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Interview

Telecoms, FSI to hugely boost Nigerian Economy in 2021 – CWG’s Business Director

CWG Plc’s Business Director chats with Nairametrics about the economy, telecoms industry and Financial Service Institutions.

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Mr. Abayomi Olomu, the Business Director, Financial Service Institutions at CWG Plc, a Pan-African Information and Communications Technology company, has opined that there is a ray of hope in the horizon for the Nigerian telecommunications industry in 2021 

READ: Afreximbank expands Trade Finance Intermediary Initiative, lists 8 Nigerian banks

In this interview with Nairametrics, he projected that despite the impact of COVID-19 on the global economy in 2020, the industry is expected to grow by at least 5.7%, while the Financial Service Institutions (FSI) is to also experience growth due to increased transaction and a further improvement in the financial inclusion plan. 

READ: How digital transformation will impact Nigeria’s projected $8.79 billion economic expansion

How would you assess the Nigerian economy in 2020?

The negative impact of the COVID-19 pandemic cannot be over-emphasized, still, the Nigerian economy has shown some resilience and there seems to be a ray of hope in the horizon, judging from certain macroeconomic indicators and recent government policies to help strengthen the Naira.

Taking a critical look into the Nigerian economy this FY2020, the GDP contracted by 6.10% in Q2 and had a mild downturn of 3.62% in Q3 (year-on-year) – this represents an improvement of 2.48% growth rate (comparing Q2 – Q3). It still means that Nigeria recorded two consecutive quarters of negative growth rate in FY2020, the performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2. After these restrictions were lifted and businesses re-opened, some economic activities returned to positive growth. A total of 18 economic activities recorded growth in Q3 2020, compared to 13 activities in Q2.

READ: How Cryptocurrency is driving economic growth

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The oil sector contributed 8.73 per cent to total real GDP in Q3 2020 – down from 8.93% recorded in the preceding quarter, Q2 2020. The non-oil sector contributed 91.27 per cent to the nation’s GDP in the third quarter of 2020, which is 3.54 per cent higher than in Q2 2020. The non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration. In my opinion, we need to focus more on the non-oil sector to drive sustainability.

READ: Over 1 million people took loans from banks below 20% interest rate in 1 year- CBN

Probing further into some specific economic indicators such as inflation rate, unemployment rate, and interest rates, we will be able to make some certain inferences. Consumer Price Index (CPI) rose by 14.23% in October as against 13.71% in September and 12.13% in January 2020. The unemployment rate stood at 27.1% as at Q2 2020, even though this is beginning to reduce gradually.

READ: Zenith USSD banking transaction value rises by 30.8% Y-o-Y to hit N497.29 billion

The interest rate currently stands at 11.50% as against 13.50% in January 2020. Overall, 2020 has not been a great year for the Nigerian economy but the fact that the non-oil sector is growing, which ultimately compensates for the decline in growth in the oil sector is something to cheer about and hopefully, it can be the real motivation that is needed to diversify the economy. Also, judging by the available data and the current economic outlook, the economy was in recession during Q3 and hopefully, it will be out of it by the end of Q1 2021.

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READ: How Crypto can curb Nigeria’s high unemployment rate

With COVID-19 still around, going forward, what do you think can be done to have an established e-Payment system in Nigeria?

The electronic system of payment has come to stay but the traditional trend of over-reliance on cash transaction by Nigerians happens to be the major challenge to this emerging system. Asides educating the populace on the need to switch to making transactions using e-payment options, the government needs to come up with favourable policies that will encourage people to use the e-Payment options now that physical contact has reduced.

READ: Nigeria generates N416.01 billion from Company Income Tax in Q3 2020

The fundamental issue of trust must also be addressed. The government needs to take the fight against cybercrime more seriously and assure the people that it is safe to transact online.  The regulatory body must ensure that the failed transaction rate is reduced to the minimum and peradventure it happens, a reversal should be done almost immediately. This can be achieved when there is a seamless line of communication between our financial institutions.

READ: CIBN: Our economic challenges are of a global dimension – Emefiele

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Lastly, licenses should be issued to more mobile money providers because they will be able to operate in remote areas where banks may not be situated. This will increase the financial inclusion rate by accommodating the illiterates and ignorant in the cashless policy agenda of the government.

How would you describe the CBN’s financial inclusion drive in Nigeria and its impact?

The financial inclusion drive has been identified globally as a vehicle for economic development and since its adoption by the CBN, it has seen the exclusion rate drop from 53% in 2008 to 46.3% in 2010 with a target of 20% by 2020. The channels for delivering financial services have been equally targeted by CBN, with deposit money bank branches targeted to increase from 6.8 units per 100,000 adults in 2010 to 7.6 units per 100,000 adults in 2020, microfinance bank branches to increase from 2.9 units to 5.5 units; ATMs from 11.8 units to 203.6 units, POSs from 13.3 units to 850 units, Mobile agents from 0 to 62 units, all per 100,000 adults between 2010 and 2020.

READ: ValuAlliance posts N237.96 million profit in Q3 2020; up by over 1000% Y-o-Y

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In line with CBN’s vision, CWG has world-class cutting-edge solutions that will help to bring this vision to reality. CWG has a range of solutions from ATM AAS to POS solutions. Till date, CWG has successfully installed over 4000 ATMs and manages over 2500 ATMs for banks across Nigeria.  Our Finedge solution will further help to advance the Microfinance industry in Nigeria; Also, we have started pushing other solutions that cut across the commercial banks, Stockbrokers, mobile money providers, asset management, insurance and PFAs.

READ: Non-oil sector to contribute 80% of Nigeria’s revenue in 3 years – FIRS 

What are your predictions for the Nigerian Economy in 2021?

With COVID-19 vaccines now being approved for use by most countries, it means there will be an improvement in the global economy come 2021. The global price of crude oil is expected to increase, and the global manufacturing industry will also record increased production. That said, the Nigerian economy should be out of recession by the end of Q2 2021 with a steady drop-in inflation rate due to the proposed opening of the land borders and also, a global increase in production. The prices of raw materials should also reduce, and this will impact our manufacturing sector positively.

The unemployment rate is expected to contract by at least 1.3% before the end of Q2. With the recent AFCFTA agreement, there will be an increase in the GDP as many MSMEs will benefit from these initiatives. The GDP is expected to increase by at least 2.1% before the end of the year.

The Non-oil sector will continue to experience growth with the telecommunications industry expected to grow by at least 5.7%. The FSI will also experience growth due to increased transaction and a further improvement in the financial inclusion plan. State Governments will also want to increase spending as election year is drawing closer. They would want to embark on projects that will be campaign-worthy and as a result, we might experience a significant rise in government spending come 2021.

Many banks in Nigeria rely on CWG’s expertise to operate. What exactly is CWG offering financial institutions in Nigeria?

CWG offers ATM installation and management service to banks and the company is taking it further through her ATM AAS initiative. We provide cloud services and software solutions to over 60% of all financial institutions in Nigeria and have successfully implemented and supported Finacle, the foremost core banking application for most Nigerian banks. We also play in the Risk management space by helping the financial institutions mitigate against risk such as Employee Fraud, AML, Credit risk etc.

CWG also provides products and services such as Finedge (It enables MFB to effectively reduce operational costs and challenges relating to IT resources), Vericash (a banking software that delivers a robust and unified Pan African mobile solution such as mobile banking and mobile wallets), and POS in the FSI space.

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Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Exclusives

Crypto may suffer setbacks, remain trading within speculative confines except … – DLM Capital CEO

A domestic investor should focus on companies that have either better endured or increased their sales channels beyond the pre-pandemic levels.

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Several Nigerians, including Vice President Yemi Osinbajo, have called on the apex regulators of the banking and Financial market sectors, the Central Bank of Nigeria and the Securities and Exchange Commission (SEC) to implement a regulatory framework for Cryptocurrency transactions in the country.

In this interview with Nairametrics, Sonnie Ayere, the Group Chief Executive Officer of DLM Capital Group, a firm that has been at the forefront of creating alternative financing solutions for businesses and providing bespoke innovative ideas to access funds for growth, bared his mind on the subject.

To him, without a status of cryptocurrency as a medium of financial exchange by the majority, it could suffer setbacks and remain trading within speculative confines related to commodities, like gold.

READ: Crypto crash: 3 major risks involved in investing in Crypto

What growth trajectory do you predict for the Nigerian economy in 2021 after recovery from recession?

We believe that the post-recession economy for Nigeria in 2021 would reflect significant growth as the effects of the Covid-19 pandemic on the economy wanes with the resumption of vaccinations to beat back its spread. Businesses requiring customer visits were most severely affected in 2020 by lost patronage. While manufacturers, and marketers alike, carried on with stable, unthreatened production levels and supply of goods; the challenge was how to get customers to pick and purchase them. This inspired a rise in demand for delivery options, by both customers and sellers; thus, we have indications of further potential in new and existing delivery and logistic companies, online retailing, and online payments for sales beyond fixed locations or outlets.

We expect the post-recession economy to exceed its current state in economic performance as this is a state for which most movement restrictions have been eased, and the conduct of business for physical transactions has resumed. We believe that the earlier formed opinions on the Nigerian economy forecasted a more than a transient period of recession relative to other countries facing the same. We believe this was premised on significant negative expectations of anticipated weak responsiveness from the government, high infection rates and perceived challenges of financing and management of the pandemic.

READ: Here’s what should be expected in Nigeria’s fixed income market this week

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The year 2021 resumed with increased activity in the global economy which has induced higher price levels for commodities following a rebound in demand. In Nigeria’s case, this is relevant to the nation’s Crude Oil exports. Nigeria is again opportune with increased revenues and a chance to increase its savings.

Despite the disruption triggered by the COVID-19 pandemic, Agriculture, ICT and Financial Services sectors have remained resilient. What do you think is responsible for this and which sectors do you see driving further growth in 2021?

For these three sectors mentioned, the most profound contributions came from the ICT services, because it largely facilitated greater levels of transactions for the financial sector particularly with regards to growth in electronic payments and online merchandising. Agriculture particularly thrived as supply chains faced little threats with movement restrictions, and unlike most other sectors, enjoys steady demand. The prize for value should go to ICT related services for easing the sales of goods and services away from physical markets where people would ordinarily transact.

The Federal Government has presented a budget estimate of 13 trillion with a historic deficit of N5 trillion. How realistic do you see the 2021 budget in line with the assumptions?

Overall, higher oil prices translate to stable expectations on financing with crude oil production and sales. The expectations of performance from that should be covered with increased global energy consumption. Higher revenue from sales also affords the country a greater capacity to service future debt financing payments, which also translates to lower borrowing costs.

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What would be critical is the government’s success in increasing tax revenues in the face of depressed economic activity and its ability to raise debt and conduct asset sales if needed.

What is your assessment of the investment climate in Nigeria on the back of COVID-19?

The Investment climate in Nigeria following the Covid-19 outbreak is shaped to reflect the economic situation following the impact felt within average households, and these are lower average earnings per household, a reduction in businesses that can breakeven, and a need for preserving wealth.

For the Financial Markets, the trend is of lower yields for all fixed-income investments; these span government treasury bills and bonds, corporate debt, that is commercial papers and corporate bonds, and even rates on bank deposits. For the stock market, 2020 featured a strong rally though corporate performances were varied, clearly reflecting differences in customer patronage of underlying sectors. We believe it was a clear search for yield as many companies offered attractive dividends relative to their trading prices.

What will be the outlook for the Nigerian fixed income market in 2021 in terms of the regulatory landscape and opportunities for investors?

For the fixed income market for 2021, we anticipate an increase in corporate issues from companies familiar with the financial market and “in-pipeline” transactions from new corporate prospects. The focus would be access to the current lower market rates at different tenures and refinancing their existing debt at these lower rates. We expect to also see increased issuance of commercial paper to shore up working capital for financing inventory.

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We anticipate support from our regulators as we push for the inclusion of more companies into the opportunity space for all stakeholders in our domestic financial markets. However, there appears to be a push for higher rates by the main buyside operators, hence an increase in FGN yields.

The Nigerian equity market was on a rally that triggered a circuit breaker on the NSE recently, what does this mean for the market’s outlook?

The impressive rally of equities in 2020 was triggered by investors searching for higher yields. It is only rational that some investors would reconsider their aversion for stocks and seek the upside offered by rich dividend income relative to fixed income investments at the time. Institutional investors have for a recent while favoured fixed income and backed down on taking on equities; fixed income yields in the market had sufficed for the performances of their managed portfolios. We have seen this change with the rally and we do hope for better corporate performance to sustain strong fundamentals for each component industry represented on the Nigerian Stock Exchange All-Share Index.

From an investment perspective, what investment options would you advise investors (retail and institutions) to focus on in 2021?

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2021 presents opportunities for value investors as some domestic company stocks remain undervalued relative to similar companies in other foreign stock markets. A domestic investor should focus on companies that have either better endured or increased their sales channels beyond the pre-pandemic levels.

In the fixed-income space, it is important to note that upcoming deals will seek to capitalise on current market offered rates as some sectors of the Nigerian economy ease back into profitability under rising economic activity. Current traded debt securities would be more attractive and priced to yield lower based on improvement in economic conditions.

The theme for investment should be the location of the business front. Many location-based businesses that an individual would traditionally visit to view and purchase merchandised products have had to step up on selling efforts by expanding sales channels beyond their physical location by way of promoting brands and products via social media, their e-commerce sites and offering online options of delivery and payment.

The frontier for distribution has been stretched to include mobile devices with online payments; investors must seek where revenues are secured with a focus on distribution costs.

What is the future of crypto regulation in Nigeria, and what are the gains of Nigeria adopting a digital currency?

Ultimately on admission as an acceptable medium of exchange; some form of regulation under the ambit of the monetary authority and the securities exchange commission would be handed down to manage its effects on the economy as currencies do. The adoption of cryptocurrency as an acceptable medium of transactions included in monetary resources across more countries would most likely precede its adoption in Nigeria; we do feel these would be soon addressed by individual countries and the International Monetary Union as full adoption of cryptocurrencies quite literarily portend some displacement of currently accepted international currencies in international trade, a development member countries which own the major currencies would most likely resist; and of course, countries with currencies out of this group, would most likely support.

Without a status of cryptocurrency as a medium of financial exchange by the majority, it could suffer setbacks and remain trading within speculative confines related to commodities, like gold.

Some critics have argued that there are other ways for the CBN to curb illegal transactions instead of placing a ban on crypto transactions. What is your take on this?

There is no argument that there are other ways to curb illicit flows, but with an unregulated status, it would be natural for the apex bank to view some transactions as ‘rogue’; that is, operating without oversight, controls or data on source and destination of transactions. Until the monetary authority props its infrastructure to monitor and regulate this, cryptocurrencies would be seen to support parallel transaction ecosystems.

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Smallholder farmers need to deploy technology to tackle wastage – Farmforte CEO

Farmforte CEO discusses how Nigerian can utilize technology to create the most efficient and affordable methods to produce crops.

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With increased worldwide awareness of food security and sustainable food production, agriculture is rapidly growing as one of the key industries on both a global and local level.

In Nigeria, there is a renewed focus on growing the non-oil sector of the economy and the Agro-industry is experiencing a renaissance with dedicated government policies geared towards encouraging farmers and investors and increasing the contribution of the sector to the GDP.

In this interview with Osazuwa Osayi, Co-Chief Executive Officer (CEO), Farmforte Limited, he buttressed the need for the nation to sustainably increase export earnings and how to increase earnings for smallholder farmers. Farmforte’s roots lie in an end-to-end agricultural solution and mechanized farming system.

Excerpts: 

What influenced your choice of Agribusiness?

Farmforte is an agricultural – value chain development firm, we play along the entire Agri value chain of specific crop types in Nigeria, Africa, and across the world. Our mission is to utilize technology and innovative models to create the most efficient and affordable methods to produce crops, add value and create access to markets locally and globally.

When we launched our operations, we were a mainly export-focused business and the challenge we had in mind was how to sustainably increase export earnings and how to increase earnings for smallholder farmers. Our business has, however, now evolved and we work to solve challenges across the value chain from farm to fork.

How exactly do you play across the value chain?

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Our solutions cut across sustainable agriculture, value addition, and market creation. A large part of our farming and processing activities are housed at the Farmforte Food Valley (FFV), an agro-industrial park located in the Evbolekpen community of Benin-City, Edo State where we have a collective landbank.

Some smallholder farmers still find it difficult to source and aggregate produce like sesame seeds, cowpea among others. What do you proffer to address this?

Smallholder farmers are the key to food security in Africa. Not only do they hold large swaths of arable land, but they also constitute about 70% of the workforce on the continent. Through our out-grower programs, we work with smallholder farmers (about 110,000 of them in our network) to source and aggregate produce such as sesame seeds, cowpea, cocoa, and cashew both for export and for local consumption.

What are the challenges the smallholder farmers are facing?

They are bedevilled by a myriad of challenges ranging from low yields, post-harvest losses, lack of finance, low mechanization, and poor access to markets. We provide them with credit, training, input, and harvest support. Another major challenge farmers on the continent face are access to markets and guaranteed access is vital for profitable success.

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What are the solutions needed to drive growth in Agri-business?

We have developed several solutions to process and package agricultural goods into world-class products for local and global markets. From our sweet potatoes grown in Nigeria, we produce a sweet potato beer product for the European market in our facilities in the Netherlands, we also produce sweet potato puree, french fries, and chips.
At FFV, we have a 10 ton per hour integrated rice mill, a fully automated poultry centre with 2,500 birds per hour processing capacity and we are setting up a 50 cattle per hour automated slaughterhouse. We also have a 20 metric tons per day capacity cashew processing facility in Lagos State.

Storage and logistics are key challenges facing farmers. How do you address these?

We eliminated wastage by deploying world-class technology to tackle storage and logistics challenges to ensure that traders in open markets across Nigeria can gain easier access to produce sourced directly from farmers.

On retail, we recently launched our retail flagship store in Lekki where we give consumers a complete farm to fork experience. They are able to purchase produce sourced from our farms and from other farmers across Nigeria.

On export, we understand that guaranteed market access is vital for the profitable success of smallholder farmers. At Farmforte, we provide reliable access to local and global markets for smallholder farmers. We buy up all our smallholders’ produce and add value, thereby giving them a guaranteed income and greater potential for profit. A lot of our export activities are coordinated by our sales office in the Netherlands.

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What is Farmforte’s value proposition?

Our Value Proposition is ‘Adding Value, Creating Wealth.’ It is based on the premise that Agriculture goes beyond just farming and the true substance lies in adding value to what is farmed, to maximize its potential. We recognize sustainable agriculture as a strong instrument of economic growth and shared prosperity.

We are an impact-oriented firm focused on creating novel solutions to existing problems in the African agriculture landscape and transforming them into economic opportunities.

How have your operations evolved over the last few years?

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We started our operations in 2014 and we were focused on creating global markets for local produce, by exporting very specific crops such as sweet potatoes, sesame seeds, cocoa, cowpea, and so on. Since then, we have expanded our activities to play across the entire agricultural value chain, from production to retail.

What strategic partnerships have you embarked on to aid growth and expansion on the domestic and international front?

Our strategic partners have been instrumental in helping us achieve some of our set goals. For example, we have partnered with HYBR, a Pan-African innovation firm and growth platform for the implementation of scalable solutions on some of our projects.

Matter Innovation, a UK-based innovation firm has also been working with us on a syndicated innovation program, centred around unlocking opportunities in the agricultural value chain in Nigeria. We have also worked with Technoserve, an international non-profit organization, for some of our activities with smallholder farmers.

How would you describe your organisation’s work culture?

Our work culture can be described in three words: Authentic, innovative, and entrepreneurial. We work in a dynamic, rapidly evolving sector that requires us to constantly take intelligent risks in order to stay ahead.

What are the lessons learned from the COVID-19 pandemic?

The pandemic has taught us to be nimble and ready to adapt to situations, even on short notice. Despite the pandemic, we have been able to maintain a seamless flow of our operations across over 8 locations, leveraging virtual office platforms and using bespoke project/task management and tracking technologies.

Is adopting corporate social responsibility in line with Farmforte’s core values? If so, what are your CSR objectives?

Corporate Social Responsibility is not just something we adopt; it is embedded into all our business operations from sustainable farming to community relations, to employee welfare, and so on. We aim to ensure that all our activities are socially responsible and also take steps to maximize our positive social impact. We are dedicated to improving the quality of life and wellbeing of the people living and working on the farms in the communities we operate in because sustainable agriculture and social development go hand in hand. We are aligned with the United Nations Sustainable Development Goals (SDGs) which has guided our commitment to social innovation in the following areas: Water, Energy, Healthcare, and Education.

What CSR activities have you taken on?

We have several projects in the works but most notably, we recently renovated a school in the Evbolekpen community in Edo State (where our farm and industrial centre are based) and both the enrollment and attendance at the school have increased significantly. We also created a 5KM road in the same community to improve mobility and access to the community from Benin City.

What are your priorities for 2021?

There are several exciting projects in the works, but over the next few months we plan on increasing our cashew processing capacity to 13,200 tons per annum by expanding to a new location, we also plan to have completed our fully automated rice mill with a capacity of 73,000 tons per annum at the Farmforte Food Valley (FFV) to name a few.

What would you say is Farmforte’s vision for the next 5-10 years? And what strategy is the company employing to make these goals a success?

Ultimately, our vision is to feed the world but we hope to partner with at least 1,000,000 smallholder farmers by 2025 and beyond that, we aim to be the largest and most valuable global sustainable agri-business by 2050. Our strategy is to constantly innovate and to remain relentless in our approach to tackling challenges and achieving our goals.

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