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Highest paid CEOs in Nigeria earn N5.4bn as salaries in 2018

CEO’s of some of the largest publicly quoted companies on the Nigerian Stock Exchange earned a whopping N5.459 billion in 2018

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Highest Paid CEOs, MTN completes listing with SEC, registers 20.3bn shares

Uneasy lies the head that wears the crown and so does the compensation that goes with it. The Chief Executive Officers (CEOs) of some of the largest publicly quoted companies on the Nigerian Stock Exchange (NSE) earned a whopping N5.459 billion in 2018, a 26.4% rise from the N4.317 billion earned in 2017.

These companies, 20 in number, span across the various sectors of the Nigerian economy from banking to oil and gas, cement, food & beverage, brewery, and telecoms.

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The NSE has about 169 quoted companies with a market capitalization of about N13.69 trillion. These companies make up over 60% of the total recapitalization in the stock exchange.

Nairametrics will review the compensation of some of the notable earners and compare this with their performance.

 

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Highest Earning CEOs in 2018

Highest Earning CEOs in 2018

Highest Earner:  MTN’s Fredy Moolman topped the chart with a total executive compensation (comps) of N571 million for the year ended December 2018. His salary is up by a whopping 89.1% from the N302 million earned in 2017. Moolman took over as MTN chief in 2015 following the devastating $1 billion fine imposed on the telecommunication giants for SIM card infractions by the Nigerian government.

Soon after his appointment in 2015 MTN recorded its first loss in over 20 years, posting a $108 million loss in 2016. Since then, the company has returned to profitability, posting an astonishing N98 billion in half-year profits for MTN Nigerian alone this year. The company also concluded payment of the fines this year.

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Under the guidance of Moolman, MTN also survived several challenges in the last four years, particularly the crisis with the Central Bank of Nigeria (CBN) and Ministry of Justice over the $8.1 billion dividend repatriation.

Major accomplishments

  • Completed payment of fines
  • Record profitability, and revenue growth. Up 79% YoY 2018.
  • Helped MTN’s pivot into data, increasing data revenue to over $500 million annually.
  • The successful listing of MTN on the Nigerian Stock Exchange
  • Successful Bond raising

In the spotlight: There is no gainsaying that the erudite Oando Group CEO, Wale Tinubu, is one of the most controversial CEOs on the Nigerian corporate scene. JAT, as he is popularly called earned a whopping N568 million in 2018, a 67% increase from the N340 million he earned a year earlier.  Tinubu is now the highest-earning indigenous CEO among NSE quoted companies.

In terms of profitability, Oando group’s profits had increased by 113.8% from N13.4 billion in 2017 to N28.7 billion in 2018. Despite this impressive turnaround in the company’s fortunes, he remains in the spotlight over his current tussle with Security and Exchange Commission (SEC) which had asked him to resign as the firm CEO.

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[Read Also: Flour Mills’ dividend may increase by 20% despite economic headwinds]

Although Oando has failed to live up to expectations of stakeholders in the oil and gas industry who had expected the company to transform into a dominant player in both the upstream and downstream sectors of the industry, Tinubu deserves credit for helping the company to avoid an imminent bankruptcy in the wake of the 2014  global oil price crash. Shareholders of Oando are still reeling from a massive loss of market value following the crash and will have to manage a couple of more years without dividend payment.

Major Accomplishments

  • Grew profits by 114% from N13.4 billion to N28.7 billion.
  • Oversaw the negotiations of restructuring of loans of over N250 billion.
  • Successfully spun off key operating assets raising cash to pay down some debts
  • Restructured the company and allowing smaller entities to function as profit centers.
  • Avoiding bankruptcy and possible liquidation following the 2014 oil crisis.

Least Earner: Surprisingly, one of the richest men in Nigeria and one of the only CEOs and co-founders of a major corporation in Nigeria is the least earner on our list.

Herbert Wigwe of Access Bank earned just N85 million in 2018, unchanged from 2017.

Despite the flat growth in his personal compensations, Wigwe helped the bank grow its profits from N53.6 billion to N94.9 billion in 2018, representing a 77% growth.

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Key Accomplishments

  • Successful merger with Diamond Bank Plc, making Access Bank the largest bank in Nigerian by total assets
  • Seamless integration between Diamond Bank and Access Bank operations, a difficult task during post-merger activities.
  • Led the bank through the recession and keep it profitable over the years.

Foreign Legion: Nigeria’s corporate landscape is largely led by foreigners who are brought in for their experience and expertise. They mostly dominate the consumer goods sector where their Nigerian counterparts have largely failed.

  • While MTN’s Moolman tops the list, he is closely followed by Guinness Nigeria CEO, Baker Magunda. Uganda- born Magunda earned a whopping N461 million in executive compensation in 2018, a 148% rise from the N186 million earned a year earlier.
  • Guinness has gone through a rough patch of late, raking in losses amidst stiff competition and change in taste of younger alcohol drinkers. However, he helped return the company to profitability in 2018.
  • Lafarge Wapco has had a tumultuous few years. Their share price has fallen from about N100 to under N10 earlier this year, lowest in about 5 years. However, since the spin-off of their loss-making South African Entity, they have had some respite. Nevertheless, Michel Puchercos, its CEO earned about N312 million up 21% from the year before.
  • Unilever’s Yaw Nsarkoh, a Ghanaian, earned N330 million in 2018 up by 50.3% when compared to the N220 million earned a year earlier. Unilever has struggled through the bad years of the recession but has since seen its profits rise to N9.1 billion in 2018.
  • Julius Berger has had it rough under President  Muhammadu Buhari but seems to have turned the corner. Last year it reported a profit of N6.1 billion up from N2.5 billion in 2017. The turnaround was led by Wolfgang Goetsch who retired in 2018. Dr. Lars Richter took over in October 2018. Between him and Wolfgang, the company incurred compensations of N319 million.
  • Nestle is one of the most profitable company in Nigeria and has been a consistent performer. Its Mexican CEO, Mauricio Alarcon, earned N210 million in 2018, up by 23.8% from N170 million the previous year.
  • Modest by most standards, especially if you consider how well run the company is.
  • Nestle profits rose 27.5% to N43 billion in 2018.

Nigerian Behemoth: We can’t end this article without mentioning Nigerian owned largest company by market capitalization, Dangote Cement, owned by Africa’s richest man, Aliko Dangote.

Dangote Cement is one of the most profitable companies in Nigeria and on the continent.

  • Engr. Joseph Makoju was made the substantive CEO in April 2019 after he was appointed to the role albeit in acting capacity in October 2018.
  • He earned N429 million as CEO during the year.
  •  Makoju is a veteran of the cement industry and has featured in executive capacity for over two decades.

See the full list below

Top 20 CEO Executive Compensation on the Nigerian Stock Exchange.

The list is sourced from the highest paying directors reported on the published annual reports of the companies.

Patricia

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

2 Comments

2 Comments

  1. Bigz

    July 29, 2019 at 8:48 am

    this is highly encouraging, the figures mentioned here are overwhelming considering how much i earn.

  2. 5NFGS

    July 29, 2019 at 5:40 pm

    Oando and Union Bank need to be stricter with executive compensation.
    The value for money is relatively poor for those 2 compared to the rest

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Blurb

2020 revised budget, spending inefficiencies, and a looming debt hole  

For the revised budget, the oil benchmark was reduced from $57 per barrel to $28.

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2020 revised budget, spending inefficiencies, and a looming debt hole  , President Muhammadu Buhari, loans, Oil price, FG, Solar vehicles, P&ID firm, Nigeria's GDP, Debt Servicing: Nigeria pays $1.12 billion to World Bank, others in 10-month , How the latest Fitch report affects you in 2020 , Nigeria’s credit rating faces downgrade by Fitch, Nigeria’s fiscal crisis looms, oil hits $32, S&P downgrades Nigeria to junk rating, as India cuts interest rates

The COVID-19 pandemic has been nothing short of unfavourable to an already vulnerable Nigeria. The nation’s overdependence on oil, fragile infrastructure, low foreign and domestic investments, declining foreign reserves and debt crisis, has further tightened the expected economic consequence of the pandemic. It is also what is responsible for the recent revision of 2020’s budget. Last Friday, President Muhammadu Buhari signed into law a revised budget for the year 2020 of N10.8 trillion. Following the restrictions in international trade due to pandemic-induced lockdowns in many parts of the world, weakened global oil demand, as well as the pronounced decline in oil prices, the budget had to be revised to reflect current realities 

The GDP was projected to grow at 2.93% in 2020, but this has now been revised to -4.41%. For the revised budget, the oil benchmark was reduced from $57 per barrel to $28, and crude production was reduced from 2.18 million to 1.7 million barrels per dayNigeria’s Minister of Finance, Zainab Ahmed revealed that the impact of these developments is c.65% decline in projected net 2020 government revenues from the oil and gas sector. So far, Nigeria has been only able to meet 56% of its target revenue from January to May as the global oil price crash affected government revenue due to the COVID-19 pandemic. A budget deficit of N5.365 trillion is expected to be funded by domestic and foreign borrowing while direct revenue funding will cover N5.158 trillion.  

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 READ MORE: G-20 central banks are considering ‘special’ debt swap deal for African countries

The debt situation 

Data from the Debt Management Office (DMO) reveals that Nigeria’s total debt currently stands at N28.62 trillionThis is following the move by Fitch, in Aprilto downgrade Nigeria’s Long Term Foreign Currency Issuer Default Rating (IDR) to ‘B’ from ‘B+’ with a negative outlook. Mahmoud Harb, a director at Fitch had explained that the debt to revenue ratio for Nigeria is set to deteriorate further to 538% by the end of 2020, from 348% that it was a year earlier before improving slightly next year. While the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries released in 2020, noted that a country’s debt service to revenue threshold should not exceed 23%, Nigeria’s debt service to revenue ratio for the past five years hawitnessed a relatively steady increase. Analysis using data from CBN’s annual Statistical Bulletin reveals debt service-revenue ratio of 32.63% in 2015, 56.83% in 2017 and 43.62% in 2019. For the first quarter of 2020, we witnessed a 99% debt service to revenue ratio suggesting that almost all the revenue generated from both oil and non-oil sources was used to meet debt service obligations.  

While this is reflective of the decline in oil revenue for the period, it is also one sign of our looming debt crisis. According to information contained in the recently approved revised budget, Nigeria spent N943.12 billion in debt service in the first quarter of the year and N1.2 trillion between January and May 2020. It also plans to spend N2.9 trillion on debt service in 2020 against a revenue of N5.3 trillion. This represents a 55% debt service to revenue ratio. About N1 trillion was spent on debt service in the first 5 months of the year. 

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If we were to strive to attain a palatable benchmark debt service to revenue ratio of even 25%, based on the projected debt service for 2020, the government will have to generate at least 11.6 trillion annually. The highest FG revenue witnessed over the past five years since 2015 was 2019’s N4.8 trillion. Even though some of the debts come with very little interest rates like the $3.4 billion loan under the Rapid Financing Instrument (RFI) ajust a 1% rate of interest, the overall debt servicing burden is one that Nigeria may not be able to get itself out of especially since it cannot completely stop borrowing.  

With oil projected to only increase marginally in the coming years from the $28 dip, the nation needs to look into harnessing non-oil revenues. However, because the non-oil sector requires that productivity is enhanced, it begs the question of whether the right infrastructures exist for us to make such demands of the sector. 

 

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What we have been spending on 

Over the past 5 years spanning 2015 and 2019, the Nigerian government has spent about N34.8 trillion comprising of both recurrent and capital expenditures in the ratio of 73% in recurrent expenditure and only 19in capital expenditure; the difference is attributable to transfers. What this means is that only about 19% of the debt load is what has been invested in further developing the nation through the creation of relevant infrastructure. The rest were spent on recurring expenses like salaries – a testament of the profligacy that thrives. Consequently, the funds being spent on debt servicing can be seen as another way of wasting limited resources while funding very little capital expenditure that could be used to stimulate the productivity of Nigerians.  

While COVID-19 has revealed our overdependence on the oil sector as well as the inefficiencies that have left us in the quagmire of increasing debt and reducing revenue from known sources, the biggest slap comes from knowing that Nigeria as a nation has spent so much and achieved so little that it can bank on when the chips are down.  

 

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Why Insurance firms are selling off their PFAs

It has not been uncommon over the years to have insurance companies with pension subsidiaries.

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Why Insurance firms are selling off their PFAs

The idea of mitigating risks and curtailing losses at the bare minimum begins from the insurance industry and only crosses into the pension space with the need for retirement planning. For this reason, it has not been uncommon over the years to have insurance companies with pension subsidiaries. However, controlling the wealth of people is no easy feat – and crossover companies are beginning to think it might not be worth it competing with the big guns; that is, the pension fund administrators (PFAs) that already cater to the majority of Nigerians.

A few months ago, AXA Mansard Insurance Plc announced that its shareholders have approved the company’s plan to sell its pension management subsidiary, AXA Mansard Pensions Ltd, as well as a few undisclosed real estate investments. It did not provide any reason for the divestment. More recently, AIICO Insurance Plc also let go of majority ownership in its pension arm, AIICO Pension Managers Ltd. FCMB Pensions Ltd announced its plans to acquire 70% stakes in the pension company, while also acquiring an additional 26% stake held by other shareholders, ultimately bringing the proposed acquisition to a 96% stake in AIICO Pension. The reason for the sell-off by AIICO does not also appear to be attributed to poor performance as the group’s profit in 2019 had soared by 88% driven by growth across all lines of business within the group.

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 So why are they selling them off? 

Pension Fund Administration is, no doubt, a competitive landscape. Asides the wealth of the over N10 trillion industry, there is also the overarching advantage that pension contributors do not change PFAs regularly. Therefore, making it hard to compete against the big names and industry leaders that have been in the game for decades – the kinds of Stanbic IBTC, ARM, Premium Pension, Sigma, and FCMB. Of course, the fact that PFAs also make their money through fees means the bigger the size, the more money you make. With pressure to capitalize mounting, insurance firms will most likely spin off as they just don’t have the right focus, skills, and talents to compete.

The recent occurrence of PENCOM giving contributors the opportunity to switch from one PFA to another might have seemed like the perfect opportunity for the smaller pension companies to increase their market shares by offering better returns. More so, with the introduction of more aggrieved portfolios in the multi-fund structure comprising of RSA funds 1, 2, & 3, PFAs can invest in riskier securities and enhance their returns. However, the reality of things is that the smaller PFAs don’t have what it takes to effectively market to that effect. With the gains being made from the sector not particularly extraordinary, it is easier for them to employ their available resources into expanding their core business. There is also the fact that their focus now rests on meeting the new capital requirements laced by NAICOM. Like Monopoly, the next smart move is to sell underperforming assets just to keep their head above water.

READ MORE: AIICO seeks NSE’s approval for conducting Rights Issue

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Olasiji Omotayo, Head of Risk in a leading pension fund administrator, explained that “Most insurance businesses selling their pension subsidiaries may be doing so to raise funds. Recapitalization is a major challenge now for the insurance sector and the Nigerian Capital Market may not welcome any public offer at the moment. Consequently, selling their pension business may be their lifeline at the moment. Also, some may be selling for strategic reasons as it’s a business of scale. You have a lot of fixed costs due to regulatory requirements and you need a good size to be profitable. If you can’t scale up, you can also sell if you get a good offer.”

What the future holds

With the smaller PFAs spinning off, the Pension industry is about to witness the birth of an oligopoly like the Tier 1 players in the Banking sector. Interestingly, the same will also happen with Insurance. The only real issue is that we will now have limited choices. In truth, we don’t necessarily need many of them as long all firms remain competitive. But there is the risk that the companies just get comfortable with their population growth-induced expansion while simply focusing on low-yielding investments. The existence of the pandemic as well as the really low rates in the fixed-income market is, however, expected to propel companies to seek out creative ways to at least keep up with the constantly rising rate of inflation.

 

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Patricia
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Nigerian Banks expected to write off 12% of its loans in 2020 

The Nigerian banking system has been through two major asset quality crisis.

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Nigerian Banks expected to write off 12% of its loans in 2020 

The Nigerian Banking Sector has witnessed a number of asset management challenges owing largely to macroeconomic shocks and, sometimes, its operational inefficiencies in how loans are disbursedRising default rates over time have led to periodic spikes in the non-performing loans (NPLs) of these institutions and it is in an attempt to curtail these challenges that changes have been made in the acceptable Loan to Deposit (LDR) ratios, amongst others, by the apex regulatory body, CBN. 

Projections by EFG Hermes in a recent research report reveal that as a result of the current economic challenges as well as what it calls “CBN’s erratic and unorthodox policies over the past five years,” banks are expected to write off around 12.3% of their loan books in constant currency terms between 2020 and 2022the highest of all the previous NPL crisis faced by financial institutions within the nation.  

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Note that Access Bank, FBN Holdings, Guaranty Trust Bank, Stanbic IBTC, United Bank for Africa and Zenith Bank were used to form the universe of Nigerian banks by EFG Hermes.  

READ MORE: What banks might do to avoid getting crushed by Oil & Gas Loans

Background  

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Over the past twelve years, the Nigerian banking system has been through two major asset quality crisisThe first is the 2009 to 2012 margin loan crisis and the other is the 2014 to 2018 oil price crash crisis 

The 2008-2012 margin loan crisis was born out of the lending institutions giving out cheap and readily-available credit for investments, focusing on probable compensation incentives over prudent credit underwriting strategies and stern risk management systems. The result had been a spike in NPL ratio from 6.3% in 2008 to 27.6% in 2009. The same crash in NPL ratio was witnessed in 2014 as well as a result of the oil price crash of the period which had crashed the Naira and sent investors packing. The oil price crash had resulted in the NPL ratio spiking from 2.3% in 2014 to 14.0% in 2016.  

Using its universe of banks, the NPL ratio spiked from an average of 6.1% in 2008 to 10.8% in 2009 and from 2.6% in 2014 to 9.1% in 2016. During both cycles, EFG Hermes estimated that the banks wrote-off between 10-12% of their loan book in constant currency terms.  

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 READ MORE: Ratings firm explains why bank non-performing loans could be worse than expected

The current situation 

Given the potential macro-economic shock with real GDP expected to contract by 4%, the Naira-Dollar exchange rate expected to devalue to a range of 420-450, oil export revenue expected to drop by as much as 50% in 2020 and the weak balance sheet positions of the regulator and AMCON, the risk of another significant NPL cycle is high. In order to effectively assess the impact of these on financial institutions, EFG Hermes modelled three different asset-quality scenarios for the banks all of which have their different implications for banks’ capital adequacy, growth rates and profitability.  These cases are the base case, lower case, and upper case. 

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Base Case: The company’s base case scenario, which they assigned a 55% probability, the average NPL ratio and cost of risk was projected to increase from an average of 6.4% and 1.0% in 2019 to 7.6% and 5.3% in 2020 and 6.4% and 4.7% in 20201, before declining to 4.9% and 1.0% in 2024, respectively. Based on its assumptions, they expect banks to write-off around 12.3% of their loan books in constant currency terms between 2020 and 2022a rate that is marginally higher than the average of 11.3% written-off during the previous two NPL cycles. Under this scenario, estimated ROE is expected to plunge from an average of 21.8% in 2019 to 7.9% in 2020 and 7.7% in 2021 before recovering to 18.1% in 2024.  

Lower or Pessimistic Case: In its pessimistic scenario which has a 40% chance of occurrencethe company projects that the average NPL ratio will rise from 6.4% in 2019 to 11.8% in 2020 and 10.0% in 2021 before moderating to 4.9% by 2024It also estimates that the average cost of risk for its banks will peak at 10% in 2020 and 2021, fall to 5.0% in 2022, before moderating from 2023 onwards. Under this scenario, banks are expected to write off around as much as 26.6% of their loan books in constant currency terms over the next three years. Average ROE of the banks here is expected to drop to -8.8% in 2020, -21.4% in 2021 and -2.9% in 2022, before increasing to 19.7% in 2024.   

Upper or optimistic case: In a situation where the pandemic ebbs away and macro-economic activity rebounds quicklythe optimistic or upper case will hold. This, however, has just a 5% chance of occurrence. In this scenario, the company assumes that the average NPL ratio of the banks would increase from 6.4% in 2019 to 6.8% in 2020 and moderate to 4.8% by 2024Average cost of risk will also spike to 4.2% in 2020 before easing to 2.4% in 2021 and average 0.9% thereafter through the rest of our forecast period. Finally, average ROE will drop to 11.6% in 2020 before recovering to 14.4% in 2021 and 19.0% in 2024. 

With the highest probabilities ascribed to both the base case and the pessimistic scenario, the company has gone ahead to downgrade the rating of the entire sector to ‘Neutral’ with a probability-weighted average ROE (market cap-weighted) of 13.7% 2020 and 2024. The implication of the reduced earnings and the new losses from written-off loans could impact the short to medium term growth or value of banking stocks. However, in the long term, the sector will revert to the norm as they always do.   

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