Multiple Frequencies: How Domestic airlines struggle under dominance by foreign carriers

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Domestic carriers grapple with a lot of challenges ranging from high cost of aviation fuel, lack of aircraft maintenance facility, foreign exchange rate, multiple taxation amongst others.

However, among these problems is the multiple frequencies operated by foreign airlines in the country; one that has continued to hugely deplete the revenues of local carriers.

BASA agreements

Bilateral Air Service Agreement (BASA) is an agreement that allows foreign airlines to operate in the country but the agreement is founded on the principle of reciprocity. It is a deal that enables a country’s airlines to enjoy equal leverage, in terms of flight operations, in countries with which their home country has an air agreement.

In addition to the numerous BASAs signed by Nigeria with other countries, the country recently signed BASA with the Republic of India. The agreement stipulates that passengers being processed from Nigeria would enjoy direct flight to India as a result of the agreement.

While Nigeria has continued to sign various BASAs, experts have raised concerns on the ability of Nigerian carriers to reciprocate these agreements and even if they are able to reciprocate, they often contend with stringent regulations from the host countries, making it extremely difficult to sustain the routes.

It is in the light of these Nigeria needs to find out what went wrong with previous air agreements it signed with other countries and why they are not delivering value before  it signs more.

How BASA works against local carriers

No matter how juicy a BASA agreement may seem between two countries, these agreements must be signed on the basis of reciprocity or else the country on the other end may be shooting itself on the foot.

Domestic airlines operating in Nigeria have continued to lose out in revenue and flight frequencies, … Read More...

Government support, not strict regulation will develop the Power sector

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Chukwueloka Umeh, executive director,  Nestoil,  have identified non adherence to signed agreements by regulators, fixing of uncompetitive price and lack of support as malaise to the provision of regular power to Nigerians. In this interview with Olusola  Bello at the sidelines of the recently held Nigeria Oil and Gas conference in Abuja, he mention ways on how government can make provision of power available to the citizenry.

How can Nigeria as a country tap from its huge natural gas reserve to develop the power sector?

Like I earlier said Nigeria is at the point where we need to decide where we’re going as an economy. Our primary income is from oil and gas with a large percentage of that skewed towards oil. But the world is changing, the energy focus is changing and we must also change so that we can survive as a country.

Where we are today. We export. You heard the ghroup managing director of the Nigerian NationalPetroleum Corporation  (NNPC)  said that  we will use only about 10 percent or thereabouts of our gas domestically. And I think this is what causes a lot of the economic challenges that we are having in the country today. We should really be a gas economy rather than an oil economy. But as you know it’s the other way around.  For us to be a gas economy, we must make the entire gas value chain work. What that means is the gas producer should be able to make the investments required for them to produce, the gas transporter, the owner or the owners of pipelines should have robust infrastructure to move their gas around the country.

And it’s not just what we have today. The pipelines we have in the country today are grossly inadequate Read More...

Consumer goods sell off is a golden opportunity to Buy these stocks

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While the consumer goods industry is the hardest hit by a harsh and unpredictable macroeconomic environment, the broader market selloff has created an opportunity for many stocks.

Tremendous opportunity arises whenever stock sell off arises, but investors with weak stomach for volatility are advised to sit on the side-lines and watch.

Investment House Cordros Securities Limited have a Buy ratings on  Dangote  Sugar (DANGSUGAR), Flour Mills of Nigeria (FLOURMILL), NASCON Allied  Industries  (NASCON)  and  PZ  Cussons  Nigeria  (PZ), while we have ‘HOLD’ ratings on Nestle Nigeria (NESTLE) and Unilever Nigeria (UNILEVER).

Dangote Sugar’s shares traded at 7.67 times earnings while share price closed at N10.35 as of 2:00 pm Lagos-July 16 2019-; revenue for the first three months through March 2019 dipped by 7.24 percent.

The valuation trend of the producer of the sweetener  shows revenue fell by 26.44 percent in December 2018 as price to earnings stood at 6.58 times, and the share price closed at N21.80 as of March 20 2018.

As of March 20 2017, Dangote Sugar shares traded at N6.50, while P/E ratio was 5.41 times earnings; revenue grew by 20.44 percent as at December 2017. As of March 20 2016, its shares traded at N5.70 as revenue spiked by 67.95 percent; P/E ratio stood at 6.12 times in the period under review; Revenue in that period was up 6.53 percent in December 2016.

NASCON Allied Industries shares closed at N15.50 as of 2:00 pm in Lagos-July 16 2019- while the shares traded at 9.80 times earnings; sales for the first quarter of 2019 were flat.  The company’s P/E ratio stood at 10.39 times earnings in 2018 while shares closed at N21.70 as of March 20 2018; revenue as at December 2018 fell by 4.80 percent.   

As of March 20 2017, the … Read More...

Nigeria’s growth problem laid bare by US GDP expanding faster

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It’s a sign of economic trouble when the economy of an emerging or frontier market economy, assumed to have plenty of room to expand, is moving at a slower pace compared to a developed market, adjudged to have peaked and already operating near capacity. That’s the scenario playing out in Nigeria, Africa’s largest economy, where…

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Why micro, small and medium enterprises matter

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Micro, small and medium scale enterprises (MSMEs) are the bedrock on which the Nigerian economy stands. A recent report by the National Bureau of Statistics (NBS) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) proves this point.

The number of MSMEs rose from 37million in 2013 to 41.5million in 2017. Micro enterprises were 41.47 million, constituting 99.8 percent of the total enterprises, while small and medium businesses were estimated at 73,081, which is 0.2 percent of the total.

Together, they employ 59.647 million people in the economy. They also contribute 50 percent to the gross domestic product (GDP) and 7.64 percent to export receipts.

While they are scattered across various sectors, they are majorly found in the trade sector— both for wholesale and retail—, agriculture, manufacturing, and food services, among others.

Interestingly, the report shows that the number of medium scale enterprises dropped by 61 percent, from 4,670 in 2013 to 1,793 in 2017, while the total MSMEs grew marginally by 12.1 percent.

Analysts say this is a reflection of the Nigerian economy in the last six years—particularly in periods of negative or sluggish growth in 2016/2017.

“The periods covered by the survey were when the Nigerian economy was in mostly down and in recession. The small and medium enterprises suffered from shocks in the economy, forcing many to close shop,” Friday Opara, director, strategic partnership, SMEDAN, who contributed to the survey, told BusinessDay on the phone.

“This was why we had a decline in the number of medium-sized businesses. The growth recorded in micro businesses was as a result of so many retrenched workers starting up micro businesses to keep life going,” Opara explained.

Yes, there were massive retrenchment and business closures, particularly between 2016 and 2017 when the Nigerian economy was … Read More...