If we could vote for one word we didn’t stop hearing all week, it would be the word Fraud. But before we get into that, on the bright side, President Buhari inaugurated Nigeria’s 43 ministers this week, and the stock market responded positively to it. Sounds like we’re off to a great start! 🎉
Amongst many things said this week, the newly appointed minister of power, Saleh Mamman had this to say, “What I need from Nigerians at this time is prayers. I have just been appointed Minister of Power, so I have nothing much to talk about or say than for Nigerians to pray for me to succeed.”
Now you know what to do to have constant power supply.
Let’s dive into the news 😊
A British court has given Process and Industrial Development Limited (P&ID) consent to seize Nigerian assets worth $9 billion.
Remind me how did we get here
It all started in January 2010 when the federal government entered into a 20-year gas and supply processing agreement (GSPA) with P&ID to build a gas processing facility. Under the agreement, Nigeria was to receive 85 per cent of the refined non-associated gas, free of charge, for power generation and industrialisation. While P&ID would receive the remaining 15 per cent and the by-products – namely methane, propane and butane – which it would export.
Looks like a sweet deal…
But there was an initial obligation on the country — the GSPA required the government to build a gas supply pipeline to the P&ID facility. This is where it all fell apart. The government somehow for some unknown reason didn’t fulfil its end of the bargain and P&ID after spending about $40m on the project, decided to take FG to court. When it was looking like P&ID would win, Nigerian govt decided to settle the case outside court agreeing to an initial settlement of $1.5b which was later reviewed to $850m.
Phew! Case settled right?
Not really, In 2015. President Buhari came into power just after the settlement was agreed. Change was in the air, He was full of promises but with Nigeria’s economy already on its knees – Oil prices down, forex crunch and states owing salaries. He decided to ignore the $850m.
Yes, wrong move. P&ID frustrated by the government’s unresponsiveness took the matter to court again and was granted a $9b settlement for all the stress Nigeria put them through.
What’s Nigeria saying?
Nigeria is arguing that she has immunity as a sovereign nation — and therefore the judgment cannot be enforced against her. Also, there are accusations that P&ID did not fulfil its own part of the contract. Really, After all these years? Given, the contract seems to have some loopholes but then how is this just coming to light now after almost 10 years???
What could happen: Buhari could continue ignoring and push the case till his tenure is over or It’d be settled outside court again. However, with Nigeria’s debt – which is ever on the increase – at N24.9 trillion as of July 2019, Nigeria can barely afford to pay this judgement debt of about N2.7 trillion.
Just as the class Captain would put together a list of noisemakers or latecomers, the auditor General of Nigeria has disclosed in his latest report that almost all Ministries, Departments and Agencies (MDAs) are guilty of financial wrongdoing. In the latest assessment of these government bodies, the number of MDA without audited reports increased from 148 in 2014 to 323 in 2018.
Wait how many MDAs are there again in Nigeria?
We wish we knew but it appears nobody knows.
K, moving on. What does this mean?
An audit is an official inspection of an organization’s accounts to ascertain the credibility of the financial statements. These government bodies haven’t been audited because there’s a lot to cover up and the audit process doesn’t seem to be properly enforced.
Case in Point: Over 40 agencies including the presidency, Economic and Financial Crimes Commission (EFCC), and the National Assembly didn’t remit about N3.79 billion.
Hmmm! Even EFCC?
Yes oh. About N13.96 billion reported as salaries and wages can’t be traced, and N315 million marked as a doubtful cash balance.
Why should I care?
Trust Issues. A national survey by the Nigerian Economic Summit Group, showed that about two in every three adults do not trust the government with their taxes, hence about 83% of individuals and nearly 70% of businesses do not consider tax evasion as wrong. This affects the revenue generated by the government which in turn affects how much “good” can be done in the society.
No rules. Nigeria’s President claims to be fighting corruption but has refused to approve necessary laws that would curb this menace.
Jumia released it’s 2nd Quarter results for 2019. While revenue grew to €39.2 million from €24.8 million a year ago, its net losses increased significantly to €67.8 million from losses of €42.3 million a year earlier.
Tell me more
A major issue raised was that of improper orders placed and subsequently cancelled on its marketplace platform, this wrongly inflated its order volume leading to about €16 million ($17.5 million) in gross merchandise volume (GMV) value – total sales value – between the last quarter of 2018 and the first two quarters of 2019.
Big Picture: Jumia which has made over $1B loss since its inception is working towards breaking even – making neither profit nor loss – by 2022. Jumia plans to do a number of things to achieve this, some of the things on its list is Spinoff Jumia Pay and Jumia Logistics as solo services to the public, commence partnership with NIPOST for delivery, increase advertising on the platform.
In the past week, Nigeria has been in the spotlighted back to back for different fraud cases. First of, after a 13-month long investigation, the FBI arrested Nigerian Obinwanne Okeke in an $11 million Business Email Compromise fraud case. Then the FBI drops a list of 80 Nigerians involved in various online fraud schemes to defraud victims out of millions of dollars.
Why it matters
This is increases the bad rep Nigeria has in the international community. As it leads to increased scrutiny for visa processes, trust issues when attempting to do business internationally and restrictions from using international payment platforms.
What you can do: Protect yourself by tightening up your security measures – E.g Upgrade to using two-factor authentication for all your accounts.
Also, strive to live a life that promotes a positive narrative about Nigerians.
Egypt is the Middle East’s fastest-growing economy, yet more Egyptians are getting poorer. Last year Egypt vowed to halve poverty by 2020 and eliminate it by 2030 but It is going in the wrong direction.
Bottomline Stay Woke! What’s driving growth matters more than how fast growth is happening.
Amazon rainforest has enveloped with smoke for many weeks as the number of forest fires in Brazil has increased at a rate never seen in years.
Environmental organizations and researchers say the wildfires were set by cattle ranchers and loggers who want to clear and utilize the land.
Why it matters?
Brazil is the largest beef exporter in the world, providing close to 20 per cent of total global beef exports. However, its meat companies are striving to enter new markets. Hence the drive for more.
This incident has put pressure on Brazil’s President Jair Bolsonaro to respond appropriately or face losing a trade deal with the European Union.
WeWork, the coworking space now known as The We Company, released its S-1 filing, a public filing of information with the Security and Exchange Commission (SEC), in its bid to go public. The plan is to raise $3.5 billion, making it the second-largest IPO of the year after Uber. This move has brought about many talking points.
Tell me more
WeWork is growing fast but it’s haemorrhaging money. In 2017 revenue was $886 million and net loss was $933 million, In 2018 revenue increased to $1.82 billion (+105.4%), while net loss followed suit increasing to $1.9 billion (+103.6%). Typical “Tech” startup playbook.
Is WeWork a Tech company or a Real Estate: WeWork likes to identify its self more as a Technology company (the word “technology” appears 110 times in its prospectus) than a Real Estate company but really what makes a company a tech company? Is it a Low Capital Investment, Network Effects, Ecosystems that boost expansion with little cost?
Its corporate governance structure could use some tweaking. WeWork has an all Male Board of Directors which shows a lack of diversity. Also, Its founder Adam Neumann has control over the company and conducted two shady deals with the company.
Can it withstand the storm of recession: WeWork seems to be getting by because all is well, the economy is stable, however as Ben Thompson said, “It is one thing to sign long leases at low rates and rent out office space at higher rates when the economy is growing; what happens when the economy is shrinking and those long-term leases are not going anywhere, while WeWork customers very well maybe?”
Big Picture: With more and more companies hiring for remote work, flexible working spaces are only going to become more necessary, making co-working spaces both a vital service and an exciting market. However, WeWork’s future is still much of a debate.
Apple advised owners to clean Apple Card with a microfiber cloth, avoid contact with leather and denim.
Two notable memes
The mystery of market size in Nigeria: Everything’s competing for food
And that’s all for this week! 😎
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