msme bonanzas vs quality service - nigerian law and ... · mr. tokunbo sanni mrs. toyin odusanya...

23. LEGAL REVIEWThe Exclusive Jurisdiction of National Industrial Court on Employment Matters under the 3rd Alteration Act 2010

17. CASHLESS NIGERIA PROJECTIn Who’s Interest?

45. WASTE MANAGEMENTSafeguarding the environment through efficient service process

September | 2012

N800 $10 £5

Bonanzas Vs Quality ServiceMSMEIgniting the spirit of Entrepreneurship amongst African Youths

ICT | Environment | Financial Services | EDUCATION | Legal Review

MSME TAX MATTERS Facts & Figures 5 Minutes MBA Consumer Protection Advocacy

the Role of Finance

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September 2012

LEGAL REVIEW 23 �e Exclusive jurisdiction of National Industrial Court on Employment Matters under 3rd Alteration Act 2010

MSME 64 Igniting the Spirit of Entrepreneurship amongst African Youths

52 Bonanzas Vs Quality Service

Contents

11SPOTLIGHT Diversifying the Nigerian Economy: the Role of Finance


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Contents

From the Editor

FINANCIAL SERVICESCashless Nigeria Project: In Who’s Interest?

Insurance presents new Investment Opportunities in agriculture, Takaful

Nigerian Capital Market: One Probe too late

ENVIRONMENTSafeguarding the environment through efficient service process

Bonanzas Vs Quality Service

Facts & Figures

5 Minutes MBA:Derivatives

Laugh Out Loud

Tax Matters

Doing Business in NigeriaCommencing Business Operations in the giant of Africa

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Managing EditorOlamipo Akinsulire-Jinadu

Associate Editor‘Sanmi Abiodun

Advisory BoardDr. Sherrif Alabi

Dr. Adewale Alawiye-AdamsMr. Tokunbo Sanni

Mrs. Toyin Odusanya

ConsultantsEmmanuel TarfaFola Onasanya

Business DevelopmentEfe Obadan

Daniel Eluwah

ITSeyi Sapara-Williams

GraphicsNavigant

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TO OUR READERSThe views expressed in this article are the authors’ and are not necessarily those of Nigerian Law and Business Review. Some of the authors may have consulting or business relationships with the companies they discuss. All articles are correct as at the time this publication went to press.


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From the Editor

Stepping out in today’s sporadically changing world, the birth of NLBR is not only timely, but also strategic as it focuses on providing content on law and business in Nigeria. Recent indications show that by the year 2020, there will

be a major shi� in the global balance of economic power compared to 2010 with consumer markets in emerging economies presenting enormous opportunities. GDP in developing countries for instance is projected to expand by 5.3 percent in 2012 and economic news during the first four months has been positive. Significant structur-al, fiscal and monetary policy steps in high-income Europe during this period, has contributed to a significant improvement in mar-ket sentiment, and less constraining financial conditions. �e harsh ripple effects of the global crisis of 2009 and the “Arab spring” of 2011 also seem to be dwindling. �e Nigerian finance minister while recently reviewing Nigerian economic issues indicated that the anticipated sovereign wealth fund would start operating during the next few months, with U.S. $1 billion from the Excess Crude Account to start. She also not-ed that the economy was growing at 7.4%, even though the growth was majorly piloted by its non-oil components. �e last few years have also convinced sceptics that the stage is set for Africa, and Nigeria precisely to take its place as a soon-to-be economic world power. With the recent reports by the International Monetary Fund showing that Nigeria is the third fastest growing economy across the world, it becomes imperative that timely critical reviews of economic standards and strides be undertaken, charting legal and regulatory trails; formulating and dictating standards; and guiding investors. �e NLBR is set as a highly comprehensive medium through which legal and business issues interface bringing salt for business executives, providing investors with remarkable tips, keeping regulators and government agencies in check, and foster-ing sustainable development in the Nigerian economic climate. �e magazine reviews various sectors of the Nigerian economy in line with universal standards, trends and developments, by undertaking critical and comprehensive analysis of existing practices and their attendant legal frameworks. �e NLBR is principally founded on the bedrock of bringing Nigerian economic and industry standards in tandem with international best practices and global commercial realities. In this maiden edition, our spotlight focuses on the role of finance in diversifying the Nigerian Economy. As the cashless policy spills across Nigeria, we explore its effects on business opera-tions vis-a-vis the advent of the global cashless economy. Although it is no longer news that the Nigerian Capital Market suffered a near collapse, the edition reflects on the bourse regulators in line with adherence to corporate governance ethics and standards. In the ‘Doing Business in Nigeria’ Column, we bring you a review of global trends and local tips for commencing business operations in Nige-ria. Our feature on Environment focuses on efficient service process

in waste management. �e Personal Income Tax Act (as amended in 2011) continues to generate interests across board as it introduc-es novel and progressive tax regime. We also bring you Investment opportunities in Insurance while the Consumer Protection Advo-cacy column, considers the telecommunications industry and how service providers may have deviated from quality service delivery to less industry specific activities. UK-based marketing consultant, Dr. Sheriff Alabi also discusses challenges and tips for igniting and inculcating the culture of entrepreneurship at grass roots stages While we assure you that with every publication released, we intend to raise the level of awareness and understanding of the Nigerian Law and its impact on Businesses – equipping readers for greater business success, we seize this opportunity to extend our highest benefits and regards and look forward to you deriving op-timum value by also flipping the pages of the next edition and the one a�er it.

We welcome you!

Hello!

“The Nigerian economy has come of age!”

Olamipo Akinsulire-JinaduManaging Editor


Spotlight

“Imperfect as our fi-nancial system is, I still find myself admiring it for what it does, and imagin-ing how much more impressive it can be in the future.”

Finance has had a bad rap in the global economic sphere lately. Bankers are routinely hounded from Manhattan to Moscow,

while regulators in diverse jurisdictions are seeking to close (with tough new rules), the regulatory arbitrage that finan-cial firms exploited, which some say led to the bankruptcy of financial behemoths such as AIG, and Lehman brothers. Amidst the near general consen-sus about the evils of high finance, there is a dissenting voice.

Robert Shiller, a Yale economics profes-sor in a new book, “Finance and the Good Society”, highlights the power of finance, noting that, “imperfect as our financial system is, I still find myself admiring it for what it does, and imagining how much more impressive it can be in the future.” Mr. Shiller argues in his book that the good society requires an effective financial sector, and the way to extend the good life to more people is not to shrink the financial sector nor “restrain financial innovation but instead to release it”.


In 2011, Nigeria’s financial services sector contributed 4.07 percent to its Gross Domestic Product (GDP), according to data from the National

Bureau of Statistics (NBS), this compares with 21 percent for South Africa. Nigeria is the second largest economy in Africa, and the International Monetary Fund (IMF), estimates the size of its nominal GDP at $270 billion for 2012. A further rebasing of its GDP ex-pected by September, 2012 may see it rise further by 40 percent, bringing it closer to South Africa’s GDP currently estimated at $422 billion. It is therefore clear that Nigeria’s financial services sector (at just 4.07 per-cent of GDP) is currently too small and anemic to properly play its financial in-termediation role in Nigeria’s economy. �e failure of Nigeria’s financial sector intermediation can be partly seen in the plight of millions of Nigerian hom-eowners, with formal and informal titles

who are unable to extract home equity from it, for use in either starting or ex-panding a business or making a big ticket item purchase. �e lack of a clear legal frame-work for individual property rights as well as inadequate, financial products

(such as home equity lines of credit) is the major stumbling block. Peruvian economist Hernando De Soto’s book �e Mystery of Capital helps to highlight the problem. It explains that poverty lingers in the third world because of the failure to create a system

Spotlight

Shiller’s credibility lies in the fact that he is no shill for the proponents of a loosely regulated free market run amuck. In fact he had warned in the past about the impending bubble in the United States (US) housing sector.

Shiller in a 2000 paper outlined the need to develop comprehensive insur-ance against the possible decline in home equity, through a futures and options real estate price indices.

�e financial system as the bed-rock of every successful modern economy is evident in the fact that the global finan-cial centres of New York, London, Hong Kong and recently Shanghai, Sao-Paulo, and Johannesburg are domiciled in the most developed or fastest growing devel-oping economies in their respective re-gions.

�e size of the US municipal bond market is $3.7 trillion according to the latest data from the US Federal Reserve, helping cities, counties and States to finance badly needed infrastructure; everything from new school dis-tricts and bridges to incinerators.

Africa and indeed Nigeria’s road to economic diversifi-

cation will have to start from the bottoms up. In the municipali-ties, local governments and various state and regional govern-ments and in developing a financial system that is robust and efficient enough to help finance badly needed infrastructure in the public and private sphere, Small and medium scale enter-prises (SMEs) as well as large corporates.

Trapped in the home


Spotlight

of recognizing and organizing each citizen’s property that will allow for it to be converted into dynamic capi-tal usable to produce wealth. De Soto, notes that, “�e poor inhabitants of the world - five-sixths of humanity do have things, but they lack the process to represent their property and create capital. �ey have houses but not titles; crops but not deeds; businesses but not statutes of incorpo-ration.” He estimated that the world’s poor held roughly $9 trillion in frozen savings, locked up in un-registered assets, such as homes and businesses. It is clear that in countries like Nigeria, once the legal framework towards easier registration of land titles and deeds is sorted out, the financial services sec-tor must play a role in unlocking such “dead” assets. Even in areas that are less legally encumbered (such as access to savings accounts) the Nigerian fi-nancial services sector still underperforms. According to the Central Bank of Nigeria (CBN), Nigeria lags be-hind some of its peers in Africa with respect to Finan-cial Inclusion. Financial Inclusion implies access to a broad range of financial services including payments, sav-ings, credit, insurance and pension’s products.

�e CBN estimates the formal use of financial services in Nigeria, is currently at a low 36 percent of the adult population, roughly 31 million out of an adult popula-tion of 85 million.

�is figure compares to 68 percent in South Africa and 41 percent in Kenya.

The lack of financial inclusion in Nigeria is stifling the growth of start up businesses and SMEs, which are o�en the engine of

economic growth in developing coun-tries. Recent data from the World

Bank shows that formal sector businesses in Nigeria obtain 70 per cent of their fi-nancing from retained earnings, 25 per cent from suppliers’ credit or custom-ers’ advances, 4 per cent from family and friends, and only 1 per cent from banks and other financial institutions.

A trickle of progress

Ngozi Okonjo-Iweala, Finance Minister


Spotlight

On a more macro-level, a deeper and more liquid capi-tal market(equity, bond and derivatives) will help Nigeria to fi-nance the huge infrastructure deficit the country currently faces, the cost of which will be at least $20 billion a year, or up to $200 billion in the next 10 years according to the Urban Development Bank of Nigeria.

More importantly if municipals and local governments in the country can gain access to the bond markets, it will help to minimize the current unproductive attitude of waiting for monthly oil revenue from Abuja, that governs most sub-national entities in Nigeria.

It may indeed also engender a culture of accountability as well, since tax receipts would be used to service the bonds. Municipalities may then compete for businesses to set up shop in their locale, based on the infrastructure they are able to pro-vide, and the available tax breaks.

Some of what needs to be done, is already happening, albeit in drips not a gush.

�e International Financial Corporation (IFC) an-nounced in April 2012 that it had gained approval from the Nigerian government to issue its first naira-denominated bond this year subject to market conditions.

�e IFCs (a member of the World Bank Group) pri-mary responsibility is to provide finance for private sector com-panies in developing economies and its plans to raise a naira bond points to a deepening and sophistication of the domestic bond market.

�e size of the Nigerian domestic bond market while

small ($42 billion) compared to South Africa ($184 billion), is growing fast, with the value of transactions in the domestic fixed income market up four folds since 2006, reaching a value of N14.7 trillion at the end of 2010. �e CBN has rolled out a financial inclusion strategy, aimed at setting a clear agenda for significantly increasing both access to and use of financial services by 2020, by which time the bank aims to increase the formal use of financial services to 70 percent from the current level of 36 percent of the adult popula-tion. �e Nigerian Stock Exchange has launched the Al-ternative Securities Market (ASeM), board (with less stringent listing requirements) where SMEs and start up firms can more easily raise low cost and long-term capital. Nigeria’s largest city, Lagos has recently intensified its efforts at financially empowering its residents through a series of initiatives, aimed at reforming the process of the issuance of property titles and deeds and the easier registration of small businesses. �e case for the increased development and sophisti-cation of Nigeria’s financial services sector is very strong. Little steps being taken in that direction (while commendable), need to be transformed to huge strides. �e legal and regulatory frameworks that guide com-merce and property rights in the country must be clear and less cumbersome. �is will help to reform the structure of the Nige-rian economy, and unleash the full entrepreneurial spirit of all its citizens. •

Infrastructure deficit


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Facts & Figures


Financial Services

Abstract�e Central Bank of Nigeria (CBN) re-cently initiated a cashless policy to sub-stitute the predominantly cash dependent Nigeria economy, for improved efficiency of the financial system to facilitate eco-nomic growth and development.�e infrastructure and know how needed for the cashless policy are not in place, yet CBN set a prohibitive penalty for Nigeri-ans who may violate the set cash limits.Although people cried out in resistance against the policy, CBN went ahead de-fiantly. Now the policy is failing, CBN is backpedaling by adjusting the limits and punitive measures. �e proposed in-troduction of N5, 000 currency note by CBN, considered by experts and popular, but informed opinion, is contrary to the objectives of the cashless policy; yet CBN leadership is desperate to print the N5, 000 notes… Which way Nigeria?

�e Cashless Nigeria Project and Re-cent Updates Cashless Nigeria project, a monetary management initiative of the Central Bank of Nigeria (CBN) under Governor Sanusi Lamido Sanusi projected the en-tire Nigeria banking system as the plat-form for the implementation of the pol-icy, in scheduled phases in different parts of the country.

Skeletal and uncoordinated publicity programmes were organized in selected cities and urban areas of Nige-ria by the Central Bank and its agencies which did not afford majority of the citi-zenry, required information and worthy enlightenment of such a crucial policy.

�e main focus of the cashless Nigeria project is to reduce the use of cash to the barest minimum in the entire payment and settlement systems critical to the intermediation function of the fi-nancial system to facilitate efficient eco-nomic growth and development, replac-ing same with other non-cash payment and settlement methods for both local and international commercial activities, electronics mode of payment through computer networks and internet system, with local and shared interbank service networks through coordinated linkages, that helps to reduce investment in infra-

structural facilities and human capital investment needs, were to be the antici-pated structural and foundation benefits of the new policy concept.

Basic provisions of the Cashless Nige-ria ProjectAt the inception of the roll out of the pro-visions of the forceful and punitive policy, the leadership of the Central Bank of Ni-geria gave itself pleasure by setting limits, at which Nigerians both individual and corporate bodies will be penalized both for paying and demanding for their mon-ey deposited into deposit money banks (DMB) beyond the set limits. A daily limit of a maximum of One Hundred and Fi�y �ousand Naira (N150, 000.00) for individuals, and One Million Naira (N1, 000, 000.00), for cor-porate bodies respectively, were set for both deposits and withdrawals. According to the implemen-tation plan, imposition of cash limits kicked off in Lagos from 1st of January, 2012, without penalties until the end of March. All transactions within Lagos, to and from Lagos from other parts of the country were to attract the specified pen-

alties from the end of March, 2012. However, public outcry on the feasibility and rationality of the process, procedures and the desperation of the Central Bank governor to penalize Nige-rian on their choice to save or withdraw their hard earned money,(if they save or withdraw beyond a set limit), echoed all round the world and reached a crescendo that forced the CBN to retreat on its des-peration in the month of June, 2012. �e CBN has cut down dramatically on the 10 -20 percent surcharge on custom-ers of banks when they exceed the cash limit set by the CBN.

Why cashless policy?In my opinion, which is in consonant with, but realistically enlarged, the point of view of the Central Bank of Nigeria, the cashless Nigeria policy was initiated for the following reasons among others:(i) To drive the development of the finan-cial system and the economy as a whole.(ii) To initiate and commence a radical modernization of our payment system in line with international best practices worldwide and to facilitate the realization of the dreams of vision 202020 aiming to

The Cashless Nigeria Project:In who’s interest?Adewale Adegoke Alawiye-Adams Ph.D


Financial Services

list Nigeria amongst the top 20 econo-mies in the world by year 2020,(iii) To develop a robust and an efficient modern payment system positively cor-related with economic development and a key requirement for economic growth.(iv) To reduce to the barest minimum, the cost of banking services, particularly as it relates to cash management and delivery between the CBN and the banking com-munity.(v) To facilitate and drive financial inclu-sions by providing more efficient transac-tion options, greater and wider banking services, to reach the Nigeria society.(vi) To enhance the effectiveness of mon-etary policy in the effective management of macroeconomic indicators particularly inflation, cost of lending while driving economic growth simultaneously. Cash-less Nigeria project.

Additional Motives for the Cashless Policy(vii) To stem the high cost of cash handling involved in the producing and managing cash resources, along the value chain from the CBN to the banks, to cor-porations, traders and other individuals, a cost that needs to be reduced; it is evi-dent that everyone within the value chain bears the high cost associated with vol-ume cash handling.(viii) To reduce the high risk of cash handling: Cash carrying encourages rob-beries, fraud, corruptions, the�; pilfering and other cash related crimes. It can also lead to colossal losses in the case of fire outbreak, flooding incidents in cash stor-age and management centres within the chain.(ix) High subsidy in cash management: A critical analysis of the daily operational activities of banks in Nigeria reveal that only 10 percent of daily banking transac-tions are above N150, 000.00, but the 10% account for majority of the high value transactions. �is suggests that the en-tire 90% volume of lower value banking transactions by the majority, subsidizes the costs that the tiny minority 10% in-curs in terms of high costs of cash usage, in other words, it is the poor majority in the economy, that moves the 90% volume of cash in their little transactions in cash

movements that bear the burden of subsi-dizing the high cost of cash management moving the higher value cash transac-tions and movements by the minority 10% of the individual business and com-mercial population in transactions in and out of Nigeria.(x) �e need to capture and recycle back into the formal banking system, the larger proportion of funds remaining outside the formal banking system: successive research on the proportion of money in and out of the formal economy, have over time emphasized that only a meager 35% of the money in circulation in Nigeria are resident within the formal banking sys-tem, the remaining 65% of the money in circulation remain within the informal system making it continually difficult for the financial system to account accurately for the amount of financial resources within the Nigerian economic system for the purposes of monetary policy regula-tory controls and for economic develop-ment purposes. �ose funds outside the formal system, limits the effectiveness of monetary policy in effectively manag-ing inflation and encouraging economic growth.(xi) Curbing inefficiency and corrupt practices: High cash usage enables cor-ruption to thrive, through multiple sys-tematic leakages, money laundering among other related fraudulent practices.

Implications of the Cashless Policy on the Economic Environment(a) Apart from the little savings expected on cash management; significant loss of profit will ensue on the operations of the banking system as a result of the imple-mentation of the cashless policy.(b) Banks will lose a lot of accounts of people who are opposed to the cashless policy as a result of the high handedness and lack of consideration of the CBN, which translates to loss of profitable busi-nesses, for the banking community. (c) �e Nigeria business environment particularly the high value commercial traders, never trust the epileptic opera-tions of the Nigeria banking system, so a large proportion of such customers, have lost confidence in the banking system and will prefer to move their funds out of the

formal banking system to some sort of in-formal system where they can have more control on their funds without withdraw-als or deposit penalties. �e consequence of this is the loss of significant value of deposits of such dissenting customers.(d) A significant proportion of bank cus-tomers are illiterates and another propor-tion has a relatively low level of education and therefore lack the knowledge of In-formation and Communication Technol-ogy (ICT) required to access or operate cashless operation technology includ-ing access to and knowledge of internet transactions. �is group obviously cannot participate or benefit from the cashless policy until the knowledge and technol-ogy inadequacies are removed. �e only option they have is to keep their money where they could access it without the technological sophistication required to participate in e-banking operations. Banks will also loose these categories of customers to the informal banking mar-ket where there are less punitive rules and regulations. (e) �e consequence of (d) above is that, quite a lot of good accounts will fly away from the formal banking system and their volume of money will follow them, to the ever growing informal financial environ-ment. All the above factors translate to reduced resources for banks to do their businesses resulting to loss of income and profit in the meanwhile.(f) �e carefree attitudes and the ineffi-ciencies of some of the operators of the Nigerian financial system and its lack of


Financial Services

respect for regulatory policies are poten-tial obstacles to the success of the cashless project.(g) �e uncompromising dictatorial ap-proaches to regulatory policies and policy implementation as opposed to persuasive moral suasion by the current leadership of the Central Bank of Nigeria are poten-tial reasons to generate oppositions and lack of support for the cashless policy.

Reviewing expert opinion on the cash-less policy around the worldWe have looked at the Central Bank of Ni-geria’s postulations, views and opinions as to the inherent benefits to be derived and penalties to be invoked from the cashless Nigeria Project from the perspectives of the various stakeholders in the policy.

We must however observe at this point that the Central Bank of Nigeria has totally omitted how the features of this policy will apply to all levels of govern-ments and their parastatals in the man-agement of their revenue collections and applications of cash transactions, except they have been grouped along with cor-porate bodies. Government and its agen-cies are known to be the highest spenders and cash users within the economy, re-search statistics have indicated that about 70% of financial resources flowing in an economy emanate from government ex-penditure, and the remaining 30% rep-resent the entirety of the resources from individuals and corporate bodies who in-deed receive a greater percentage of their funds from governments through sala-ries and wages, contracts payments, and consultancy payment proceeds, costs of maintaining social services and the like. Assuming that this is true, it goes further to establish that indeed governments command access to a larger proportion of funds in circulation and those spent on payments and settlements for various services averaging about 80% of funds in circulation. �erefore, if governments are exempted from the rules of the cashless Nigeria project, then the leakages envis-aged as one of the major reasons for ini-tiating the project has not been projected to be included and pluged in the effective management of the leakage process. �is factor alone is capable of marring the ex-

pected success of the entire project and this omission will be grossly unfair to other captured stakeholders; that is indi-vidual and corporate bodies. Jowl Kutzman (1993), in his write up titled “�e Death of Money” stated that money in the traditional sense no longer exists, he went further to say; it died two decades ago when Richard Nix-on, forever abolished the gold standard. �erefore, money as we knew it then had value that was backed by the intrin-sic value of the gold standard, therea�er; the value of money has been based on an unstable new global medium of exchange that is called “megabyte money”. Kutzman went further, saying that ‘megabyte money’ on its own pos-ses no value beyond the ‘fiduciary’ value placed on it, as just papers with writings on it accepted and used the world over as in the United States because of the ‘trust’ or faith, society has built in the ability of the Federal Reserve Bank or the Central Bank of Nigeria as applicable in our case, the government and the private individu-als, to redeem or back that paper (money) with something of value in the form of goods or services as was the practice dur-ing the gold standard, when currency is-sues were backed by gold deposits. Kutzman was of the opinion that with the relative limited confidence we have in the physical cash paper which ev-eryone has attached value and confidence, in its common fiduciary state, as an ac-ceptable medium of exchange, how does it feel for someone or financial regulatory body to suddenly say that you would no longer be able to rely on that paper for all your transactions, but will now be forced to rely upon electronic technology which majority of the citizenry are not conver-sant with, (particularly the efficiency of which has not been proved or guaran-teed) in our kind or environment where appropriate technological infrastructure cannot be seen to be adequately provided or sufficiently efficient enough for the transition, compelled upon the society with very prohibitive penalty, even before adequate and efficient infrastructures are put in place. Al Smith, a senior Vice Presi-dent and Principal economist for Nations

Bank, said that an effective and beneficial use of the e-payment system requires functional education, and an age differ-ence that appreciates the value of com-puter for electronic banking. He averred that nothing suits better to derive maximum benefit from electronic banking than majority of user of electronic banking (both individual and corporate bodies) having access to computer systems and the other accesso-ries enabling one to sit in the comfort of his or her home in front of a personal or organizational computer system, transfer funds from one’s account to the account of others and transact all other banking facilities through your own computer. Smith sees the more towards a total electronic economy as a sign of the times, and a choice of a new generation must be backed by good education, age advantage, possession of the appropriate Information and Communication Tech-nology equipment and other relevant information technology infrastructural facilities installed by all participating members of the financial system and found to be adequate and efficient by the regulation before every bank customer is subjected to compliance. In the opinion of Paul Richard of the San Diego based National Centre for Financial Education, there is very lit-tle reason to switch to a cashless system, advocated by governments. He observed that the danger to the general public is too heavy, he described the entire cash-less scheme as a conspiracy to remotely watch over people’s life, and that in most cases, the hidden reason is for the govern-ment to have an avenue and opportunity to monitor purchases, spending habits and the business patronages received. Mr. Richard explained that people have con-cerns about the measure of such exten-sive, personal information, that it’s really frightening when you think about the real intentions of governments in the massive move towards a cashless society. Matt Zeblo, Manager for op-erations, Strategy magazine, a monthly financial magazine, said that the move from cash to electronic money is a part of a well organized attempt to unify the world and control it through its currency.


Financial Services

Zeblo further said, the media and govern-ment are playing a role in the move to a cashless world with diverse hidden pur-poses, he cited the ‘Smart Card’ product that will be used as a form of electronic money that has other uses, that borders on the invasion of privacy of unwary bank customers. �e small cards are ready to go, a lot of information on the user is stored on a credit-card with the use of micro-chip, the ‘smart card’ would then hold your bank account, all of your life identifying information, including ev-erything concerning the customer; most times such information and their storage are unknown to the customers.

�e New Identity and Placement of Mi-crochip in Human Hand, Under the Guise of Security for the Cashless Project

US Case�e most frightening aspect of the move-ment towards a cashless society is the emergence of a technology that would al-low access to the identity of every human being on the planet and allow them to buy and sell without coins, paper money or any kind of card. Terry cook, (1994) a retired Los Angeles Deputy Sheriff and a former fraud investigator, speaking on the new biochip technology, charged that the United States Government will intro-duce a national I.D. card supposedly to end illegal immigration that will extend into commercial activity. �is card will be the last step before the government will move to place a biochip in the right hand of every American.

India CaseIndia is also going into issuing similar I.D cards for its 1.2 billion populations in preparation for a cashless society. �e I.D. card will have far reaching surveillance

features in addition to its hidden biomet-ric identification features as revealed by the truth seekers journal with a hidden agenda to strategically establish a device to monitor individual’s private life, busi-ness establishment’s operations & activi-ties and illegally invade their privacies, for the various purposes of government.

Nigeria making a debut in its own style of a cashless societyWe have heard and read about various styles and methods adopted or designed cashless projects all around the world. Most of them with diverse booby traps of governments hidden intentions to exploit and invade the freedom and privacy of its citizenry including in some cases the dan-ger of installing biometric micro-chips in the body of unwary citizens, under the guise of individual identity, with undis-closed intentions to elicit facts beyond formal identity expositions, but with the hidden agenda to monitor citizens pri-vacy and economic life for government interest including revenue assessment purposes. However, what is unique about the Nigerian cashless economy project, which makes it outstandingly different from other projects around the globe in nature and intentions, is the fact that Ni-geria is the first country all over the world that will build a unique positive penalty clause into its cashless project plan with-

out concern for what the people feel. A feature that promises a dictatorship kind of whip in hand, to punish the citizenry and corporate bodies for the use or de-posit or withdrawal of their own hard earned money beyond a Central Bank set limits.

ConclusionWhile we are yet to get over the cash-less Nigeria fever, a new one is thrown at Nigeria: the introduction of N5, 000.00 notes from January, 2013. �ere is defi-nitely a conflict in the expected focus of the cashless policy and the decision to re-lease N5, 000 notes, the financial authori-ties out of share arrogance to seek coun-sel and quality opinion from experts with superior understanding continue to con-fuse themselves by introducing several contradictory policies that confuse them more, than solving our myriad economic problems. Who needs N5, 000 notes in a projected cashless economy where 80% of the population are so ravaged by pov-erty to the extent that they cannot afford $1.00 a day for living? It is obvious that the new currency is designed for the up-per economic class, where all the govern-ment power brokers belong; the fraudster in the society, the corrupt and the bribe takers and not for the economic interest of the Nigerian common population. It is not in our interest; it will only foster a higher level of inflation and corruption on the Nigerian economy. �ere is need to rescind the decision and forge ahead with the cashless policy with its attendant challenges as it is forced down the throat of helpless Nigerians. We are watching to see the outcome of the policy unfold in the course of its implementation.•

Dr. Alawiye-Adams is a financial analyst/devel-opment consultant @Triple-A Global Nig. Ltd.(08033900620 )

References

(1) Central Bank of Nigeria (2011): �e Cashless Nigeria Project.(2) Joel Kutzman (1993): “�e Death of Money” curezone.com educating Instead of Medicating.(3) Towards a Cashless Society- “Prevention, Cure, Caring Protocol” www.newdawn magazine.com/articles.(4) Al Smith (1994): identification, Privacy, Freedom and guaranteed by the use by personal PCs for e-banking transactions’ fortune magazine, June 27,(5) Paul Richard, On Massive Invasion of the privacy of the public through cashless society operations.(6) Matt Zebro “On the uses of smartcard for the invasion of the privacy of people.(7) Terry cook; “On I.D. card and placement of Biochip in the right hand of every American”, www.newdawnmagazine.com/articles.(8) Editorial feedback: [email protected], (2010): Cashless society; India implements first biometric I.D. program for all its 1.2billion inhabitants.

“...Nigeria is the first country all over the world that will build a unique positive penalty clause into its cashless project plan without concern for what the people feel.


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Legal Review

While it is trite law that ju-risdiction is the live wire of any trial court, any trial conducted without

jurisdiction is a nullity as opined in Jeric Nigeria limited Vs Union Bank. Courts are creatures of statutes and these en-abling statutes confer specific jurisdic-tion. Today, the issue of jurisdiction is usually raised especially in issue of Fed-eral and State High Courts. �e Supreme Court has laid down the foundation of such jurisdiction in renowned cases some of which are the case of N.E.P.A Vs Ede-gbero, PTF Vs FSB International Bank Plc and the recent case of Adetayo Vs Ademola.

Brief HistoryAs a result of difficulty in handling trade disputes and for purposes of providing a legal framework for settlement of same, the Nigerian Government promulgated the Trade Disputes (Arbitration and En-quiry) (Lagos) Ordinance of 1941 which was applicable to only Lagos until 1957 when the Trade Dispute (Arbitration and Enquiry) Federal Application Ordinance of 1957 was passed. Initially these laws provided for arbitration tribunal and the role of government was discretionary. Subsequently by the Decree of 1969 the law created the Industrial Arbi-tration Tribunal, banned strikes and lock outs and imposed imprisonment without option of fine for same. However, due to problems faced with this decree, the Federal Government of Nigeria proceeded to amend same

through the Trade Dispute, (Amend-ment) Decree No. 47 of 1992. It was this amendment that made the National In-dustrial Court (NIC) a superior court of record and made provision for appeals to lie as of right to the court from the award of the Industrial Arbitration panel with-out seeking the leave of the Minister of Labour. �e jurisdiction of the NIC will now be discussed in two parts; being a brief discussion of the jurisdiction under the NIC Act 2006 and the jurisdiction af-ter the passing of the 3rd Alternation to the 1999 Constitution.

Brief insight into the Jurisdiction of the National Industrial Court under the National Industrial Court Act 2006

�e section applicable for jurisdiction of the National Industrial Court under the National Industrial Court Act 2006 is Section 7 and it provides that: (1) �e Court shall have and exercise exclusive jurisdiction in civil causes and matters-(a) Relating to –(i) Labour, including trade unions and industrial relations; and(ii) Environment and conditions of work, health, safety and welfare of labour, And matters incidental thereto; and(b) Relating to the grant of any order to restrain any person or

body from taking part in a strike, lock-out or any industrial action, or any conduct in contemplation or furtherance of a strike, lock-out or any industrial actions;(c) Relating to the determination of any question as to the interpretation of –(i) Any collective agreement,(ii) Any award made by arbitral tribunal in respect of a labour dispute or an organizational dispute,(iii) �e terms of settlement of any labour dispute, organizational dispute as may be recorded in any memorandum of settlement,(iv) Any trade union constitution, and(v) Any award or judgment of the Court.

(2) �e National Assembly may by an act confer such additional jurisdiction on the court in respect of such other causes or matters incidental, supplementary or re-lated to those set out in subsection(1) of this section.(3) Notwithstanding anything to the con-trary in this Act or any other enactment or law, the National Assembly may by an Act prescribe that any matter under subsection(1) (a) of this section may go through the process of conciliation or ar-bitration before such matter is heard by the Court.(4) As appeal shall lie from the decisions of an arbitral tribunal to the Court as of

1. (2002) 15 NWLR (pt.691), (2000) 12 S.C (pt. II) 1332. (2002) 18 NWLR (pt. 789) 793. (2008) All FWLR (pt.399)480 at 498 -500 paras H-B4. (2010) All FWLR (pt. 533) 1806.

The Exclusive Jurisdiction ofNational Industrial Court on Employment Matters under the 3rd Alteration Act 2010Toyin Odusanya


Legal Review

right in matters of disputes specified in subsection (1) (a) of this section.(5) For purposes of subsection (4) of this section, a party to an arbitral award shall be entitled to obtain a copy of the records of the arbitral proceedings and the award from the arbitral tribunal.(6) �e court shall, in exercising its jurisdiction or any of the powers con-ferred upon it by this Act or any other en-actment or law, have due regard to good or international best practice in labour or industrial relations shall be a question of fact. From the totality of these and the provisions of the NIC Act, and what has evolved as practice in the NIC, its jurisdiction can be divided into two, namely, original (where litigants can di-rectly come before the NIC) and appellate (where litigants may have to go through the processes of part I of the Trade Dis-putes Act (TDA) 2004 and end up with a referral of the matter to the NIC by the Minister of Labour acting pursuant to the provisions of Section 14 of the TDA). It must be pointed out, however, that where an improper referral of a matter is made by the Minister, as where the referral was made when there was no objection against the award of the Industrial Ar-bitration Panel (IAP) in issue, the NIC will decline jurisdiction to entertain the matter as was the case in Steel and En-gineering Workers Union of Nigeria Vs. Avon Crown Caps & Containers (Nige-ria) Plc. However, a referral to the NIC by the Minister pursuant to the provision of section 17 of the TDA approximate to the original jurisdiction of the NIC given that thereby the matter is coming for the first time before the court without the in-terposition of the processes of mediation, conciliation and arbitration. What all of this suggests is that the original/appellate categorization of the jurisdiction of the NIC is not watertight and may depend on

a case-by-case analysis. �e interpretation jurisdiction of the NIC is one example of the original jurisdiction of the court. �is interpreta-tion jurisdiction relates to the interpreta-tion of any collective agreement, terms of settlement of any labour or organization-al dispute, any award made by an arbitral tribunal in respect of a labour or organi-zation dispute, any trade union constitu-tion, and any award or judgment of the NIC. Prior to the NIC Act 2006, a trade union constitution was not one of the documents that the NIC could inter-pret in its original jurisdiction. �is has been provided for under Section 7 of the NIC Act; and litigants have approached the court to have trade union constitution interpreted. �is was the case in Nnorom v. NLC & Ors where the NIC was called upon to interpret the constitutions of the Nigeria Union of Pensioners (NUP) and the Nigeria Labour Congress (NLC) in

terms of the nature of electoral right of the applicant regarding the elective office of the President of the NLC. In the case of National Union of Hotels and Personal Service Workers Vs Whassen Ernst (Nigeria) Ltd the court held that to activate the interpretation jurisdiction of the National Industrial Court for the purpose of interpreting a collective agreement, there must be a suf-ficient nexus between the applicant and the collective agreement in question and it is not enough that the applicant benefits from the collective agreements without more. To be so entitled, there has to be proof that the beneficiary is a member of the signatory trade union to the collective agreement. �e Trade Disputes Act has however laid down the procedure that has to be passed through before eventually going to the National Industrial Court on an industrial dispute which are: 4(1) If there exists agreed means for settlement of the dispute apart from this Act, whether by virtue of the provisions of any agreement between organisations representing the interests of employers and organisation of workers or any other agree-ment, the parties to the dispute shall first attempt to settle it by that means.(2) If the attempt to settle the dispute as provided in subsection (1) of this section fails, or if no such agreed means of settle-ment as are mentioned in that subsection exists, the parties shall within seven days of the failure (or, if no such means exists, within seven days of the date on which the dispute arises or is first apprehended) meet together by themselves or their representa-tives, under the presidency of a mediator mutually agreed upon and appointed by or on behalf of the parties, with a view to the amicable settlement of the dispute.

Section 5 of the TDA empowers the Min-ister of Labour and Productivity to ap-

5. (2010) 18 NLLR (pt.51) 2886. Hon Justice Kanyip: “�e jurisdiction of the National Industrial Court of Nigeria in the light of the third alteration of the 1999 Constitution of the Federal

Republic of Nigeria :A Lecture presented at the Lagos State Ministry of Justice in-House Training Programme tagged ‘LEARN’ on the 1st of March 2012 7. (2008) 12 NLLR (pt.32) 236 8. (2005) 2 N.L.L.R Pt. 145 especially at p.154 9. Hon. Justice Kanyip Supra

Hon. Justice Babatunde A. Adejumo OFRPresident, National Industrial Court of Nigeria


Legal Review

10 (2004) 1NLLR (Pt 2) 32611. Hon Justice Kanyip: “�e jurisdiction of the National Industrial Court of Nigeria in the light of the third alteration of the 1999 Constitution of the Federal Republic of Nigeria”:A Lecture presented at the Lagos State Ministry of Justice in-House Training Programme tagged ‘LEARN’ on the 1st of March 2012

prehend a trade dispute and appoint a conciliator or refer the dispute to the In-dustrial Arbitration Panel.5(1) Notwithstanding the foregoing provisions of this Act, where a trade dis-pute is apprehended by the Minster, he may in writing inform the parties or their rep-resentative of his apprehension and of the steps he proposes to take for the purpose of resolving the dispute.(2) Such steps as the Minister may, pursuant to this section, take may in-clude— (a) the appointment of a conciliator under section 8 of this A (b) a reference of the dispute or any matter relating thereto for settlement to the Industrial Arbitration Panel under sec-tion 9 of this Act; or (c) a reference of the dispute to a board of inquiry under section 33 of this Act.If the mediator appointed by employer and employee under Section 4(2) is un-able to settle the dispute within seven days, the dispute shall be reported to the Minister (Section 6), who shall refer the matter either to a Conciliator, the Indus-trial Arbitration Panel (IAP), the National Industrial Court or a Board of Inquiry.6(1) If within seven days of the date on which a mediator is appointed in ac-cordance with section 4 (2) of this Act the dispute is not settled, the dispute shall be reported to the Minister by or on behalf of either of the parties within three days of the end of the seven days.(2) A report under this section shall be in writing and shall record the points on which the parties disagree and describe the steps already taken by the parties to reach a settlement.7 Notice requiring com-pliance with sections 4 and 6(1) �e Minister shall, if not satisfied that the requirements of sections 4 and 6 of this Act have been substantially complied with, issue to the parties a notice in writing specifying the steps which must be taken to satisfy those requirements and may specify

in the notice the time within which any particular steps must be taken.(2) Where a�er the expiration of the period specified in the notice issued under subsection (1) above or, if no period is spec-ified, a�er the expiration of fourteen days following the date the notice is issued, the dispute remains unsettled and the Minister is satisfied— (a) that the steps specified in the no-tice have been taken; or (b) that either party is, for its part, re-fusing to take those steps or any of them,the Minister may proceed to exercise such of his powers under section 8, 9, 17 or 33 of this Act as may appear to him appropriate. 8(1) �e Minister may for the pur-poses of section 7 of this Act appoint a fit person to act as conciliator for the purpose of effecting a settlement of the dispute.9(1) Within fourteen days of the re-ceipt by him of a report under section 6 of this Act, the Minister shall refer the dispute for settlement to the Industrial Arbitration Panel established under this section.17 If in the case of any trade dispute of which he has received a report under section 6 of this Act it appears to the Min-ister— (a) that the dispute is one to which workers employed in any essential service are a party; or(b) that in the circumstances of the case reference of the dispute to an arbitration tribunal would not be appropriate,then, within seven days of the receipt by him of a report under section 8 (5) of this Act, the Minister shall refer the dispute directly to the National Industrial Court.33(1) Where any trade dispute exists or is apprehended, the Minister may cause inquiry to be made into the causes and cir-cumstances of the dispute and, if he thinks fit, may refer any matter appearing to him to be connected with or relevant to the dis-pute to a board of inquiry appointed for the purpose by the Minister; and the board shall inquire into the matter referred to it and report thereon to the Minister.

�e procedure has to be exhausted before a party can approach the National Indus-trial Court. Parties however sometimes try to avoid the process of the said Trade Dis-putes Act. Other provisions of the TDA are as stated in Section 15. It is essential to note that at times matters are brought to the National Industrial Court prematurely or in which the group of people that instituted the ac-tion cannot be legally classified as a trade union. In practice, the Court would have hinted the parties on the futility of their action and such are usually with-drawn. Unlike the State High Courts, all actions seeking to activate the interpreta-tion jurisdiction of the NIC are fresh ac-tions and so are ordinarily treated on the basis of applicable laws at the time they were filed.

Section 7 (1) (b) of the National Indus-trial Court Act is a section that has been challenged severally. One of such is that of the recent Health workers strike where the Health workers challenged the power of the Lagos State Government to dismiss them as a result of their participation in a strike action. Also in the case of Federal Republic of Nigeria Vs Adams Oshiomole, it took the High Court of the Federal Capital Territory, the Court of Appeal and the Federal High Court to decide whether Comrade Adams Oshiomole and the Ni-geria Labour Congress can validly lead Nigerians on a strike action. In the paper presented at the Ministry of Justice by Hon justice Kanyip, he stated as follows “in practice, section7 (1)(b) does not op-erate to allow a party claim the benefit of an ex parte order where there is already commenced a strike action”. In such a case, the NIC insists that the other party be put on notice.�e provision of Section 7(1) (b) of the


Legal Review

12. Hon. Justice Kanyip Supra

NIC Act is novel and is meant to guard against the circuitous nature in which the legality or otherwise of strike actions is o�en determined in the country. �e ra-tionale for this is that a strike is not per se illegal or unlawful. �e NIC deems is manifestly unfair to grant ex parte orders behind striking workers where a strike action has already commenced. �e proper thing to do in such a case is for the party seeking interim orders to sim-ply file the complaint, a motion on notice for the interim orders and an affidavit of urgency. However, where the ex parte application relates to a situation where workers are threatening to go on strike (in other words, the strike is yet to com-mence), then an ex parte order may be is-sued to stop the strike as was the case in the January 2012 nationwide strike over the withdrawal of subsidy on petrol. Another provision which is novel in nature again is the Section 7(6) which states that:“�e court shall, in exercising its jurisdic-tion or any of the powers conferred upon it by this Act or any other enactment or law, have due regard to good or interna-tional best practice in labour or indus-trial relations shall be a question of fact”. �is permits the NIC to have regard to international best practices when exer-cising its jurisdiction or power. �erefore the NIC feels at ease to apply ILO juris-prudence and be part of the global world of industrial relations law and practice. However a litigant that seeks to rely on best international practice must be prepared to establish or prove same as what international best practice in indus-trial relations is, is a question of fact.

�e National Industrial Court under the 3rd Alternation Act 2010�e National Industrial Court experi-enced a new dawn with the amendment of the Constitution of the Federal Re-public of Nigeria 1999 by virtue of the Constitution of the Federal Republic of Nigeria (3rd alteration) Act, 2010 which took effect from the 4th of March 2011. �e said Act amended the Con-

stitution of 1999 by adding Section 6(5) CC to the existing section 6(5) to include National Industrial Court as one of the superior courts established for the Fed-eration. By its preamble its states that it is “An Act to alter the Constitution of the Federal Republic of Nigeria Cap.23 Laws of the Federation of Nigeria, 2004 for the establishment of the National Industrial Court under the Constitution. Section 3 of the said law amends Sections 84(4) by “inserting immediately a�er the words “judge” of the “Federal High Court” in line 4, the words “Presi-dent of the National Industrial Court, Judge of the National Industrial Court.” Section 4 of the Act amends Section 240 of the Constitution by “inserting im-mediately a�er the word “Federal High Court” in line 3, the words “the National Industrial Court”. Section 243 of the Constitution is also altered and the essential alteration is that of sub-section 2 that “An appeal shall lie from the decision of the National Industrial Court as of right to the Court of Appeal on questions of fundamental rights as contained in Chapter IV of this Constitution as it relates to matters upon which the National Industrial Court has jurisdiction”.(3) An Appeal shall only lie from the de-cision of the National Industrial Court to the Court of Appeal as may be prescribed by an Act of the National Assembly;Provided that where an Act or law pre-scribes an appeal from the decisions of the National Industrial Court to the Court of Appeal such appeal shall be with the leave of the Court of Appeal. A major amendment is that of sub-section (4) which states that “without prejudice to the provisions of Section 254(5) of this Act the decision of the Court of Appeal in respect of any appeal arising from any civil jurisdiction of the National Industrial Court shall be final”. Effectively, this means that no appeal shall lie to the Supreme Court on any civ-il jurisdiction exercised by the National Industrial Court from the Court of Ap-peal.

“The court shall, in ex-ercising its jurisdiction or

any of the powers con-ferred upon it by this Act or any other enactment or law, have due regard to good or internation-al best practice in labour or industrial rela-tions shall be a question of fact”.


Legal Review

13. Lawal Pedro SAN, Jurisdiction of Courts in Nigeria Ministry of Justice, Law Review Series. 2006 Revised Edition

Section 6 of the said Act pro-ceeds to amend Section 254 by inserting immediately a�er Section 254 a new sub-heading (cc) and Sections 254 A-F. Section 254 A of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) provides:

(1) �ere shall be a National Industrial Court of Nigeria.(2) �e National Industrial Court shall consist of:(a) President of the National Industrial Court and (b) Such number of judges of the National Industrial Court as may be prescribed by an Act of the National Assembly”By Section 254 B (4) a person shall not be eligible to hold the office of a Judge of the National Industrial Court unless the person is a legal practitioner in Nigeria and has been so qualified for a period of nor less than ten years and has consider-able Knowledge and experience in the law and practice of individual relations and employment conditions in Nigeria”

�erefore, section 1(2) and (4) of the National Industrial Court Act, an existing law which provides for ap-pointment of one third of members of the court from ordinary graduate of a recognized university of not less than 10 years standing with considerable Knowl-edge and experience in law and practice of industrial relations and employment conditions is inconsistent with section 254(b) of the Constitution and therefore null and void. Mr. Lawal Pedro SAN in his book on Jurisdiction of Courts in Ni-geria opined that any member of the court who was appointed under the Na-tional Industrial Court Act and is not a legal practitioner of not less than 10 years experience shall cease to be a member or a judge of the National Industrial Court with effect from 4th of March 2011.

Jurisdiction of the National Industrial Court�e territorial jurisdiction of the court is one. Section 254C (1) provides that: (1)

Notwithstanding the provisions of the Section 251, 257, 272 and anything con-tained in this Constitution and in addi-tion to such other jurisdiction as may be conferred upon it by an Act of National Assembly, the National Industrial Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters-

(a) Relating to or connected with any la-bour, employment, trade unions. Indus-trial relations and matters arising from workplace, the conditions of service, in-cluding health, safely, welfare of labour, employee, worker and matter incidental thereto or connected therewith;

(b) Relating to, connected with or arising from factories Act, Trade Disputes Act, Trade Unions Act, Labour Act, Employ-ees Compensation Act or any other Act or law relating to labour, employment, in-dustrial relations, workplace or any other enactment replacing the acts or law;

(c) Relating to or connected with the grant of any order restraining any person or body from taking part in any strike, lock-out or any industrial action, or any conduct in contemplation or in further-ance of a strike, lock-out or any industrial action and matters connected therewith or related thereto;

(d) Relating to or connected with any dispute over the interpretation and ap-plication of the provisions of Chapter IV of this Constitution as it relates to any employment, labour, industrial relations, trade unionism, jurisdiction to hear and determine.

(e) Relating to or connected with any dispute arising from national minimum wage for the Federation or any part thereof and matters connected therewith or arising therefrom;

(f) Relating to or connected with un-fair labour practice or international best practices in labour, employment and in-

“By this sec-tion, the juris-diction of the Federal and State High Courts as well as that of the High Court of the Federal Capital Terri-tory Abuja, in labour, trade union and in-dustrial mat-ter is ousted.


Legal Review

dustrial relation matters.

By this section, the jurisdiction of the Federal and State High Courts as well as that of the High Court of the Federal Capital Territory Abuja, in labour, trade union and industrial matter is ousted.

In the exercise of its jurisdic-tion, Subsection (2) provides that “not-withstanding anything to the contrary in this Constitution, the National Indus-trial Court shall have the jurisdiction and power to deal with any matter connected with or pertaining to the application of any international convention, treaty or protocol of which Nigeria has ratified re-lating to labour, employment, workplace, industrial relation or matters connected therewith”.

It does seem that the court can now apply without hindrance, interna-tional conventions, treaties and protocol that relate to employment labour issue which are ratified in Nigeria: Section 7 (6) of the National Industrial Act permits the court to have regard to International best practices when exercising its juris-diction or power. A similar provision can be found in the Industrial Relations Law of Trinidad and Tobago. In a lecture delivered by Hon Justice Kanyip at the Lagos State Ministry of Justice, he stated that the chief advantage of Section 7 (6) is that it permits the National Industrial Court to be part of the global world of in-dustrial relations law and practice where the experience of other jurisdictions can be brought to bear in the adjudication of labour disputes. He noted that in practice however the National Industrial Court applies ILO jurisprudence regarding mat-ters that come before the court.

Sub-section 3 of the Act goes on to provide that “the National Industrial Court may establish an Alternative Dis-pute Resolution Centre within the court premises, on matters which jurisdiction is conferred on this court by the Consti-tution or any Act or Law” – therefore this introduces the powers to establish ADR

centres. It further states that “provided that nothing in this subsection shall pre-clude the National Industrial Court from entertaining and exercising appellate and supervisory jurisdiction over an arbitral tribunal or commission, administrative body or board of enquiry in respect of any matter that the National Industrial Court has jurisdiction to entertain or any other matter as may be prescribed by an Act of the National Assembly or any law in force in any part of the Federation”

�is provision gives the Nation-al Industrial Court appellate jurisdiction over arbitral proceedings and continues in the same vein in subsection 4. Subsec-tion 5 then proceeds to grant the National Industrial Court jurisdiction over crimi-nal causes and matter arising from any cause or matter of which jurisdiction is conferred on the court.

Prior to the amendment of the Consti-tution of the Federal Republic of Nige-ria 2010 via the 3rd Alteration, the High

14. Hon Justice Kanyip: “�e jurisdiction of the National Industrial Court of Nigeria in the light of the third alteration of the 1999 Constitution of the Federal Republic of Nigeria :A Lecture presented at the Lagos State Ministry of Justice in-House Training Programme tagged ‘LEARN’ on the 1st of March 2012

15. Section 10 of the Industrial Relations Act Chp 8801 Laws of Trinidad & Tobago16. Hon.Attorney –General of Enugu State V. National Association of Government General Medical and Dental (NAGGMDP) & Ors.


Legal Review

Court of a State had jurisdiction in trade disputes and industrial relation matters notwithstanding the exclusive jurisdic-tion conferred on the National Industrial Court by the Trade Dispute Act and later the National Industrial Court Act 2006. In the case of Attorney General Oyo State Vs Nigeria Labour Congress, Oyo State & Ors, the respondents were employees and workers in the government of Oyo State. �ey were dissatisfied with certain aspects of their conditions of service and threatened to embark on industrial ac-

tion. �e government of Oyo State com-menced an action in the High Court of Oyo State against the workers. �e defen-dants filed a notice of preliminary objec-tion challenging the jurisdiction of the High Court on the grounds that it was only the National Industrial Court that had jurisdiction to entertain the dispute under the Trade Dispute Act. �e plaintiff responded by stat-ing that the Trade Dispute Act could not override the provision of Section 315 of the 1999 Constitution that gives unlimit-

ed power to the High Court of a State. �e State High Court held that it lacked juris-diction to entertain the case. At appeal, the Court of Appeal pronounced that the conferment of exclusive jurisdiction over trade dispute matters by the National In-dustrial Court was unconstitutional. With the constitutional amend-ment, the situation is now very clear and with the re-establishment of the National Industrial Court as a superior court of record, and the conferment of exclusive jurisdiction in civil causes and matters relating to labour, trade union and indus-trial relations, a State High Court ceases to have jurisdiction in such matters. It is essential to note that the ju-risdiction conferred on the National In-dustrial Court in fundamental right and criminal issue is only in relation to the above stated matters. Although amendment to the Constitution has removed the uncertain-ty as to which court has jurisdiction on employment and trade dispute, however the problem that arises at times in court is where such matters have been pending for many years at the State High Court, but due to retirement of the Judge handling the case or delay of parties, the matter has not gone to trial or had commenced trial but had to commence same de-novo before another court. With the constitu-tional amendment, the courts have had conflicting orders as to the proper order to make in such circumstances. Is it to transfer the matter to the National Indus-trial Court or to strike it out? Generally, a Court without ju-risdiction lacks the power to make any order in the case or matter including or-der of transfer to the court with jurisdic-tion to determine it. However if there is an express statutory provision that con-fers power of transfer on a court where it lack jurisdiction to entertain a matter, the court would in the circumstances have the power to transfer the matter to another court having jurisdiction over the matter. Such provision is Section 22

17. Lawal Pedro SAN, Jurisdiction of Courts in Nigeria Ministry of Justice, Law Review Series. 2006 Revised Edition 18. (2003) 8 NWLR (Pt 821)


Legal Review

of the Federal High Court Act Cap F12 whereby the Federal High Court can transfer a matter to the High Court of a State where it does not have jurisdic-tion, but there is no such provision for the State High Court and the law or rules of a court cannot be made or interpreted to regulate the practice and procedure of another court. As there is no statute made by any of the States of the Federation that confers such powers on the State High Court, a Judge of a State High Court has no power to transfer an action to the Fed-eral High Court or the National Indus-trial Court. �ere is also the uncertainty of the applicable court in a matter that has been pending in a court for a long time and an amendment robs the court of the jurisdiction it previously had. Some law-yers are in a fix as to which court actually has jurisdiction especially where there is fear of limitation of time of the action. �e cases of Obiuweubi Vs. Central Bank of Nigeria20, and Olutola Vs University of Ilorin are very instruc-tive. In Obiuweubi; the appellant was a senior employee of the respondent bank, an agency of the Federal Government of Nigeria, on the 11th day of August 1987, he was put on suspension and on the 30th day of October 1987 his appoint-ment was terminated. Aggrieved by the situation he sued the respondent at the Lagos High Court on 7th June 1988. �e suit was before Fafiade J. but trial never commenced before Fafiade J. retired on 22nd January 1991. �e case went before Olugbani J. and for the first time on the 15th day of December 1993 trial commenced. Appel-lant concluded evidence on the 8th Octo-ber 1996. Olugbani J. retired on the 23rd September 2002 and then the case came up before Lufadeju J. for the first time. �e respondents raised an ob-jection to the jurisdiction of the High Court and prayed for an order striking out the suit for want of jurisdiction in

view of Section 251 (1) and (v) of the 1999 Constitution. �e trial court struck out the suit for lack of jurisdiction. �e appellants appeal to the Court of Appeal was dismissed. He appealed to the Supreme Court and it held that “the law in force or existing at the time a cause of action arose is the law applicable for determining the case. �is law does not necessarily determine the jurisdiction of the court at the time that jurisdiction is invoked. �at is to say the law in force at the time a cause of action arose governs the determination of the suit, while the law in force at the time of the trial based on cause of action determines the Court vested with jurisdiction to try the case…..As from 17/11/93, the State High Court no longer had jurisdiction. If trial had commenced before 1993, the court to try the case would have been the State High Court but a�er 17/11/93 the case would be heard in the Federal High Court’.

ConclusionIt is my view that the constitutional amendment via the 3rd Alternation Act is a progressive step in the right direction. Now the cases in which the National In-dustrial Court has jurisdiction upon are clear, matters are also being handled with dispatch. It has also reduced the heavy work load of the State High Courts and the ideal judiciary where speedy and ef-ficient dispensation of justice is gradually being achieved.•

“There is also the uncertain-ty of the a p p l i c a b l e court in a mat-ter that has been pending in a court for a long time and an amend-ment robs the court of the j u r i s d i c t i o n it previous-ly had. Some lawyers are in a fix as to which court actually has jurisdic-tion especially where there is fear of limita-tion of time of the action.

19. Lawal Pedro SAN. Supra20. (2011) 7 NWLR. 46521. (2004)12 SCNJ 236; (2004) 18 NWLR (pt. 905)


Tax Matter

Tax: A fiscal policy instrumentIn every society, tax is an instrument of fiscal policy and plays a leading role irrespective of the political or constitutional struc-ture. �e function of government in a sovereign state becomes enormous over time as population grows, resulting in heavy ex-penditure and necessitating tax payment by the working class citizens for the continuous development and maintenance of infrastructure.

For a developing economy like Nigeria, the primary goal is to accelerate the rate of economic growth through in-come generation.

Although the Nigerian tax law does not define the term tax, the Black’s Law Dictionary defines is as “a charge usu-ally monetary, imposed by the government on persons, entities, transactions, or property to yield public revenue”. Tax can also be defined as a compulsory exaction of money by a public au-thority for public purposes, while taxation on the other hand is the imposition or assessment of a tax; the means by which the state obtains the revenue required for its activities.

�e importance of taxation cannot be overemphasized, as it plays a vital role in the development and sustainability of the economy. Nigerians have for several reasons evaded tax remission with a belief that taxation is only favourable to the government and not individuals. �is is a wrong perception as taxation benefits both the government as well as the tax pay-ers which include employers, employees (full time or part time), agent consultants, foreign investors and business corporations

Types of Taxes in NigeriaPersonal Income Tax: �is tax is charged based on the income of an individual and increases as income increases thus dubbed

Pay-As-You-Earn (PAYE). Following the recent amendment to the Personal Income Tax (PIT) Act on 14th of June 2011, in-come taxes are now progressively charged to 24% against 25% that it was before with an increase in the minimum tax rate from 0.5% to 1% of gross income. Other key changes to this tax type can be understood by comparing the PIT Act of 2004 with the amended one of 2011.

Companies Income Tax: �is tax is levied on corporate bod-ies a�er an assessment of profits made by the company for each year at the rate of 30%. Small businesses are charged at a rate

You and Your TaxEfe Obadan, Daniel Eluwah


Tax Matter

of 20%. �is tax type is backed up by the Company Income Tax Act of 2004 which was amended in 2007. �e amended act is believed to cause an increase in rural investment allowances from 10% to 20%, provide 10-year tax holiday, increase tax free period for mining companies from 3 to 5 years, and increase tax free period for gas utilization companies involved in downstream operations from 5 to 7 years.

Education Tax: In addition to the com-pany’s income tax, an extra 2% is charged as education tax on all incorporated com-panies which is accessible from the profits they make. Viewed as a social obligation, this tax ensures that all companies con-tribute their own quota to the advance-ment and development of the educational sector. �is tax is in line with the Educa-tion Tax (Amended) Act of 1998.

Capital Gains Tax: �is pertains to gains accruing to a taxpayer from the sale or lease or other transfer of proprietary rights called assets in a chargeable inter-est, and this is at a rate of 10%. �e asset may or may not be situated in Nigeria and the charges may be corporeal or incorpo-real.

Withholding Tax: A withholding tax is the tax required by Law to be withheld by a party from each payment made to another contracting party from the in-come or services rendered. �is tax, when deducted and withheld, is required to be remitted periodically to applicable tax bodies: if a corporate entity, payment is re-mitted to Federal Inland Revenue Service while those of Individuals are collectible by the State tax body where the individual resides. �e tax body is in turn required

to issue a Withholding Tax Credit Note for the benefit of the latter party, part of whose income was withheld. Withhold-ing tax rate is at 5% for individuals and 10% for corporate entities.

Value Added Tax: �e Value Added Tax (VAT) is another rather prominent tax obligation being a consumption tax levied at each stage of the consumption chain, and is borne by the final consumer. Payment of VAT is at a rate of 5% of all in-voiced amounts of taxable goods and ser-vices. �e Federal Inland Revenue Service (FIRS) administers the VAT on behalf of the three tiers of government and the generated revenue is shared among the federal, state, and local government by a sharing formula determined by the leg-islature which is subject to review from time to time. Other types of tax-like revenue sources for the Nigerian government in-clude stamp duties, social security contri-butions of 7.5%, training tax of 1.0% and tax on interest of 10%.

Benefits of TaxationAlthough many see the remission of taxes as a financial burden and have questioned why other options of income generation have not been explored; however, the fact remains that they are the most veritable and sustainable financial source for any government. Taxation also plays a vital role in the economy by ensuring that re-sources of the government are channeled towards essential projects such as build-ing of infrastructure, roads, job creation and proper maintenance of the environ-ment. In a developing country like ours, there is need for the government

to encourage the populace to pay tax. Earning the trust and confidence of the tax payers cannot be overemphasized. �e placement of signposts “tax payers’ money at work” on a just concluded road project or school development project is not enough motivation that money paid to the government via taxes is not divert-ed into the purses of government officials and tax agencies. More needs to be seen in terms of actual development across board.

Tax IncentivesIn order to create favourable tax climate for investors, vtax incentives have been created by the government as a means of motivating and stimulating domestic and foreign investment towards the achieve-ment of economic advancement. �e reason for the creation of tax incentive is to create a friendly and effective tax environment. However, tax incentives should be constantly reviewed so that the benefits will not outweigh the benefits of taxation on the government’s revenue. Tax incentives should also be given to Micro, Small and Medium Enterprises for the first 2-5 years in business to support and aid the growth of the business. �is would give them enough time to break even and also encourage people to start up small scale business which in the long run create job opportunities and improve the nations GDP and overall economic development. •


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Doing Business in Nigeria

According to a report issued by the World Bank early this year, Singapore is rated as the most investor-friendly na-

tion across the world. Primary indices considered include among others invest-ment incentives and flexible terms and conditions for business operators. Closely behind Singapore are Hong Kong SAR, China, New Zealand, the United States, and Denmark. �ere is no gainsaying that no booming nation thrives solely on her natural resources and the strength of her population, however viable it is. To this end, it has been recorded that over the past six years, 163 economies have

made their regulatory environment more business-friendly for investors and im-migrants, thereby creating avenues for economic developments through public private partnerships, immigration and attendant investments, encouraging for-eign exchange and striking cordial inter-national relations with complementing economies across the world. Within the last year also, it is worthy of note that governments in 125 economies out of 183 countries implemented a total of 245 business regulatory reforms, which is about 13 percent more reforms than was witnessed in 2010. On the African terrain, North

African country, Morocco is recognized as having consolidated and improved her regulatory environment substantially in recent times, while Sierra Leone also taken significant strides to encourage foreign participation and immigration in her economic landscape. Within the rest of the Sub-Saharan Africa also, a note-worthy record of 36 out of 46 economies improved business regulations within the last year. With a population exceeding one hundred and sixty seven million, Nigeria stands tall at the hinge point of the African map, fostering substantial immigration and emigration across its

‘Sanmi Abiodun



boundaries on a daily basis for tourism or business transactions. �is is reput-edly premised on international relations, several cross-border alliances and partici-pation or membership with international entities such as the ECOWAS, OPEC, AU, G-20 among others. Doubtlessly, there are numerous openings, opportunities and potentials for business investments, with indigenes and foreigners alike, maximiz-ing raw potentials embedded in Nigeria. It is also important to recognize that the Nigerian Government is currently propa-gating an ambitious economic revitaliza-tion programme in line with its target of becoming one of the 20 leading econo-

mies in the world by the year 2020. To this end, with the exceptions of a few sectors which are regarded as the “negative list”, foreign investments by corporate entities or individuals occur and are encouraged in every sector, phase or level in Nigeria, hence the nations “open-door-policy”. �e most patronized and lucrative sectors for investments include Oil and gas, Tele-communications, Infrastructure, Phar-maceuticals and Health, while the sec-tors specified on the negative list include Production of arms and ammunitions, Production of and dealing in narcotic drugs and psychotropic substances; and Production of military and paramilitary

wears. Prior to commencement of busi-ness operations in Nigeria, the key struc-tural foundation is either the incorpora-tion of a new company, or the operation of a Joint Venture. While incorporation of a new company may be the reasonable stride for an indigenous investor in Nige-ria, it may be worth substantial consider-ation that a foreign investor enters into a Joint Venture with an already existing indigenous company in Nigeria. As oper-ates in many other countries, the option of collaboration is widely encouraged as it creates leverages for foreign investors and eases the process of business opera-



tions. In India for instance, even though most sectors are now open to 100% FDI, many foreign investors still prefer to set up a joint venture with an Indian part-ner company as this can give them access to the Indian partner’s pre-established market and distribution channels, local management and know-how. Similarly in South Africa, it is recognized that Joint Ventures are being increasingly used by businesses that want to explore new op-portunities, find new leads and attract new customers. Also recognized is the fact that even though the “Joint ventures”, also known as “Strategic Alliances” take time and energy to set up and run, they can be hugely advantageous to your busi-ness if implemented properly. Nigeria is not in any way different, with respect to the entering of Joint Venture Agreement by foreigners with indigenous companies. �e Joint-Venture may however specify inter-alia, the mode of subscription by parties, manner of Board Composition, mutually protective quorum for meet-ings, specific actions which would neces-sitate share-holders approval by special

resolution, etc. As a matter of fact, the pri-mary industry in Nigeria which is the Oil and Gas industry witnesses a lot of such agreements, typically referred to as Joint Operating Agreements (JOA) between the Nigerian National Petroleum Com-pany (NNPC) and other companies. With respect to the other pro-cedure for commencing business, which is the incorporation of a new company with the Corporate Affairs Commission “CAC”, it is important to note that the first step to incorporation of a new company in Nigeria is to conduct an availability search on the proposed name(s) of the new company at the CAC. Subsequent to the incorporation, certain key post in-corporation matters which must be car-ried out include Fund transfer, obtaining Pre-investment Approvals (Certificate of Business Registration, Business Permit, Expatriate Quota Approval), the process of Tax Registration Compliance {it is im-perative that all companies in Nigeria are registered with the Federal Inland Rev-enue Service (FIRS). Companies register with the FIRS primarily for Income Tax

and Value Added Tax (VAT) purposes}, filing of statutory returns (which include Corporate Returns at the CAC, Tax Re-turns with the Tax Authorities and Im-migration Returns with the Nigerian Im-migration Services) and Appointment of Company Secretary. Established by the Companies and Allied Matters Act “CAMA” which was promulgated in 1990, the CAC is the primary regulatory body created to regu-late the formation and management of companies in Nigeria. �e Commission has a vision “to be a World Class Compa-nies Registry” while its mission statement is “to Provide Excellent Service Delivery through the best Technology, driven by a Motivated Workforce.” �e Commission has as its primary function, “to adminis-ter the Act, including the regulation and supervision of the formation, incorpo-ration, management and winding up of companies”. While it is not the intention of this piece to assess whether or not the CAC has effectively prosecuted its cause, it is worthy of mention that the CAMA which is one of the major legislations



governing the regulation and manage-ment of business operations in Nigeria is currently been considered for extensive review and amendment based on current realities and strides at economic develop-ment.

�e Nigerian Investment Pro-motion Commission (NIPC) is another Federal Government Agency in Nigeria whose impact in business operations and regulation cannot be over-emphasized. �is is primarily premised on the involve-ment of the NIPC in all acts of foreign participation and investments in Nigeria. �e NIPC was established in 1995 to en-courage, promote, and coordinate invest-ments in Nigeria. �e Agency provides services for the grant of business entry permits, licenses, authorizations and in-centives in a One-Stop-Shop environ-ment and these services are provided in a coordinated, streamlined, efficient and transparent manner to meet the needs of investors.

�e Nigerian Immigration Ser-vice (NIS), Federal Ministry of Interior and the Federal Inland Revenue Service (FIRS) are other important regulatory au-thorities that must be encountered in the course of business operations in Nigeria. �ese are however general regulatory authorities which cut across all sectors. �ere are however several sector specif-ic organizations and Commissions that govern the specific industries in which investments and business operations may be made. Some of these are Nigerian Na-tional Petroleum Commission (NNPC) and the Department of Petroleum Re-sources (DPR) regulating the Oil and Gas industry, the Nigerian Communications Commission (NCC) and the Nigerian Lottery Regulatory Commission (NLRC) for the telecommunications industry, the Federal Aviation Authority of Nigeria (FAAN) for the aviation sector, the Na-tional Health Insurance Scheme (NIHS) in the Health sector, the National Agency for Food and Drug Administration and Control (NAFDAC) which controls im-

ports and circulation of food and drug items, the Central Bank of Nigeria (CBN) which oversees the Banking sector, the Power Holding Company of Nigeria (PHCN) for the power sector among oth-ers. In another vein, in line with global competitive and contemporary standards, the Nigerian government plac-es its focus on building a private sector driven economy and to provide enabling environment to encourage foreign invest-ment and sustain growth of small and medium industries. To this end, there has been the promotion of several incentives, both general and sectoral, for investments in certain areas of the Nigerian economy. Some of these investment incentives are premised on nouvelle strides at promot-ing or contributing substantially to eco-nomic development. �ese can be broad-ly categorized under the following:

1. Pioneer status reliefs2. Companies Income Tax reliefs3. Tax relief for research and development4. Capital allowances5. In-plant training6. Investment in infrastructure7. Investments in economically disadvantaged areas8. Labour intensive modes of

production9. Local value added10. Re-investment allowance11. Minimum local raw materials utilization

Sectors where reliefs are paramount in-clude Agriculture, Solid minerals, Petro-leum, Gas industry, Telecommunications, Energy (electricity), Industry, Tourism and Transportation. Conclusively, the Nigerian econ-omy is doubtlessly a fertile terrain for foreign investors having Nigeria as a tar-get business location. �e Nigerian eco-nomic strength is primarily in the wealth of natural resources, coupled with one of the largest human capital base in Africa and consequently a large market base. Admitting but not conceding also that the country is plagued with several nega-tive cultural traits, it still remains evident that the Nigerian government is working tirelessly to encourage both foreign and local investment, by enacting “investment friendly” laws and sustaining an invest-ment friendly climate for interested per-sons. Subsequent editions of this magazine will lay emphasis on the pros-pects and procedure for local investors and investment incentives for both local and foreign investments.•


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Insurance presents new investment opportunitiesin agriculture, Takaful


Financial Services: Insurance

It has become increasingly difficult to discuss economic advancements in emerging economies without mak-ing reference to the most phenom-

enal economic crisis in recent times. �is global economic/financial crises, which brought economies and markets to their knees have caused many countries to be-gin to look inwards to develop allied sec-tors of their economies that would help bring stability and also assist the poor populace overcome the crippling impact of the crises now, and in the future. Nigeria, like many other de-veloping nations have largely remained mono-economies with 80 percent reli-ance on oil for revenue for decades, which current economic realities suggests is only temporary, without developing oth-er sectors. While the real sector in Nigeria has also produced 7% of the nations GDP in recent times, it should be noted that ag-riculture has provided 30% of that contri-bution, manufacturing 32% and services provide 38%. Although other sectors are be-ing explored for investment and pros-perity possibilities, agriculture has been identified as the next investment haven because of its potential for food produc-tion and security, employment, wealth creation and directly closer to majority of the lower end of the population. �e sector is receiving a lot attention both from the Federal and state governments, becoming an area that every wise inves-tor should look into, which has led some schools of thought to argue that invest-ment in agriculture will be the best in-

vestment of the 21st century. It therefore becomes necessary to critically consider the viability of these propositions. While that statement might be a little bold, there is no gainsaying that a large number of basic commodities grown in Nigeria have both local and export potentials, and so the country has the capability not only to meet its growing food needs but also to become one of the leading food exporting countries in the sub-region and the world at large. With this development there-fore, allied service providers including the insurance industry are tightening their belts to key into the new agricultur-al reform programme of the government, where a whopping N68.4 trillion ($450 billion) has been approved by commercial banks to be administered by the Nigerian Incentive Base Research Sharing for Ag-ricultural Lending (NIRSAL), which will support farmers with so� loans and other growth facilities. �e involvement of the Insur-ance industry in this scheme is to provide risk covers for the new investments in agricultural farms, products and storage infrastructures as well as credit guaran-tee scheme for accessing different funds. While the insurance sector in the country is still teething with respect to agricultur-al insurance, with only the government owned Nigerian Agricultural Insurance Corporation (NAIC) providing risk in the sector and covering only 20 percent of the industry, there are new plans under-way by the National Insurance Commis-sion (NAICOM) to open up the industry

“Although other sectors are being explored for in-vestment and

prosperity pos-sibilities, agricul-ture has been identified as the next investment haven because of its potential for food production and security, em-ployment, wealth creation and di-rectly closer to majority of the lower end of the population.

Fola Daniel, Minister of Insurance

Akinwumi Adesina, Minister of Agriculture



for more players to invest in agriculture insurance. �e reform is expected to birth a new legislation in view of the ongoing reviewed insurance laws currently with the National Assembly. It is expected that this legislation would liberalize the sector for new entrants and investors in Agric Insurance business. If this happens, then the perceived monopoly of NAIC would have been cut short. �e intention howev-er is to deepen the market by reaching the under insured large populace of farmers in the grass root. �is cue we can suggest was taken from countries like Northern Sudan, Malaysia and even India. NAICOM, in an effort to ensure the viability of this scheme, has com-menced approval of agricultural insur-ance products for insurance companies willing to invest in the new business. �e Commissioner for Insurance, Mr. Fola Daniel has reiterated the willingness and readiness of National Insurance Com-mission to approve products from insur-ance companies that show interest in un-derwriting Agric Insurance. �e NAICOM boss has indi-cated that at the moment, only Industrial and General Insurance Company Plc has come up with some agricultural insur-

ance products and has secured approvals on them. He further opines that agricul-tural insurance is one of the strategies NAICOM is pursuing to increase market penetration and grow the grass root mar-ket under its Market Development and Restructuring Initiative (MDRI). Meanwhile, proactive insurance con-sultants across the world particularly in Agricultural Insurance jurisdictions have commenced conversations with some lo-cal insurance companies for partnership deals that would enable them come to play in the industry. While agriculture is not expect-ed to run alone in the target for increased market penetration, NAICOM under its MDRI is also looking at further deepen-ing insurance through Takaful Insurance, otherwise called Islamic insurance. �e Commission stated it has concluded the guidelines for implementation of Taka-ful (Islamic) Insurance and before end of September 2012 start issuance of license for Takaful Insurance companies. Takaful Insurance is a type of Islamic insurance which has in fact been practised in various forms since 622 CE, where members contribute money into a pooling system in order to guarantee each other against loss or damage. Taka-

“NAICOM, in an effort to en-sure the viabil-ity of this scheme, has c o m m e n c e d approval of ag-ricultural insur-ance products for insurance c o m p a n i e s willing to in-vest in the new business.



ful-branded insurance is based on Sharia, Islamic religious law, and explains how it is the responsibility of individuals to co-operate and protect each other. �e core principles of this scheme include; Policy-holders cooperating among themselves for their common good; each policy-holder pays his subscription to help those who need assistance; division of losses and liabilities according to the commu-nity pooling system and elimination of uncertainty concerning subscription and compensation. �e scheme also does not support deriving advantage at the cost of others. Takaful insurance companies were introduced as an alternative to com-mercial insurance companies, which go against the riba (interest), al-maisir (gam-bling), and al-gharar (uncertainty) prin-ciples, that are outlawed under Sharia.

�e Insurance Commissioner in Nigeria said the commission had un-derstudied the Indian and Malaysian markets, pointing out that these were successful Takaful markets whose experi-ence could be replicated in Nigeria. “We are not resting on our oars in pursuing this micro/Takaful insurance market be-cause the insurance gap in our domain is endemic, problematic, and we seem not to have a solution. But we have found a way out and that is Takaful, because it is a mutually beneficial way of sharing risk.” It is selling very well in America and South Africa, which have very few muslims, Daniel said.

In another vein, Sabbir Patal, a member of the Sudanese Insurance mar-ket said at the recently concluded African

Insurance Organisation (AIO) forum that even though Takaful was designed based on Islamic principle, the principle had been found to be attractive even to non-Muslims. According to him, it is capable of addressing the high poverty situation in the continent if all the markets can embrace it to help the vulnerable poor in the society. Patal noted that the Sudanese insurance market had succeeded with Takaful to such an extent that it has got no religious boundaries, but rather, looks at creating value to the lower ebb of the society. Although it has been consid-ered in trickles in Nigeria, this scheme is therefore encouraged further in the light of successful precedence by over 60 companies offering Takaful insurance services in 22 other countries around the world which countries include Malaysia, Singapore, Indonesia, Tunisia, Bahrain, Brunei, Kuwait, Jordan, Qatar, UAE Sri Lanka, Bangladesh, Turkey, Luxembourg, Senegal, Egypt, Saudi Arabia, Sudan, Iran and Pakistan. With the hindsight that Takaful Insurance companies around the world especially in the Middle-East, North Africa and South Asia set a target of N180billion ($12billion USD) pre-mium generation from takaful insurance for 2011 as the demand by Muslim popu-lations across the globe for the products increased, the scheme has grown signifi-cantly in recent times in those countries except for Nigeria which is yet to level up substantially in the Islamic insurance business.•

“The core prin-ciples of this scheme in-clude; Policyholders cooperating among them-selves for their common good; each policyholder pays his sub-scription to help those who need as-sistance.


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Environment

Waste Management:A Global ConcernManaging waste effectively and efficiently is one of the many challenges that have bedevilled many nations for decades. In urbanised areas, the collection, transport, treatment, and disposal of waste still pose challenges for those responsible. It is even the more worrisome in developing coun-tries, where fiscal, human, and other cru-cial resources are limited.

According to the global review

on solid waste management, ‘What a Waste’, released in March 2012 by the World Bank, world cities currently gener-ate about 1.3 billion tonnes of solid waste annually and an increase of about 1% is expected by the year 2025. Currently, the annual global costs for waste manage-ment accounts for $205 billion and this is projected to hit $376 billion by 2025 also. �e review also forecasted that cost will increase by over 5-fold in low income countries and by over 4-fold in lower-middle income countries.

Wastes, whether domestic, med-ical, industrial, or electronic, account for a reasonable percentage of environmental degradation. �ey are also known to pro-duce a substantial amount of methane, a powerful green house gas (GHG) that is particularly harmful within a short time. Unmanaged waste promotes flooding,

water and air pollution, and public health impacts such as diarrhoea, malaria and dengue fever. �e consequences of the harms done to the environment through busi-ness operations and domestic environ-mental negligence has caused global bod-ies like the United Nations Environment Programme (UNEP) and other regional bodies and governments to take effec-tive actions into ensuring that we leave a cleaner and better world for posterity. Re-cent strategies incorporate an integrated

approach which combines a set of waste management options, including stringent policies, waste avoidance, capacity build-ing on environmental friendly activities, waste to wealth schemes, resource recov-ery, and environmentally sound treat-ment and disposal. �e choice of these options must however be based on a lo-cality’s technical and economical makeup in order to be environmentally sustain-able.

LAWMA:Keeping Lagos Clean?As population increases, the overall quan-tity of wastes increases proportionately; it is becoming increasingly arduous to establish new facilities to manage these wastes. Given its present rate of popula-tion growth (7%) and the continuous in-flux of both Nigerians from other parts of

the country and foreigners into the city, which has been aptly regarded as the eco-nomic nerve of Africa, Lagos, according to the UN-HABITAT 2010/11 State of the World Cities Report, has been tipped to become the third largest mega city in the world by 2015 a�er Tokyo (Japan) and Mumbai (India). �is envisaged in-crease in population ultimately infers a rise in waste generation in the state. It is against this backdrop that the Lagos State government (Ministry of Environment) revived its commitment to tackle waste in the state through the Lagos Waste Man-agement Authority (LAWMA).

Clean Strategies...Private Sector Participation (PSP) Pro-gramme: Since the investment resources required for efficient waste management cannot be met by the state alone, given the need to develop of other key sectors, a public-private partnership in waste man-agement was initiated. Under this stra-tegic partnership, LAWMA creates the right atmosphere for investment for the private sector to succeed while the pri-vate investors are expected to apply their

Waste Management:Safeguarding the environment through efficient service processBy Daniel Eluwah and Olamipo Akinsulire-Jinadu

Currently, the annual global costs for waste management accounts for $205 billion and this is projected to hit $376 billion by 2025 also.

Unmanaged waste promotes flooding, water and air pol-lution, and public health impacts such as diarrhoea, malaria and dengue fever.


Environment

technical know-how, funds and resources. �ese private partners commonly known as PSP operators are saddled with the re-sponsibility of waste collection from pri-vate premises (households, schools, ho-tels, hospitals, factories and commercial buildings) while LAWMA handles pub-lic waste from markets to highways and waterways. �is innovative strategy has helped LAWMA to have a wider coverage of the state and allow its services to be ac-cessible to the almost 22 million residents of Lagos State while also generating em-ployment for many residents of the state.

�ought-out Policies: LAWMA’s stance towards managing waste is that of “tak-ing no chances”. With this mindset, a string of policies aimed to mitigate waste management challenges were rolled which includes “No Waste”, “Zero Waste Tolerance”, Climate Change Mitigation” and “Community Participation”. �e “No Waste” strategy is aimed at recovery through waste recycling, composting, waste-to-wealth and waste-to-energy while the “Zero Waste Tolerance” strategy is aimed at ridding communities of waste and prohibiting illegal dumpsites. �ese policies are made feasible by the involve-ment of the PSP operators.

Transfer Loading Stations: To enhance waste services, transfer loading stations (TLS) at strategic locations in the state were erected by LAWMA with more still to be built. �e TLS according to LAW-MA will serve as stop-gaps between the points of waste generation and waste disposal to improve collection efficiency and reduce the carbon footprint of waste management. �is innovative strategy also aligns with international best practise for turnaround time for municipal waste collection trucks which is at least one hour or a distance of 18km. Waste collec-tion trucks can now quickly despatch col-lected wastes and return to collect more. �e strategy has also prevented collection trucks to be caught in traffic if they were to go directly to the landfill sites.

Recycling Banks: To bolster its “No Waste” and Waste Recycling initiative, LAWMA introduced recycling banks placed in some estates within the Lagos metropolis to serve as depots for biode-gradable materials such as paper, can, glass, and plastic. �is initiative, though a pilot scheme, is to be replicated soon in other neighbourhoods in Lagos accord-ing to LAWMA. �e recycling banks are envisaged to not only fast track the state’s

waste-to-wealth programme but also to substitute the overtly overfilled landfill sites in the state and as a best option for green living which promotes sustainable development. It is also hoped to be used in converting tonnes of organic wastes into usable resources especially renew-able energy.

Advocacy Groups: �e creation of the LAWMA CLUB, an environmental advo-cacy club to educate school children on proper waste disposal and recycling op-tions, is a step in the right direction as this will inculcate a positive attitudinal change towards environmental sustainable devel-opment. �ere is also the Street Captain Scheme which co-opts youths from vari-ous streets and the NYSC LAWMA Club in collaboration with the National Youth Service Corps. �ese were both estab-lished to inculcate environmental con-sciousness in youths and in turn make them advocates for proper waste disposal and management.

...But Dirty ShortcomingsDespite the giant strides made to keep Lagos State clean, there still appears to be some shortcomings in service deliv-ery activities at LAWMA. Contrary to its

Although they are listed among the worst offenders in terms of the waste generation, Switzerland is a refer-ence point and a model in waste disposal especially in recycling. Of the more than 6 million tonnes of

urban waste generated in the country in 2006, almost half was recycled and most of the rest was incinerated making them champions of waste management indeed. �e Switzerland Federal Environment Office stated that of the 3.65 million tonnes of waste incinerated in 2006 from its 29 incineration plants, over 10% came from neighbour-ing countries. Incineration may bring to mind the issue of air pollution through burning but the Swiss have advance technolo-gies in place that reduce pollution to as low as reasonable and practicable. In fact, incineration from the 29 facilities is used in generating electricity for about 250,000 homes. �is decreases the amount of oil imports required for heating substantially.

With a recycling rate of near 50%, Switzerland stands as one of the greenest and cleanest countries in world. A look into the Environmental Performing Index (EPI) Reports shows that it has remained among the top three cleanest countries in the world since 2008. Currently with an overall score of 76.7 on the 2012 EPI Report, Switzerland is the cleanest country in the world out of the 132 countries evaluated. Impressively, Ga-bon which ranks 40th on the 2012 EPI reports is the only African country amongst the top 50 cleanest countries in the world out of the 26 African coun-tries that made the list. It is rather disappointing that Nigeria ranks 119th globally and occupies the 24th position among the African countries just be-fore Libya and South Africa. •

Thriving through efficientwaste management process


Environment

8-point vision which embraces making the organisation a household name in the area of waste management and related services, many residents of Lagos only get to see the waste collectors once in a blue moon. �e result is the illicit dumping of waste on the streets and continuous pa-tronage of cart-pushers who have been outlawed and regarded as enemies of the state. On the other hand, individuals who decide to keep the law have to bear the stench emanating from their waste bins as they wait for a long time for the waste collectors to come clear their wastes.

Except for a handful of them, many of the PSP operators need to un-dergo trainings in customer service de-livery as the attitude to work of many of them is a far cry from the professionalism expected of them. �ey are uncouth and insolent while dealing with clients and render their services unprofessionally to Lagosians despite the facts that charges are collected on waste. In some areas in Lagos, the deficiency in management is glaring as there is no particular time for waste collection. People who are caught unawares by the sudden arrival of the PSP operators have to run a�er them in order to dispose their wastes and in the process litter the streets with wastes that would

have otherwise been accommodated by the compactor trucks if everyone was aware of the scheduled collection time. �ere is also the issue of inad-equate or few waste collection vehicles available to pick up generated waste or a delay in doing so especially in markets. LAWMA asserts that it handles public wastes but market traders in some parts of the state complain that the waste man-agers who are supposed to dispose re-fuse every week a�er the markets’ weekly cleaning now only do so twice in a month. Some of the PSP operators who are also assigned to some markets do not even have the required fleet of operational vehicles to cater for the huge amount of wastes being generated each day which results in consequent delay in the evacua-tion of the waste by the refuse collectors, especially a�er the weekly sanitation ex-ercises. �e end result is piles of rubbish constituting environmental nuisance. Under S. 4(1)(b) of the LAWMA Act (2007), the next prime function of the organisation is to remove and dispose of abandoned and scrapped vehicles. To put it mildly, absolutely nothing has been done in this regard as abandoned and scrapped vehicles still brandish the streets of Lagos. �ese derelict vehicles have not

only become impediments to traffic flow but have also become stationary “waste collection” vehicles as residents illicitly dump their wastes in them. However, ac-cording to LAWMA, a recently reviewed law assigns them only to the collection of solid waste, while the evacuation of der-elict vehicles is a function handled by the Ministry of Transportation. Another worrisome issue is that of the vehicles used by the waste collec-tors for their operations. Many of these trucks have reached the end of their use-ful life and have a question tag on their roadworthiness. Due to their deplorable state, some of them break down in the middle of the road and are le� there for days causing impedance to free traffic flow. While they are le� unattended, efflu-ents from the waste leak out onto the road causing environmental and health distur-bances. �is contravenes the standard environmental emission requirements as stipulated in the Operational Handbook for waste collection vehicles of PSP op-erators.

Enforcement in RetrospectAlthough many residents of Lagos have poor waste disposal habits and very low compliance to sanitary laws, there is no

Calculated by Yale Centre for Environmen-tal Law & Policy, Yale University and Centre for International Earth Science Information Network, Columbia University; in collabora-tion with World Eco-nomic Forum and Joint Research Centre (JRC), European Commission)

Top Ten Cleanest Countries in the WorldTop 25 Cleanest Countries in Africa

Other Selected Countries


Environment

gainsaying that the enforcement of en-vironmental regulations is intricately connected to achieving effective manage-ment of waste. Enforcement on waste manage-ment and general sanitation in Nigeria can be traced as far back to the colonial times. Between the 20s and early 80s, sanitary inspectors, popularly known as “wole wole” were the prime enforcers for environmental sanity and their pres-ence sent chills of fear down the spines of people as they had the mandate to inspect residential premises. During those times people were disciplined and neat as they never wanted to be tipped as unhygienic or face heavy sanctions. Sadly, memories of the then active enforcers have faded away. On 29th July 1985, the envi-ronmental sanitation enforcement arm of the War Against Indiscipline (WAI) campaign was flagged off by the then Military Head of State, General Muham-mad Buhari. Just like in the days of the sanitary inspectors, the WAI brigade had a zero tolerance for indiscipline. �ough the scheme also made its mark, it was criticised on the premise that the punish-ments were too inhuman and it had too much military connotations as persons were literally whipped or asked to frog-jump when they fell short of the environ-mental standards. �e brigade eventually died off as the regime of General Buhari ended. Armed with the knowledge that compliance to environmental laws is fundamental to the actualisation of a clean Lagos, LAWMA created its Moni-toring, Enforcement, and Compliance Department which is charged with the responsibility of regular monitoring and enforcement of environmental laws, and promoting stringent compliance by Lago-sians.

Sustaining the Green PathCapacity Building and Aggressive Aware-ness Campaigns: �e involvement and the understanding of the civil society in the importance of managing municipal solid wastes is no doubt the most veri-table way to attaining zero waste toler-

ance and environmental sustenance. “A population that has no information on the environment has neither the incen-tive to act nor the power to give impetus to government action”. Although LAW-MA engages in awareness campaigns that cut across different age groups, much more needs to be done in this regard. Each street should be well represented in the grassroots’ Street Captain Project if “green” is LAWMA’s focal point. Environmental groups for school children should not just be cre-ated but must be tailored to match up with similar international groups. Activi-ties like advocacy, tree planting, competi-tions on green practices and workshops that will inspire children and youths to initiate and implement community envi-ronmental projects in their schools and communities should be mapped out. �is will further advance their understanding of environmental issues and also provide them with the opportunity to voice their concerns for the environment. A cue should be taken from the Tunza Interna-tional Children and Youth Conference on the Environment put together by UNEP. �e conferences provide the opportunity for youngsters to present environmental projects, inspire each other with their environmental works, become active en-vironmental citizens and contribute to-wards the future of the planet. Furthermore, mothers should be included in LAWMA’s list for capacity building on waste management as they play important roles as the primary edu-cators of their children, which influence their future lifestyles.

Segregation on Generation: For a bet-ter and more efficient waste management, wastes should be segregated at the points of generation. �e implication of this is that LAWMA will have to expand its re-

cycling programme and take the initiative to provide mini recycling banks where generators of wastes (especially domestic generators) can put in their wastes. Just like the Montessori Method, this will acti-vate a consciousness of waste segregation in the minds of Lagos residents and with time the challenges of waste sorting will be hugely minimised.

Sharing LAWMA’s Philosophy: To en-sure a sustainable progress in the tackling of wastes in Lagos, all Lagos State Gov-ernment workers should share in LAW-MA’s mission and vision and in fact be champions of its philosophy. Nothing is as appalling as seeing a LAWMA staff dropping a sachet of “pure water” on the street or a Bus Rapid Transit (BRT) staff throwing a used Polyethylene tere-phthalate (PET) plastic bottle out of the bus window. Time and again people tend to do what their leaders do. If we must sustain the green path, government work-ers must be exemplary.

Environmental Governance: Without sound environmental governance prin-ciples, waste management practises and strategies cannot be sustainable. �e 2011 African Green Index report on selected African cities proves this fact. In the re-port, Lagos though ahead of Accra and Johannesburg in waste management, had on the overall, an average environmental performance rating when compared to these two cities. �e reason was due to the fact that in the area of environmen-tal governance, Accra and Johannesburg performed well above average and above average respectively while Lagos had an average performance. For LAWMA to achieve continuous success in its waste mitigation activities, good environmen-tal governance should be the oil in its wheels.•


fghmghmhmhmmh


5 minutes MBA

A derivative is a financial in-strument used as a contract or an agreement for exchange of payments between two or

more parties specifying certain condi-tions such as dates, value of the under-lying variables and estimated amounts under which payment exchanges are to be made between or among the involved parties. It is a term that describes a broad class of trading instruments that have no tangible worth of their own, but “derive” their value from the claim they give their owners to some other financial asset or security. �us, the price of a derivative is dependent upon one or more underlying assets and its value is determined by vicis-situdes in the underlying asset. In simple words, the price of a derivative depends on the price of the underlying asset. �is means that without an underlying asset and a market, a derivative is incapable of independent existence. �e commonly known underlying assets are bonds, com-modities, currencies, interest rates, mar-ket indexes and stocks.

Characteristics of Derivatives1. Derivatives usually have large monetary value and high lever age.2. Markets involving derivatives are usually complex and risky.3. All transactions in derivatives takes place in future specific dates.4. �e value or price of a derivative changes as the value or price of an underlying asset changes.5. Derivatives usually have stan dardized terms.

Advantages of Derivatives1. �ey help in transferring risks from risk-averse people to risk- oriented people.

2. �ey help in the discovery of fu ture as well as current prices.3. �ey stimulate and catalyse en trepreneurial activity.4. Because of participation of risk- averse people in greater numbers, derivatives help in crease the volume traded in markets.5. Being innovative financial products, there is no risk, no scenarios, which derivatives cannot take care.6. �ey increase savings and investment in the long run.

Types of Derivatives �ere are several types of derivative in-struments they are however commonly classified as: Forward contracts, Futures contracts, Options, and Swaps

1. Forward ContractsA forward contract is an agreement ne-gotiated between two parties, usually a buyer and a seller, to buy and sell a spe-cific quantity of a commodity( e.g. gold), foreign currency, or financial instruments (e.g. stocks) at a specified price (the deliv-ery price) agreed upon today which is to be delivered or settled at a specified future date (the maturity date). As an over the counter (OTC) agreement, forward contracts usually have no formal regulation or exchange but have standardized market features. Provided the forward rate is same with the present market rate, forward contract agreements can take place without cash payment. �ey are o�en used to hedge price fluctuations of a commodity, a for-eign currency, or a financial instrument whether or not there is a price increase or decrease.2. Futures ContractsA futures contract is an agreement ne-

gotiated between a buyer and a seller to buy or sell or take delivery of a specified quantity of a commodity, a foreign cur-rency, or a financial instrument at a speci-fied price, with delivery or settlement at a specified maturity date. Future contracts are regarded as special types of forward contracts and share some characteristics. However, un-like forward contracts which are OTC transactions, futures are traded on or-ganised exchanges called future markets using banks, brokers, or clearing houses. Future contracts are thus legally binding agreements. Another difference between a futures contract and a forward contract is that futures are subject to a daily settle-ment procedure where investors who in-cur losses pay them daily to investors who make profits. Since the contract value and underlying asset prices change propor-tionately, futures contracts like forward contracts are also used to hedge price changes of a commodity, a foreign cur-rency, or a financial instrument. Futures contracts are commonly classi-fied into stock index futures, interest rate futures, and currency futures. In the Unit-ed States, future contracts usually involve treasury bonds, stock indices, agro-prod-ucts, interest-earning assets, and foreign currency.

3. OptionsOptions are contracts between an option writer and buyer obligating the former and permitting (without obligation) the latter to sell/buy a definite quantity of a particular commodity, financial instru-ment, or foreign currency at a specified price, during a specified period of time (American options) or on a specified date (European options) as stated in the con-tract. In simple terms, options are rights to buy or sell.

Derivatives


5 minutes MBA

Option contracts have expira-tion periods. Although it may be longer or shorter, the standard is usually a 30-day or one month period. At the end of the period, the buyer may or may not ex-ercise the right to buy the underlying as-set. In American options, a buyer can ex-ercise his rights, if he wants to terminate the contract, before the expiry date but in European options, a buyer has to wait till the expiry date before terminating it.

�ere are two main types of options: calls and puts.(i) Call Options: �ese give the buyer or holder the right to buy a definite quan-tity of an underlying security at a definite price on or before a specified future date but not under obligation. (ii) Put Options: �ese give the buyer or holder the right to sell a definite quan-tity of an underlying security at a definite price on or before a specified future date but not under obligation.Other types of options include caps, floors, collars, stock or equity options, fu-tures options, and sometimes, swaptions.Options are used to hedge a unidirection-al movement in the underlying commod-ity, foreign currency, or financial instru-ment.

4. SwapsA swap contract is a flexible and custom-ised forward-based agreement usually between counterparties to exchange cash flows according to an agreed formula over a definite period of time in the future.�e two most common swaps are interest rate swaps and currency swaps. Others are equity swaps and commodity swaps.(i) Interest Rate Swaps: �ese involve swapping only the interest related cash flows between the parties in the same currency.(ii) Currency Swaps: �ese entail swap-

ping both principal and interest between the parties, with the cash flows in one di-rection being in a different currency than those in the opposite direction.Swap contracts are used to hedge entire price changes (symmetrically) related to an identified hedged risk, such as interest rate or foreign currency risk, since both counterparties gain or lose equally.

Users of Derivatives�e derivative market serves different groups of users, including hedgers, specu-lators, and arbitrageurs.

1. Hedgers: �is group of users enter the derivative market to reduce risk. A hedg-er reduces risk through a process called hedging. Hedging usually involves taking a position in a derivative financial instru-ment, which has opposite return charac-teristics of the item being hedged, to off-set losses or gains.

2. Speculators: �is group of users enter the derivative market looking for profits, and are ready to accept risk. A speculator takes an open position in a derivative in-strument (i.e. there is no offsetting cash flow exposure to offset losses on the posi-tion taken in the derivative instrument).

3. Arbitrageurs: �is group of users are speculators who attempt to lock in near riskless profit from price differences by concurrently buying and selling financial instruments that significantly identical.Other known users of the derivative market include clearinghouses, brokers, financial institutions and banks, futures exchange, futures commission merchants, commodity futures trading commission, commodity pool operators, and com-modity trading advisors.•


Consumer Protection Advocacy

Bonanzas

Appreciation of the role of tech-nology in the contemporary marketplace is a core index of developmental trends across

the world. In West Africa, Nigeria has been noticed aspiring to actively embrace technological advancements in telecom-munications and allied services. With the positive reception of Global System of Mobile Communication (GSM) and increasing consciousness of social, edu-cational and commercial activities driven by ICT in Nigeria, the telecoms sector has in fact been termed Nigeria’s fastest grow-ing sector. In other parts of Africa, a recent development indicates that competi-

tion for customer retention in the sector across countries heats up as Bharti Airtel entered a five-year deal with Avaya Com-munications Outsourcing Solutions, to provide technological and customer ser-vices to Airtel customer care centers in 16 African countries. Specific countries also seem to be paying renewed attention to this sector. South Africa for instance has a network that is 99.9% digital and includes the most updated in fixed-line, wireless and satellite communication, setting the country out as having the most developed telecoms network in Africa. �e nation’s telecommunications sector is also recog-nized as one of the fastest growing sectors of South Africa’s economy, and this is pri-

marily influenced by the brisk nature of growth in mobile telephony and broad-band connectivity. Similarly in Ghana, the early monopoly of Ghana Post & Tele-communications Operations (GP&T) which was certified inefficient, witnessed only three out of every 1000 inhabitants having access to mobile phones and the entire country having only 25 payphones (all in Accra) between 1980 and 1993. With investments of over US$ 5 Billion by operators since the 1990s, the tele-coms sector is now booming with about 20 million subscribers, operators such as MTN having over 9.8 million subscribers, Airtel having about 2 million subscribers, and the least patronized Expresso having

QualityVsService



about 260,000 subscribers. �e sector also accounted for almost 40% of the nations GDP growth in 2010. In Kenya, the tele-communications and broadband market is also undergoing a revolution follow-ing the arrival of three fibre-optic inter-national submarine cables in (Seacom, TEAMS and EASSy), ending its depen-dency on limited and expensive satellite bandwidth.

�e evolution of the Nigerian Tele-coms IndustryBarely above a decade ago, the industry in Nigeria had about 400,000 connected lines from Nigerian Telecommunications Limited (NITEL). �ere was no meeting point between the fundamental faces of communication, being Information Tech-nology, Broadcasting and Telecommuni-cations. As at February this year however, there were 116,439,548 GSM lines, 13, 064, 176 connected CDMA lines and 2, 319, 228 fixed wired/wireless lines. Result-ing from the recent sweep of registration of mobile lines across the country also, reports from the Nigerian Communica-tions Commission (NCC) indicate that about 109 million SIM cards have so far been registered nationwide. Statistics on GSM operators reveal that as at Decem-ber 2011, MTN had a subscriber base of 41, 641,089 which marked a growth rate of 1.30% from the previous quarter, Glo-bacom with about 19, 886,014 marking 0.16% growth from the previous quar-ter, Airtel had 18,028,385 marking 8.06% growth, Etisalat with about 10, 752,230 being 13.02% growth from the previous quarter and Mtel with 258,520. �e fig-ures indicate that operators are inclined towards development of subscriber base. �e question however is, “to what extent is there a developmental coefficient in the quality of network service provided?”

Key performance indicators for monitoring operators include:1. CALL SETUP SUCCESS RATE – �is measures the ease in which calls are established or setup, the higher the value the easier it is to set up a call. �e higher the percentage attained, the higher the number of calls made that were success-ful.

Considering the first quarter of 2012, only one of the operators attained an im-pressive performance under this category. One operator which seemed to have met the Commissions target had their data rendered unacceptable for lack of integri-ty. None of the other operators had a Call Setup Success Rate that met the Commis-sion’s target.

2. DROP CALL RATE – �is indicator is used to measure the network ability to retain call conversation when it has been established or set up. Operators endeav-our to reduce this to the barest minimum as the percentage of this infers the num-ber of calls made by subscribers that were terminated involuntarily. In the first quarter of this year, three operators exceeded the target set by the Commission, while one operator had her data disregarded for not being trans-parent.

3. SDCCH CONGESTION RATE - �is indicator measures the ease in which a call can be setup, the ease in which we can recharge our account, send SMS, location update, paging etc. None of the operators met the Commissions target for the first quarter of 2012 and while the data captured by one operator was disregarded for lack of integrity.

4. TCH (Assignment) CONGESTION RATE - �is indicator measures the rela-tive ease in which we can seize a traffic channel to set up a call a�er a signaling seizure has been successful, the higher this value, the relative difficulty in mak-ing a call. Considering the first quarter of 2012, the same three operators which met the Commissions target were able to meet and supercede the target under the TCH performance indicator.

5. TCH CONGESTION (With Hando-ver) RATE – �is measures the relative ease in which we can seize a traffic chan-nel to set up a call a�er a signaling seizure has been successful, because of the mo-bile nature of the wireless network there might be reasons to handover already

established calls to serve the consumer properly this instigates the request for traffic channel assignment from neigh-boring cells. General performance of the op-erators was un-impressive for the period under review. None of the operators was able to meet the Commission’s target for the period.

Regulatory framework�e Nigerian Communications Com-mission “the Commission” is the national regulatory authority for the telecommu-nications industry in Nigeria, responsible for creating an enabling environment for competition among operators in the in-dustry as well as ensuring the provision of qualitative and efficient telecommu-nications services throughout the coun-try. �is is to be achieved through the consistent enforcement of clear and fair policies that protect stakeholders, ensure efficient resource management, share in-dustry best practices and deliver afford-able, quality telecom services. Recent regulations have been focused on Regis-tration of Telecoms Subscribers, Type Ap-proval, Numbering, Telecommunications Networks Interconnection, Competition Practices, Consumer Code of Practice Regulations, Enforcement Processes, Quality of Service, among others. A peep at recent occurrences in the industry indicates that while op-erators fall short of standards set by the Commission, the Federal Government levies heavy sanctions and fines on the operators. �e fundamental issue how-ever remains the fact that the effects and consequences of default and inefficient service delivery is saddled on subscribers. �ere have however been insignificant measures to ensure compensation to the primary victims of substandard practice ethics and service delivery. Consider-ing for instance when a network service provider unreasonably deducts or zaps out prepaid airtime purchased by a sub-scriber, a sanction or fine by the Federal Government paid to the Federal Gov-ernment coffers in no way remedies the harm or inconvenience suffered by the subscriber. Also, occurrences of network inefficiencies, failure in network service



and inability to reach out via telephone to customers, clients, partners and associ-ates at crucial times, cause un-accounted hardships and gross inconvenience on such subscribers. It should be the primary focus of the Commission to ensure that in the course of daily practices, optimum operator service delivery and productiv-ity is attained. �e Commission should not merely serve as a watchdog or limit oversight activities to terminal reviews and impositions of sanctions.

Earlier this year, the Federal Government sanctioned operators over inefficient service deliveries. �e four primary telecoms networks were fined a cumulative penalty of N1.17bn over poor quality telecoms services. MTN and Eti-salat were fined N360 million each, while Airtel and Globacom were fined N270 million and N180 million, respectively. Similarly in Ghana, �e National Com-munications Authority (NCA) recently imposed a fine totaling GH¢1.2 million on five operating telecommunication companies in the country for providing poor quality services to their clients. Af-fected operators included Airtel having the highest sanction, MTN, Vodafone, Ex-presso and tiGO. While these fines could deter operators from subsequent errors and inefficiencies, the damage caused by the instant errors is le� unattended to.

Considering for instance the scope and purview of industry activities of network operators thus far, even though it may be difficult to ascertain the exact point where these operators begin to act outside the purview of industry-specific activities, it is still easily noticeable when focus is laid in wrong directions. Consid-ering for instance, Globacom whose scope of activities entails “providing all round world class telecommunications solutions at a cost effective price while improving and setting the pace on GSM, technology to mention a few” recently structured a strategic and fiduciary non-telecoms in-clined partnership with an English based soccer club, and this raises questions as to if indeed maximum satisfaction has been attained by subscribers as for the operator to commence delving into extra-curricu-lar projects. It has become characteristic to associate network service providers

and operators with sponsorship of enter-tainment programs, media related events and competitions, sports-centred activi-ties, multiplicity of promotions packages, frequent bonanzas and such other traits which could be said to not directly impact on the quality of service provided to sub-scribers. �ese, even though not within the ambits of network service provision, can either be termed as projects under Corporate Social Responsibility or allied matters aimed at stimulating interest and visibility with subscribers and potential subscribers. However, these should not be permitted to overshadow the primary role of network operators. Performance based projects should be the focal point of operator activities, and in view of this, subscribers may resort to laying specific demands on operators . �e National Lottery Regula-tory Commission (“NLRC”) is a sepa-rate body which regulates the declaration of lotteries, bonanzas and other similar incentives issued by operators to sub-scribers and potential subscribers. How-ever, even though the Commission has recently established and acknowledged that telecommunications operators must bow to the regulations of the National Lottery Regulatory Commission in mat-ters relating to lottery, it is opined that the Commission and the NLRC collaborate to ensure that operators are not preoccu-pied with the peripherals of the industry at the expense of quality network service delivery. �is also applies to the Asso-ciation of Licensed Telecommunications

Operators of Nigeria (ALTON) which is an industry body for Nigerian telecom-munications companies and those pro-viding subsidiary services to telecom-munications service providers in Nigeria with a view to promoting growth in the telecommunications sector. �e ultimate responsibility of the ALTON which is to enhance efficient and affordable telecom-munications services delivery to users of these services should be retained as a primary focal goal, even in a bid to pro-tect operator’s interests and articulating demands and desires of its members. A recent joint response by core telecoms industry operators to queries bordering on low productivity and reduced quality of service delivery to subscribers, gave exposure to the following issues as ma-jor plagues in the industry: Absence of a reliable source of power, as every site is powered by two diesel generators 24 hours a day, 365 days a year; frequent cuts of fibre networks which link all the sites; the recent trend towards the indiscrimi-nate closure of sites by the government, in pursuit of multiple taxation of telecom-munications infrastructure; security has also been identified as a prevalent threat to our operating environment; customer protection issues. �ese issues are expect-ed to be addressed by the Commission in collaboration with industry bodies such as the ALTON, having in mind that the primary beneficiaries of the entire tele-coms sector in Nigeria are the subscrib-ers.•


Financial Services: Capital Market

Nobel economics prize win-ner–professor Joseph Stiglitz places great emphasis on the role of capital markets for

developing economies like the Nigerian economy. He reminds us that “if capital is at the heart of capitalism, then well func-tioning capital markets are at the heart of a well-functioning capitalist economy” Prior to the recent global finan-cial crisis, the Nigerian capital market was the destination point for every discerning investor including local and foreign in-stitutions –little did they know that the market will be a subject of probe at the National Assembly years a�er. Without gainsaying, the global financial crisis may have played a part in the crash, but it is mostly exposure of dirt

at the bourse that led to loss of investor confidence. �is is in addition to many schools of thought that other macro-eco-nomic factors were key contributors to the never-before experienced event. Following critical analysis how-ever, the fundamental question analysts now ask is why the probe did not come earlier than now, going by the revelations made about regulations, operations and investments in the market. By virtue of Section 13 (k) of ISA which provides “the Commission shall be the apex regula-tory organisation for the Nigerian capital market and shall carry out the functions and exercise all the powers prescribed in this Act and, in particular, shall Act in the public interest having regard to the protection of investors and the mainte-

Nigerian Capital Market:

One probe too late



nance of fair and orderly markets and to this end establish a nationwide trust scheme to compensate investors whose losses are not covered under the inves-tors protection funds administered by securities exchanges and capital trade points”, the Commission itself has the statutory mandate not only to regulate industry practices but also to ensure ad-herence to core principles of regulatory compliance and corporate governance in accordance with the dictates of the Cor-porate Affairs Commission and other sec-tor specific regulators. Recent revelations however indicate that the integrity and forthrightness of the Commission itself is being called to question based on in-stances of financial mismanagement, cor-rupt practices and arrant flouting of the core principles of corporate governance. �is, according to analysts may have been responsible for the entire collapse of the Capital Market structures and eventual fi-nancial crises in Nigeria. Also, the unethi-cal practice which banks themselves were involved in during the consolidation pro-cess which included the selling of shares to themselves, and other direct breaches of the Companies and Allied Matters Act and CBN Regulations.., etc. cannot be di-vorced from the eventual consequences suffered by the industry.

In retrospect, the cause of this crisis seems similar to the 2003 incidence in the Nigerian Ports Authority which led to the eventual dismissal of the entire Senior Management, based on multiple occurrences of contract splitting and ir-regularities in financial activities and procedures. Furthermore was the pros-ecution by the EFCC under the adminis-tration of Farida Waziri which arraigned the then Chairman of NPA and four oth-ers on a 163 count-charge of conspiracy, disobedience to lawful order, abuse of of-fice and alleged illegal award of contracts worth N84 billion. It was expected then that this incidence will serve as a deter-rent to other government agencies and parastatals. However, the eventual activi-ties at the Securities and Exchange Com-mission have proven otherwise.

�e boom period ushered in financial crisis

Nigeria’s own financial crisis in 2009 shook the foundation even more, causing it to crack under the weight of some man-ifest causes of the near-collapse of the market like macro-economic instability, low financial literacy, market indiscipline, and the lack of investor and consumer sophistication, an inadequate regulatory framework, corporate governance weak-nesses within the Nigerian Stock Ex-change (NSE), and the lack of liquidity. Between 2004 and 2008, oil prices were on a steady rise. As Government spend-ing tracked the price of oil, monthly dis-bursements of oil revenues flooded the banking system, driving up deposits and lending, and accelerating credit creation. Nigeria’s financial boom was too rapid for the real economy to absorb the excess li-quidity from oil revenues and foreign in-vestments in productive sectors. �is drove significant flows into non-priority sectors and into the capital markets – mostly in the form of margin loans and proprietary trading. A number of these loans were without the appropri-ate regulatory framework for their opera-tion. As a result, the NSE’s market capi-talisation surged between 2004 and 2008.

Speaker, House of Representative - Hon. Aminu Tambuwal


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How it all started �e capital market boom of 2004-2008 triggered an increase in retail participa-tion. With little-to-no experience, first-time investors poured into the market, unaware of the innate risks of investing in the capital market. During this time (January 2, 2004 to March 5, 2008 – the peak of the market), the All Share Index (ASI) surged 225.37 percent and the mar-ket capitalization for listed equities grew 841.46percent. Investment decisions were driven mostly by speculation, and easy access to loan facilities usurped the need for proper financial planning. Low financial literacy made it easy for some fi-nancial institutions to take advantage of inexperienced investors and consumers, and as a result, market discipline was al-most non-existent. While many banking institu-tions had risk management processes in place, these were o�en overlooked in anticipation of higher returns on their investments and loans. �is led to an un-precedented level of bank over-exposure and high rates of margin lending. Under the weight of the 2008 market downturn, these practices trig-

gered unseen rates of default. �is was further compounded by the lack of an ad-equate consumer protection framework to educate investing consumers on their rights. �e result was retail investors tak-ing flight, foreign investors selling off to mitigate losses, and institutional investors getting jittery and exiting. �is caused illiquidity in both the financial and capi-tal markets, and the near collapse of the stock market itself.Inadequate disclosure by listed compa-nies and broker/dealer firms was another key contributor to the crisis. Reports to the NSE and the investing public were o�en inaccurate, late or simply not sub-mitted. �is prevented market access to critical information that is required in making informed investment decisions. While some listed companies did not comply with the reporting rules of the Exchange, some brokerage firms treaded a fine line from front-running, insider trading and market manipulation, to actually upholding their fiduciary re-sponsibility to their clients. Paper-driven processes slowed down the regulatory capacity of the Ex-change and contributed to the lax attitude


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surrounding enforcement. While impor-tant information was sometimes released on a selective basis, some listed com-panies and broker/dealer firms seem to have engaged in the act of “cooking their books”.

In the case of listed companies, the result was inflated stock prices, and in the case of broker/dealer firms, misplaced trust led to improper acts involving inves-tors’ funds (to shore up their own invest-ments) or to meet minimum capitaliza-tion requirements. �ese practices (and others) fueled the speculative nature of the market, and consequently, the advent of the bubble that led to the recent bear market.

Unstructured management and ineffective internal processes were re-sponsible for the NSE’s lenient approach to achieving its directive to oversee the capital market – the companies listed on the Exchange and its licensed dealing members.

�e Council of the NSE (equiva-lent of a Board of Directors) is entrusted to carry out a specific mandate of pro-viding an efficient market by ensuring appropriate oversight of Exchange man-

agement, but priorities may have been skewed during the boom, causing a shi� in focus, from the stability and develop-ment of the market to other non-priority areas. �ereby, exposing the unsound Corporate governance principles. Committee structures were not fully deployed and no performance man-agement framework existed to ensure the Council’s oversight of management’s suc-cess in meeting the NSE’s objectives. �e Exchange was not adequately equipped to manage systemic risks, nor was it diligent in enforcing the rules of the market. Market compliance was defi-cient, supported by the lack of automated processes. �ere were little-to-no analy-ses-based linkages between market per-formance and market surveillance, com-pliance, growing investor complaints, and market inflows/outflows – all critical to mitigating market risk. Information from the Exchange was also scant and fell short of addressing investor fears (both locally and internationally). Investors lost their savings to investment decisions guided by the ‘herd mentality’ and were reluctant to re-enter the market; brokers were denied access



to low-cost funds to curb risky and poten-tially undisciplined behavior; and quotable companies stood on the sidelines waiting out low valuations and inadequate liquid-ity. �is resulted in paltry levels of partici-pation in the market that forced a market correction and the near-collapse of the capital market in 2008 through 2011. In the 12 years leading up to the 2008 financial meltdown, the Nigerian eq-uity market returned over 1,200 percent, but has struggled since then. In 2011, the market lost approximately N1.4 trillion in market capitalization (from N7.92 tril-lion at the end of 2010 to N6.54 trillion – a 17.42percent drop). �ere were lots of reports coming from investors. �ese complaints ranged from unauthorized sale of shares, to with-holding of proceeds of sale of shares.

Questionable actions at the Nigerian Stock Exchange �e NSE was far from implementing the Part XIV of the Investment and Securi-ties Act of 2007, with respect to the main-tenance of an investor protection fund. At the Stock Exchange, while assets grew by 9 times between 2006 and 2008, expenses rose by more than 150 percent from 2007

to 2008. �ere were incidences of financial skimming, misappropriation of income and assets, false accounting, misrepresentation, questionable transactions and financial gratification. For instance, the NSE bought a yacht for N37million and wrote down the book value within one year by recog-nizing it in the books as a gi� presented during its 2008 Long Service Award (LSA) yet there are no records of the beneficiary. �e Exchange also expended N186million on procuring 165 Rolex watches as gi�s for awardees out of which only 73 were actually presented to the awardees. �e outstanding 92 Rolex watches valued at N99.5million remain unaccounted for. �ese were the kinds of financial imprudence and deliber-ate attempts at gra� which exemplified the leadership of the NSE. It is noteworthy that these transactions were routed through companies owned by senior officers of the Exchange. According to the Securities and Exchange Commission (SEC), “in 2009, N1.7billion of the 2008 operational surplus was distributed to Council members and employees in flagrant violation of CAMA and SEC rules which preclude the NSE from such given as the NSE is a company limited by guarantee. Other notable fraud-



ulent transactions include the reclassifica-tion of the sum of N1.3billion originally expended on business travels. Of this sum, N953million was grouped under “So�ware Upgrade” and subsequently expended as against being capitalized. �is is an unethi-cal accounting practice.” SEC said: “�e SEC inspection report also observed serious oversight lapses with respect to the Council of the Exchange. For example, important Com-mittees such as the Risk and Compliance Committee last met in 2007 while the Dis-ciplinary and Rules Committee last met in 2005. �ere are also multiple litigations regarding purported elections held on 6th August 2009, which election was subse-quently declared a nullity by a court of law on 12th March 2010. Although Section 26 and 27 of the ISA 2007 provides for sub-mission of audited financials not later than three months a�er the end of each year to the Minister, the Exchange failed to meet this requirement to submit its 2009 audited financial statements by 30th June 2010, six months a�er the end of the period as re-quired by the ISA 2007.” In addition to breaches of the ISA, all these developments had significantly eroded investor confidence and under-

mined market integrity, two anchors of any capital market. It is also opined by some Capital Market Operators in Lagos that the erosion of investor confidence in the capi-tal market was due to poor enforcement of corporate governance codes. �is probably justifies the recent assertion of the erst-while acting DG of SEC who stated “our quick win strategies would include those strategies that would restore investor con-fidence in the market as well as bring more investors...” More questionable are the recent flagrant violations of regulatory stipula-tions with respect to clear breach of the Civil Service Rules and Section 19 and 22 of ISA which stipulates that all monies, fees, penalties, gi�s, donations among oth-ers due to SEC must be paid into the bank account of the Commission. Current in-vestigations of the activities of SEC expose that funds revealed towards the Project 50 of the Commission were kept in bank ac-counts separate from that of the Commis-sion.

Market abuses…they kept coming �e extent and nature of the market abuses carried out between 2006 and 2008 are the primary reasons for the continuation of the

L-R: Executive Commissioner, Finance and Administration, Securities and Exchange Commission, (Sec), Lawan Store; Executive Commissioner, Opera-tions, Ms Daisy Ekineh and Director-General, Ms Arunma Oteh, at the public hearing.



investor apathy that we see today. �e SEC investiga-tion of the intervened banks uncovered them.

Afribank: With respect to Afribank, Afribank Trustees, Afrib-ank Registrars and their Directors, they committed various grave market infractions in share buyback schemes, made misrepresentations in the returns to the SEC to prevent detection that the Bank funded its public offer, violating Section 106 (4), and Section 110 of the ISA 2007 as well as Rule 109B of SEC Rules. Shares owned by 1,258 entities (some fictitious) and individuals were merged into fourteen accounts of nine companies some of which were owned by Af-ribank and its Directors. �ese transactions were done outside the floor of the exchange. Falcon Secu-rities, Fidelity Finance and Spring Capital were some of the entities used.

Finbank: Between August 2006 and December 2008, the Exec-utive team of Finbank engaged six law firms to incor-porate 95 companies and transferred more than N25 billion of depositors’ funds to nine of these compa-nies and purchased 2.8 billion of its own shares, vio-lating Rule 109b of SEC Rules. �e Bank also violated Section 105 of the ISA 2007 which prohibits a person from creating a false or misleading appearance of ac-tive trading of a listed security.

Intercontinental Bank: Between June 2007 and December 2008, Intercon-tinental Bank, its Directors and principal officers engaged in unlawful share buyback schemes, buy-ing about 3.4 billion shares using depositors’ funds. It violated Section 105, 106 and Section 110 of ISA 2007 which provide against false trading and market rigging transactions, Securities market manipulation and Prohibition of fraudulent means respectively as well as Section 160 of CAMA which provides against Acquisition by a Company of its own shares and Rule 109b of SEC Rules.

Union Bank: In 2007, Union Bank borrowed amounts totalling N30.4 billion from two foreign investment banks. �ese funds were transferred to Union Trustees which in turn transferred the funds to Falcon Secu-rities. In four days in November 2007, Falcon pur-chased 620.4 million shares worth N30.8 billion ahead of a public offer/rights issue. In 2007, Falcon Securities carried out 181,088 transactions with re-spect to Union Bank. �e shares of Union Bank rose from a low of N23.30 in January 2007 to N50.33kobo in November 2007, in other words, the share price

more than doubled in 11 months. Oceanic Bank: A maze of unverified investments, award of loans and bad debts were uncovered in 2010 which led to the sack of the principal officers of the bank. As managing director of Oceanic Bank, Mrs. Ibru was alleged to have granted credit facilities to the tune of N747 billion naira with more than half going to her family and proxies with assets in excess of 1 trillion Naira ($6.5billion) unearthed which were traceable to Mrs. Ibru on the decision of the Court however, she was sentenced to 6 months imprisonment for 3 different charges to run concurrently, a�er which she was released and the bank became subject to a merger with a significantly smaller bank. Today, our regulators aim at building a world class capital market that will enable the public sector finance important projects including to ad-dress huge infrastructure needs, provide businesses with medium to long term funds, and enhance the business climate and operating environment, how-ever, the questions remain whether the current mar-ket cycle presents an incredible opportunity for gov-ernment to play a leadership role in revitalising the capital market, and for investors to once again, begin to create durable wealth for themselves. To some, the future will tell as far as the regulatory framework is investor protective. •


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Micro, Small & Medium Enterprises

This contribution is an attempt, as far as possible, to chart the now familiar phenomenon of high unemployment amongst

Africa’s educated youth as a dissonance to employers’ continuing demands for skilled labour, in the context of a conti-nent-wide growing youth bulge, whilst highlighting some of the key contributors to the current debacle in the education and training systems in Africa. �e term ‘entrepreneurship’ is universally applied herein, to define the attitude to work, the spirit required in business environment and the modern skills necessary to op-erate successfully in that environment; whether in a gainful employment or as applicable to self-employment and small business entrepreneurialism. In attempt-ing to promote the right attitude and skills fit for the modern business environment, it is necessary, first, to determine what un-derscores the current deficiencies in the existing systems prior to the proposition of any useful solutions. �ere is a current wider recog-nition that the need for sustainable de-velopment in Africa is imperative and that the current education and training policies and strategies are not respond-ing effectively to the economic, social and cultural needs of African countries. �erefore, sustainable development is at-tainable only if new education and train-ing systems which take cognizance of in-dividual and national development needs and have the capacity to produce relevant and high quality products are designed, built and implemented in collaboration with all stakeholders - private, public and

civil society institutions. As a process, sustainable devel-opment requires that economic growth is closely linked to conservation of natural resources, building an inclusive society and instilling values of solidarity and peace among the people upon whom such development is to impact. �e concept provides a framework for understanding the criticality of skills to the development process. As a matter of point, the author contends that any attempts at developing Africa must begin with the continent’s future leaders; the younger generation,

if such attempts are to be successful and to have lasting impacts. �is generational approach, no doubt, will necessitate abso-lute systemic change and the development of a total mindset shi� amongst young Africans; with a reinvigorated sense of self-belief in a modern Africa, a respect for self and society, better levels of socio-ethnic tolerance and co-existence, respect for the rule of law, access to quality edu-cation and skills and the development of new paradigms in political leadership, public governance and stewardship. In Africa, the concept of sustain-able development still appears a mirage as it is plagued by a plethora of challenges that range from food insecurity, ravaging

Igniting the spirit of entrepreneurship amongst

Africa’s YouthDr. Sheriff Alabi

Unemployed graduates



poverty, and internecine wars to deserti-fication, accelerated by a phenomenal demographic dynamics. If sustainable development continues to elude African countries, it cannot be attributed to a lack of resources; rather it is symptomatic of a failure to equip its human asset with rele-vant skills and engage them in productive economic activities.

Unlike the developed world, Africa has a young population, which, if fully equipped with appropriate skills and competencies, can effectively generate value in the economy and, thus, effective-ly face the challenges of sustainable de-velopment. In this regard the education and training systems are culpable in so far as educational institutions have failed to provide students with qualitative learn-ing, and as the skills so acquired do not actually prepare the beneficiaries for real-life challenges. In addition, the relevance of the learning received becomes suspect, to the extent that the knowledge, skills and values acquired are incongruent with the needs of the society and, in particular, the needs of employer.

�e quality and relevance of learning are critical to any sustainable development efforts as they contribute to any country’s efficiency and productivity which result in employment and econom-ic growth. �ey also provide a country with a stock of knowledgeable workers and capacity to participate actively in the wider global economy. Africa’s inabil-ity to participate fully in world economy has been traced to its capacity deficit, especially in respect of modern skills. Furthermore, the evidence abounds that the countries that have made significant progress are those that built their capacity through quality education and training.

�e current African educational system has largely remained a product of colonial era, further characterized by paternalism in which the recipient-beneficiaries have no voice. Given the historical context within which the cur-rent education and training systems were introduced into Africa from external sources, they do not fully integrate nor accurately reflect African values and, as a result, they alienated the beneficiaries that such systems were designed to serve.

�ey were largely supply-driven systems and their legacy has remained with Afri-cans, many years a�er the demise of colo-nial administration and government.

A summary of the key challenges of skills in AfricaIt is evident that the challenges confront-ing the skills sector in Africa are multifar-ious and inter-twinned. What is also sig-nificant of note in the current situation is the recognition of the way in which these challenges pose particular problems for employers of all sorts, including the pri-vate, public and civil society organisations and the roles all these organisations could play, if working collaboratively, to tackle head-on the seemingly insurmountable shortage of quality skills and the rising tiding of youth unemployment. Some of the notable key challenges currently being experienced within the African education and training systems, and which continue to rob the local economies of the capacity to meet their economic and social needs are highlighted below.• Lack of relevance of education and training systems• A largely supply-driven system• Declining quality of education • Stakeholders and managers of education and training system operating in silos• Lack of pragmatism in education and training

• Neglect of training and development support for artisans, farmers and those engaged in agrarian areas• Insufficient quality vocational training institutions• Accreditation, Verification and Certification challenges• Accreditation, Verification and Certification• Lack of a culture of life-long learning• Limited education opportunities for young girls• Poor financing and a low-level commitment by governments

In view of this stark reality, a paradigm shi� seems inevitable. Its aim will be to link education and training to a plan for social change and, to this end, train high-ly qualified citizens who are capable of bringing about the economic, social, cul-tural and political transformations that are required for sustainable development to ensue.

Lack of relevance of education and training systems�e failure of the existing systems can be readily observed in the mis-alignment of education and training in Africa with the socio-economic development and ca-pacity needs across the continent; hence, making education and training relevant becomes a real challenge. �e current education system functions in such a way



that is far removed from societal and in-dustry concerns, in the sense that what is produced isn’t really what society or the labour market urgently needs. �e system is predominantly overtly supply-driven thereby resulting in a mismatch between the skills produced and the skills actually required in order to move Africa forward. Implicitly, there is a disconnect between education and training on the one hand and the labour market on the other, with the inevitable paradox that although ed-ucational institutions are churning out thousands of graduates annually, there is a dire shortage of the actual skills needed in the labour market.

Further examples of the mis-match of curricula offer to industry and societal skills requirements can also be seen in situations where traditional pro-grammes remain the focus of many ter-tiary and vocational institutions. In some vocational institutions the dominant courses are carpentry and woodwork, catering, tailoring, textile and fashion designs, mechanical engineering, civil engineering, electrical engineering, etc. without the corresponding curriculum complements for cross-cutting skills in ICT, CAD, CAE, CAM, or other electron-ics-based facilitative productive skills that will strengthen overall human capacity development and launch readily into a more competitive global business envi-ronment.

�ere still is, to a large extent, the usual pedagogic predominance of theory-based curriculum with a low pro-vision for practical training which is the actual basis for skills acquisition, with several institutions splitting their train-ing delivery 80 percent on theory and 20 percent on practical application of learn-ing. A participant noted that in some vocational institutions in his country 80 percent of the time was devoted to theory and only 20 percent to practical training. Even amusingly, there are examples of in-stitutions offering programmes that are adjudged to be “prestigious” even when the country has neither the need nor the capacity to justifiably absorb the cost of such curriculum offer; e.g. in space engi-neering and nuclear technology.

A largely supply-driven systemClosely related to the first challenge is the fact that the consumers of educational products are not offered the opportunity to determine or influence the curricula (design and delivery) at educational in-stitutions. Such functions are typically determined by civil servants who are generally distant from the realities in the private sector which is the greatest con-sumer of the products of educational in-stitutions. �ere appears to be an inter-nal but unrealistic logic where education and training requires society to adjust to it rather than the other way round. It is

clearly a case of the tail wagging the dog and that has stark implications for qual-ity. �ere is a lack of awareness amongst members of the civil society in many Af-rican countries, with respect to the criti-cal issue of skills.

Declining quality of education �is challenge can be viewed from a two-dimensional perspective. Qual-ity generally refers to the ability to pro-vide satisfaction to clients, customers or consumers of a service or product. It is currently noted that the African educa-tion and training systems do not produce what the consumers want and need and, to that extent, the systems do not provide satisfaction to its clients. Secondly, even when they produce the skills and compe-tencies required, these generally do not meet the standards required by employers of labour, whether private, public or civil society sectors and this generally further necessitates further investments in the long-term training and development of new recruits, which most employers found both burdensome and unwilling to commit and easily swayed by the ready availability of labour supply beyond na-tional or continental boundaries.

Stakeholders and managers of educa-tion and training system operating in silosWhilst it can be said that the labour mar-ket and public managers of education and training systems value each other and understood the potential benefits in a collaborative, even joined-up, approach, they tend to operate in silos, and hardly communicate with each other. �e chal-lenge is that there is no mechanism for bridging the chasm between them. Ironi-cally, even within the governance struc-ture of education in some countries, there is a glaring lack of coordination between ministries, departments, units, agencies and parastatals, such that attempts at developing collaborative working would result in abject futility; perhaps, because everyone has a corner to defend. �is absence of dialogue between the various units responsible for education, training and human capacity-building exists in many countries and stifles the possibility,



at national level, to meet the demands of the labour market, with a consequential large-scale inefficiency and lack of syn-ergy in the management of education and skills.

Lack of pragmatism in educationFurther observations of note in current systems suggest that efforts at review-ing the goals of education and training had not been progressive and that the strategies for mass skilling and capacity-building are not in accord with the needs of many African countries. �e current dysfunctional education and training systems had endured for so long because of the reluctance to challenge them. In addition, other challenges or militating factors include inefficient management of resources, corruption and the fact that development partners seem to pursue their own agenda. �e most urgent and greatest challenge is how to make a shi� in policies, financial and institutional sys-tems, and build a partnership that will attract crucial private sector investment in the skills sector, including the involve-ment of foreign investors and other actors in education.

Neglect of training and development support for artisans, farmers and those engaged in agrarian areasAfrican governments do not pay suffi-cient attention to the training of artisans, farmers or those engaged in the produc-tive informal sectors; particularly young people and women in rural communities. As a matter of fact, in some countries it is not certain which government depart-ment has the responsibility for support-ing the training of artisans and other oc-cupational groups in the informal sector. �is is particularly worrying because over 80 percent of African economies (90% in many Sub-Saharan countries) are made up of the informal sector, which includes artisans and farmers and micro or small units of production and services. It has been observed in some parts of Africa that the funds for the training programs for artisans or renewed apprenticeships come from development donor partners (rather than government), which begs the question as to what would happen to such

programmes when such funding ceases.�e training of rural operators in the areas of agriculture – fishery, animal husband-ry, etc. has also been neglected, in view of this development. �e challenge now is how the private and CSO stakehold-ers can partner with the governments, to modernize the training programmes to be more attractive for artisans, farm-ers and other operators in the rural com-munities; with a greater focus on women. As in many cases, there is urgent need to build the capacity of organizations that provide training in the informal sector. It was noted that master cra�smen tend to be reluctant to enroll apprentices into the system for fear that the apprentices have the potential to compete with them in the trade. �ere infers a conflict in ap-prenticeship training in local communi-ties, where it is not properly co-ordinated or managed.

Insufficient quality vocational training institutionsGood quality vocational training institu-tions are not adequate in number to train the new entrants for the labour market. Most of the training institutions are not well resourced in respect of capable per-sonnel, equipment, facilities, and quality curricula – which is largely outdated and outmoded in structure, content, focus and delivery. All these being the result of a lack of a coherent training strategy,

which pose a major capacity challenge for meeting the skills needs of young benefi-ciaries of cra�s training.

Accreditation, verification and certifi-cation challenges �e challenge of an uncoordi-nated approach to national skills delivery naturally lends itself in the way of varia-tions in the quality of training provided by the few outlets that exist and, in the majority of cases, giving the impression of sub-standard training and question-able levels of competences in the training recipients. It is paramount to ensure that training delivery at local (rural) levels is implemented within a context that is conducive to learning, and the teaching methods used are adapted to the learn-ers’ environment, to meet to their needs, whilst also meeting minimum national standards for competences in respective vocations and that qualifications from such providers are comparable to those obtainable with the established main-stream educational institutions.

Lack of stakeholder collaborationPartnership between the private sec-tor and other actors is generally lacking; hence, training institutions are unable to identify competences which are criti-cal for growing the economy, as they fo-cus on delivering old-fashioned business skills, which do not fit the modern econo-



my. �ere is a need for partnerships that involve governments, the private sector, labour and the managers of national edu-cation and skills programmes.

Lack of a culture of life-long learning�ere is a general lack of employer com-mitment to life-long training of em-ployees, irrespective of status or term of employment. �is is even true for those that are already engaged in their jobs for a considerable period, where the idea is generally shunned at, with most training budgets firmly focused on new recruits or appointees. Yet their development, effec-tiveness and productivity largely depend on continuing training and participation in refresher courses. �e ability of companies to compete effectively in the market, espe-cially national or sub-regional markets, depends on the competence of their staff which is a function of training and development. It was noted that a major inhibitor of employer commitment to the training of existing staff is the popu-lar view that employees would naturally leave their employment upon comple-tion of training, for better opportunities elsewhere. However, a good countenance to this view should be the consideration for what would happen if staffs were not trained and they remained in the same employment. Life-long training and ca-pacity building is therefore not only im-perative, but critical to improving and

sustaining the competitiveness of all busi-nesses.

Limited education opportunities for young girlsIt is estimated that about 70% of girls do not enter the formal labour market. Con-sequently, increased focus is required for the recognition of skills in the informal sector to ensure sustainability. A specific focus is needed for the education of girls in rural communities as well as the provi-sion of out of school training facilities.

Poor financing and a low-level com-mitment by governmentsWhilst there has been a notable poor investment in the public education and training arena in Africa, it is equally true that there is an over-reliance on central governments who are expected to provide the entire financial resources required to sustain national skills needs – however, such approach would be considered un-sustainable for systematic and continual training to ensue, as such needs are large-ly beyond the capacity of government. �ere is an urgent need to find more in-novative ways of funding national skills delivery programmes, in order to tackle the deficits inherent in national budgets and to sustain the concept of life-long learning for all Africans of working age. �ere is potential for a longer-term so-lution in such ‘collaborative’ funding ap-proach, where all stakeholders would be

encouraged to commit to a mutually-beneficial framework.

Conclusion�e current situation clearly represents a serious challenge for Africa’s future development; not least in governments’ continuing failure to address the key task of improving employment opportunities for young people and better preparing them, at the various points of institu-tional learning (formal and informal) for the world of work, citizenry and future leadership in private and public life. �is challenge, if not addressed as a matter of urgency, will continue to stem Africa’s future growth. �e next article in this series will explore some of the practical steps that could be taken in tackling the skills deficiency in Africa and unleashing the power of entrepreneurship across the continent, pro-youth and women.•

Dr. Sheriff Alabi is the CEO of Savan-nah Enterprise Development Ltd, a UK-based entrepreneurship and marketing development consultancy.(+44798 531 4291)


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