speed of delivery of innovation must meet speed of infrastructure innovation. Plug the annual $40 billion infrastructure funding gap and let’s get the ball rolling.
Fourth, Meet t h e L o c a l Partner: ideally there will have to be local partners that can meet the expectations in every capacity to handle major i n v e s t m e n t s . This is ideal to integrate into l o c a l geographies as the know-how for navigating local markets. If we go back into the history of the i n d u s t r i a l r e v o l u t i o n
depictions of economic progress, we find that there existed many economic models that tested negative. The stories being put forward are ignoring the fundamental narratives of the African people, history and status quo. I have browsed most quotes on innovation and the internet from the WEF 2015, a body and gathering I hold in the highest regard. There is a deficit on research with reference to Africa and emerging markets, more steered to making innovation or European and US based technologies available to Africa consumers. Richard Quest is also a highly regarded anchor and personally live off his content from a global perspective. However, in a world where the US and Europe are lagging in growth, emerging markets received the bottom of the shoe coverage for the markets that have the greatest growth and prospect for investment. We need a change and the Chair of the WEF ought to take cognisance that African CEO’s who have built billion dollar companies on the continent should be the ones d i rect ing thought leadership…. Or maybe, just maybe innovation starts with media coverage, with African skill and talent, a people with a history of storytelling.
OSCE Secretary General Lamberto Zannier (second right) participating in a panel on the Global security context at the World Economic Forum’s 2015 Annual Meeting in Davos, 21 January 2015. (Flickr/WEF Michele Limina
16 | CED Magazine January 2015 CED Magazine January 2015 | 37
CONTENT
OPINIONCOVER
to have clarity in the system of public-private partnerships. And then comes the most difficult part, which is to eliminate or, at least, curb chronic corruption.
How big an obstacle is corruption to Nigeria's economic development?Quite substantial. Corruption doesn't simply create a transaction that has to be factored into the business plan officially or unofficially. What corruption does is it creates space for the incompetent to buy their way into the most important sectors of India's economy.
How can you prevent this type of insidious, pervasive corruption?It's difficult because democracy is a very hungry and thirsty beast, and the cost of elections is rising. So that's one of the real problems.
In some ways, Nigeria seems to have moved backwards lately, with less progress in terms of and little decisive government action. Is that a concern?Yes, the momentum seems to have stalled a bit. That is because of the absence of governance, rather than misgovernance. But give us another election, either a new term for the incumbent or a new government, and let's see.
When you look at these almost intractable problems like corruption and a lack of political leadership, it must be easy to lose hope. What is it that nonetheless makes you optimistic about Nigeria's future? Is it encouraging, for instance, that so many regular Nigerians speak against corruption and to demand change in attitude?The fact that people are angry and are capable mobilize their anger and unseat governments is cause for enormous hope. Now, everybody knows that if an elected government doesn't deliver, then it will be in for its own disaster. We don't really need a sudden volcanic outburst because we have a system in which the guilty can be punished electorally. This is the dividend of democracy.
The Minister of Works, Mr Mike Onolememen, on Wednesday in Abuja said that Nigeria needs
N500 billion annually for four years to have a sustainable road network. Onolememen said this while answering questions at the News Agency of Nigeria (NAN) forum in Abuja. According to him, inadequate funds continued to be the major challenge faced by the ministry of works and this had led to the slow pace of some arterial roads projects. ''There are some arterial roads that are affected by the lack of the required funds; if you ask me, for us to be able to drive these roads to the level Nigerians want;''We need to be investing about N500 billion in road development in the ministry of works every year in the next four years. ''But a situation where what we get is not up to N100 billion you can imagine the predicament we have sometimes and we have to prioritise. ''It's like you have a requirement that will for instance cost you about 500 billion naira and you have maybe 70 to 80 billion naira to play with. ''So funding, no doubt, is a limitation, but even within that limitation we are doing our utmost best to ensure that such critical fate section of the federal road are tackled within the little resource that is available to us,'' he said According to Onolememen, the budgetary allocation alone is not enough to stimulate the road development that would sustain the economy of the nation. He said that was why it was mandatory for every country to have a special fund set aside for infrastructural
development. ''That was what the National Development Plans were doing in the post-independent era and that was why they succeeded the way they did. ''Thus, waiting for the budgetary allocation alone is not enough in order to stimulate Private partnership fund into the sector and that was what necessitated the road sector reforms.'' He said that the reform in the road sector would be exploited to woo Public Private Partnership investment into the sector. The minister said the SURE-P was a blessing to infrastructure development in Nigeria because it had helped in scaling up most road projects it's the country since its introduction. He said that the ministry was able to upscale construction work from the Abuja-Lokoja way from the 18 per cent it met the project to about 72 per cent as at December 2013. He added that the Benin-Ore road alignment had been fully completed while the Sagamu to Ajebandele road had been awarded for asphalt overlaying through SURE-P funding. He said that about 10 to 12 billion
naira had gone to the road sector and this had helped to award the contract of the construction of the Oweto Bridge in Benue and the second Niger Bridge.
Onolememen
said no road
project was abandoned or forgotten as
the ministry was working with the
Federal Road Maintenance Agency
(FERMA) to ensure that most roads
were put in good shape especially the
Umuahia-Ikot Ekpene road
SUSTAINABLE ROADSOnolememen: Nigeria needs N500 bn annually for four years sustainable road network
Airport road, Abuja
It is no longer news that Nigeria has a housing deficit in excess of 17 million units, with an estimated requirement of
about 720,000 housing units to be constructed yearly to plug this deficit. Also, the mortgage industry is just starting if one looks at the size of its contribution to the country’s GDP of less than 1 per cent. This is seen as one of the major reasons why the housing deficit has over the years been one of Nigeria’s major challenges as a nation. The Federal Mortgage Bank of Nigeria (FMBN) was established in 1992 by the National Housing Fund Act 3 with a mandate to promote the delivery of affordable and modern houses to Nigerians. The bank operates as an effective vehicle for increasing the mobilization of long-term funds, lending volume and expansion of mortgage lending services to all segments of the Nigerian population; it does this by mobilizing long-term funds from Nigerian workers, banks, insurance companies and the Federal Government to advance loans at soft interest rates to its contributors. The bank is rising up to the challenge with the new National Policy on Housing where the Federal Government in its bid in transforming the housing sector has set a target of delivering 1 million housing units every year. Through this agency’s intervention, the federal government has released
N1.83 billion to finance housing projects in some parts of the Federal Capital Territory (FCT). FMBN Managing Director, Gimba Ya’u Kumo was recently quoted as saying that:”The board of the bank has approved N1.83 billion to finance this project and has disbursed the first tranche. Upon completion, we expect this estate to deliver 272 housing units comprising 70 units of two bedroom semi-detached bungalows, 112 units of three bedroom semidetached and 90 units of three bedrooms fully detached houses. The bank has assured contributors to this
national housing project that this project serves as evidence to the relevant contr ibutions of the h o u s i n g d e l i ve r y i n Nigeria.” Our findings revealed t h a t t h e b a n k h a s c o m m e n c e d o n t h e au tomat ion of both r e c o r d - k e e p i n g a n d operational processes by providing necessary IT infrastructure in its Head Office It has also launched the National Housing F u n d e - C o l l e c t i o n s Platform that was said to have greatly improved the fund’s operations as it
executes deduction, remittance and record-keeping functions using the IT infrastructure of commercial banks in the country with ease. According to a source in the bank, this single act has ensured openness, transparency and accountability as contributors are issued individual NHF e-cards similar to ATM bank cards which serve as identification cards. With the NHF e-Card, a contributor can use any of the hundreds of thousands of bank ATMs nationwide or use the Internet to access real-time, up-to-date record of contributions. In addition, contributors can receive SMS transaction alerts on their GSM phones. The instant NHF deductions are effected which allows for seamless remittance of NHF deductions to FMBN and provides for historical and up-to-date record of individual contributions. This platform not only eliminates the deficiencies associated with the manual collection method, but also ensures efficiency and accountability in NHF collections. In the past 30 months, the Bank has recorded a total of N58.8 billion which accounts for 53.1% of its cumulative collections of N110.79 billion, while monthly average collection has risen by 174% over the same period. The non-salaried sector is not left out as the bank has in the last 12 months, expanded its market coverage and begun operations to effectively integrate the non-salaried informal sector into the National Housing Fund scheme, using
Mrs. Akon Eyakenyi, Minister of Housing
Mortgage financing as panacea to Nigeria’s housing deficit
SOLVING THE HOUSING CHALLENGE
AContinued on page 39
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The Board and Management of YOLAS CONSULTANTS Ltd.
Engineers, Planners and Project Managers Rejoices As Nigeria Celebrates 100 Years of Unity.
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ELECTRICITYCOVER
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The infrastructure investment space continues to attract the attention of the nations of the
world (developed and developing nations alike) and the global investment community. As populations grow, infrastructure needs expand including needs for transportation assets, health and education facilities, communications networks, utility and energy distribution systems, and so on. In Nigeria, as in other parts of the world, whilst infrastructure needs continue to expand and increase, government revenue continues to be constrained. Unstable crude oil production, significant cost of debt servicing and increasing expenditure on subsidies has contributed to widening the huge infrastructure gap that has been in place over the years. Nigeria 's infrastructure stock stands at 35% of her Gross Domestic Product (GDP) which is below the international benchmark of 70% of GDP. As the table below shows, when compared to other emerging economies, Nigeria's infrastructure stock is inadequate. The Federal Government of Nigeria has been taking some proactive steps to
NIGERIAN RULES: New Nigerian SEC rules on infrastructure funds
address the infrastructure deficit in the nation. Some of these steps are discussed below.
Nigeria is fast embracing the financing of public infrastructure by the private sector by creating an enabling environment to encourage private sector investors to address funding shortfalls and to support e c o n o m i c d e v e l o p m e n t . T h e Infrastructure Concession Regulatory Commission (“ICRC”) was established in 2005 to accelerate investment in national infrastructure through private sector funding by assisting the Federal Government of Nigeria and its Ministries, Departments, and Agencies to implement and establish effective Public Private Partnership's (PPP) procurement. The ICRC was established by the Infrastructure Concession Regulatory Commission (Establishment, etc) Act, 2005. Infrastructure projects of the ICRC include the concession of the Kainji, Jebba and Shiroro power plants in partnership with the Bureau of Public Enterprise; construction of the second Nigeria Bridge, a 6-lane dual carriageway
Public Private Partnership
approximately 1.76 kilometres long; the concession of 33 silo complexes located in different States of Nigeria on behalf of the Federal Ministry of Agriculture.
The National Economic Council (NEC) on Tuesday, 24 June 2014, considered the final draft of the National Integrated Infrastructure Master Plan (“NIIMP”) meant to accelerate infrastructure development in the country. The NIIMP was formulated to span 30 years beginning from 2014 to 2043 with focus on key areas of infrastructure including energy, housing, agriculture, ICT, transport, and security with a target i n v e s t m e n t r e q u i r e m e n t o f approximately $2.9 trillion over the next 30 years. NIIMP clearly identifies required investment to bring infrastructure in Nigeria to desirable state. NIIMP's key objective is to ensure coordinated approach to infrastructure development in Nigeria and help to integrate diverse infrastructure plans and projects across all sectors and regions in Nigeria. In order to bridge the current infrastructure gap and reach desired optimal investment, NIIMP states that Nigeria must increase core infrastructure stock from 35-40% of GDP in 2012 to 70% by 2043. The NIIMP document indicates that about $127 billion is required over the next 5 years translating to an average of $25 billion per annum from 2014-2018 (“the 1st Operational Plan Period”). Budgetary resources alone, currently standing at $9 -10 billion for capital expenditure per year, will be inadequate to m e e t N i g e r i a ' s i n f r a s t r u c t u r e requirements. At the States level, financing of infrastructure will also require private sector participation. During the 1st Operational Plan Period, the private sector investment requirement is projected to increase from 46% to 48% and public sector investment projected at 52% out of which only about 15% of public sector funding is projected to be from the government treasury, leaving the balance of 85% to be sourced through the debt capital markets as well as the traditional lending market. As
National Integrated Infrastructure Master Plan
Photo of Prot Harcourt Monorail line
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expressed their grievances against DISCO on the contentious fixed charge of N750 which it tagged “illegal and extortionary”. Also included on the list of grievances was failure to supply pre-paid meters already paid for, estimated billings without meter checks and poor power supply even when customers pay monthly electricity bills. By making the collection from ignorant consumers they alleged that DISCO has committed to fraudulently enriching it’s management at the expense of the poor, hapless and innocent Nigerians, who crave electricity at home and for business but do not get any during the month, but most part with a reasonable amount in the name of fixed charge. Regrettably, while Nigerians have been complaining of the illegal fixed charge and high electricity tariff without a commensurate service on the part of DISCOs, the federal government took a further step in its power sector reform programme by announcing an upward review of tariff from N8.50 to N10 per kilowatt. They noted the move was aimed at making the power sector attractive to investors who have been arguing that the tariff in Nigeria is the lowest in the world and as such, it does not make the market viable.
The price hike is a deviation from the promise made by the commission that it would not increase tariff until there was a marked improvement in the power supply. Even last year, the federal government said it would crash the “real cost” of electricity tariff by 65 percent, as part of the measures to check the present trend whereby exorbitant real cost of electricity consumed by Nigerians has led to high cost of goods and services in the economy. In the light of the above statements, many consumers have started to wonder what the federal government is up to. This decision to increase electricity tariff regardless of DISCO’s poor services has drawn a lot of flak from Nigerians. Because there is no guarantee that the rise in tariff would bring about
any improvement in power supply, since the goal of increasing power supply to about 5,300 megawatts was not met, the shortfall will continue to reflect on the poor performance of the DISCOs. From all indications, what Nigerians want now is certainly not increase in power tariff or retention of the inexplicable fixed charge, but increase in current supply that will ensure steady power. DISCOs should be committed to supplying constant electricity to consumers, and surmounting some of the challenges they met on ground
including, “aged, undersized and over extended high and low tension feeders, over billing of customers, no service orientation, staff illegally collecting money, illegal connections. Others are power theft, inadequate metering, inadequate power supply, low level of information available, poor health and safety practice, poor maintenance practice and others. They should strive to provide over 8,000 backlog of prepaid meters paid for by customers under the previous regime; high volume of estimated billing, liabilities from PHCN, and power theft. With all these manifesting, there is no doubt that electricity consumers will assist DISCOs in providing effective power to them.
NIGERIA SALES OFFICE CEO/Publisher, CED Magazine Century 21 Systems Comm. Limited Mr. Kenneth Odusola-Stevenson 14, Shofidiya Close, off Ilesanmi Street, Masha Surulere, Lagos, Nigeria Tel: 234 1 774 3404 Mobile: 234 805 5243 516 E-mail: [email protected]; [email protected]
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OPAL AWARD/CORPORATE COVER
ELECTRICITY CHALLENGE
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infrastr ucture f inance entails long term, high initial capital requirements, it does not appear that Nigerian banks can provide the needed financing on their own.
N e w r u l e s o n infrastructure fundsApparently in response to the need to bridge the infrastructure gap, Nigeria's Securities and Exchange Commission (“SEC”), in the exercise of its powers to make rules and regulations under the Investment and Securities Act 2007, has introduced a set of rules to govern infrastructure funds in Nigeria (“IF Rules”). The IF Rules apply to infrastructure funds constituted as collective investment schemes, a broad concept which includes a scheme in any form, including an open - ended investment company, in pursuance of which the members of the public are invited or permitted to invest money or other assets in a portfolio. In addition, all other SEC Rules and Regulations applicable to collective investment schemes will also be applicable to Infrastructure Schemes/Fund, the Trustees of such schemes/funds as well as the relevant Fund Management Companies, except where the context of the Rules and Regulations in relation to Col lec t ive Investment Schemes otherwise requires.
Establishment of infrastructure fundsAn “Infrastructure Fund” is considered as a specialised fund or scheme that invests primarily in (each as defined in the IF Rules):· The securities or securitized
d e b t i n s t r u m e n t s o f infrastructure companies
· I n f r a s t r u c t u r e c a p i t a l companies
· Infrastructure projects· Special purpose vehicles created
for the purpose of facilitating or promoting investment in infrastructure
· Completed revenue generating infrastructure companies or
projects or special purpose vehicles ((a) – (e) above are Permissible Assets)
· Other Permissible Assets such as money market instruments,
fixed income securities and equities, convertibles including mezzanine financing instruments of companies engaged in infrastructure, infrastructure development projects, whether or not listed on a recognised stock exchange in. Infrastructure funds can be set up as either private equity funds or trust schemesAn infrastructure fund set up as a trust scheme may be open-ended or closeended. The infrastructure trust scheme must have a minimum tenure of seven (7) years unless it is structured as an Interval Scheme. Interval Schemes are close-ended with a five-year lock-in period but can be made open-ended during an interval period, which cannot exceed one month but can occur more than once in the life of an Interval Scheme, within which redemptions can be made and new subscriptions received. Units of an infrastructure scheme may be listed on a recognized exchange, after such units are fully paid up. The approximate time of listing must be stated. A listed infrastructure fund is allowed to buy back units of the scheme from the market for up to 20% of the initial unit during the life of the fund. Infrastructure funds set up as private equity funds are restricted from soliciting funds from the public, are not permitted to be listed on any exchange and may only source funds from Qualified Investors,
which include Banks, Fund Managers, Pension Fund administrators, Insurance Companies and other entities listed in the SEC Rules, each as defined in the SEC Rules.
R e g i s t r a t i o n o f t h e infrastructure fundsSimilar eligibility criteria for the registration of the Unit Trust Funds (and Private Equity Funds in the case of Infrastructure Funds set up as private equity funds) are applicable for the registration of Infrastructure Funds by the S E C. I n a d d i t i o n , a n
Infrastructure Fund will only be registered by SEC where the Fund Manager has a minimum of two (2) key personnel having relevant experience in the infrastructure sector. An approval of registration may be granted to an applicant proposing to establish an Infrastructure Fund where the sponsor or the parent company of the sponsor has been carrying on activities or business in the infrastructure financing sector for a period of not less than five years; and fulfils eligibility criteria for registration as a fund manager.
Investment thresholdsAn Infrastructure Fund must invest 90% of its net assets in Permissible Assets. The balance of 10% may be invested in Other Permissible Assets. A total of 80% of the net assets of an Infrastructure Fund must however be invested in Nigeria. These restrictions are applicable throughout the life-cycle of the Fund and are calculated with reference to the amount raised by the Infrastructure Fund. Other than funds set up for a specific purpose, not more than 70% of the net assets of an Infrastructure Fund can be invested in the securities or assets of any single infrastructure company or project or special purpose vehicle. Investments in debt instruments of any single infrastructure company or project or special purpose vehicles which is rated below investment grade or unrated is limited to 30% of net assets although the limit may be extended to 50% for a good cause with the prior approval of the trustees, the investment committee of the
Pressure on Infrastructure
Electricity ‘fixed charge’: Are Nigerians paying for darkness?
Nigeria’s Minister of Power, Prof. Nebo
The recent increase in electricity tariff is expected, however, the refusal by Niger ian Electr ic i ty Regulator y Commission (NERC) to abolish ‘Fixed Charge’ is becoming a source of worry to many subscribers who could not explain why they will continue paying for a service not rendered. Most of them have described the practice as paying for darkness. While some say the charges in whatever guise are unnecessary and maintained that stable power supply must be in place before any increase in charges. While justifying the retention, Chairman of the commission, Dr Sam Amadi said power consumers in the country will pay N750 as fixed charge for electricity instead of N1, 500 that should have been paid. According to NERC, the decision to retain the current fixed charge was reached after the last minor review of tariffs, but stated that if the review had not been carried out, power consumers would be paying about N1, 500 as fixed charge. He said, “Many of the customers should be paying a fixed charge of about N1, 500. Now, the adjustment has
resulted in a decrease in such that the fixed charge will not change. If this review was not done, the fixed charge should have been about N1, 500 in some places. “But now, the reduction is that instead of having an increment in fixed charge, the consumers now have a decrease from N1,500 that would have been paid from June 1 to N750 for most places.
NERC has always stressed that fixed charge represents the capacity charge on customers for power supplied by power generating and transmission firms to the DISCO. They claimed it has been there and never a new innovation. It was formally N500 and was later increased to N700. The fact remains that once you are connected to power supply you pay fixed charge every month whether there was power supply or not. However, the controversial retention of electricity fixed charge nationwide has generated a lot of controversy. The complaint cut across Civil Society Organisations including students, traders, house owners and politicians, who labeled the continued collection of fixed charge by the Elect r ic i ty Dis t r ibut ion Companies, as illegal. They inquired on the rationale behind incurring fixed charge whether they have supply or not each month. In this outer frustration occasioned by this inexplicable reason of this charges, consumers nationwide have called for a stop to what they tag the “unfounded and illegal collection”. According to the Electric Power Reform Act in section 1, subsection 4-1 “every DISCO shall issue bills for electricity USED at each consumer’s supply address at regular intervals. The intent and purpose of this law was for consumers to be billed for electricity consumed either with prepaid meters; you recharge or with analog you are charged for that which you used. The law never provided for charging citizens fixed fees like DISCOs are doing. The reality is that if you buy a N1, 500 recharge for your prepaid, DISCO collects N750 as fee; if you consume N3, 000 a month on analog meters, they give you bill of N3, 750. It is the N750 they will remove. Only god knows why DISCO is charging people for bills not incurred. To add to the difficulty, they are not even maintaining the meters or replacing faulty electric poles and not even supplying prepaid meters for which many have paid and are yet to get them since last year. Moreover, they charge VAT. All the people are saying, is that the fixed charge is illegal and must be discarded like a pack of card. Electricity consumers have freely
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Infrastructure Fund and the board of the
Fund Manager.The general disclosure requirements for collective investment schemes and private equity funds that apply under the 2013 SEC Rules, will apply to an Offer Document for an Infrastructure Fund, such as details of the investment policy and objective of the fund; the industry or geographical focus of the fund; the investment criteria for target portfolio companies; material risk of investing in the fund and a statement of any minimum investment commitment required of an investor, all of which are typical requirements in other regulated markets. In addition, the Offer Document for an Infrastructure Fund is required to contain information on the projects to be undertaken, the hurdle rate and the exit strategies of the Fund. Other disclosures to be made include the minimum number of subscription units, the interest or penalty which may be deducted in case of nonpayment of call money by the investor within the stipulated time and the amount of interest or penalty to be retained in the scheme. The SEC may also direct on what further information should be disclosed.
The duties of the Fund Manager of Infrastructure Funds are typical of a fund manager registered by the SEC. Specific duties are listed under the Investment and Securities Act 2007 which provides that the Fund Manager should avoid conflicts
The fund manager
of interest, disclose the interest of its directors and management to the investor, maintain adequate financial resources to meet its commitments and to manage the risks to which its collective investment scheme is exposed, amongst others. In addition, such Fund Managers are required to keep and submit (to the Trustees) quarterly records of the decision making process for the acquisition of sale of infrastructure assets and appoint an experienced service provider for monitoring and supervision of the assets.
Reporting requirementsIn addition, Fund Managers are obliged to s u b m i t q u a r t e r l y r e p o r t s o n Infrastructure Funds' activities to both the trustees of the funds as well as the SEC. Infrastructure Funds must be audited annually and the reports filed with the SEC within three (3) months of the year end of the relevant Fund. Upon approval by the SEC, the annual report should be dispatched to investors in electronic form to registered e-mail addresses and also displayed on the Fund Manager's website. Transactions done by any trustee or employee or director of either the Trustee or the Fund Managers with investee companies must be disclosed to the compliance officer within one month of the transaction and views of the Trustees (or in the case of transactions involving Trustees, the Fund Manager) must be sought before entering into such transactions with the investee companies. The compliance officer, in turn, is
required to make a report (from a conflict of interest viewpoint) together with recommendations and submit same to the trustees or board of the Fund Manager as may be applicable. The reporting requirement for a manager of an Infrastructure Fund set up as a Private Equity Fund with respect to Quarterly Returns must be submitted to the SEC which shall include, amongst other things, the total number of investors in the fund; the total commitment received from investors; the total commitment already drawn-down; the current investments of the fund; the current value of the assets of the fund. A Private Equity Fund Manager is also required to issue semi-annual reports to the investors showing details of total commi tmen t s ; d r aw-down and distributions; changes to investment strategy (if any); current and new investments; detai led realization summary by investments; valuation of each investments and statement of benefits, fees and net management fee. These requirements are in addition to the requirement for the Infrastructure Fund to be audited annually and such reports filed with the Commission within three (3) months of the Infrastructure Fund's year end.
Last wordsThe private sector has a huge role to play in bridging the infrastructure gap in Nigeria. The Regulation on Investment of Pension Fund Assets, 2012 issued by the National Pension Commission lists Infrastructure Funds and Infrastructure bonds as allowable instruments in which Nigeria's pension fund assets can be invested, which is a significant step in the right direction. The enactment of the IF Rules therefore c rea tes the enab l ing environment for the issuance of allowable instruments for the investment of Nigeria's $24 billion pension fund assets. It is envisaged that the Nigerian and global investment community will take advantage of this opportunity to provide the needed long term financing for infrastructure development.
This article was written by Kingsley Opia-Enwemuche, Associate at Jackson, Etti & Edu,
and Aramide Oyeneyin, Trainee Associate at Jackson, Etti & Edu.
The crowded train
we can maintain law and order," said another government source. "The military will be deployed so broadcast and communication is secure." Zuma's office declined to comment.
RUN OUT After a power supply crunch and spate of blackouts in 2008, many South African businesses and a few homes have back-up generators, but over time they will run out of fuel – as will the generators at fuel stations, bringing transport to a halt. "Those who have diesel generators will only be able to run them for as long as fuel reserves last, as petrol and diesel pumps work off electricity. Then, people will be in trouble," van Deventer said. Eskom, which supplies almost all the country's electricity, has not put a figure on how much investment it would need to upgrade infrastructure to the level needed to avoid blackouts.
Zuma's government in October said it would inject R20-billion ($1.7-billion) to boost its coffers and convert its existing R60-billion subordinated loan to state-owned equity. At their worst, rolling blackouts or "load-shedding" have never taken out more than 3 000 MW of demand, roughly 10% of consumption. However, many big companies are not taking their chances.
Gold and platinum mining companies say they have emergency power units to get men above ground, but are unable to generate the vast amounts of electricity needed to operate what are some of the deepest mines in the world, at up 4 km (2.5 miles). MTN, Africa's biggest mobile phone firm, has a private 2 MW power plant at its Johannesburg headquarters with 1.5-million litres of diesel reserves – enough, its says, to keep its core operations going for a month.
"If you don't have diesel reserves then you are in big trouble," said Willem Webber, MTN's "core implementation manager" who is working on plans to generate up to 24 MW for the firm's own needs and possible feeding back into the grid. "Imagine a company like MTN down for a month."
Eskom chief executive Brian Dames
Eskom chief executive Brian Dames
Global crude steel production rose 1.2% year-on-year to 1.66-billion tonnes in 2014, the
World Steel Association (worldsteel) revealed on Thursday. While crude steel production in the European Union (EU), North America and Asia expanded by a modest 1.7%, 2%
and 1.4% respectively during the year under review, the smallest region for crude steel production – the Middle East – boasted the most robust growth during the year.The Commonwealth of Independent States (CIS) and South America, however, recorded lower output last year.
Asia delivered 1.13-billion tonnes of crude steel in 2014, with a 0.9% uptick in China’s output to 822.7-million tonnes of crude steel – despite China’s share of world crude s tee l product ion decreas ing marginally to 49.5%. Japan produced 110.7-million tonnes and South Korea 71-million tonnes. During the year under review, crude steel production in the EU was 169.2-mi l l ion tonnes. Nor th American producers delivered 121.2-million tonnes and US producers 88.3-million tonnes. Crude steel output from the CIS contracted by 2.8% to 105.3-million tonnes, with South America registering a 1.4% decrease in
production to 45.2-million tonnes. Steel production in Africa contracted by 0.7% to 15.58-million tonnes, compared with 15.69-million tonnes the year before. South African producers delivered 7.21-million tonnes – 0.6% lower than the 7.25-million tonnes produced in 2013. In December 2014, world crude steel production for the 65 countries reporting to worldsteel was 133.7-million tonnes – an increase of 0.1% compared with December 2013.
World crude steel production increased 1.2% in 2014
STEEL DEVELOPMENT
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Akpabio Attributes Africa's Growth To Advent Of Democracy
DEMOCRACY AND DEVELOPMENT
The advent of democracy and recourse to the rule of law has been identified as the reason for
the recent growth and progress in most African countries. Governor Godswill Akpabio stated this while presenting a lecture at the 2014 Annual Lecture of NewsAfrica Magazine, held at The Dorchester Hotel, London. Governor Akpabio who was also honoured as the Leader of the Year by NewsAfrica, identified that in recent years, several African Countries have recorded significant progress and economic development largely because of the institutionalization of democracy by some African leaders. The Governor who spoke on the topic “Delivering Dividends of Democracy: An African Experience” acknowledged that after decades of military dictatorship in most countries in the continent, democracy came like the dawn for Africans. “Military dictatorship
was characterized by the suppression of human rights and privileges, corruption and nepotism. It was a winner-takes-all system,” adding that the current experience in Africa can be likened to a “summer of freedom, bringing with it a government of the people, by the people, for the people which has set us on paths of glory and reinvention.” Citing Paschal Fletcher of Reuters, Chief Akpabio noted that, “The continent that was a byword for poverty, chaos and bloodshed only a few decades ago, providing a media feast of famines and wars, is slowly but steadily notching up gains on the democracy scorecard too… Combined with better economic management by many governments”. Akpabio mentioned some African leaders like the Governor of the Province of Katanga in the Democratic Republic of Congo, Mr Moise Katumbi Chapwe and President Paul Kagame of Rwanda who have both recorded notable growth
in their respective economies since assumption of office few years ago. The Akwa Ibom State Governor who also applauded the current democratic dispensation in Nigeria re-iterated that the 15 years of democracy in the country has recorded more gains in the country than the 35 years of military rule.Such gains include the regulation of the communication sector, which led to the introduction of Global System for Mobile Telecommunication (GSM) in the country; passage of the freedom of information bill; the revolution in the aviation sector; establishment of more Federal Universities and other higher institutions; the deregulations of the downstream sector of the economy; the reintroduction of railway transportation, the construction of many dual carriageways among others. “Despite the challenges of insecurity, which I believe will soon be history, President Goodluck Ebele Jonathan, has instituted laudable policies, programmes and interventions that shield the Nigerian economy making it the 26th largest economy in the world and the largest in Africa.
North–South road, rail and related infrastructure corridor, managed by South Africa. “In addition, a number of hard and soft infrastructure issues and projects are in progress and are being addressed. To date, there are various projects in various stages of the project lifecycle, including road, rail, bridge, border posts and energy projects,” he said. Among these, South Africa and
Zimbabwe continued to work together to improve operations at the Beit Bridge border post. The PICI Ministerial Working Group had also, at a January 16 meeting, recommended that a number of energy projects be developed. These would include the Strategic North–South Transmission Line, the Sahel Desert Tech Solar Project and the Central Power Transmission Line. The Ministerial committee had, in addition, recommended that South
Africa champion the manufacturing and production of locomotives and wagons as part of a “deepened industrialisation drive”. Zuma emphasised the importance of infrastructure as a means to ensure sustainable development, stating that Africa was “on the right track”. Further, he stressed that, in addition to regional infrastructure plans, countries on the continent also had to invest in national infrastructure.
Zuma on Infrastructure
Days of rolling blackouts recently have blighted South African society and business, and they face an increasing
number of outages in years to come. But the alternative, a grid collapse, could be catastrophic. Bordered by tiny, war-scarred or impoverished states such as Botswana, Mozambique and Zimbabwe, Africa's most advanced economy cannot rely on help to power its 42 000 MW electricity network and has nobody to turn to if the lights go out. State power firm Eskom has implemented rolling blackouts for almost a year as its old, deteriorating infrastructure buckles under the strain. They are a last-resort measure to avoid total failure of the power system.Such a collapse would bring the country to its knees within days. After their back-up diesel generators run out, everything from hospitals to water suppliers and
mobile phone firms could cease to function, while law and order could break down. Eskom has suffered from years of underfunding and investment in new plants has not kept up with demand. It has warned South Africans face rolling blackouts for several years to come. As yet no plans for a long-term solution have been announced. President Jacob Zuma's government is working on a financing plan for the sector and details are expected to be outlined when the finance minister presents the budget next month. Rolling blackouts – when electricity is shut off to specific areas at certain times to conserve capacity – became more frequent in November after a major power-generating silo collapsed. There have been three days of power cuts this week alone. Many restaurants, shops and offices
simply shut when they hit – a big blow to an economy whose growth averaged 5% in the five years before a 2009 recession, but has languished below 2% since, and a deterrent to foreign investment. Crime is already a major concern for most South Africans and with no power going to electric fences or security gates and streets pitch black at night, criminals have new opportunities in a nation with 25% unemployment and massive inequality.
TROOPSSuch effects can be devastating – but they still pale in comparison with the consequences of a grid collapse. The chaos would not be short-lived. Eskom, which stresses that a complete shutdown is extremely unlikely, nonetheless has emergency plans in place to resume power delivery – known as a "black start" – but warns it would take weeks. "In our projections, it is roughly a two-to-four week period to restart the whole country," Al'Louise van Deventer, Eskom's national control manager, told Reuters at the utility's nerve centre near Johannesburg. Behind her in the bowels of the ultra-secure building stand banks of screens and computer terminals, staffed round-the-clock in an operation similar to NASA's mission control. In such an emergency scenario, Zuma and his cabinet would be taken to a secret location and soldiers would be deployed at key sites such as the central bank and South African Broadcasting Corporation HQ, a government source said. "The government has command centres that will be activated to make sure
South African power cuts hold off doomsday as sector seeks rescue
SUPPLY SHORTAGE
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He also listed some dividends of democracy in Akwa Ibom State which has transformed the State into a preferred destination. Such programmes include the free and compulsory education, turn key infrastructure, free medical care, and quality road network among others. He maintained that Akwa Ibom State is now a reference point in democracy and good governance. According to him, “We have within the last seven years turned a state with a dearth of infrastructure, into an investment hub and tourist delight.”Among those who spoke at the event
included, was the Chairman of Business Council on Africa, UK Mr Patrick Orr
who set the tone by commending the Governor for his transformation programmes in Akwa Ibom State. Also speaking, the Publisher of NewsAfrica Mr Moffat Ekoriko said Chief Akpabio was the only man to be honoured with the Leadershiip Award by the Magazine, after the former Secretary General of the United Nations, Mr Kofi Anan who was earlier honoured in 2002. Mr Ekoriko said Akpabio was voted “for showing uncommon leadership in a country where leaders see their success in office in terms of personal wealth…and for giving hope of a greater future for Nigeria, a key country in Africa.”
In this fascinating article, Ben Armstrong explores the evidence around mobile usage and electrification to ask what implications
developments in these two areas can have on a country's democracy and GDP. Ben Armstrong is CEO at WellDone, an organization using mobile technology to collect and communicate critical infrastructure data.In rural Nigerian hospitals, doctors hold mobile phones with their teeth as they deliver babies by the dim light of a Nokia screen. The power has long since died, and doubting that it will return, doctors transform the nearest handset into a surgical device. Mobile access in Africa is more reliable than power, water, or sani tat ion infrastr ucture. Whi le historically unorthodox for a reliable mobile network to precede a reliable power grid, robust mobile access can improve the speed and accountability with which reliable power infrastructure
is distributed in Africa. The continent's leap past landlines to use mobile phones for both mundane and innovative purposes has excited telecommunications companies and prompted expanded investment in mobile infrastructure. Data indicates that mobile coverage includes 59% of Africans, while only 35% of the population has access to electricity. There are 33% more cell phones than toilets on the continent. The mobile network has become the strongest infrastructure that countries can boast. What matters in the final analysis, however, is not just that infrastructure e x i s t s b u t t h a t i t f u n c t i o n s comprehensively and reliably. Often, a c r o s s t h e c o n t i n e n t , w h e r e infrastructure exists, it remains sparse and unreliable. For example, on average across the continent, firms go 1 in 5 days
without power and at least 1 in 3 water handpumps are broken at any time, according to World Bank and UN statistics. Even cell towers rely on diesel generators with the expectation that the grid will fail often enough to interrupt service. Functioning infrastructure is the single biggest factor shaping the investment climate on the continent - more so than corruption or red tape, World Bank surveys have concluded. Such statistics tell us more than the acute, oft-lamented need for more reliable critical infrastructure in Africa: they also reveal a surprising relationship between infrastructure, growth, and democracy on the continent. Country data suggests a positive correlation between Global System of Mobile Communication (GSM) access and democracy, but no significant relationship between GSM access and GDP. Moreover, there is a p o s i t i v e c o r r e l a t i o n b e t w e e n electrification and GDP, but a slight n e g a t i v e c o r r e l a t i o n b e t w e e n electrification and democracy. A more democratic country is likely to have better mobile access than an undemocratic country. The fundamental po in t makes sense , a s mob i l e infrastructure is often developed more quickly by private enterprise. Moreover, restrictions on communication in authoritarian regimes might not shrink the demand for mobile access, but it does reduce operators' ability to meet it. That there is no strong relationship between mobile access and GDP might surprise those who see mobile as a boon for
POWERING DEMOCRACY AND GROWTHExploring the links between electrification, mobile use, growth and democracy.
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Commenting in his capacity as chairperson of the Presidential In f r a s t r uc tu r e Champ ion ing
Initiative (PICI), President Jacob Zuma recently provided an update on the progress of several cross-border and reg iona l in fa s t r uc ture pro jec t s championed by the heads-of-State cluster and aimed at accelerating regional trade. The PICI served to link African heads of State to specific infrastructure corridors to ensure strategic political leadership in the championing of cross-border infrastructure projects.These were projects that were aimed at ultimately unlocking the economic potential of the continent and providing deve lopment oppor tun i t i e s for communities, cities and regions, Zuma explained. Addressing the thirty-second summit of the New Partnership for Africa's Development (Nepad) Head of State Gove r nmen t s and Or i en t a t i on Committee, he said South Africa continued to ensure the advancement of multimodal infrastructure in the cross-border North-South Corridor; including road, rail, border posts, bridges, ports, energy and other related infrastructure. The corridor passed through 12 countries, namely Tanzania, Congo, Malawi, Zimbabwe, South Africa, Zambia, Botswana, Mozambique, Kenya,
Ethiopia, Sudan and Egypt. “Through this initiative we are leading the charge in infrastructure development across the continent and these projects form the nucleus of the implementation of the broader Programme for Infrastructure Development in Africa,” he commented. Commenting on the “missing link” of the Trans-Sahara Highway – a road corridor aimed at improving and easing border formalities on an existing trade route across the Sahara Desert – Zuma outlined that the construction of the remaining 100 km stretch across Algeria would start early this year. “The construction of this highway is expected to be completed by 2017,” he noted. Meanwhile, the roll-out of a fibre-
optic network from Algeria to Nigeria through Niger was also set to start later this year, while the PICI’s objective to connect five capital cities through broadband links had been completed in 2013. “All the five countries are now interconnected a n d l i n k e d t o t h e submar ine cab les a t Mombasa and Dar es Salaam.This brings this particular PICI project to successful completion within three years as planned and is a flagship successful project for the
PICI,” he noted. Zuma further revealed that the West African Economic and Monetary Union had agreed to finance all technical studies r e l a t e d t o t h e Dakar¬–Ndjamena–Djibouti road and rail link, which were expected to be completed at the end of November. The project implementation phase was due to start before 2018. Meanwhile, the execution of contracts for the early gas phase on the Nigeria–Algeria gas pipeline, known as the TransSaharan gas pipeline, were in progress. Moreover, two workshops were planned for 2015 to finalise the detailed design stage of the Kinshasa–Brazzaville Bridge road and rail project, after which the project would move to the tender process for construction of the bridge – envisaged to be completed by 2025. Further, Zuma said the prefeasibility study for the establishment of a navigational line from Lake Victoria to the Mediterranean Sea via the River Nile project, in Egypt, was now expected to be completed by the end of May. “The project would also embrace an intermodal transport system… and to enhance data collection, missions to Sudan, South Sudan and Uganda are planned for February. The project is expected to be operational by 2023,” he noted. “Significant progress”, meanwhile, continued to be made with the
SUSTAINABLE INFRASTRUCTUREZuma outlines progress on African infrastructure projects
South African President, Jacob Zuma
30 | CED Magazine January 2015
OIL AND GAS REPORT
CED Magazine January 2015 | 23
COVER EXTRA
There is a minor negative correlation between
electrification and democracy: among African states with
strong electrification, seven are undemocratic and four
democratic. Among the states with weak electrification data, seven are democratic and five
undemocratic.
business and innovation. While mobiles might accelerate financial transactions and unlock new opportunities for micro-entrepreneurs, the largest drivers of GDP growth are not affected by increases in mobile access at the margins. The relationship between electrification and GDP is similarly intuitive. As GDP increases, countries are more l ike ly to have increased electrification. It is important not to overstate this claim, however, since electrification measures where electrical infrastructure exists, but not its reliability. Even so, the implication is that more access to power is good for economic growth. There is a minor negative correlation between electrification and democracy: among African states with strong electrification, seven are undemocratic and four democratic. A m o n g t h e s t a t e s w i t h we a k electrification data, seven are democratic
and five undemocratic. The main conclusion here is that more electrification has not translated into more democracy, even though broader access to electricity implies increased opportunities for speech, commerce, education, and participation in government. It could be that electrification has provided largely unreliable power, so the statistic is a representation of a country's investment in power, but not necessarily access to it. Another explanation is that electrification is more prevalent in resource-rich countries, where the rentier effect has stalled democratic development. Indeed, two of the undemocratic, strongly electrified, states are resource-rich countries (Nigeria and Sudan), where robust infrastructure might be related to extraction. It is more surprising that African democracies have struggled so much to electrify, while electrification has substantial political benefits to those in power, and the access to infrastructure financing is more available for democratic states. These dual trends - rapid growth in mobile access, stagnating electrification -
invite use of the mobile network to illustrate where the power grid is weakest and call for improvements. A simple first step is to place an inexpensive mobile sensor in diesel generators that serve as backup power for cell towers. The mobile sensor can read how much diesel is pumped and report the data back by the mobile network. The diesel data will reveal how often the grid fails as well as how expensive these grid failures are for business. Real-time data collection with mobile networks can identify the cost of poor and absent power, which guides governments where to invest and companies where to establish operations. Political leaders who claim to deliver power to their districts and campaign on these improvements become accountable to the voters through data. While power can often be an instrument of patronage politics, reliability data pressures political leaders to prove their effectiveness by delivering power as a public good with uniform reliability. Otherwise, they invite strong populist critics who can wield stark evidence of their favoritism or false promises. If power data become indicators for companies looking to expand and citizens looking to vote, the pressure for reliable electrification is on.
Airport
The relationship between electrification and GDP is similarly
intuitive. As GDP increases, countries are more likely to have increased
electrification.
GAS DEVELOPMENT
The once-promising notion that gas was soon to become a game changer in Africa seems unlikely
to happen in the near future, owing to the negative impact of the low oil price on the industry, says growth consulting firm Frost & Sullivan. “A preliminary assessment of global market moves by international oil companies (IOC) and gas producers seems to show that oil and gas exploration [projects] have been negatively affected by low oil prices,” says Frost & Sullivan Africa consulting associate Kumbirai Gundani. Oil and gas companies Royal Dutch Shell and Tullow Oil last year cut exploration costs and implemented divestment plans, which negatively affected exploration projects in Mauritania and Namibia, in Africa; as well as French Guiana, off the north Atlantic coast of South America.
Exploration and Drilling Cuts Gundani tells Engineering News that Frost & Sullivan is expecting several
IOC’s to make exploration and drilling cuts this year. Multinational energy corporation ConocoPhillips announced in December last year that it would slash capital expenditure in 2015 by 20%, reduce its spending budget to $13.5-billion and defer significant investment on its pro jects, inc luding in i t i a l - s tage development and exploration drilling. The company is likely to defer its early-stage Block 37 exploration in Angola’s Kwanza basin after finding a dry well in the adjacent Block 36 late last year, says Gundani. He further points out that oil and gas company BP is planning to cut costs by close to $2-billion as it attempts to arrest drops in profits. Industry analysts also expect energy corporation Chevron to cut costs by 11% to 14% of its exploration and drilling budget, Gundani says.
Brighter Outlook Gundani points out, however, that there are some positive developments taking
place amid the expenditure cuts. He says Mozambique is aiming to unlock its gas reserves this year, driven by secure demand from likely offtakers that include, but are not limited to, Japan, India and South Africa. “In lieu of falling oil prices, gas projects are relevant. Besides dry and liquefied natural gas, the gas industry also produces other industrial products, like butane, cement, gas condensates, methanol and urea fertiliser, which all increase the investment return and attractiveness of gas projects, especially in terms of economic industrialisation.” Gundani says African policymakers need to ensure that competitive and comprehensive gas master plans and regulations, designed and tabled timeously, are implemented to attract and sustain foreign direct investment in gas projects. He concludes that, while policymakers design and implement clear legislation to regulate the industry, the opportunity for regional engineering, procurement and construction management companies exists to tailor gas offerings accordingly and to capitalise on unlocking vast opportunities in the African gas economy.
Oil prices affecting progress of gas in Africa
CED Magazine January 2015 | 29 CED Magazine January 2015 24
OIL AND GAS REPORTGLOBAL REAL ESTATE
Shell hopes to press ahead with its controversial drilling campaign in the Arctic this summer, despite
announcing plans to slash group investment by $15bn (£9.9bn) over the next three years. The Anglo-Dutch company has disappointed investors with a larger-than-expected 44 per cent drop in fourth-quarter profits, as the tumbling oil price took its toll on the bottom line. Furthermore, Shell warned that the damage inflicted on its balance sheet by falling oil prices had worsened during the current quarter, and said it was looking further to reduce the costs of its North Sea operations. Shares in the company fell by nearly 5 per cent to close at 2,138p. While low oil prices have forced Shell to curtail spending in the short term, its chief executive, Ben van Beurden, said prices would eventually rebound and it was important not to overreact to the declines by indiscriminately scrapping longer-term projects. As a result, Shell aims to continue with its Arctic campaign, which it suspended after its ice-strengthened drill barge Kulluk ran aground off Sitkalidak Island in the Gulf of Alaska on 31 December 2012. Although Alaska's oil is potentially expensive to extract, Shell strongly believes the Arctic offers great opportunities for
exploration in future. "Will we go ahead? Yes, if we can," declared Mr van Beurden. "That will depend on whether we are technically and logistically ready to go ahead. "I will be so disappointed if we aren't because we have been working on this for a long period of time. We have kept all our capability in place, tuned it, upgraded it, just to be ready to drill this upcoming summer season." He noted that Shell still needed to resolve various legal disputes and secure several permits before it could begin exploratory drilling in the Chukchi Sea, but he said he was hopeful of doing so. Shell's comments about its Arctic ambitions are the clearest it has made about its intention to continue working in Alaska since the Kulluk accident. However, the news angered environmental campaigners. Charlie Kronick, of Greenpeace, said: "Despite announcing cuts, Shell has not taken the opportunity to cut its most high-cost, high-risk project. Shell is taking a massive risk doggedly chasing oil in the Arctic, not just with shareholder value, but with the pristine Arctic environment. A spill there will be env i ronmenta l l y and f inanc ia l l y catastrophic. It is time for investors to recognise that it is impossible for Shell to justify its continued pursuit of offshore
Arctic oil." The investment cuts were unveiled as Shell reported a $3.26bn profit for the fourth quarter, compared with the previous three months. It said it had suffered as the price of oil tumbled by more than 50 per cent since July to less than $50 a barrel. Shell's upstream division, which produces oil and gas, saw profits dive by 60 per cent over the period. However, the chief financial officer, Simon Henry, warned that oil profits could fall further this quarter, pointing out that the average price in the fourth quarter was $77 a barrel - well above the $50 mark seen for most of this year. "Although we saw a couple of billion dollars of year-on-year price reduction overall, that is not the full extent of the reduction in the oil price today," he said. "That full extent will roll through into the Q1 results and beyond, depending on how long… so there is still further downside to come." Shell also cautioned that the North Sea was "a tough place that just got tougher" as it renewed its call for the British Government to reduce taxes on operations in the area. Mr van Beurden said there was no question at the moment of closing oilfields early but acknowledged that he would keep a close eye on costs. Contractors and the supply chain would be the first to be squeezed. Mr van Beurden pointed out that there were ways to cut costs other than through job losses, although he did not rule them out. "Of course we will look at areas where we have high costs, and the North Sea is one of those… but there are other ways to take out costs [than redundancies]," he added. Shell said it typically takes some time before falling oil prices translate into changes in consumer behaviour. However, asked what might happen if prices remained subdued for a long time, Mr van Beurden said it would "not help the drive to shift away from fossil fuels into renewables". "It would not help with the drive to improve fuel-efficiency standards in cars, unless they are mandated, and could also change consumer behaviour towards hybrid or electric vehicles," he said. Shell's fourth-quarter profits were 12 per cent higher than in the fourth quarter of 2013 - a torrid period in which it was forced to issue a profits warning. Full-year profits were up by 14 per cent, at $19bn.
GLOBAL OIL CRISIS
Tom Bawden
Energy companies are being forced to adapt to the new oilprice environment
Foreign ownership restrictions relaxed, increasing interest from international investors, property
industries going mobile - these are just some of the developments that are on the cards for frontier real estate markets in 2015.As 2014 draws to a close, global property portal Lamudi looked at five key trends to watch out for in emerging market real estate next year.
Changes to foreign ownership lawsIn many emerging markets, foreigners are prohibited from buying property. In the Philippines, for example, the country's constitution bans non-Filipinos from owning land. However, there are signs this may be about to change. 2015 will see countries in the Association of Southeast Asian Nations (ASEAN) merge to form a single market. The establishment of the ASEAN Economic Community is expected to boost foreign direct investment in the Philippines and also in untapped markets across the region, putting pressure on lawmakers to amend these ownership restrictions. In 2015, foreign ownership laws will also come into focus elsewhere in Asia, with debate set to continue in Indonesia and Myanmar about opening up the count r i e s ' p roper ty sec tors to
international investors.Increasing investor interest Foreign direct investment (FDI) in emerging countries has recently hit record highs and this trend is expected to continue for 2015. Africa's share of global FDI projects has also been increasing steadily over the past decade. A recent report from the African Development Bank, the United Nations Development Program and the Organization for Economic Cooperation and Development forecast that FDI in the continent would hit a record $80 billion in 2014, with real estate a major contributor. In May, Ernst & Young's Africa attractiveness survey revealed that FDI projects in the real estate, hospitality and construction sector had increased by 63 percent, making the sector the fifth most attractive for foreign investors.
Growing middle classes boost demandCountries such as Indonesia have seen significant growth of their middle class. On the back of strong economic growth in the country, the number of middle class and affluent Indonesians is expected to reach more than 140 million people by 2020, according to research from the Boston Consulting Group. The impact of this trend cannot be underestimated, as it
continues to be felt in 2015. As people become more affluent, they also become better educated, more career-minded and have more purchasing power - including within the property market. They buy houses earlier and more often, leading to increasing turnover and demand for property.
Mobile internet transforms property industriesAcross the emerging markets, more and more people are switching online every year. But the internet revolution in emerging countries has been different to the digital wave that already swept the developed world. For many people in these regions, the first time they access the web they will be using a mobile device or smartphone. This trend has been particularly pronounced in Latin America. Over the past six months, more than 1.1 million sessions on the Lamudi Mexico website were carried out using mobile devices. In Colombia, over half (51.25 percent) of new sessions on the Lamudi.com.co website come from mobile devices. For those working in the real estate industry, this means their focus for 2015 must switch to mobile for marketing their properties and reaching the maximum number of potential customers.
High growth - and optimism - continuesIn a recent online survey conducted by Lamudi, real estate agents across the emerging markets predicted high growth for their national property sectors in the coming year. In Saudi Arabia, nearly a quarter (23 percent) of agents believe there will be growth of eight to 10 percent over the next year. Similar results were seen elsewhere in Asia and the Middle East. In Sri Lanka, where the real estate sector has expanded rapidly since the country's civil war ended, more than half the agents surveyed by Lamudi forecast growth of eight percent or above for the coming year. The survey also recorded high levels of optimism among property agents, with 65 percent brokers in Pakistan, Sri Lanka, Myanmar and Indonesia describing their outlook as positive for 2015. Optimism among brokers in the Philippines is particularly high - nearly 93 percent of those surveyed were positive about the coming year.
2015 FORECAST:What's in store for the global real estate sector?
28 | CED Magazine January 2015 CED Magazine January 2015 | 25
OIL AND GAS
I N T E R N A T I O N A L
OIL & GAS REPORTA M a g a z I n e P u b l I c a t io n
FALLING OIL PRICES: WINNERS AND LOSERS
C O M I N G E V E N T
JOIN US AS WE HONOUR THE CED MAGAZINE’S PROFESSIONAL OF THE YEAR 2014
Global oil prices have fallen sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations, while
consumers in many importing countries are likely to have to pay less to heat their homes or drive their cars. From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. But since June prices have more than halved. Brent crude oil has now dipped below $50 a barrel for the first time since May 2009 and US crude is down to below $48 a barrel. The reasons for this change are twofold - weak demand in many countries
due to insipid economic growth, coupled with surging US production. Added to this is the fact that the oil cartel Opec is determined not to cut production as a way to prop up prices. So who are some of the winners and losers? Russia: Propping up the rouble The falling rouble and plunging oil revenue are some of President Putin's biggest challenges Russia is one of the world's largest oil producers, and its dramatic interest rate hike to 17% in support of its troubled rouble underscores how heavily its
economy depends on energy revenues, with oil and gas accounting for 70% of export incomes.Continue reading the main story US Dollar v Russian Rouble
$1 buys change %70.4760 + +1.55 + +2.25 Russia loses about $2bn in revenues for every dollar fall in the oil price, and the World Bank has warned that Russia's economy would shrink by at least 0.7% in 2015 if oil prices do not recover. Despite this, Russia has confirmed it
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focus on the following: The company is deferring spending in many areas, which should result in reduction of potential capital investment for 2015-17 of over $15 billion. "Shell is considering further reductions to capital spending should the evolving market outlook warrant that step, but is aiming to retain growth potential for the medium term." Shell operates in over 90 countries and is Nigeria's oldest energy company. Shell Companies in Nigeria produce
oil and gas from land and swamps in the Niger Delta and also operate Nigeria's
largest liquefied natural gas (LNG) plant, which exports all over the world. It also has shareholding and joint venture partnership with many oil and gas companies in Nigeria. Shell announced in June it has taken final investment decisions for the Trans Niger Pipeline loop-line (TNPL) and the Gbaran-Ubie Phase Two projects, both in Nigeria's eastern Niger Delta with capital investment for the two
bundles of projects around $3.9 billion.
Shell to cut Investments
The International Monetary Fund (IMF) has advised African nations especially oil exporters like
Nigeria to cut fuel subsidies and curb spending as a slump in crude prices takes its toll on government revenue. Dr Christine Lagarde, Managing Director, IMF who made the call on Wednesday in Kigali, the Rwandan capital, also stressed the need for the countries to curb spending in order to prevent further grave effect on the economies of the affected nations. Lagarde said, "Subsidising countries should think about reducing and phasing out oil subsidies, taking advantage of the oil price and using public finance m o r e w i s e l y t h a n i n undifferentiated energy subsidies. "For the exporting
countries that are clearly taking a h i t o n b o t h a c c o u n t s o f reduced trade revenues and reduced public revenues, they have to be very cautious with public spending, and reduce what can be reduced and use whatever
is left over as buffers." The IMF last week lowered its 2015 economic growth outlook for sub-Saharan Africa to 4.9 percent from a previous estimate of 5.8 percent in October, citing "shocks" to oil-producing economies from falling prices.The growth forecast for Nigeria was lowered to 4.8 per cent from 7.3 per cent. Lagarde urged Nigeria to re-examine her fiscal and monetary policies immediately after the February elections to see if further action is needed, after the government took steps to rein in spending and adjusted interest rates in November.
He said Nigeria had yet to ask for financial assistance from the fund but it would be willing to extend further technical support to the country if requested. "Shortly after the elections, the authorities will have to reassess the situation in view of the continued decline of oil prices to see if more needs to be done. They may have to take more measures. Negotiations with Ghana over a loan programme are continuing in order to resolve a few issues before a proposal can be submitted to the IMF board for approval, the IMF boss said. Ghana is seeking as much as $1bn in aid from the lender to help ease a crisis sparked by depreciation in the currency and soaring public debt. Cassiel Ato Forson, Deputy Finance Minister of the country said the government expects to enter the loan programme by the end of February. Lagarde noted that in the Ebola-stricken nations of Liberia, Sierra Leone and Guinea, the IMF will probably propose additional support valued at $130m, along with considering debt relief through, at least in part, "re-purposed funding".
She said a precautionary credit line for Kenya, East Africa's largest economy, will probably be concluded by next month.The IMF said in November it had reached a preliminary agreement with Kenya for a $750m standby loan to help protect the economy against possible market shocks.
THE OIL CRISISReduce Fuel Subsidies, IMF Urges Nigeria, Others
Oil Platform
e s Prof s ional of
Ye 2014ar
RAWA DS
MARCH 12, 2014. VENUE: IKEJA SHERATON HOTELS, LAGOS
CED Magazine January 2015 | 2726 | CED Magazine January 2015
OIL AND GAS REPORTOIL AND GAS REPORT
will not cut production to shore up oil prices. "If we cut, the importer countries will increase their production and this will mean a loss of our niche market," said Energy Minister Alexander Novak. Falling oil prices, coupled with western sanctions over Russia's support for separatists in eastern Ukraine have hit the country hard. The government has cut its growth forecast for 2015, predicting that the economy will sink into recession.Former finance minister, Alexei Kudrin, said the currency's fall was not just a reaction to lower oil prices and western sanctions, "but also [a show of] distrust to the economic po l i c i e s of the government". Given the pressures facing Moscow now, some economists expect further measures to shore up the currency. "We think capital controls as a policy measure cannot be off the table now," said Luis Costa, a senior analyst at Citi. Russia's economy is forecast to fall into recession in 2015 if oil prices do not regain ground While President Putin is not using the word "crisis", Prime Minister Dmitry Medvedev has been more forthright on Russia's economic problems. "Frankly, we, strictly speaking, have
not fully recovered from the crisis of 2008," he said in a recent interview.Because of the twin impact of falling oil prices and sanctions, he said the government had had to cut spending. "We had to abandon a number of programmes and make certain sacrifices." Russia's interest rate rise may also bring its own problems, as high
rates can choke economic growth by making it harder for businesses to borrow and spend. Venezuela: No subsidy cuts Venezuela saw mass anti-government protests earlier this year Venezuela is one of the world's largest oil exporters, but thanks to economic mismanagement it was already finding it difficult to pay its way even before the oil price started falling. Inflation is running at about 60% and the economy is teetering on the brink of recession. The need for spending cuts is clear, but the government faces difficult choices. The country already has some of the world's cheapest petrol prices - fuel subsidies cost Caracas about $12.5bn a year - but President Maduro has ruled out subsidy cuts and higher petrol prices. "I've considered as head of state, that the moment has not arrived," he said. "There's no rush, we're not going to throw more gasoline on the fire that already exists with speculation and induced inflation." The government's caution is understandable. A petrol price rise in 1989 saw widespread riots that left
hundreds dead. Saudi Arabia: Price versus market share Saudi Arabia is not expected to cut production to prop up oil prices in the short term Saudi Arabia, the world's largest oil exporter and Opec's most influential member, could support global oil prices by cutting
back its own production, but there is little
sign it wants to do this. There could be two reasons - to try to instil some discipline among fellow Opec oil producers, and perhaps to put the US's burgeoning shale oil and gas industry under pressure. Although Saudi Arabia needs oil prices to be around $85 in the longer term, it has deep pockets with a reserve fund of some $700bn - so can withstand lower prices for some time. "In terms of production and pricing of oil by Middle East producers, they are beginning to recognise the challenge of US production," says Robin Mills, Manaar Energy's head of consulting. If a period of lower prices were to force some higher cost producers to shut down, then Riyadh might hope to pick up market share in the longer run.
However, there is also recent history behind Riyadh's unwillingness to cut production. In the 1980s the country did cut production significantly in a bid to boost prices, but it had little effect and it also badly affected the Saudi economy. Opec: Not all are equal Some Opec members need oil to be above $120 a barrel to avoid hard spending choices Alongside Saudi Arabia, Gulf producers such as the United Arab Emirates and Kuwait have also amassed considerable foreign currency reserves, which means that they could run deficits for several years if necessary. Other Opec members such as Iran, Iraq and Nigeria, with greater domestic budgetary demands because of their large population sizes in relation to their oil revenues, have less room for manoeuvre. They have combined foreign currency reserves of less than $200bn, and are already under pressure from increased US
competition. Nigeria, which is Africa's biggest oil producer, has seen growth in the rest of its economy but despite this it remains heavily oil-dependent. Energy sales account for up to 80% of all government revenue and more than 90% of the country's exports. The war in Syria and Iraq has also seen Isis, or Islamic State, capturing oil wells. It is estimated it is making about $3m a day through black market sales - and undercutting market prices by selling at a significant discount - around $30-60 a barrel. United States: Fracking boom US domestic oil production has boomed due to fracking "The growth of oil production in North America, particularly in the US, has been staggering," says Columbia University's Jason Bordoff. Speaking to BBC World Service's World Business Report, he said that US oil production levels were at their highest in almost 30 years. It has been this growth in US energy production, where gas and oil is e x t r a c t ed from shale formations u s i n g hyd r a u l i c fracturing or fracking, t h a t h a s been one of the main drivers of lower oi l
The falling rouble and plunging oil revenue are some of President Putin's biggest challenges
Russia's economy is forecast to fall into recession in 2015 if oil prices do not regain ground
Saudi Arabia is not expected to cut production to prop up oil prices in the short term
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prices. "Shale has essentially severed the linkage between geopolitical turmoil in the Middle East, and oil price and equities," says Seth Kleinman, head of energy strategy at Citi. Even though many US shale oil producers have far
higher costs than conventional rivals, many need to carry on pumping to generate at least some revenue stream to pay off debts and other costs. Europe and Asia: Mixed blessings Growth in the European Union remains weak With Europe's flagging economies characterised by low inflation and weak growth, any benefits of lower prices would be welcomed by beleaguered governments.A 10% fall in oil prices should lead to a 0.1% increase in economic output, say some. In general consumers benefit through lower energy prices, but eventually low oil prices do erode the conditions that brought them about.China, which is set to become the largest net importer of oil, should gain from falling prices. However, lower oil prices won't fully offset the far wider effects of a slowing economy. Japan imports nearly all of the oil it uses. But lower prices are a mixed blessing because high energy prices had helped to
push inflation higher, which has been a key part o f Ja p a n e s e P r i m e Minister Shinzo Abe's growth strategy to combat deflation. India imports 75% of its oil, and analysts say falling oil prices will ease its current account deficit. At the same time, the cost of India's fuel subsidies could fall by $2.5bn this year - but only if oil prices stay low.
Some Opec members need oil to be above $120 a barrel to avoid hard spending choices
Agency Reports
Royal Dutch Shell Plc yesterday said it will cut $15 billion (N2.5 trillion) of investment over the
next three years in an effort to plug dwindling revenues from oil sales. The world's big oil company in its financial results signalled that a period of adjustment lay ahead for much of the industry following a near 60 per cent slide in crude prices since June to less than $50 a barrel. Chief Executive of Shell, Ben van Beurden, said the group would respond to the fall in oil prices by being careful not to overreact to the recent fall in oil prices. "Royal Dutch Shell Plc will cut $15 billion of investment over the next three an effort to plug dwindling revenues from oil sales, after the company on Thursday reported a sharp slide in quarterly earnings due to the plunge in crude prices. "The $15 billion spending cut, which will involve cancelling and deferring projects through 2017, which would represent a 14 percent cut per year from 2014 capital investment of $35 billion. "Organic capital investment in 2015 is expected to be lower than 2014 levels, and we have curtailed over $15 billion of potential spending over the next three years. Shell has options to further reduce spending, but we are not over-reacting to current low oil prices and keeping our best opportunities on the table. Van Beurden continued: "Our strategy is delivering, but we're not complacent. Weaker oil prices underline that there's a lot more to do. The three themes of financial performance, capital efficiency and project delivery will remain as Shell's priorities in 2015." "In 2015, these priorities will include a
