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Weak Fundamentals Hurting Airtel from London to Lagos

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  • Weak Fundamentals Hurting Airtel from London to Lagos

Airtel Africa, a subsidiary of India’s Bharti Airtel Ltd, has been on the decline since it listed on London Stock Exchange (LSE) and Nigerian Stock Exchange (NSE) as investors seem wary of the fundamental issues affecting the company’s growth.

Unlike its rival in Africa, MTN Group, Airtel Africa has incurred more than $4 billion in debt, yet unable to broaden its coverage to compete effectively with MTN in Africa.

In October 2018, Airtel raised $1.25 billion in an initial round of pre-IPO funding, and in January 2019, another $200 million was raised for expansion.

Similarly, Bharti Airtel Ltd is struggling back home in India with mounting debt and a year-long price war with rivals.

While Airtel group continues to sell its ’14 key operations’ in Africa as the key to future growth, investors are concerned about the instability in emerging economies and lack of reach needed to compete efficiently, especially after what happened to MTN Nigeria in recent years.

Raghunath Mandava, chief executive of the group, said: “The 14 countries where we operate offer strong GDP growth potential and have young and fast-growing populations, low customer and data penetration and inadequate banking infrastructure. These fast-growing markets provide us a great opportunity to grow both our telecom and payments businesses.”

However, a fund manager with Scottish Investment Trust Plc, Ally McKinnon, who said he didn’t participate in the IPO, pointed to the level of vulnerability of telecommunication companies in emerging markets.

According to him, “Once you’ve got the network built, you’re vulnerable because you’ve got assets in the country, you’re a big company that makes money, or makes cash flow at least.”

Another analyst with New Street Research, Alastair Jones, said the company exposure to Nigeria and weaker position compared with rivals is an issue.

“Clearly it’s a more difficult market at the moment for African telcos,” said Jones, who doesn’t have a rating on Airtel, in an interview on Friday. “The regulatory risk around the region is elevated given what has happened with MTN over the last few years.”

Despite been the third most valuable company on the Nigerian Stock Exchange and adding more than N1.3 trillion to the exchange market capitalisation, Airtel Africa has failed to replicate MTN Nigeria success as investors are more concerned about its capability to compete with MTN Nigeria and at the same time sustain it slight edge over Globacom, an indigenous telecom giant in Nigeria.

Again, because Nigeria contributes over 35 percent of its total revenue, Nigeria remains an important market for the company. Therefore, if there is doubt about its ability to scale and compete effectively in Africa’s largest market, investors will remain wary.

Accordingly, Airtel Africa’s poor performance since its debut on the Nigerian Stock Exchange goes beyond current issues hurting the exchange as widely publicized.

Airtel does not have the same appeal as MTN Nigeria, therefore, until its management is able to address investors’ concerns and put out a growth blueprint, we may not see substantial improvement in the stock value in near-term.

Airtel Africa has dropped over 18 percent of its total market value since its debut on the Nigerian stock exchange. Down from N399.3 a share it attained on Tuesday to N323.50 on Friday. Erasing N148 billion from its market value.

Similarly, it has dropped from 80 pence it listed on London Stock Exchange to 72 pence as of Friday.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Banking Sector

Wema Bank, MOD Launch Scheme For International Students

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Wema Bank has launched an advisory and loan scheme, the Education Advisory Service, in partnership with MOD Education for young Nigerians wishing to study abroad.

Following foreign exchange control measures introduced by the government, parents and guardians have experienced difficulties paying tuition fees for their children and wards studying abroad. Some who have the money don’t know the requirements for foreign admission and waste lots of time and resources in fruitless searches.

But to help them surmount these challenges, Wema Bank has partnered with MOD Education, a professional student advisory, marketing, recruitment and placement company for the advisory services and school fees advance facility. The partnership, which was launched on Friday, April 9 at Eko Hotels, Victoria Island, will see both organizations providing innovative education advisory services and funds for international students.

Speaking about the partnership, Divisional Head, Retail Business, Wema Bank, Dotun Ifebogun, explained that the initiative would aid hundreds of thousands of Nigerians requiring advisory and financial support to pay for their wards in foreign schools.

He explained that Wema Bank does not want the aspirations of Nigerians desirous of foreign education truncated, hence the support.

“We are interested in everything that concerns our customers, and education is one of them. Some parents and guardians desire a certain quality of education for their wards outside the shores of Nigeria, and we would be able to assist them with this product. Our school fees advance loan results from the requests of parents and guardians who need to get short term financial support to meet the tuition obligation of their wards irrespective of the constant increase in fees.

“There’s nothing as heartbreaking as withdrawing a child already in a foreign university or being unable to raise the requisite forex for a child offered admission in a top-rated foreign institution of higher learning. But our school fees advance loan will take care of this problem and help secure the futures of such students – both undergraduates and postgraduates. The fact that you get counsel from the right sources at any particular time is another benefit of this product.

Also, the Managing Director, MOD Education, Michael Dosunmu, expressed gratitude to Wema Bank for the partnership. “Wema Bank has been supportive to us as a business and it was just a natural marriage. We trust the bank enough to bank with them, and our trust is enough to recommend it to others.”

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Finance

NAIC Pays N1.7bn Claims to Farmers

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The Nigerian Agricultural Insurance Corporation (NAIC) said it paid a total of N1.7 billion claims to over 5,000 farmers in the past two years.

NAIC, which is the only federal government owned insurance company authorised to offer agric insurance services to farmers at subsidised rate, said a breakdown of the paid claims showed that it paid N856 million to insured farmers in 2019 and N848 million in 2020.

Commenting on the development, NAIC Managing Director, Mrs. Folashade Joseph, said the claims were paid to the farmers to cover losses incurred in the course of doing business.

Joseph, enjoined agricultural investors and lending institutions to continue to partner NAIC by taking agricultural insurance cover that will enable them remain firm in business despite unforeseen circumstances from weather conditions and other risks in order to realise the food security agenda of President Muhammadu Buhari.

She said the above-mentioned amount was shared among five million farmers who suffered various setbacks in their farms as a result of natural course.

According to her, the NAIC Agric Insurance Scheme was launched in 1987 by federal government to restore the confidence and productivity of Nigerian farmers who suffered losses as a result of natural disaster such as flood, drought, pest and diseases.

The NAIC boss explained that the essence of the sensitisation campaign embarked by the corporation was to let the farmers know and understand exactly what NAIC does, the importance of insurance, and make them understand how insurance works, how they can access NAIC products and services, how to process their claims, as well as what insurance stands to do for them.

“Agribusiness is evolving fast and so many risks are being thrown up, many new participants are coming into the business of agriculture, and the risks are on the increase if you look at them across the value chain, there is no so many participants so we need to keep sensitising the farmers and let them know we are serving them, and we need to know from them how to serve them,” she explained.

Speaking further, she said, “our assurance to farmers is that when they are insured and they suffer losses covered by any of the policies they purchased, including natural disasters and whatever, they will get paid for their losses, and that is the purpose of insurance and setting up NAIC.

“Our motor is ‘Plowing the Farmer Back to Business, Plowing the Farmers into Prosperity’, and we settle claims.”

She said NAIC currently deals with thousands of farmers (Small, Medium, and Large scale farmers) across the country, adding that the corporation serves farmers with investment as little as N100, 000, and at the same time serves multinational farmers.

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Banking Sector

UBA Organises Capacity Building Forum

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UBA Insider dealings

As part of its commitment to support the growth and sustainability of micro, small and medium-scale enterprises (MSME) in the continent, the United Bank for Africa (UBA) Plc, is set to organise the next edition of its UBA Business Series.

The UBA Business Series which is a monthly event, is an MSME Workshop as well as a capacity building initiative of the bank where business leaders and professionals share well-researched insights on best practices for running successful businesses, especially in the face of the difficult operating environment that dominates the African business landscape.

Through this initiative, UBA has been assisting with essential tips to help businesses re-examine their models and strategies and ensure that they stay afloat and remain thriving, a statement from the bank explained.

The topic for the next edition of the series is, “Managing Performance for Business Growth,” and it will be held today, via Microsoft Teams.

At this session, the Managing Director, Secure ID Limited, Mrs Kofo Akinkugbe, will be sharing useful tips and insights on the key strategies of performance management to boost business growth.

Akinkugbe is the founder of SecureID Nigeria, a MasterCard, VISA and Verve certified Smartcard Personalization Bureau and Digital Technology company. She currently serves as the Managing Director/CEO, Secure Card Manufacturing, – a Smartcard manufacturing plant producing high security identity cards and documents for the Banking, Telecoms and Public sectors across Africa and beyond.

UBA’s Head, SME Banking, Sampson Aneke said of Akinkugbe, “with her vast experience garnered over the years from various sectors, she will help business owners understand how performance management strategies can be effectively implemented to ensure business growth.”

He emphasised UBA’s commitment and deep passion for small businesses, which according to him, remains the engine of any developing economy adding, “We know small businesses are the backbone of the economy in every country. In many climes, businesses with fewer than 100 employees account for 98.2 per cent of all businesses. This no doubt captures the importance of SMEs to a thriving economy which is why UBA is committed to seeing them flourish.”

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