E-Commerce: How Konga saved my family during the peak of COVID-19

Nigeria has fared fairly well with the COVID-19 pandemic, especially when compared with its counterparts in other parts of the world and against the backdrop of some worrisome predictions which pegged the country’s shabby public health care system as a potential source of concern.

India, for instance, is battling a terrible resurgence of the pandemic while the UK and others are only just lifting some severe restrictions.

Till date, Nigeria has recorded a little over 2,000 deaths, which for a country of an estimated 180 million people, represents a very good figure. For many, divine providence is one of the reasons that Nigeria has remained fairly immune from the sad tales being told by other countries who have racked up huge casualties since the pandemic began its rampaging run across the globe.

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This is so because the Nigerian primary, secondary and tertiary health care systems, as highlighted earlier, fall short of the standards obtain globally. Moreso, the predilection of many to flout basic preventive measures, such as wearing of face masks, observing social distance and improvement of personal hygiene is well known in this part of the world; with many Nigerians attending parties and other gatherings even at the height of the pandemic and the social status of the majority meaning that public transportation systems are often crammed with passengers and open-air markets filled to the brim, with scant regard for the principles of physical distancing.

e-commerce in Nigeria - BRANDSPUR

The foregoing, however, does not mean that we did not suffer some of the ravaging effects of the pandemic. A number of prominent Nigerians, many of them with underlying ailments, lost their lives to the COVID-19 pandemic, despite the efforts of some of the best hospitals in Nigeria and beyond to save them.

Many families also lost loved ones, especially after one or two of their members had the misfortune of contracting the dreaded virus.

The above would have been the fate of my family but we have Konga to thank for seeing us through one of the darkest periods of our life. One Tuesday morning in June 2020, we had woken up to my husband coughing and sneezing heavily. This was in the middle of the government-imposed lockdown. My husband and I, both white-collar professionals, had been taking stringent measures to guard against being infected with COVID-19. At the first hint of trouble, all our kids had been withdrawn from schools and were being home-schooled by their teachers virtually.

Also, my husband and I had started alternating the days we went to the office. Both of us, by virtue of our positions at our respective places of work, could not work from home totally. Therefore, we selected the days on which we went to work, which did not exceed thrice in a week. In addition, we made sure we strictly observed all laid-down measures to prevent infection. We even stopped our official drivers at the time in order to reduce the possibility of contracting the virus from exposure to them. Our home was fumigated and all visitors were barred.

So, when my husband woke up with that recurring cough and sneezes, we dismissed it as a potential case of the common cold. However, when it got worse upon his return from the office that day, we feared the worst. Our fears were confirmed after a couple of days when his test result came back positive for COVID-19. Before then, I had started isolating myself and the kids from him, solely as a preventive measure but that seemed like a measure too late.

After three days, I lost all sense of taste and smell, which had also been identified by the Nigeria Centre for Disease Control (NCDC) as a symptom of COVID. Consequently, I submitted myself as well as our kids for sampling. Of the family of seven, five of us tested positive to the virus, leaving only two of the kids negative at the time.

It was a shattering discovery and one of the most depressing periods of my life. But we could not keep wallowing in self-pity. We had to take action. Immediately, my husband and I took the decision to protect the two kids who had managed to evade contracting the virus. One of our relatives who resided close by in Lekki had come to pick up the two kids after another round of tests which confirmed their negative status.

The next couple of weeks proved to be arguably the hardest and most nerve-racking I have faced as a mother and caregiver. We had reached out to the NCDC hotline to notify them of our status but we were told at the time that bed spaces at the isolation centres were a bit limited. Consequently, we were given a list of medications to be taken on a daily basis, while being asked to hold on for an update on our evacuation to the isolation centre.

But that was the beginning of our worries.

Barely 24 hours after discovering our positive COVID-19 status, a power surge wreaked havoc in the house, damaging the large TV set in the living room and a few other appliances. Our depression levels went up a notch as the TV set was one of our major sources of keeping up with developments in the outside world.

In view of our status, we could not risk going out to the markets in order to limit the chances of infecting others. Our supplies were running dangerously low, however, and we needed to replenish them. We also needed to get the medications recommended by the NCDC. The youngest member of the family, my two-year-old toddler, also had some special dietary needs and other requirements which we urgently needed to source.

Having being exposed to e-Commerce, my husband and I had reached out to one of the players in the market and explained our plight.

It seemed, however, that informing them of our COVID-19 status was a mistake. We were told by the agent who picked up the call that they would get back to us shortly. It was after we had waited nearly 18 hours without a feedback and placed another call – which was dropped abruptly after we repeated our request – that we realized we were in trouble.

At this stage, our little baby was almost down to the last tin of food and his diapers were already exhausted. He had resorted to crying for long hours. For the rest of the family, we were also on the verge of starvation. We could not get a family member or friend to source the items as news of our COVID-19 status had spread and many were keeping their distance from us, as was expected.

My husband and I were confused and at our wit’s end.

Suddenly, my husband had a brain wave and recalled seeing a Konga advert on TV, urging Nigerians to stay safe by observing all laid-down COVID-19 preventive measures. I must confess, at this juncture, that prior to that moment, we had never shopped with Konga, even though a couple of our relatives had often talked up the company and their services.

My husband decided to take a chance and placed a call through to the Konga call centre after checking up the number online. The soothing but professional voice of the call centre representative at the other end of the line was a relief. She listened to our story and proceeded to reassure us that our request would be given special attention. The agent took down our orders which was a fairly long list. There were food supplies, diapers, disinfectants, antibiotics and other items for the baby, while the rest of the family required groceries, a bag of rice, FMCG products, cooking oil, a laptop for one of our kids, the medications recommended for us, as well as a new TV set to replace the damaged one and a UPS. She also took down our address and contact details.

Barely a few minutes afterwards, my husband’s phone rang again.

On the line was a young man who introduced himself as Prince Nnamdi Ekeh, co-CEO of Konga. He had proceeded to empathise with my husband over our condition and promised to personally deliver the items. We were dumbfounded! Even when we pressed to pay online due to the fear of being disappointed a second time, he assured us not to worry, adding that we can pay on delivery.

True to his words, Prince Ekeh called up my husband in the evening at about 6 pm, notifying him that he was at our Ajah residence. Could this be true? We almost fell over ourselves in the rush to get outside. Outside, we saw a young man, fully kitted in Personal Protective Equipment (PPE), complete with goggles and gloves, with a Konga-branded vehicle parked on our front porch. We were over the moon with delirium.

While keeping the recommended distance, he proceeded to drop all of the ordered items and handed over a delivery note which we cross-checked. All of the items we ordered were intact and Konga even added a free bottle of hand sanitiser to the items.

Never in my wildest imagination did I expect such quick, thoughtful and professional service from an e-Commerce company led by Nigerians. To cap it all, our needs were delivered by the CEO of the company! A lot of people are quick to write off Nigeria or Nigerians as a good-for-nothing, but I am inspired to share this experience as a way of boldly declaring that right here in this country, there are people and corporate organizations delivering great service.

Before we allowed him leave, my husband, myself and the kids showered prayers on Prince Ekeh and Konga. It is hard for this business not to succeed as it is evident that Konga is blessed already.

Two weeks after that incident, my entire family started feeling better from the effects of the COVID-19. Two rounds of test afterwards, we were all certified negative and returned to our normal lives after welcoming back our two estranged kids.

I have followed the massive strides of Konga in the e-Commerce sector till date and I can see one of the best businesses to emerge out of Nigeria. Even with all that Konga is doing in the market today, I believe more is yet to come. Lest I forget, my entire family and I are loyal customers of Konga and I have also succeeded in converting most of my friends, colleagues and other relatives.

Without Konga, my family and I would have probably been victims of COVID-19. God will continue to lift this great company to bigger heights!

My very civilized man of God advised me to make this testimony public in the appreciation of God’s favours and I am happy I have finally done this. I held back the family’s real name for privacy sake.

Mrs. X, a Chartered Accountant and mother of five, writes from Lagos

Huawei Sales Tumble 16.5% In Q1 2020

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Huawei announced its business results for the first quarter of 2021 on Wednesday, which were in line with the forecast.

In Q1, Huawei generated CNY152.2 billion in revenue, a 16.5% decrease year-on-year. Its network business maintained steady growth, while consumer business revenue declined, in part as a result of selling the Honor smart device brand in November 2020.

Huawei’s net profit margin was up 3.8 percentage points[1] year-on-year at 11.1% – the result of the company’s ongoing efforts to improve quality of operations and management efficiency, as well as a patent royalty income of US$600 million.

“2021 will be another challenging year for us, but it’s also the year that our future development strategy will begin to take shape,” said Eric Xu, Huawei’s Rotating Chairman. “We thank our customers and partners for their ongoing trust. No matter what challenges come our way, we will continue to maintain our business resilience.

Not just to survive, but do so sustainably. As always, we will remain focused on the needs of our customers and keep delivering practical business value.”

Huawei is driving efforts to fully unleash the value of 5G. It is helping carriers around the world roll out their 5G networks, meeting the demands of consumers and industries alike while boosting its own delivery efficiency.

It continues to improve its software engineering capabilities and ramp up investment in the software sector to gradually increase the proportion of software and services in its total revenue mix.

“As always, we remain committed to technological innovation and investing heavily in R&D as we work to address supply continuity challenges caused by restrictions in the market”, stressed Xu. “We will continue making breakthroughs in basic science and pushing the frontiers of technology.”

Setting Africa Up for a Post-Mao China Type Economic Revolution, The Zedcrest Perspective

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By Adedayo Amzat, GMD, Zedcrest Group

The People’s Republic of China was officially founded in 1949, but the economy didn’t really find its feet until the start of economic reforms in 1978, after the topsy turvy turbulence of the two periods of “The Great Leap Forward” 1958-1960 and the “Cultural Revolution 1966-1976.”

What changed in China? Emerging from decades of war before the founding of the People’s Republic of China in 1949, Soviet-style socialism became a focal point of governance, largely due to the expected nationalistic tendencies arising from periodic civil wars and at least two main war programs against regional arch-nemesis, the Empire of Japan. Socialism led to mixed results with massive state-controlled investments in Industry.

Setting Africa up for a Post-Mao China type economic revolution, the Zedcrest perspective Brand spur

However, the lack of private incentives and public disillusion with Marxist-Leninism led to the misallocation of resources, and an eventual collapse of the system. Sustainable growth didn’t really start until the advent of Deng Xiaoping as the Supreme leader of the People’s Republic of China from 1978. Despite being a socialist republic, Deng unleashed a culture of innovation and market-economy reforms, the eventual bedrock of the tremendous economic development of China till today, taking GDP size from 50billion dollars in 1960 to 14.3 trillion dollars in 2020, an economic miracle by all standards.

Zedcrest Group, GMD, Adedayo Saheed Amzat
Adedayo Amzat, GMD, Zedcrest Group | www.wordpress-1516176-5827464.cloudwaysapps.com

When we started Zedcrest in 2013, our conviction was that Africa was exactly where China was in the early 80s and despite continuing struggles, has the opportunity to develop continent-wide growth in a similar fashion as China. All it would take is focused leadership, a MORE connected continent and an explosion of Innovation across the continent. We then set our vision along with those tenets, with the dream to build a core of African-wide financial services businesses and a satellite of Investment portfolios. Seven years later and achieving domain leadership in the financial markets, consumer lending and now Investment management, we have now turbocharged both our continental ambition in our core businesses and in our early-stage investing initiatives to support Innovation across the continent.

Officially starting in 2019, we have invested rapidly to test our hypothesis and make up for lost grounds. Investing directly and in partnerships with co-investors and syndicates, we have backed 30+ early-stage businesses with cheque sizes ranging from $25,000 to $250,000 (US Dollars). With the potential of the continent becoming more established with the surging interests from larger and seasoned global investors, we have joined the likes of Idris Bello at Afropreneur, and Kola Aina at Ventures Partners as “discovery investors”, investing early enough and helping founders through the rough periods of market and business validation.

A STOPLIGHT ON SOME KEY INVESTMENTS

Koniku – ‘Intelligence is Natural’ led by Osh Agabi, is building sensing and thinking machines, with synthetic neurobiology at its core. Koniku’s flagship device, the “Koniku Kore” is a wetware device that can detect and interpret smells and process that data for use in aviation security, policing and medical research. A future where diseases and threats can be detected by the power of “smell” is one envisaged by Koniku.

The company recently announced its partnership with global aircraft manufacturer, Airbus.

Koniku’s work for Airbus is in aircraft and airport security. Both companies are co-developing solutions for detecting biological hazards, and spotting chemical and explosive threats. Airbus will install Koniku’s Konikore; a small device that looks like a jellyfish. The device can perform the bomb-sniffing roles that have come to be associated with police dogs. In the best conditions, Konikores are expected to detect substances within 10 seconds.

Bankly – Banking the Unbanked

We met Tomi and Fred in 2019, and immediately connected with the glint in their eyes. Despite the explosion of Fintech services, most digital banking products are built almost exclusively for the about 30million already banked people. Who is working on bringing the remaining 50million adults into the digital world? This is where Bankly’s work becomes very important. We led the pre-seed round of Bankly in 2019 and it has been beautiful to see their work blossom.

Working with agents, Bankly has built custom solutions to onboard unbanked users onto its digital platforms, leading with savings as the product.

Bankly recently concluded a seed raise of $2million, led by new investors Flutterwave and Vault.

Bento Africa – The Operating System for Salaries and Lives

Formerly known as Verifi, the leading payroll software solution firm has made a lot of progress in the last two years while also rebranding its name to Bento Africa. Bento believes that Salaries are the operating system that life is built upon and has partnered with other startups like Nigerian edtech startup, Schoolable; property rental platform, Kwaba; consumer firm, Zedvance among others to enable its users do more. 

TalentQL: Boosting the Competitiveness of African Talents

Understanding the importance and value of tech talent in Nigeria and the diaspora, TalentQL, one of Zedcrest’s portfolio companies is creating a diverse and sustainable pipeline for tech talent for companies anywhere in the world.

TalentQL recently got accepted into Techstars Toronto. The African-focused talent recruitment and outsourcing company joined nine other startups in the accelerator’s class of 2021.

Other portfolio companies are: 

…Driving the Next Generation of Fintech Solutions  

Onepipe

Working with open banking frameworks, Onepipe is an aggregator of Application Software Integrations (APIs) into a standardized gateway, offering businesses the opportunity to be a one-stop shop for digital financial services with one integration.

Spektra

Prince Boakye Boampong is building a unified alternative payment network that does not require a bank account for over 1billion Africans with Spektra. Essentially, he is building Alipay, but for Africa.

Tanda

In funding Kenya startup, Tanda, Zedcrest is supporting the founder, Geoffrey in promoting financial inclusion by converting neighbourhood dukas (micro-retailers) who account for over 70% of consumer purchases across Africa into a one-stop shop for basic financial services.

Lenco is building a better banking and expense management experience for businesses across Africa

Indicina is building the Africa’s credit infrastructure by enabling the much needed risk innovation

Kaoshi is leveraging Open Banking API technology to unlock cross border finance, specifically the finances of the diaspora to their home countries.

Julaya: Starting out of Francophone Ivory Coast, Julaya is building the digital account for African small and medium-sized businesses.

Fintor: The Los-Angeles based company turns real estate investment opportunities into micro-equity shares starting at around $5 to make investing in real estate available to everyone.

Thundr: A mobile-first equities trading platform that is designed to make investing easy for both green and expert investors alike. The YC-backed startup is pioneering commission free investing in Egypt.

Yoello is a payments platform building infrastructure that connects banks and payment networks to merchants’ consumers. 

SUDO: An API platform that enables you instantly issue physical and virtual cards with more control & flexibility at scale 

…Revolutionising Healthcare 

Helium Health is a startup leading the digitization of Africa’s medical industry by providing a suite of cutting-edge technology solutions for all healthcare stakeholders in emerging markets. The startup raised $8million in 2020 to fund its African wide expansion.

Amara Medicare aims to revolutionize the 3-in-1 services of Ophthalmology, Dental and ENT practice.

Lora DiCarlo is changing the world by empowering individuals to embrace their sexuality with positivity and confidence, with technology that solves our most important sexual health and wellness issues. The company announced the coming on-board of Cara Delevingne as co-owner and creative advisor.

Contraline is a medical device company developing a long-lasting, non-hormonal, and reversible male contraceptive using advancements in hydrogel technology.

Bypa-ss is digitizing healthcare information exchange between healthcare providers to deliver best quality of care to their patients. 

…Building the Future of Education

Abwaab: Founded in 2019 by former Uber, Careem, and Mawdoo executives, Abwaab’s online platform enables secondary school students in the Middle East & North Africa to learn different subjects at their own pace with the help of engaging video lessons and interacting with tutors, test themselves using tests and quizzes, and track their performance using different tools. The company just completed a $5.1million seed round and is now live in Jordan, Egypt, Saudi, and Palestine.

Utiva: Utiva is building talents for the future of work. With Africa needing to retrain a generation of workers to adopt the required skills set for the digital economy, Utiva is leading this mission by combining remote learning models with instructor-led approaches to help people acquire the skills they need to make a transition into new tech roles.

…Building Logistics Infrastructure 

Freterium: Moroccan startup, Freterium is giving superpowers to logistics team with its AI-driven platform. Freterium’s cloud-based transport management platform offers the easiest and most automated way for manufacturers, retailers and logistics firms, to manage their daily road freight shipments.

SOTE: Based in Kenya, Sote is building the digital logistics infrastructure for Africa. SOTE’s mission is to grow the GDP of the continent by facilitating growth of trade. The company provides a combination of ERP solutions, underwriting models, and software driven supply chain services across the continent.

FLYR Labs FLYR’s cirrus platform is a modern and cutting edge Revenue Operating System (ROS) for the airline industry.

XTI Aircraft Company is a cleantech aviation company developing the world’s first hybrid-electric long-range vertical takeoff airplane.

…Providing Basic Human Needs & Improving Sustainability 

Zenfix is providing savoury and nutrient dense foods in Nigeria.

Zumi Africa: Zumi is revolutionizing the apparel supply chain in Africa by connecting apparel wholesalers and retailers in a transparent, affordable marketplace.

Tagaddod is a renewable Energy and Waste Management company started in February 2013 and operating in Egypt. Currently focusing on clean fuels, Tagaddod is working on Biodiesel Production from Vegetable Oils. 

….Providing Enterprise Services 

Simpu helps businesses start and nurture quality relationships with their customers. With a one-tap experience platform, businesses can interact with customers across multiple channels in real-time.

Appruve builds identity and financial solutions for firms to verify data they collect from their customers across their lifecycle. Appruve provides verification services around identity and financial profiles, fraud detection and management.

Youverify is building trust in Africa by helping businesses and individuals confirm identity and physical addresses. Using artificial intelligence, Youverify confirms a user’s identity document and compares it with their facial biometrics. This information can be cross-checked against more than 300 databases locally and globally. 

Banking Data Report: Gross Loans Trend Higher Amidst Improving Asset Quality

Earlier, the National Bureau of Statistics (NBS) released the Selected Banking Data Report for Q4-2020. In the report, the banking sector Gross loans reportedly grew 16.6% y/y as well as 5.3% q/q to N20.5tn.

Similarly, absolute Non-Performing Loans (NPLs) rose 16.0% y/y and 5.5% q/q to N1.2tn at the end of Q4-2020.

Furthermore, while the NPL ratio grew 1bp q/q, it declined 4bps y/y to print at 6.0% at the end of Q4-2020. The growth in gross loans from the banking sector comes despite significant macroeconomic risks in 2020 due to the Covid-19 pandemic.

That said, we note that gross loan growth has been driven by a confluence of factors. First, the CBN’s regulatory directive which saw the Loan to Deposit ratio (LDR) rise to 65.0% supported lending appetite among commercial banks.

Also, the Naira devaluations over the past year have increased the Naira value of foreign currency loans. On the decline in NPL ratio, we believe this was driven by CBN’s regulatory forbearance which allowed banks to restructure their loan books, particularly in sectors vulnerable to the shocks ignited by the Covid-19 pandemic.

Looking ahead, we observe that growth risks have continued to dissipate amidst renewed optimism on full economic reopening in Nigeria. However, the operating environment for businesses remains fraught with legacy structural concerns.

Thus, we think lenders operating at the CBN’s 65.0% Loan to Funding ratio will be reluctant to provide more credit, while those still falling short will remain active credit creators, considering the effect of CRR debits on banking system liquidity.

On NPLs, given the banking sector’s exposure to the oil & gas industry, we do not expect a major shock in NPL ratio, considering the recovery in crude oil prices. Also, the near-fully reopened Nigerian economy posits a better macroeconomic and business story for loan performance in non-oil sectors.

Total Nigeria: PEF Inflow Propels PAT To Profitability

Recently, major downstream player, TOTAL released its audited financial result for FY-2020. It was evident that the peculiarities of the economic lockdown, which included the cancellation of local and international flights and the restriction of economic activities (and consequently vehicular movement), disrupted the business of petroleum products marketers.

As a result, TOTAL’s Revenue dipped across all business segments. Revenue fell by 29.1% y/y to N204.1bn in FY-2020, Cost of sales fell faster by 32.3% y/y to print at N173.9bn in FY-2020. Furthermore, due to the decline in sales, Gross Profit and Operating Profit declined by 12.3% y/y and 64.0% y/y to print at N30.7bn and N3.5bn, respectively.

Total Nigeria Revenue dropped by 30.13% amid Relatively Stable Bottom-Line Performance Brandspurng1

Overall, the company recorded a Profit before and after Tax of N2.9bn and N2.0bn respectively (vs Profit before and after Tax of N3.0bn and N2.2bn respectively in FY-2019). Earnings per Share (EPS) fell by 9.4% y/y to N6.08 per share in FY-2020.  The firm proposed a dividend of N6.08 per share.

Below, we highlight key details of the downstream operator’s performance and our expectations for 2021.

Weak Fuel  Demand And Loss Of Market Share Hamper Total Sales:

TOTAL’s FY-2020 performance underwhelmed, as Revenue dropped by 29.1% y/y to N204.1bn in FY-2020. Undoubtedly, weaker economic activities triggered by the COVID-19 pandemic, which sparked a series of strict restrictive measures on the movement of people in Q2-2020, hampered sales. Total sales from petroleum products declined by 34.8% y/y to N157.0bn (which made up 76.7%) whilst sales from Lubricants and others fell by 6.8% y/y to N47.7bn in FY- 2020. Lubricant sales consisted of 23.2% of Revenue in FY-2020.

Total Records Weaker Demand Across All Its Major Segments

On a business segment basis, TOTAL experienced a drop in sales across all its reporting segments.

Network sales (70% of total sales), which measures sales at service stations, declined by 29.2% y/y to N143.3bn. General trade (24% of total sales), which tracks sales to corporate customers, declined by 19.9%, as lockdown activity meant offices were fully or partially closed in 2020.

Revenue from its Aviation segment (6% of total sales) dropped by 53.2% y/y to N12.2bn, as domestic and international travel restrictions led to a reduction in sales of Jet-fuel and other aviation products.

Cost Of Sales Falls Faster Than Recovery

Cost of sales remained relatively large compared to Revenue due to the sheer nature of downstream oil and gas service. Cost of sales declined faster than Revenue in FY-2020, as COS declined by 32.3% y/y to N173.9bn in FY- 2020. As such, the firms’ cost margins printed at 85.0% in FY-2020 vs 88.0% in FY-2019.

As a result of the steep drop in total sales, the reduction in cost of sales was not significant enough to compensate for weaker demand. Consequently, Gross profit declined by 12.3% to N30.2bn in FY-2020. However, the Gross margin improved mildly to 14.8% in FY-2020, from 12.0% In FY-2019.

Similarly, TOTAL’s Operating Profit printed lower by 64.0% y/y, owing to weaker demand from sales and a 68.3% y/y drop in other income to N1.0bn, which arose from a 99.0% drop in Gains on the disposal of assets from FY-2019.

Lower-interest environment and Improved PEF Inflows cushions Net finance cost: TOTAL took advantage of the low-yield environment in 2020, as the downstream player recorded a decline of 973.4% in Net finance cost to of N629.1mn, a considerable improvement from N6.7bn in 2019. This was due to the average interest rate on the firm’s overdraft and bank charges falling to 8.4% in FY-2020, from 14.8% in FY-2019.

The improvement in Net finance cost was also boosted by a 175.2% y/y increase in finance income, mainly owing to a 96.7% y/y increase in inflows from the Petroleum equalisation fund (PEF). Noteworthy to mention, adjusting for the PEF inflow, PAT would have printed at a meagre N30.0m in FY-2020.

Overall, the company recorded a Profit before and after Tax of N2.9bn and N2.2bn, respectively, as PBT and PAT fell by 5.2% y/y and 9.4% y/y. The company proposed a N6.08 per share dividend payment for FY-2020, a 9.3% y/y decline from FY-2019.

Working Capital Management -Improvement In Net Cash Flows

In terms of working capital management, the company’s cash balances, excluding balances with Total’s treasury, improved by 10.5% y/y to N4.2bn. This was largely due to a drop in inventory purchases and an increase in accounts payable, up 35% to N73.7bn, mostly to the Total SA group’s sister companies, resulting in an increase in Total liabilities to N115.0bn from N105.0bn in FY-2019.

The company’s total amount owned to related subsidiaries increased  418% to N31.4bn in FY-2020 (previously N6.1bn).

Elsewhere, we note that the company generated Net cash from operating activities worth N43.5bn in FY-2020 from N15.1bn in FY-2019. This was due to a significant drop in inventories, given the fact that the lower fuel demand during the period did not spur the company to purchase more inventory. Also, the N2.0bn recorded from the Petroleum Subsidy Fund aided cash-inflows. Finally, the company’s leverage position (using debt/ equity) improved in FY-2020 to 122.2% from 140.8% in FY-2019.

Outlook For TOTAL – Rebound In Economic Activities To Boost Demand In 2021

Our outlook for the downstream oil and gas sector remains moderate. Our position is predicated on an expected rebound in demand for petroleum products and lubricants follow- ing the lockdown in Q2-2020. However, in our view, this remains the only significant bright spot for companies in the downstream oil and gas sector. On the downside, the prospect of full price discovery for Petrol Motor Spirit (PMS) remains hindered by policy backflips by the FGN and NNPC.

Also, on the downside, the persistent FX challenges, which makes NNPC the largest importer in the market, would mean that TOTAL, for the most part, will only earn a distributors’ margin and be unable to capitalize on wholesaler’s margins as the NNPC remains the primary wholesaler in the country.

For lubricants, we are partly optimistic concerning the growth of TOTAL’s lubricant business. Looking forward, considering the FX challenges its competitors will face in 2021, we expect TOTAL to leverage on its group structure for FX sourcing, as its lubricant sales segment re- mains more profitable than the PMS segment. We expect TOTAL to retain its market share in this segment.

We modelled for TOTAL, incorporating the current market dynamics/fundamentals, which show that most downstream firms earn only a retailer’s margin, as shown by the most re- cent policy backflip by the NNPC and the FGN in Q1-2021. We review our year-end target price for TOTAL upwards of N167.4 per share with an upside of 23.9%, from its current price of N135.9 per share. We raise our to BUY recommendation on the stock.

Examining The Effects Of CBN Policy And Its Impact On Real Estate

In Q3-2019, the CBN, in a bid to improve lending to specific priority segments of the economy released a circular directing banks to maintain a minimum loan-to-deposit ratio ( LDR) of 60% (later reviewed to 65%).

The  CBN also announced it had assigned a weighting of 150% to the Real estate, Mortgage,  Creative arts, and Consumer lending sectors to enhance lending to these sectors.

Nearly 2 years after, we examine the success of this policy lasering in on the real estate sector. The National Bureau Statistics recently released it select banking data report for Q4-2020; the report showed that total credit provided by the banking sector rose 18.5% y/y in FY-2020.

However er, credit allocation to the Real Estate sector grew 8.2% y/y to N654.2bn. This was encouraging considering that credit allocation to Real Estate Sector declined by -8.0% on average (CAGR) from Q4-2016-Q4-2019. Clearly, the CBN’s decision to improve credit to these target segments may have paid off somewhat, as banks have been forced to lend more to the real estate sector.

Also, we suspect the deliberate attempt to improve allocation to the industry contributed to the first q/q GDP expansion in the real estate sector since Q4-2016.

Going forward, while credit allocation to this sector has yielded some positive outcomes, evidenced by the positive growth in Q4- 2020, its sectoral allocation remains below pre-2016 levels.

Credit allocation in the real estate sector in Q4-2016 was N782.3bn, 19.4% higher than the figure reported in Q4-2020. Lastly, whilst we applaud the CBN’s efforts to force the hand of banks to lend to the sector, we suspect that the impact of the policy may soon begin to taper if the momentum in the real sector is not sustained due to protracted FX challenges.

To bolster sustainable growth in the real estate sector, the Nigerian mortgage market must be reformed in the context of the housing deficit in the urban centers, land ownership/tenor system, and proper regulatory framework.

 

Nestlé Strengthens Its Plan To Help Protect Labor Rights In The Palm Oil Sector

Nestlé presents its upgraded 2021-2025 action plan for addressing labor rights issues in the palm oil sector.

Workers in the palm oil industry – in particular migrant workers – are vulnerable to labor rights abuses, including forced labor. They often face adverse working conditions such as excessive working hours, low wages, inadequate social security, unsafe working conditions, unreasonable movement restrictions, and limited access to communication.

Nestlé believes this is absolutely unacceptable. The company has been working for many years to prevent and remediate human rights violations in its palm oil supply chain and has gained a much better understanding of the root causes of the problem.

“Our vision is of a sustainable palm oil sector – where nature is protected and restored, where human rights and labor rights are respected, where workers and smallholder farmers are offered decent working conditions and livelihoods,” said Benjamin Ware, Global Head of Sustainable Sourcing and Climate Delivery, Nestlé. “The updated action plan we are launching today provides a clearer, more robust guideline to take action in our supply chain with our partners and suppliers and to help tackle the root causes together with all relevant stakeholders.”

As part of the upgraded action plan, Nestlé has developed a framework that will help the company prioritize supplier engagement and systematically take action based on suppliers’ risk profile and their capacity to address labor rights issues. Under the framework, the company will work with external partners to develop corrective action plans for suppliers and put monitoring systems in place to track against a set of key performance indicators.

Nestlé will additionally deploy together with its suppliers specific guidance and tools to improve recruitment practices and the working and living conditions of workers. The company will scale up its efforts to provide an effective and safe communication channel, such as the Suara Kami helpline for workers in its supply chain to report issues.

Through its work with various industry associations like the Consumer Goods Forum, Nestlé will help to scale up the impact of these initiatives and advocate for the development of regulations, policies, programs and incentives that support the respect of labor rights. The company will participate in several landscape projects that aim to improve production practices in key production regions to be more environmentally and socially responsible.

The measures defined in Nestlé’s 2021-2025 action plan come on the back of an assessment of the company’s palm oil labor rights management systems and those of our suppliers by Verité, a global, independent, non-profit organization with a mission to ensure that people worldwide work under safe, fair, and legal conditions. Nestlé commissioned Verité to conduct this assessment in 2018 and 2019. With support from Nestlé, Verité recently created and launched a new toolkit to help palm oil producers address human rights issues.

CBN Maintains Iron Grip On Local Banks, As Interbank Liquidity Drops In 2 Years

The FGN bond market continued to trade on a bearish note, as yields rose across the benchmark bond curve for another consecutive trading session. We noted sellers mostly at the short to mid-dated papers, as tight system liquidity continues to squeeze banks out of holding positions.

The 2023s paper was offered for most of the session at mid-10% levels, with no buying interests to match.

The 2028s and 2029s papers were offered better to entice some demand, with those bonds trading around 12.50% for most of the session. Short-covering activity continued to provide support at the long-end of the curve, with the 2045s and 2049s trading just below the 14.00% mark. Yields expanded by c.13bps on the average across the benchmark curve.

We expect market demand for bonds to stay muted in the interim as short-term rates remain elevated as well as expected slight selling pressure as the month draws to a close.

Treasury Bills

The treasury bills space traded with continued selling pressure for another consecutive session as local players looked to offload positions to cover their funding positions amidst sustained tight system liquidity levels. Supply remained focused on short-dated papers, as the CBN Special Bill (31-May-2021 maturity) was offered at 6.00% as local banks looked to raise cash rather than continue overnight funding at double-digit rates.

We expect the bills market to continue the bearish trend ahead of the bi-monthly primary auction for T-bills tomorrow as investors expect higher stop rates.

Money Markets

Interest rates climbed higher for another consecutive session, despite OMO maturities of N40.00Bn, as local banks continued to camp at the CBN Lending window to fund their positions. System liquidity opened at c.N313Bn negative, the tightest levels seen since way back in September 2019. Funding from the CBN SLF & Repo windows by local banks increased by c.40.81% to N480Bn. Consequently, Open Buy Back (OBB) and Overnight (O/N) rates rose to close at 14.25% and 14.75%, respectively.

We expect the markets to remain tights and rates elevated, as the DMO is expected to oversell at tomorrow’s auction causing further strain on banks’ funding.

FX Market

The Naira had a relatively quiet trading session at both the official and parallel markets. At the IEFX space, we saw a slight uptick in traded volumes which increased by 2.00% D/D (c.$48.42mio traded). The Naira appreciated by N1.67k to close at N411.67/$, as bids ranged between N401.10 and N436.55 to the dollar.

The cash and transfer rates remained unchanged D/D.

Eurobonds

It was a bearish session in the NIGERIA Sovereigns, with some profit-taking action seen, especially on the mid-and long-tenor papers causing yields to expand slightly by c.2bps on the average across the sovereign curve. At the SSA space, the GHANA remained weak for the second consecutive day as sellers continue to improve offers in another profit-taking driven session across the sovereign curve.

The NIGERIA Corporates papers traded mixed, as we noted continued selloffs on the short-dated Access 2021s paper as investors cycled into the FIDBAN 2022s for a 120bps yield pick-up

Nokia Ranked As Number One In 5G Patents

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Nokia today announced that it has been ranked as number one in 5G patents in an independent study.

The strength of Nokia’s industry-leading 5G patent portfolio has once again been confirmed by an independent third party. In its study on Standard Essential Patents (published April 2021), independent analyst firm PA Consulting concluded that Nokia is number one for ownership of granted patents that the researchers found essential to 5G standards.

Nokia enables ultra-fast 5G services for Vodacom South Africa customers with 5G radio, core and fixed wireless access

This is the second time Nokia’s leadership in 5G Standard Essential Patents has been confirmed by PA Consulting’s research. Nokia was ranked as number one in their previous study published in 2019. The analyst firm conducted their own technical analysis of the 5G patent landscape, investigating whether the patents are truly essential to the 5G standard, instead of relying on patent holders’ own raw declaration numbers.

Jenni Lukander, President of Nokia Technologies, said: 

“These independent findings reflect the significant contribution Nokia makes to developing industry standards, our continuous investment in R&D, and the strength of our patent portfolio. The study is also a reminder that you need to look at not just the number of patents but also the quality when assessing the strength of a patent portfolio.”

For over three decades, Nokia has been significantly contributing to the development of industry standards, holding a variety of leadership positions in major industry standardization bodies. In 5G standardization, Nokia is one of the most active contributors and drivers of key features. Several independent third-party studies have ranked Nokia among the top for ownership of patents that have been declared as essential to cellular standards, including 5G.

Nokia’s industry-leading patent portfolio is built on more than €130 billion invested in R&D since 2000 and is composed of around 20,000 patent families, including over 3,500 patent families declared essential to 5G.

Nokia contributes its inventions to open standards in return for the right to license them on fair, reasonable and non-discriminatory (FRAND) terms. Companies can license and use these technologies without the need to make their own substantial investments in R&D.

NEM Insurance Announces The Appointment Of Idowu Semowo as CFO

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NEM Insurance Plc, an insurance company offering all classes of life and non-life insurance products in Nigeria today announces the appointment of Mr. Idowu Semowo as the new Chief Financial Officer of NEM Insurance Plc with effect from February 1st, 2021.

PROFILE OF MR. IDOWU OLAITAN SEMOWO

NEM Insurance Announces The Appointment of Idowu Semowo as CFO Brandspur nigeria
MR. IDOWU OLAITAN SEMOWO- B.Sc., MBA, ACS,FCIB,FCA | Brand Spur Nigeria

He is a fellow of both the Institute of Chartered Accountants of Nigeria and the Chartered Institute of Bankers of Nigeria He is also an Associate of the Chartered Institute of Stockbrokers of Nigeria [ACS].

His illustrious career spans over a period of thirty years in the financial industry encompassing experiences in auditing, banking, and stockbroking having worked with Universal Trust Bank, Magnum, MBC International Bank Limited and Kinley Securities Limited. He has served in pivotal roles in the financial growth of NEM Insurance Plc over the years.

The Board and Management of NEM Insurance Plc are confident in Idowu’s wealth of knowledge and experience.