Hand Over Refineries to Private Sector and Be Better Off, PwC Tells FG

*Says plants have recorded over N100bn in losses, produce zero barrel of refined products
*Report: Nigeria’s CEOs highest paid in Africa

Emma Addeh in Abuja and Dike Onwuamaeze in Lagos

The federal government has been advised to handover its refineries and other commercially viable projects to the private sector in order to reduce its debts and earn more revenue from the assets. The government was also advised to prepare for the future by investing more in human capital development in order to position its citizens as exportable ‘products’ and boost diaspora remittances.

These views were canvassed yesterday by Africa Tax and Legal Services Leader, PwC Nigeria, Mr. Taiwo Oyedele, and Partner/Chief Economist, PwC Nigeria, Dr. Andrew S. Nervin, during a webinar organised by the Lagos Chamber of Commerce and Industry (LCCI), in collaboration with PwC.
The seminar was titled, “2021 Mid-Year Economic and Business Outlook.”

The advice came as a new report by PwC disclosed that Chief Executive Officers (CEOs) of Nigerian-listed companies were among sub-Saharan Africa’s highest earners.
The federal government recently approved $1.484 billion for the rehabilitation of the Warri and Kaduna refineries.
But Oyedele said the government should be more concerned about strategic issues bothering the economy than approving projects and contracts that might turn out to be unprofitable.

He said, “I have my issues with the Federal Executive Council (FEC) that is just approving projects and contracts when we should be looking at more strategic issues to deal with in the economy. I do think that the amount of money we are spending on projects that are commercially unviable is unbelievable.
“Just yesterday, the approval for the turnaround of refineries for billions of dollars was given. These are refineries where we have recorded over N100 billion in losses and produce zero barrel of refined products.

“If we have given these refineries for free to the private sector, Nigeria would have been better off compared to close to N10 billion that we spend every month maintaining and running assets that are not producing.

“If we take something like rails, refining and the ports that are commercially viable and give to the private sector, they will bring money from within and outside Nigeria. They will do them better.
“They will make money. They will run them efficiently and pay taxes to the government. This is what we should do. It will not only reduce our debt and the cost of servicing them, it will also increase the overall efficiency of the economy.”

Oyodele also said Nigeria should be leading the African Continental Free Trade Area (AfCFTA) negotiation as the largest economy in Africa
“We complain over poor infrastructure, but Nigeria is largely a service-driven economy and should be more concerned about how to improve services and export them to the rest of Africa,” he stated.
He added, “The top import in Africa is petroleum products. Why can’t Nigeria refine and export to the rest of Africa?”

Nervin, in his own contribution, advised the Nigerian government to drive export and diversification of the economy through the service sector and human capital development.
He said, “Two thirds of the global economy is made up of the service sector, which has higher value added than goods. Nigeria’s creative and cultural industries presently play an important role and will generate $1 billion export revenue.

“Nigeria’s Nollywood is a good export to invest in.”
Nervin also pointed out that Africa was the only place with demographic growth in the world, stressing that this has big implications for the Nigerian economy.
“Nigeria can develop its human capital as its most strategic assets that can go abroad and earn foreign exchange.
“By investing in Nigeria’s young people and brains everything in the economy will take care of its self,” Nervin said.

He added that climate change would be a serious matter for Nigeria, and Lagos, especially, as the temperature is increasing and the sea level is rising.
CEO of Economic Associates Limited, Dr. Ayo Teriba, who moderated the panel discussion during the webinar, agreed with the perspective shared by Nervin that Nigeria might become the world’s most populous country in the next century. Teriba urged the government to develop the country’s human capital just as India and China did in the past century.

Teriba said, “Your perspective is that by the year 2100 Nigeria will have the largest population in the world, as India and China populations will be declining while Nigeria’s will be rising. So government must invest in them to generate more brains that will go to the Diasporas, like India and China have been doing, and earn big to remit billions of dollars.”

Report: Nigeria’s CEOs Highest Paid in Africa

CEOs of Nigerian-listed companies are among sub-Saharan Africa’s highest earners, a new report by Price Waterhouse Coopers (PwC) has indicated.
The remuneration report published yesterday by the accounting firm said the median value of total-guaranteed packages, which includes base pay and benefits, for the heads of Nigerian companies was $323,000. That is the highest among seven sub-Saharan African countries, excluding South Africa, and is based on data published by 382 companies, according to the report.

A Bloomberg report had also noted that chief financial officers in Africa’s biggest economy were among the best paid in the region, with median earnings of $219,000, according to PwC.
Nigeria is home to the continent’s biggest building-materials producer, Dangote Cement Plc, owned by Africa’s richest man, Aliko Dangote. The country has the biggest companies by market value on the continent, outside South Africa, in the food and beverage, banking and energy industries through Nestle Nigeria Plc, Guaranty Trust Holding Co., and Seplat Energy Plc.

The market capitalisation of Nigeria’s stock exchange is $49 billion, compared with South Africa’s $1.1 trillion bourse, which boasts the biggest listed company in Africa, Naspers Ltd.
Some of the world’s biggest mining companies, like BHP Group Plc, Anglo American Plc, and Glencore Plc, have secondary listings in South Africa and represent more than 20 per cent of the total market capitalisation of the benchmark FTSE/JSE Africa All Share Index.

A separate analysis of companies listed on the Johannesburg Stock Exchange showed a median pay of 5.17 million rand ($359,265) for chief executives across all industries and 3.34 million rand for chief financial officers, according to the consultancy.

PwC omitted percentage changes in annual compensation due to the unquantified impact of COVID-19, and its analysis excludes long-term incentives, leaving some South African executives looking poorer.
South Africa is one of the world’s most unequal nations, a legacy of the apartheid system of racial discrimination that disadvantaged the black majority and ended in 1994. The government is finalising legislative changes aimed at narrowing the earnings gap between company executives and the lowest-paid workers, in a country where the official minimum wage is about 20 rand an hour.

“The time has come for leaders to step forward, take action and actively address fair pay in their organisations,” said PwC’s reward practice co-lead, Andreas Horak.
“It is critical for leaders to be seen as committed to creating working environments in which all employees are valued and rewarded and have equal opportunities to grow, develop and flourish,” he added.

A report released a day earlier by Proshare on the salaries of Nigeria’s top 10 CEOs in the 2020 financial year showed that the average salary earned by all the top 10 CEOs was N376.19 million, with the top five CEOs being those of MTN Nigeria, Seplat Energy, Dangote Cement, GT Bank, and Nigerian Breweries.
The report added that the five company heads who earned below the group’s median pay included the CEOs of Airtel Africa, Julius Berger, Guinness Nig Plc, Unilever Nigeria Plc, and Zenith Bank.
Interestingly, except for the CEO of Unilever Nigeria Plc, the entire top 10 rewarded CEOs pocketed more, in terms of basic pay, than the average CEO salaries paid by their respective companies in the preceding years.

According to the report, “A closer look at the basic salary paid to the top 10 most highly remunerated CEOs in the year 2020 shows that the top three – Ferdinand Moolman of MTN Nigeria (who earned N567 million), Austin Avuru and Roger Brown of Seplat Energy (who earned N484 million), and Michael Puchercos of Dangote Cement (whose basic salary for the year was N448 million) – earned a combined salary of N1.49 billion, an amount that exceeds the combined salaries of the second half of CEOs on the list by up to N106 million.

“The bottom five CEOs which include those of Airtel Africa, Julius Berger, Guinness Nig plc, Unilever Nig Plc, and Zenith Bank all together earned a total of N1.393bn in the year under review.”