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Busayo Adedeji – Corporate and Individual Liability Under The Immigration Act (2015)

Busayo Adedeji – Corporate and Individual Liability Under The Immigration Act (2015)

by | Aug 29, 2016 | Uncategorized

The immigration act was
recently reviewed/amended and same was signed into law by former president
Goodluck Jonathan before leaving office in 2015. The law (upon signing by the
then president) immediately became effective as the principal law regulating
immigration in Nigeria.
Some of the sections
detailing corporate and individual offences/punishments under the act are
highlighted below:

  • The act expressly prohibits persons’ order
    than citizens of Nigeria from accepting employment anywhere in Nigeria (except
    same is offered by the government) without the consent of the Comptroller
    General of Immigrations (CGI) being first sought and obtained.[1]
  • The act
    goes further to state “no person other
    than a citizen of Nigeria shall on his own account or in partnership with any
    other person, practice a profession or establish or take over any trade or
    business whatsoever or register or take over any company with limited liability
    for any such purpose, with the consent in writing of the Minister”    .[2]
  • The
    act states that any person desirous of entering Nigeria shall produce to an
    immigration officer consent of the CGI failure of which attracts a fine of One
    Million Naira (N1,000,000) or deportation
    or both as a prohibited immigrant.[3]
  • Where a person formerly exempted from the
    foregoing provisions of the act ceases to be so exempted, he shall be deemed as
    a person seeking entry in to Nigeria for the first time and the foregoing shall
    apply to such a person.
  • The CGI may revoke a permit or reissue it on
    such terms and conditions as he deems fit, failure to comply with the
    directives of the CGI attracts imprisonment for a term of 5 years or a fine of
    Two Million Naira (N2,000, 000) or
    both.
  • Any expatriate
    person who fails or neglects to apply for the:
1.  Regularization of his stay in Nigeria
within the stipulated period;
2.  Renewal of his business visa, transit,
visitors pass, or Temporary Work Permit (TWP); or 
3.  Renewal of his residence permit after thirty
(30) days of the expiration of same is guilty of an offence and is liable to
imprisonment for a term of three years or a fine of Five Hundred Thousand Naira
or both.[4]
  • The act expressly prohibits the discharge,
    re-designation and change of employment of an expatriate employee without the
    consent and approval of the CGI first sought and obtained. The implication of
    this is the employer, employee and their dependents (if not Nigerian citizens)
    being deported and business wound up.[5]
  • It is an offence under the act to alter,
    produce or reproduce a travel document.
  • The act also makes provisions for punishments
    for offences that have not been captured by the act, the punishment in such
    cases are imprisonment for a year or a fine of One Hundred Thousand Naira (N100,000), in the case of the offender
    being an agent the punishment shall be imprisonment for ten years or a fine of
    Two Million Naira (N2,000,000).
It is pertinent to state
that the new immigration regime under the new CGI has shown zero tolerance for
issues relating non-compliance, has investigations and invitations of erring
corporations are the order of the day. Despite the foregoing corporations and
individuals alike should always seek the assistance of an immigration lawyer
when immigration issues arise.
Busayo Adedeji is an Associate in the
corporate and commercial, corporate immigration, employment and labour, banking
and corporate finance practice group of Bloomfield Law Practice; and advises multinational
and local clients on matters such as regulatory compliance, trade unions,
labour and employment, dispute resolution etc.
Image
credits: https://tarrantgreenparty.wordpress.com

[1]
Section 36(1)(a)
[2]
Section 36(1)(b)
[3]
Section 36(2)
[4]
Section 57 (5)
[5]
Section 58

 

Chukwudi Ofili – Perfection of Security Documents and the Practice of Upstamping in Nigeria

Chukwudi Ofili – Perfection of Security Documents and the Practice of Upstamping in Nigeria

by | Aug 29, 2016 | Uncategorized


In Nigeria, debts are typically secured
through the use of guarantees, mortgages, fixed and floating charges and
pledges of real, personal, tangible and intangible property belonging to the
debtor or a guarantor of the debtor. Security created in favour of a lender for
providing debt financing is documented using different forms of security
documents.

In order to perfect security documents,
such documents must be stamped at the stamp duties office and registered at the
Corporate Affairs Commission (CAC). For certain assets such as real property
which require the consent of the Executive Governor of the state where the real
property is situate, such consent must be obtained to perfect the security
created under such document. The statutory obligation to stamp documents that
transfer or create a proprietary interest in assets is provided for under the
Stamp Duties Act (SDA) with specific emphasis on sections 3, 23 (1) and (4) of
the SDA. In addition, a charge created by a company to provide security to a
lender is void against a liquidator and such lender (as a creditor of the
company) unless it is registered with the CAC within 90 days of creation.
However, in large financing
transactions, the stamp duty payable in respect of a security document could be
very high (and in certain cases, prohibitively so).  It is not uncommon
for lenders to a financing to agree that the borrower may pay stamp duty on
only a portion of the secured amount rather than the whole secured amount, with
a further assurance from the borrower that the full stamp duty will be paid on
a future date or upon the occurrence of certain events.  This practice is
known as “upstamping”.  Until the security document is upstamped, any such
lender is only protected up to the amount expressed to be secured and a lender
may lose priority to any subsequent security granted on the charged assets
during the period between the initial stamping and the full upstamping of the
security document.
The Implication of Upstamping on
Lenders
Neither the SDA nor the Companies and
Allied Matters Act (CAMA), stipulate that a security document that secures a
credit facility must be stamped and registered for the exact amount extended to
a company or person. However, where a security document is stamped for an
amount lower than the facility amount, the lenders will only be permitted to
prove for and realise the security for the secured amount i.e. the amount
for which that lenders has stamped and registered his security. CAMA
recognises the right of parties to commercially structure their transactions
such that the security documents can be stamped for an initial amount and then
subsequently up stamped for an additional amount.
Pursuant to section 202 of CAMA, any
additional amount for which a security document is up stamped will be valid and
effective to the extent of such increased amount. The lenders would only be
permitted to prove and realize the security for the full facility amount or a
higher amount only upon the security document being up stamped (i.e. payment of
additional stamp duty) to cover the facility amount or the higher amount being
sought to be recovered.
Potential Risk to Lenders in Enforcing
Security
There is a risk that prior to the
lenders up stamping the security document for the full facility amount,
intervening third party interests might have arisen (i.e. under other third
party security), thus raising pertinent priority issues where another creditor
has acquired an intervening proprietary interest. If prior to an up stamping to
secure additional amounts, another creditor advances money to the borrower, and
perfects its security interest over the same assets that form the
subject-matter of the lenders’ security, that creditor will rank ahead of the
lenders’ interest as it relates to the subsequent up stamped additional amount
to be secured but lenders will still have priority in respect of original
amounts for which the security was perfected.
Hardening Period
Another risk lenders face in an
upstamping scenario is that an agreement to upstamp to secure additional
amounts, might be viewed as a fraudulent preference in the event of insolvency
of the borrower. See section 495 of CAMA. This “hardening period” rule,
and the resultant effect is that the additional / up stamped security interest
would be void against the liquidator of the borrower and enable the liquidator
claw-back any such payments or cancel such acts. Arguments can be made whilst
referring to decisions of English courts on the fact that a preference is not
fraudulent by essentially showing that the dominant motive for such preference
is not to prefer certain creditors to the detriment of others. It should
however be noted that such arguments are only persuasive to Nigerian courts as
Nigerian courts are not bound by the decision of English courts; they are only
of persuasive authority.
On the flip side, where the dominant
motive was to carry out a pre-existing obligation, or to keep on good terms
with a creditor, it is likely that Nigerian courts will follow English courts
in holding that in such circumstances the preference is a fraudulent
preference. It is important to note that there are no Nigerian law decisions on
this point, however, Nigerian courts are likely to follow English courts on
this point.
Addressing the Residual Risks of
Upstamping
The risks identified above, while
adopting the upstamping regime, can be mitigated by:
1.     Establishing an
upstamping regime in the relevant loan documentation;
2.     Using a negative
pledge clause restricting the borrower from creating any additional security
over its assets;
3.     Using automatic
crystallization provisions in the security documents for floating charges to
crystalise into a fixed charge when there is an attempt to create security over
the assets in favour of a third party; and
4.     Establishing a stamp
duty escrow account to hold the balance of the perfection costs to enable
lenders upstamp at will.
The options highlighted in (1) to (4)
above are by no means exhaustive as other options have not been discussed in
this paper.
 Chukwudi Ofili is
a Senior Associate in the corporate and commercial, banking and corporate
finance practice group of Bloomfield Law Practice; and advises on matters such
as local and foreign currency syndicated lending, leases
transaction/structured/project finance, structured trade finance, energy and
natural resources, due diligence issues and advisory services, foreign
investment advisory services, taxation and real estate.
Ed”s Note – This article was originally published by the author here. 
Osinuga Damilola – Lease as an Alternative Financing Vehicle in Ship Acquisition

Osinuga Damilola – Lease as an Alternative Financing Vehicle in Ship Acquisition

by | Aug 18, 2016 | Uncategorized


Acquisition of ships is
fundamental to the shipping business. Notwithstanding the mode of acquisition,
i.e. whether by an outright purchase, construction of a new ship or otherwise,
ship financing continues to be an integral part of ship acquisition. Financing
ship acquisitions can be effected through the provision of debt or equity.
The most common means is
to obtain a loan for part or all of the purchase price otherwise known as debt
financing. However, due to the nature of the marine business, many financing
institutions are reluctant to finance the acquisition of ships without adequate
security or a good credit rating with such financial institution.

With the advent of “lease
structured financing” debt and equity, as the most common ways of financing
ship acquisitions appear to have found a competitor. Lease structured financing
is a popular and well-tested concept among airlines and other aircraft
operators.
Ship Lease Operation
The lease is perhaps best
described in general terms as a conveyancing method where the possession of
property passes but ownership or title in the asset does not pass to the
purchaser. A somewhat more precise legal definition of a lease is that it is a
contract through which the owner of property (the lessor) conveys to another
person (the lessee), in consideration of payment as agreed, the right to
possession and use of the property for an agreed period.
There are basically two
types of lease:
1.    
Operating Lease; and
2.    
Finance Lease
Operating Lease
Operating lease is a lease
in the real sense. Outside of shipping it is widely used for rental (or hiring)
of equipment and durable consumer items. The risk usually remains with the
lessor who maintains the asset and the lessee normally has the discretion to
terminate the lease, at the end of which the property reverts back to the
lessor. However, if so provided in the contract, either party may have the
right to cancel the lease. A typical example of the operating lease is the leasing
of containers in the shipping industry, where container lines lease containers
from container leasing companies.
As far as ships are
concerned, where an operating lease is in place, it is usually in the form of a
short or mid-term bareboat charter after which the lessee will return the ship
to the lessor. The lessor assumes such risks as the technological obsolescence
of the ship and the re-employment of the ship after the lease period. During
the charter period, the lessee acts as if he owns the ship and the lease
payments do not involve an amortization of the leased property; nor is there an
option to purchase in favour of the lessee. Recently, there has been an
increase in the use of short-term bareboat charters with an increasing number
of financial institutions willing to provide ships for this market. Although it
is not a financing vehicle in strict terms, it is referred to as an alternative
source of finance.
It is notable that there
is another quasi-operating lease where the lessor may provide the manpower and
services required to operate the equipment. In aviation this is referred to as
“wet lease” while in shipping it is referred to as time charter. Time
chartering is not pure equipment leasing because the provider of the ship, i.e.
the owner, provides the crew and is responsible for the navigational
operation of the ship. The charterer is thus not in full possession of the
ship. However, it is also an important and convenient way for a shipowner to
expand his fleet in peak trading conditions because he can completely control
the commercial operation of the ship. In this sense, time charter is very much
akin to an operating lease.
It is pertinent to note
that in recent times time-charter periods especially for big container ships
have increased. This, together with the shortening of bareboat charter period,
denotes that operating leases are playing an increasingly important role in the
supply of tonnage for shipping companies.
Finance Lease
Finance lease transfers
all the risks and rewards incident to ownership of an asset. This type of lease
is typically used for long –term finance of ships and covers a substantial part
of the ship’s economic life. The ship is usually fully amortized (including the
lessor’s returns on his investment). The lessor, whose main role is as
financier gets most of his pay-out in respect of the ship because the total of
the hire amount and payments are calculated to cover the cost or purchase price
of the ship, the additional expenses which the lessor might incur as well as
part of the lessor’s profit. The lessor also has little involvement with the
asset beyond owning it, and all operating responsibilities including
procurement of insurance fall on the lessee who, in the event of early
termination, must fully compensate the lessor (usually the lessee anticipates a
substantial down payment. This binds the lessor to the sale. If the lessee
defaults, he loses his down payment as well).
Although the finance lease
generally appears on the lessee’s balance sheet, its main attraction to
shipping companies is that it brings tax benefit by depreciating the ship’s
value against profits and by assisting companies with high profits but no
suitable investment of their own to obtain tax relief by purchasing a ship.
Under a finance lease scenario, the ship, built to the lessee’s specification
(if a newbuilding), or chosen by the lessee (if it is a second hand), is
purchased by the company providing the finance (the lessor) and leased under a
long-term agreement (usually a bareboat charter) to the shipping company
(lessee) which may purchase the property at a nominal price after the primary
leasing period.
The advantages of ship
leasing, as argued by practitioners, are similar to those claimed by the
classical economists. These advantages are focused on the two major categories,
tax benefit and financial position improvement.
Tax Benefit
The tax advantage argument
is perhaps the strongest justification for using lease as a financing vehicle
in shipping. Experts have pointed out that the tax benefits accruing out of
leasing are of predominant interest. With leasing, the most significant tax
benefit is the deferral of tax liability on capital allowance. The rate of hire
will reflect the immediate use of the tax allowance by the lessor. Capital allowances
can be used as set offs against taxable profits. The lessee would favour
leasing as a financing vehicle in shipping because the lessee is usually keen
on ‘disguising’ a finance lease in the form of an operating lease to derive the
off-balance sheet benefit.
Financial Position
Improvement
The scarcity of financing
from financial institutions or other financing options for shipping lines has
created a space which is now filled by leasing companies which have easier
access to capital funds. In such cases, it is of great value for the carriers
to have access to diverse sources of capital that will assist them with their
fleet expansion and renewal plans by acquiring larger, modern and
fuel-efficient vessels and achieving the necessary economies of scale to remain
competitive. In a cyclical and very capital intensive industry, such as
shipping, the lease can preserve the lessee’s working capital and its financial
position through long-term repayment structure (often longer than the one
offered from banks) and effective cash management through matching the rental
profiles with income streams (cashflow). Moreover, the lease structure permits
the lessor to lock in carriers to long-term charter arrangements and fixed
rates that are oblivious to the volatility of the spot charter market and thus
achieve a secure revenue base and higher financial leverage than other
investors in the ship financing market.
Furthermore, in comparison
with the traditional debt financing from financial institutions, lease
financing differs in the sense that the lessor retains legal title/ownership of
the ship during the lease period which provides the lessor with a built-in
security that offsets the absence of a loan agreement and ship mortgage in the
lease financing ‘equation’. Despite being the owner, the lessor does not have
possession of the ship since such right is retained by the lessee.
Conclusion
Despite the current
downturn in the shipping market, there are good grounds to believe that there
is still overflow of available finance in the market. In the last few years,
there has been significant growth and expansion in the leasing business.
Similarly, there has been an upsurge inleasing transactions, particularly
amongst the Chinese commercial banks, the subsidiary leasing companies of
banks, hedge funds and financial institutions fueling this growth and becoming
major capital providers to the shipping industry with an intention to further
expand and diversify their portfolio of ships and establish their presence in
Europe, America and Africa.
It can be argued that the
lease structure highlights the polarisation of the shipping business. As a
result, the pure asset players, such as the lessors have strengthened their
financial position while the carriers have become weaker. This has changed the
traditional notion of the ‘shipowner’ as we know it, in the sense that the
leasing companies are now the large shipowners.
Being a sophisticated
structure, whether or not the purchaser will qualify for a the ship lease will
depend on the parties’ intentions, credit ratings, operational decisions and
market status. Despite its restrictions, the prospects of the finance lease
seems promising given the increasingly popular trend of outsourcing the asset
management services of shipping companies. As a relatively new alternative in
the international financial arena, ship lease is still developing and
undergoing tests.
Damilola Osinuga is an
Associate in the Shipping and Oil Services practice group of Bloomfield Law
Practice, Nigeria
Ed’s Note – This article
was originally posted here.
Tanimola Anjorin – An exposè on the Arbitration procedural stages

Tanimola Anjorin – An exposè on the Arbitration procedural stages

by | Aug 15, 2016 | Uncategorized

Arbitration as a better alternative to litigation: An
exposè on the procedural stages[1]
ABSTRACT
Alternative Dispute Resolution (“ADR”) simply refers to any means of
dispute resolution excluding litigation in a courtroom.  It is a form of
facilitated settlement, which is confidential and without prejudice. 
Consequently, the details of the process are not usually disclosed to the
public except where it snowballs into a court action. 

The laws governing arbitration in
Nigeria include the Arbitration and Conciliation Act (“the Act”)[2],
which is a federal law, Lagos State Arbitration Law 2009 (“the Lagos Law”) and
some other states’ arbitration laws. This paper seeks to examinethe procedural stages in arbitration,one of
the most common ADR mechanisms, and the reasons which
make arbitration a better alternative to litigation. 
I        INTRODUCTION
Arbitration
provides a forum for participants to present arguments and evidence in support
of their case, to a third party neutral who makes a binding decision called an
award. It is a process controlled by a single arbitrator or a panel of
arbitrators appointed by the parties.
Any
of the parties to a contract may adopt arbitration where an arbitration clause
is contained in the agreement, and a dispute arises in relation to it.Where
there is noarbitration clause and the parties desire is to proceed to
arbitration, a consent to arbitration via submission agreement may be entered
by the parties.
The
expeditious disposal of cases in arbitration stems from the less formal
procedure adopted in arbitral proceedings.The procedure for initiating and
conducting arbitration are spelt out in the arbitration rules to be found in
the First Schedule to the Act. 
One
of the advantages of arbitration is that the disputants have consensually
chosen their own private “judge” called the arbitrator(s)[3].
The arbitral tribunal determines the venue of the hearings after due
consultation with the parties. Where there are three or more arbitrators,
decision is by majority. Therefore, an odd number of arbitrators is advised. 
Arbitration
commences with a notice to commence arbitration being sent by an aggrieved
party to the other party.In the course of arbitration proceedings, request for
more information, discovery of documents and visits to relevant location may be
done. However, to ensure expeditious disposal of the matter, all of these
issues would most likely be narrowed down during pre-hearing review. 
The
tribunal listens to the oral statements and questioning of the witnesses of
both parties(cross examination)as examination-in-chief may be in form of
witness statements on oath. Also, expert witnesses may be called by the parties
to render their opinions on issues in dispute.This may be pruned down during
pre-hearing review as the parties are likely to distill witness of facts and
expert witnesses.
Arbitration
proceedings are not however regulated by formal rules of evidence as stipulated
in the Evidence Act thereby resulting in less formal and flexible proceedings.
II       PROCEDURE
IN ARBITRATION
In
ensuring an expeditious process in arbitration, some basic procedures are adopted
which endears the business world to arbitration instead of litigation:
JURISDICTION
The
first step in any arbitral proceedings is to constitute the arbitral panel.This
can either be provided in the arbitration agreement or conducted in accordance
with the Act[4]. In any
case, there can be no arbitration without an arbitrator and an arbitrator must
be appointed to conduct the reference. Once the arbitrator is appointed he must
be clothed with jurisdiction.Jurisdiction is the authority to arbitrate
upon the dispute between the parties.
The arbitrator is only authorised to
exercise the jurisdiction and powers conferred on him by the parties.His
jurisdiction is derived from the agreement of the parties i.e. the issues
submitted to him for determination or from Statute. The arbitral tribunal is
competent to rule on its jurisdiction[5].
PRELIMINARY MEETINGS
The
mainpurpose of a preliminary meeting is to plan the expeditious and efficient
conduct of the arbitration. Arbitration is a broad spectrum where innovations
and variety are not only encouraged but lauded:
“…the
arbitral tribunal may, subject to this Act, conduct the arbitral proceeding in
such a manner as it considers appropriate so as to ensure a fair hearing”[6].
The
overriding procedural obligations of an arbitration tribunal in conducting a
reference include:
(i)    complying with the express mandate, if any,
laid down by the parties;
(ii)   conducting the process fairly and even-handedly;
and
(iii)  using all reasonable dispatch in entering on, proceeding
with the reference and making an award.
 
Preliminary
meeting therefore cannot be held until:
(i)    The tribunal has been appointed;
(ii)   The tribunal has been provided with the
information as to the principal issues between the parties although this can
sometimes be dealt with at the preliminary meeting;
(iii)  Administrative fees, where applicable, have
been paid; and
(iv)  The impartiality of the arbitrators have been
checked, where necessary, and the result made available to all.
It
is imperative that adequate preparations be made well ahead by the arbitrators,
the parties and their advisers before the preliminary meeting. Issues like the (i)
venue[7],
(ii) time[8],
(iii) transportation arrangements for the arbitrators and other sundry issues must
be addressed in order to have a successful meeting and most importantly, a well-drawn
up agenda.
In
advance of the preliminary meeting, the parties should also try to identify the
matters to be dealt with and, if possible, agree on the procedure and any
directions to be sought from the tribunal. If agreement is reached, this will
save time and costs at the preliminary meeting itself and may even render such
meeting unnecessary.
PRE-HEARING REVIEW
It
is preferable except in very simple cases to hold a pre-hearing review before
the hearing and after all the preliminary meetings. This helps to save time and
costs at the hearing because the pre-hearing review helps the arbitrator and
the parties clarify all outstanding issues so that by the time they go into the
hearing they can go through them on a day-to-day basis and finish in a short time.
The matters to be discussed at the pre-hearing review will vary depending on
what has transpired at the preliminary meetings (if any).
PROCEEDINGS AT TRIAL
The choice of proceedings to be adopted depends on
the facts of each case[9]. Where parties do not
choose or agree on any type of hearing, the tribunal chooses the type of
hearing[10].It is better for the parties to agree
on the type of hearing to be adopted where there is a serious dispute over
relevant facts. The proceedingat trial may take the form of:documents only where there are no oral testimonies to support
the claim;documents only with brief oral final submissions; or documents only
with only experts in attendance to give oral testimony before the arbitrators.If
“Documents Only” method is
agreed, then the “issues” need
to be framed with more precision than when any other form of proceedings is
adopted. 
Short
Procedure Hearing:
This
is only suitable for “quality”
dispute requiring some summary decision,i.e,“look
and sniff” cases.  Each party usually
bears his own costs.
Full
Procedure with Hearing:
This
is for disputes that require examination
or cross-examination of witnesses of fact.  This evidence is usually partly oral and partly documentary.
The tribunal must consider whether a Scott Schedule[11]
is desirable.
It must
be noted that the procedure adopted determines the length of the hearing.
However,the
procedure adopted must not contravene the provisions of the applicable law and
procedural rules:
“…the Claimant to state the fact
supporting his Points of Claim, the points at issue and the relief or remedy
sought by him whilst the respondent is to state his Points of Defence in
respect of the particulars unless the parties have otherwise agreed on the
“required elements of the Points of Claim and Defence.[12]”
The
tribunal and parties must consider such factors as the complexity of the matter
and the nature of the dispute in ensuring that they adopt the most suitable
procedure. Disputes with little factual details may be best suited to the
Statement of Case procedure by mere exchange of correspondence; e.g. quality
disputes which are tobe determined on expert evidence only while pleadings may
be best suited to cases involving complex issues of law.
The
tribunal is to determine the time for exchange of written statements. In any
case, the law provides that the time must not exceed 45days except if
justifiable[13].
AGREED BUNDLE
In
arbitration proceedings the parties agree on an “Agreed Bundle” of documents,
which constitutes the documents to be referred to during the hearing. The arbitrator
will direct the parties to meet and agree on the bundle within a specified
time. This also helps to fast track proceedings.
RELEVANCY AND ADMISSIBILITY
The Evidence Act excludes
arbitration from its application[14].
This is not to say however that rules of evidence do not apply to arbitration.
In fact, the rules of evidence are wider than what the Evidence Act provides
and they apply to arbitration to enable the arbitrator come to a reasonable
decision on the evidence before him. It should be noted that Section 15 (3) of
the Actconfers powers on the arbitral tribunal to determine the admissibility,
relevance, materiality and weight of evidence placed before it[15].
The reason for this provision is to play down as much as possible the recurrent
technicalities that surround the rule of relevancy and admissibility under the
Evidence Act.
III     ARBITRATION
AS A BETTER ALTERNATIVE
The
numerous advantages of arbitration over litigation include a faster and cheaper
means of dispute resolution, utmost privacy of the issues between the parties[16]amongst
others. While litigation has been shown to give room for frivolous techniques, arbitral
proceedings have been sped up byadmitting written statements in place of
opening and closing speeches, admitting depositions made by
witnesses of fact and inviting such witnesses only for cross-examination. In
addition,admitting reports prepared by experts while they appear only for
cross-examination,using a Scotts Schedule.
Other ways to save time at the
hearing are:
Defining the Issues
The
arbitrator should direct, at the outset, that a list of issues be agreed and
delivered to the arbitrator a reasonable time before the hearing, and that
failing such agreement each side delivers a list of what it considers to be the
issues. The procedure for defining the issues vary according to the nature and
complexity of the dispute.
Exchanging
Proofs in advance
The
arbitrator may require that proofs of all witnesses be exchanged, and copies
delivered to the arbitrator, before the hearing.
Documents
Selected before Hearing
The arbitrator
may require that the documents to be referred to at the hearing be selectedbefore
the hearing, and this should be the responsibility of the advocate who is to
conduct the case.  The arbitrator should also
direct that:
(i)      The consolidated bundle(s)
of the documents selected should be delivered to the arbitrator by a specified
date before the hearing;
(ii)      At the hearing all the
documents so submitted shall be taken as read (because he will in fact have
read them); and
(iii)      At an appropriate stage
the arbitrator will specifically consider the question whether a substantial
number of irrelevant documents has been selected, and if so whether a special
order should be made in respect of the additional costs thereby occasioned.
The
frontloading system and the case management conference in the rules of court[17]
can be likened to the preliminary meetings, pre-hearing sessions, defining
issues and exchanging proofs and written statements obtainable in arbitration
proceedings. The introduction of these similar concepts in the rules of court
and a fast track division is to ensure efficient and speedy dispensation of
justice but the bureaucracy in the system has prevented the system from making
any remarkable achievements. Even the motion for summary judgment in the rules
which shouldn’t take more than 2weeks to hear and determine usually suffers the
same fate as the cases on the general cause list.
It
is the duty of the arbitral tribunal to adopt
procedures suitable to the circumstances and to avoid unnecessary delay and
expenses. The parties must also cooperate by doing all things necessary
for the proper and expeditious conduct of the proceedings as cost may be
awarded against any party that foists any sort of delay tactics in the course
of the proceedings.
IV CONCLUSION
The
proceduresin arbitration sessions examined above have proved effective and
efficient in the expeditious disposal of arbitral cases, thereby endearing the business
community and the public in general to the choice of arbitration over
litigation. The adoption of arbitration either by an arbitration clause or
submission agreement has become more popular as people are coming to terms with
the fact that arbitration constitutes a better alternative. It is also an
amicable method of dispute resolution enabling the parties to maintain their
business relationships.

[1]Tanimola Anjorin
holds a bachelor’s degree in History and International Studies from Lagos State
University. He thereafter obtained a Bachelor of Laws degree from Lagos State
University and was called to the Nigerian Bar. He is also an Associate of the
Chartered Institute of Arbitrators (UK) Nigeria Branch.
[2]1988 Cap. A18 LFN 2004.
[3]Where the parties to an arbitration
agreement do not provide for the number of arbitrators to be appointed, section
7 of the Act provides that the number of arbitrators shall be deemed to be
three.
[4]Section 6 of the Act provides for
the number of arbitrators to be appointed in the event that the arbitration
agreement is silent on this issue while Article 6 – 8 of the Arbitration Rules
in the First Schedule gives a detailed procedure to be adopted in the
appointment process.

[5]This is laid down in the popular case ofCOMPETENZ v COMPETENZ. See also section
12 of theAct and Article 21 of the Arbitration Rules in the First Schedule to
the Act.

[6]Section 15(2)of the Act.
[7]Section 16 of the Act.
[8] 
Section 17 of the Act.
[9]  Section 20(1) of the Act
[10]See Article 15 of the Arbitration
Rules in the First Schedule to the Act.
[11]In arbitration sessions, parties
bring numerous claims and issues which make the arbitral proceedings appear
like litigation. In order to avoid this, the tribunal may resort to the use of
the Scott schedule. The Scott schedule is essentially a table with inputs from
both the claimant and respondent. The claimant sets out hisargument first, and
then the schedule is passed to the respondent to set out his responses. The
main objective of the Scott schedule is for the issues in disputes to be
presented as clearly as possible, thus saving time, reducing cost and
conserving efforts.
[12]  Section19 the Act.
[13]See Article 23 of the Arbitration
rules in the First schedule of the Act.
[14]  Section 256(1)(a) of the Evidence Act 2011.
[15]See also Article 25(6) of the
Arbitration Rules in the First Schedule of the Act.
[16]Article 25 (4) of the Arbitration
rules provides: “Hearing shall be held in
camera unless the parties agree otherwise”.
[17]Order 3, 5 and 25 of the High Court
of Lagos State (Civil Procedure) Rules 2012.

Photo Credit – www.newtonarbitration.com

Abimbola Balogun – Position Of Commissioned Photographers under The Nigerian Copyright Law

Abimbola Balogun – Position Of Commissioned Photographers under The Nigerian Copyright Law

by | Aug 4, 2016 | Uncategorized



So I somehow walked into
an argument with a friend of mine the other day of which the true and current
position on the topic has been on my mind for a few days now. I really Don’t
remember how that happened but the issue sent me into a frenzy as I really hate
to loose arguments. Here is how I got myself into the argument.  So I just
finally got my wedding album from my fantastic photographer and I was really
impressed with the turnout as I was frankly scared that it would not look as
dreamy as I had pictured in my mind (brides and their outlandish fantasy ideas
right) so I didn’t waste any time to whip out my new priced possession albums
for my guests to view on one fine Thursday evening. 

To my greatest pleasure,
my guests were as impressed as I was when I first saw the albums. As they
flipped through the pages of the albums many different topics ensued from each
picture. From how hilarious a particular picture turned out; to how the
photographer’s skills were beautifully displayed when she captured “emotions”.
All small talk was warm and very welcome to massage my growing ego until one of
my guests said and I quote “do you know that the photographer owns the
copyright on your pictures?” basically she could do what she pleases with my
pictures. I thought that idea was ridiculous and I did not hesitate to mouth
out that fact. I knew that we had moved from small talk to big business. The
room was instantly heated up in arguments and legal talk on what does or should
apply. I against guest and my husband trying to be diplomatic by trying to see
the sense in both views. Of course myself and guests did not budge on our own
lawyerly opinions on the issue.
 My Guest opined that
when a photographer takes shots, he/she as the author of that image has the
copyright on the pictures over and above any other. This is regardless of if
the pictures have been paid for. I thought this idea was weird and ridiculous.
How can I pay for someone to do a job and the person still can hold on to
rights of my own personal images that I paid to be taken?
 The night ended
quite pleasantly; warm hugs and kisses goodnight, but silently I knew this
argument was definitely not over.
I tried to forget about
the argument for a couple of days, but as I said I really hate to loose
arguments. So I went on my own literal photobomb expedition.
While on my research I
stumbled on the American copyright article which agreed 100% with my guest’s
position[1]. The author states that Under U.S. copyright law, the original
owner of a created work is exclusively the creator, unless it’s a ‘work for
hire’. The author therein stated that in the wedding scenario, a photographer
is hardly ever ‘for hire,’ Even though married couples spend thousands for a
photographer to cast their most memorable moments in just the right light, they
may never actually own the results and also, the fact that the photographer
hands you a cd, hard copy, or soft copy of pictures taken of you does not mean
he has handed you the rights to those pictures. Hmmm interesting I thought to
myself, but still confused; plus, that one is the Americana situation; so back
to Nigerian scenario to find something that makes more legal sense to me or at
least someone or something that could explain this crazy phenomenon to me.
It also occurred to me
that I have come across this topic a number of times in the past but I lazily
brushed aside the thought of researching the crux of the matter. For instance,
the 2face and Annie Idibia suit of 2013, where the an un-commissioned and
uninvited photographer took wedding photos of 2face and his bride[2]. Secondly;
a client of mine who also happens to be in the entertainment industry had
complained to me about his photographer who had uploaded pictures recently
taken on social media as publicity for his photography career. This was done
without any recourse to my client and even before he had seen the said
pictures. And oh thirdly, back to my wedding album, one of my photographer’s
crew members had uploaded some very nice shots of the wedding for publicity on
her Instagram page (Of course I immediately demanded that he takes down the
shots before I blink my eyes). These are only a few incidents out of the
thousands that occur on a daily basis in the new era of the growing photography
sector.
So now to answer this
lingering question of where the copyright stands with commissioned/hired/paid
photographers in Nigeria, I have cast away the spirit of laziness and
procrastination and buried my face first to the copyright act itself, my
findings made me smile in 8 different ways. inside smile, outside smile, evil
smile, happy smile, confused smile, wide smile, one sided smile, haahahaaa I
told u so smile. (yes, 8 different types of smiles).
(1)Copyright
conferred by sections 2 and 3 of this Act, shall vest initially in the author.
(2) Notwithstanding
subsection (6) of section 10 of this Act where a work-
  • is commissioned by a person who is not
    the author’s employer under a contract of service or apprenticeship; or
  • not having been so commissioned, is
    made in the course of the author’s employment,
the copyright shall
belong in the first instance to the author, unless otherwise stipulated in
writing under contract.
(3) Where a
literary, artistic or musical work is made by the author in the course of his
employment by the proprietor of a newspaper, magazine or similar periodical
under a contract of service or apprenticeship as is so made for the purpose of
publication in a newspaper, magazine or similar periodical, the said proprietor
shall, in the absence of ]any agreement to the contrary, be the first owner of
copyright in the work in so far as the copyright relates to the publication of
the work in any newspaper, magazine or similar periodical,; or to the
reproduction of the work for the purpose of its been so published; but in all
other respects, the author shall be the first owner of the copyright in the
work.
(4) In the
case of a cinematograph film or sound recording, the author shall be obliged to
conclude, prior to the making of the work, contracts in writing with all those
whose works are to be used in the making of the work.
Now here’s were the
confused smile and happy smile came in. I had to read this provision about 10
times to get the gist. (legislative drafters right). So here’s how I see this
provision:
In Nigeria the
photographer owns the copyright to pictures he has taken as a general rule.
However, the following situations are exceptions to this rule.
1.    
CONTRACT OF APPRENTICESHIP:
where a photograph is taken under an apprenticeship relationship, the rights of
the photograph belongs to the trainer or master.
2.    
CONTRACT OF EMPLOYMENT WITH A
NEWSPAPER MAGAZINE OR SIMILAR PERIODICAL: in this case
section 10(3) of the copyright act stipulates that the rights to such works
belong to the proprietor in the absence of any contrary agreement in so far as
publication is concerned.
3.  CONTRACT OF EMPLOYMENT:
reference to section 10 (1)(2)(a) (which I had to read really
slowly, and aloud several times). And here is where I had my fifty shades
of smiles; “… commissioned by a person who is not the author’s employer
under a contract of service or apprenticeship; or… the copyright shall belong
in the first instance to the author, unless otherwise stipulated in writing
under contract.” Where a photographer is an employee of a company
instructed to take the photos or is an employee whose duties include or require
photography, the photographer will be acting on behalf of his employer, and as
such the copyright in photographs taken by the employee in the normal course of
business will belong to the employer. In simpler words, a work done by a
commissioned person or employee belongs to the employer or
commissioner[3].
4.    
ASSIGNMENT: A
photographer may assign his copyright by written agreement. This will supersede
the provisions of the law. If there is a written contract or an agreement
signed by the photographer assigning copyright to another party, then the
rights will be deemed to belong to the assignee.
5.    
GOVERNMENT COMMISSIONING: Section 4.(1) Copyright
shall be conferred by this section on every work, which is eligible for
copyright and is made by or under the direction or control of the Government, a
State authority or prescribed international body. Such rights are conferred on
the Government on behalf of the Federal Republic of Nigeria.
6.    
LAPSE OF TIME.
The 1st schedule to the copyright act provides that an author of a photograph
can exercise exclusive rights on his photo for a period of 50 years after the
end of the year in which the work was first published., after which he looses
the exclusive right on the said work.
7.    
CONTRACT FOR SERVICE:
where I have commissioned the services of the photographer, I am the employer
of the photographer’s services under a service agreement, the rights on my
photographs and album belongs to me. And yes I had to ponder on the issue of
the; “Of or For Service”. I found the key word to be
“Commission” as contained in Section 10 of the Copyright Act; my
interpretation is that once someone has paid for the service of the
photographer under a contract of any nature, without an agreement stating that
the right will belong to the photographer, such rights will be vested in the
commissioning party. Therefore, whether you employ the photographer under a
contract of service or employ the services of the photographer for a specific
purpose, this law will apply[4].
Nigerian case law further
buttressed this point in the case of Joseph Ikhuoria v. Campaign Services
Ltd and Anor[5], the court noted that when a person commissions the
taking of a photograph or the painting or drawing of a portrait or undertakes
an engraving and pays or agrees to pay for it in money’s worth and the work is
made in pursuance of that commission, the person who so commissioned the work
is entitled to any copyright in it as an original work. See also Kolade
Oshinowo v John Holt Group Co [1986] FHCR 308.
On this same point in my
research journey, I also found a very interesting post online which I totally
align myself with. It said in summary that although when the photos are taken,
the photographer owns the copyright to the photos. The writer further made a
distinction between license and other rights. He stated that the licence
represents the leave to reprint (i.e., use the photos for personal use, such as
on Christmas cards or in a wedding photo book), for which the photographer may
charge an extra fee. This is so for the sole reason that the photographer will
lose out on the money that you would have paid for the prints. All other rights
are purchased off the photographer upon the payment of the fees. The
photographer however is free to charge an extra and separate fee for the
release of all the rights as mentioned in a contract[6]. But to me, I know I
will only agree to a payment of extra charges if the photographer is Madame TY
Bello!
As regards the 2face and
Annie Idibia matter mentioned above, I think this is an issue of facts which
will be discussed another day where the issues for determination will be
whether or not a photographer can claim copyright on an unauthorised or
illegally acquired photograph, or the copyright for paparazzi, I’ll find a
catchy name (Watch out for part 2).
Therefore, ladies and
gentlemen, it is with great pleasure that I state that in my firm opinion that,
my husband and I own our beautiful wedding photos, album, and all rights
connected thereto. As I said, I hate to lose an argument.
[3]http://www.academia.edu/4673044/Who_Owns_Copyright_under_the_Nigerian_Copyright_Act;
viewed 13th July 2016. Who Owns Copyright under the Nigerian Copyright Act; by
Meshack Okezi
[5] F.H.C.R. 308 1986, http://news.nlipw.com/?p=19254
viewed 11th August 2012,
Impact of the World Trade
Organisation TRIPS Agreement on the Intellectual Property Law of Nigeria; by
Temitope Oredola Oloko; http://repository.up.ac.za/dspace/bitstream/handle/2263/53216/Oloko_Impact_2015.pdf?sequence=1&isAllowed=y;
viewed 11th August 2013
[6]http://apracticalwedding.com/2015/09/wedding-photography-contract/;
by steven Portland; viewed 11th august 2016.

Ed’s Note – This article
was originally posted here
Photo Credit – www.guardian.ng
What you should know before signing a contract (Part 2)

What you should know before signing a contract (Part 2)

by | Aug 2, 2016 | Uncategorized


This is the 2nd
post in a series of articles on contract. The first article defined contracts
while this post will be examining the terms and contents of contracts. 
Terms of contracts can be
described as the rights and obligations of parties under the contract. For
instance, under a tenancy agreement, a term of the contract is for the tenant
to pay rent, another term is for the landlord to deliver the premises in
tenable condition. 

A term of contract may be
express. i.e. written out expressly in the contract while others may be
implied. i.e. it can be read into a contract though it is not expressly written
out in the contract. For instance under a contract to supply frozen chicken, it
is usually an express term to state the number of cartons of chicken the buyer
requires, however it may be implied into the contract that the seller must
deliver them in good condition, probably in a cooling van in other to keep them
in good condition and not with the cartons dripping with murky defrosted water
and chicken pieces falling out of the cartons. 
No matter what the
contract is for, either a contract to merge companies, buy a property, a
recording contract or a contract of employment. Understanding what terms are express
and those that can be implied into a contract is essential for all parties. As everyone
must know and understand their respective duties and obligations under the contract.
Failure to do this may result in conflict later on, if a party is seeking to
enforce a perceived right under the contract but the other party claims being
not obligated for that right. This may help save you and/or your company from
unwarranted liability. 
With regard to liability,
it is also important to identify if the alleged obligation is an actual term of
the contract or a mere representation. Also,  if it can be implied into the contract. 
The fact that parties must
fully understand the terms of their contract is further expressed by the
Nigerian Supreme Court in Best (Nigeria) Limited v. Blackwood Hodge
(Nigeria) Limited & 2 Ors (2011) 1 -2 SC (Pt I) 55, where the court
held that –
“A
contract ought to be strictly construed in the light of the essential and material
terms agreed by parties. The court should not allow a party to dribble the
other party”.  
It is recommended that
before you sign an agreement, you evaluate if the terms constitute a valid
contract and all parties are clear of their respective duties and obligations
under the contract. Also, do not hesitate to seek counsel from a legal
practitioner if you need to.
Dunmade Onibokun Esq.
Principal
Partner
Adedunmade
Onibokun & Co.
info@adedunmadeonibokun.com
dunmadeo@yahoo.com
www.adedunmadeonibokun.com
+2349095635314
Dunmade’s legal practice
focuses on corporate and commercial law, regulatory compliance, due diligence,
corporate advice and commercial transactions. 
He is the Principal partner of Adedunmade Onibokun & Co. Dunmade is
also a blogger and publishes the Legalnaija Blawg via www.legalnaija.com
Olubunmi Abayomi-Olukunle – Nigeria’s Venture Capital Industry: DFIs have a Role to Play

Olubunmi Abayomi-Olukunle – Nigeria’s Venture Capital Industry: DFIs have a Role to Play

by | Jul 15, 2016 | Uncategorized


By: Olubunmi Abayomi-Olukunle
By many standards, the venture capital
industry in Nigeria is still emergent especially if one considers the size of
the deals, number of funds and sophistication of investors in the market.
Accordingly, the Federal Government must promote venture capital activity in
Nigeria as a strategic policy initiative and in order to promote innovation and
enterprise amongst the most productive segment of its population. As part of
that process, the Federal Government should strategically engage all the
stakeholders in the industry’s value chain. This is particularly important at
this time given the increasing flow and value of foreign investments into the
venture capital space in Nigeria, a trend, which in our view, holds the promise
that Nigerian start-ups can unleash a revolution of wealth creation and rapid
economic growth in a sustainable manner. Our proposition is that local
Development Finance Institutions (DFIs) are critical stakeholders in the value
chain and have a significant role to play in Nigeria’s venture capital
industry.

It is in this context that the decision by
the board of Nigeria’s Bank of Industry (BOI) to be investors in the first-ever
social innovation fund out of Nigeria, is commendable. In a financing mix of
both local and foreign investors, BOI (alongside Venture Garden Group and
Omidyar Network) is committing up to USD230, 000 to a USD 1 Million social
innovation fund promoted by Nigeria’s foremost startup incubator, CCHub.- a
first of its kind for BOI–( I am glad to have advised on this deal!)
It is interesting to note that the fund
will be managed onshore. Also noteworthy, is the fact that the fund aims to
invest in early-stage tech companies that demonstrate an ability to solve a
social problem – Think of a company that converts heaps of refuse to clothing,
shelter or other usable material.
Global
Trends
The decision of the Board of the BOI
accords with trends we see in the international venture capital space, tending
towards an overall increase in the portfolio allocation by international DFIs
to early-stage fund managers and ventures. This July, the board of directors of
the International Finance Corporation (IFC) will be meeting to consider making
a USD 10 million commitment to Algebra Ventures Fund which will target
technology and technology based start-ups in Egypt, the broader middle-east and
the North African Region. Similarly, the European Investment Bank is
considering making a USD 10 million commitment to TLcom’s TIDE Fund, a planned
100 million venture capital fund, which will invest in entrepreneurs and
enterprises that are leveraging technology. Recently, it was announced that IFC
has decided to double its venture capital portfolio to USD 1 Billion to further
spur innovation in emerging markets. One of the companies in IFC’s venture
capital portfolio is Andela, a company co-founded by a Nigerian. The Company
recently received USD 24 Million in a series B funding in a round led by the
Chan Zuckerberg Initiative.
Availability
of Risk Finance
Growing trends in this space should bring
to focus debates around how DFIs in Nigeria can be used to strategically grow
Nigeria’s venture capital industry especially with regard to the risk finance
to the industry. There is, in our view, a shortage of risk finance to high
growth tech/e-commerce start-ups especially when one considers the rapid
increase in the number of Nigerian tech start-ups with scalable business
models. The majority, if not all, of the financing currently available from
local DFIs is debt-linked and sewed with requirements that venture companies
will find hand to fulfil.  More of the risk financing available have been
from foreign venture capital, incubators and angel investors who focus on
Africa. On the local scene, the Lagos Angel Network and the African Business
Angels Network, are gathering a more enduring appetite for early-stage risk.
Also, a growing network of solo angels, incubators and corporate venture funds
in Lagos and Abuja hold the promise of soaking up some of the demand that is
available in the market. Nonetheless, we think that a sizeable portion of the
market is underserved in terms of the availability of risk finance.
 Nigeria’s venture capital industry will require a sustained injection of
risk capital and local DFIs are in our view better positioned to close this gap
as, by their nature, DFIs have higher risk tolerance and longer investment
horizons and are able to take up investments in sectors where the private
sector finds it difficult to invest.
DFIs:
Which Roles?
The active involvement of local DFIs in the
venture capital space can help grow the industry in a number of ways. First,
there is empirical evidence that lends credence to the theory that increased
portfolio allocations by local DFIs to early-stage ventures or venture capital
fund managers can catalyze and help attract and mobilize other sources of
capital. In addition to helping mobilize other sources of capital, the
involvement of DFIs can also help provide the much needed management support
and hands on experience that can help commercialize entrepreneurial vision.
Secondly, DFIs can help in promoting and entrenching ESG compliance across
board, thereby promoting the adoption of sound business practice, an
imperative, which will further give comfort to potential limited partners.
We think that the current state of play
presents a good opportunity for local DFIs to expand the range of financial
products available to Nigerian start-ups, by increasing allocations to
Nigeria’s venture capital sector either through dedicated venture capital funds
or through participations in privately-managed venture capital funds.
Legal
Restrictions?
Yes and it is important however to situate
the foregoing within the extant legal framework for DFIs in Nigeria, especially
because, there are a number of provisions contained in the CBN Regulatory and
Supervisory Guidelines for Development Finance Institutions in Nigeria ( the
Guidelines) that have a bearing on a DFI’s level of exposure to the venture
capital patch in Nigeria.
For instance, local DFI’s may only invest
in a start-up business up to a limit of 10% of shareholders fund
unimpaired by losses. DFI’s are also subject to a maximum of 25% holding in any
enterprise. Whilst we take the view that the current thresholds are fairly
acceptable given the state of development of the industry, we note that the
Guidelines do not define the term “start-up business”. In our view, it is
important to define that phrase as the meaning of the phrase is not immediately
obvious and also capable of multiple interpretations. Businesses at different
stages can qualify as a “start-up business” depending on the indices
used. 
More importantly, the wording of the
Guidelines suggests strongly that DFIs can only take up equity directly in start-up
businesses as opposed to taking up participating interests in third-party
managed venture capital funds, a prospect which we think may hinder the growth
of the venture capital industry in Nigeria.
Going
Forward
Nigeria’s DFIs would also have to do more
in terms of building capacity to complement a possible increased allocation to
early-stage ventures and as part of own value creation strategy.
In addition to building capacity in terms
of evaluating, structuring and negotiating new equity, venture-type
transactions, it will be important to develop venture capital investment
strategies that are not only reflective of commercial realities but can also
help to mitigate possible risks in a downside event.
Although there are usually contractual
remedies available to a portfolio company or to a fund in the event of a time
default,  DFIs can make a lot more progress in terms of improving internal
disbursements processes for commitments made.
Overall, allocations to the venture space
will have to be in the form of patient capital, an investment strategy which
has now overtaken the traditional venture capital as a source of investment for
tech start-ups in mature markets
Olubunmi specialises in venture
capital and private equity financing.
This piece was originally published
on http://www.thisdaylive.com/index.php/2016/07/08/the-role-of-dfis-in-venture-capital/
and on https://www.proshareng.com/news/Private%20Equity/The-Venture-Capital-Industry-in-Nigeria-DFIs-have-a-Role-to-Play/31577
Source: Linkedin
Tochukwu Chikwendu – CBN OTC Fx Futures: Understanding The Derivatives Market

Tochukwu Chikwendu – CBN OTC Fx Futures: Understanding The Derivatives Market

by | Jul 13, 2016 | Uncategorized



By: Tochukwu Chikwendu
 The Central Bank of
Nigeria (CBN) recently removed the peg on Nigerian currency (Naira) and
officially announced a floating rate. The implication therefore is that the
value of Naira will be determined by the forces of demand and supply. In its
announcement, the CBN introduced an over- the-counter (OTC) Foreign Exchange
(FX) Futures, a derivatives product which will help open up the market and
encourage foreign investments.

Meaning of Derivatives
Derivatives (Futures,
Forward, Swaps, Options and Swaptions) are bilateral contracts or payments
exchange agreement whose respective values are derived from the value of an
underlying asset or underlying reference rate. This means that the value of a
contract entered into today will be determined on a future date based on market
forces.
For instance, if Party A
enters into an arrangement with Party B to buy 1,000 barrels of oil at US$40
per barrel (pb) in 6 months in anticipation that price will spike to US$50
within the period; the value for such contract is determined by
market position of the commodity at the end of the 6 months. Thus,
the price at the end of the 6 months will determine the value added to the
parties.
X-ray of Futures and
Forwards Contracts
Futures are exchange
traded forward contracts with standardized terms. Their price is determined by
market price. Futures contracts are highly regulated by an exchange, thus
counterparties’ credit risk are largely minimized as such is borne by the
exchange. To prevent credit risk, the exchange ensures that parties post
Initial Margins (IM)[1] before they are allowed to transact on the floor of the
exchange. Counterparties, in addition to IM, are also required to mark the
market daily by posting Variation Margin (VM)[2] with the exchange. An
Illustration will aid the understanding of the concept of IM and VM. Recall our
Party A and B example; Party A wants to buy oil at US$40pb in 6 months and
Party B also wants to sell at that price despite the future price of the
commodity. The buy side approaches the exchange[3] which links it with the
sell side. Assuming the contract sum is US$40,000, the exchange will mandate
the counterparties to post at least US$2,500 each as IM. At the close of each
trading day, depending on the market movement, any counterparty the market
moved against will be required to post a VM. Thus, if at the close of Day 1
(D1) trading, oil price moved down to US$35pb, a cash call will be made on
Party A to post US$5,000 to mark the market and bring the price to US$40pb
which he contracted to pay in 6 months and vice versa.
Forwards on the other hand
are OTC negotiated i.e. they are bilaterally negotiated between participants
upon flexible terms. They mature over time based on the need of the parties.
Counterparties to Forward contracts generally do not mark the market since
there is no exchange to regulate the conduct of counterparties. The paucity of
regulation, exposes Forward contracts counterparty’s credit risk.[4].
Counterparties in both
Futures and Forward contracts, settle their trade positions at the end of the
contract period. Settlement could be physically or cash settled (traditionally,
Futures are cash settled while Forwards are physically settled). Following our
illustration, for Futures contracts cash settlement, if  at the end of the
6 months the price of oil had risen to US$50pb, the exchange will pay US$10pb
being the difference between the contract and spot price of the commodity to
Party A. On the other hand, if the price of oil at settlement date was US$30pb,
the exchange will give the difference to Party B. In Forwards (physical)
settlement, if the oil market price was US$45pb at the last trading day of the
6 months, Party A will hand over US$40,000 to Party B who will then make up the
difference and purchase the contracted 1000 barrels. Alternatively, if the
price was down to US$30 pb, Party A will still hand over the same US$40,000 to
Party B, the US$10 made by Party B on each barrel constitutes the risk
premium[5].
 CBN OTC FX
Futures
FX Futures are derivatives
contracts traded on an exchange where the delivery of underlying currency is
the subject matter of the contract. In the United States, FX Futures are traded
on the International Money Market of the Chicago Mercantile Exchange as well as
other licensed Exchanges. To replicate this, the CBN in its Revised
Guidelines for the Operation of the Nigerian Inter-Bank Foreign Exchange Market
dated June 2016 (The Guidelines) stated that the OTC FX Futures will be traded
on the FMDQ OTC Securities Exchange. It is noteworthy to state that OTC FX
Futures as explained in Guideline 2.2.2 (non-standardised contract
with fixed tenors and bespoke maturity dates), aligns more with Forwards
contract. It is the writer’s view that the CBN probably adopted OTC FX Futures
for convenience since the contract will be cash settled and FMDQ will act as an
Exchange with IM and VM mandate.
OTC FX Futures is a
welcome development in the Nigerian financial sector. The instrument is a sui
generis financial product that will help participants engage in FX ventures
without being inundated by currency fluctuations. The major drawback in the
Futures contract market is the activities of speculators,[6] but the Guidelines
seems to have plugged that hole as Guideline 2.2.3 provides that “OTC
FX Futures sold by Authorised Dealers to end-users must be backed by trade
transactions (visible and invisible) or evidenced investment.” The import
is that there must be evidence of a transaction that the end-user intends to
hedge before the authorized dealers will be allowed to take a trade position.
The CBN also, in Guideline
2.2.1, indirectly maintained that Naira will be the only legal tender
acceptable in Nigeria as Authorised Dealers are only permitted to offer
Naira-settled non-deliverable OTC FX Futures. The implication is that at the
end of the contract tenor, settlement will be (Naira) cash settled. The Naira
equivalent of the difference in the current and contract spot prices will be
paid to the counterparty who is in positive region of the trade. The
exception to Naira settlement is for a foreign investment after a Certificate
of Capital Importation (CCI) together with FMDQ OTC FX Futures Settlement
Advice is presented, Guideline 2.2.7.
Negotiating OTC FX Futures
Counterparties willing to
trade in OTC FX Futures will approach the FMDQ Exchange, an interface between
the buy and sell side, and decide on the positions and tenor of their trade.
The Exchange will provide the spot price at which the trade will be carried out
after the necessary KYC has been carried out to ensure that the
counterparties/dealers will comply with FMDQ’s trade regulations. If satisfied
with the KYC, the FMDQ Exchange, as part of its regulatory oversight, will
demand that counterparties post an IM (constituting at least 5% of the entire
contract sum) to hedge against counterparties’ default.
FMDQ Exchange as part of protective
mechanism, makes cash calls on the trade counterparties depending on the market
movements. The mark-to-market rate will be determined by the Inter Bank Foreign
Exchange Fixing (NIFEX). The FMDQ’s appointed agent, Nigeria Inter-Bank
Settlement System PLC (NIBSS) in charge of clearing the inter-bank OTC FX
Futures, is empowered to collect the IM and VM, and settle the party on the
maturity date. NIBSS is also empowered to settle the trade if one of the
counterparties decide to close out its position before maturity date.
It seems therefore that
the CBN has put a very strong mechanism in place to ensure that the OTC FX
Futures market minimise the disequilibrium in the FX market and cause the FX
rate to moderate and attract significant capital flows into the Nigerian
economy. It is hoped that all the holes are properly plugged to prevent
speculators from entering into this market as that will likely derive up the
dollar rate, defeating the CBN’s purpose of developing this market.
Conclusion
The Naira- settled OTC FX
Futures product is a welcome development which will be of tremendous benefit to
individuals and corporate entities that engage in FX businesses. It will also
present an opportunity to hedge against future market movements. Whilst
applauding the CBN for its policy, it is hoped that this will be sustained and
CBN will put good surveillance in place to ensure that market participants will
not engage in activities that could undermine the effectiveness of the
innovation.
[1] IM is the percentage
(5% and above) of the contract sum deposited (at the contract start date) with
the exchange to hedge market movement from the day a party defaults in payment
of its VM to the day the counterparty’s position is eventually closed out. IM
cushions the exchange in the event a counterparty defaults in its obligation.
It prevents the exchange from using its funds to offset counterparties’ trade
positions. The amount of IM posted by counterparties may increase during high
market volatility.
[2] VM which is difference
between the contract and current market price at the close of any day’s
trading. A party whom the market moved against is required to post the amount
before the Day 2 trading.
[3] Because Futures are
exchange-traded, the parties are unaware of the counterparty taking the other
position of the trade.
[4] Since Forward contract
are largely unregulated, they are not the most reliable and efficient financial
instrument for hedging risks
[5] Settlement of both
Futures and Forward contracts are now mostly done in cash.
[6] Speculative trading
occurs when a market participant approaches the exchange to hedge a speculated
risk without possessing real risks i.e. hedging that the price of a commodity
will spike without actually having any intention of buying any commodity in the
future.
Tochukwu is admitted to the Nigerian Bar, and holds an LLM in Corporate,
Finance and Securities laws from the New York University School of Law. Tochukwu has a strong interest for capital markets, securities
transaction and finance, with an ardour for dispute resolution, both in
the international and local sphere. Tochukwu is goal-driven, resourceful
and a natural team player.  Whilst Tochukwu’s career interest is in international business law and
transactions, he is also committed to worthy charitable courses, and has
offered his assistance on a pro bono basis in certain cases.
Ed’s Note- This article was originally posted here.
Jamiu Akolade – Can the draft National Code of Corporate Governance be made applicable to all private companies?

Jamiu Akolade – Can the draft National Code of Corporate Governance be made applicable to all private companies?

by | Jul 10, 2016 | Uncategorized



By: Jamiu
Akolade MCIArb

Purpose
of the FRCN                 
                     
     
           
                     
                     
        
1.    
The FRCN was created under the Financial
Reporting Council of Nigeria Act 2011 with the legislative intent to establish
a body to be ‘charged with the responsibility for, among other things,
developing and publishing accounting and financial reporting standards to be
observed in the preparation of financial statement of public entities in
Nigeria[1]. The
duties of the FRCN are stated under section 8 of the Act[2]. With regards
to the powers of the FRCN, it is clear that it has been empowered to among
other powers, enforce and approve enforcement of compliance with accounting,
auditing, corporate governance and financial reporting standards in Nigeria.[3]Ostensibly for
the purpose of exercising this power, a Directorate of Corporate Governance was
created under the Act to, among other duties, develop principles and practices
of corporate governance.[4]

Coverage
of the FRCN’s powers: Eko Hotels v FRCN
2.    
However, with regards to the extent of the
applicability of the Act and the powers of the FRCN, it is clear from the Act
that such are restricted to ‘public interest entities’[5] which by the
meaning ascribed to that phrase under the Act excludes private companies that
routinely file returns only with the Corporate Affairs Commission and the
Federal Inland Revenue Service. The extent of the powers of the FRCN has been
tested in court in the case of Eko
Hotels v Financial Reporting Council of Nigeria[6]. In
that case, the FRCN had sought to enforce its powers against Eko Hotels Limited
(EHL). EHL instituted an action at the Federal High Court challenging the
application of the Act to it as a private company on the ground that it was
excluded from the operations of the Act. The FRCN had written to EHL requesting
for evidence of compliance with the registration requirements of the Act and
payment of statutory and renewal dues. EHL responded by informing the FRCN that
it was a private company and that it only filed returns with the FIRS and CAC
and was therefore not a public interest entity as contemplated by the Act. The
FRCN however contended that EHL was a public interest entity because it filed
returns with the Nigerian Tourism Development Corporation.
3.    
The court ruled in favour of EHL on the
grounds that there is no provision in the Act which requires private companies
to be registered with the FRCN as the registration can only be extended to
public companies and public interest entities and that FRCN cannot seek to
exercise implied, incidental or consequential powers where there are no express
provisions in the Act empowering it to do so. Crucially, the court also held
that the functions and powers of the FRCN can only be exercised over public
interest entities, public companies, professional accountants and other
professionals engaged in the financial reporting process and the FRCN cannot
enlarge its regulatory powers beyond the limit provided in the statute.
Although FRCN has appealed this decision, it is still the position of the law
until it is set aside by a superior court[7].
Our
opinion
4.    
It is our opinion that in view of the
decision of the court in Eko Hotels, the question of the applicability
of the provisions of the Act to private companies that only file returns with
the CAC and FIRS is not in doubt. Therefore, the applicability of the Code
should also be viewed within that prism. In this regard, we hold the view that
the Code is in the nature of a subsidiary legislation because it was made
pursuant to the powers of the FRCN donated by the Act[8]. As a
subsidiary legislation, the law is clear that it cannot contain provisions
which are contrary to the provisions of the enabling statute. In Barclays Bank of Nigeria Limited v Alhaji
Ashiru[9], the Supreme
Court held that:
 
 “Subordinate legislation is invalid if it is repugnant to the general law
of the    country or if it
is repugnant to the provision of a statute which delegates to the    
    body or person making it, the powers so to do.” It is, however,
not bad merely         because it deals with something
which the general law does not deal with or because it makes unlawful something
which the general law does not make unlawful, but it must not, expressly or by
necessary implication, profess to alter the general law by making something
unlawful which the general law makes lawful, or vice versa, or by adding
something inconsistent with the provisions of a statute creating the same
offence”, (see on the subject of Bye Law: Halsbury Laws of England Vol. 26, 3rd
Edition, P. 516 Para 950). Accordingly, subordinate legislation ‘is prima
facie ultra vires if it is inconsistent with the substantive provisions of the
statute by which the enabling power is conferred” (which is not the case here)
“or of any other statute” (which is alleged or submitted to be the case here)
“and equally, of course, if it purports to affect existing statutes expressly”
(see Volume 36 Halsbury, Laws of England, 3rd Edition, Pages 491-492, Paragraph
743).” Per Idigbe, J.S.C. (Pp.19-20, Paras.G-E)”
5.    
Adopting the test laid down by the Supreme
Court in Barclays Bank above, the provisions of section 2 of the Code
which purports to make the Code applicable to (a) All public companies (whether
listed or not); (b) All private companies that are holding companies or
subsidiaries of public companies; and (c) All regulated private companies would
appear to be beyond the powers of the FRCN under the Act since the Act which is
the principal legislation has excluded private companies which only routinely
file returns with the CAC and FIRS[10]. Another
provision of the Code which conflict with the Act is Section 40.1.12 which
creates the concept of a ‘regulated private company’ which is defined as ‘private
companies that file returns to any regulatory authority other than the Federal
Inland Revenue Service and the Corporate Affairs Commission’ whereas no
such definition exists in the Act;
 The Code contradicts CAMA
6.    
Also, apart from the fact that the Code
contravenes the Act, it is also ultra vires the powers of the FRCN
because it conflicts with another statute – the Companies and Allied Matters
Act[11] (CAMA) which
regulates the operation of companies in Nigeria. For instance, the entire
provisions of section 6 of the Code regarding the election of directors and
chairman of boards of directors as well as regulating meetings of the board are
either conflicting with CAMA or alter its provisions. This would amount to an
implicit amendment or repeal of the provisions of CAMA which is beyond the
powers of FRCN.
7.    
In view of the foregoing, we are of the
view that the application of the Code to all private companies without taking
cognisance of the exceptions under the Act is unlawful and beyond the powers of
the FRCN. Also, even if the Code were applicable to all private companies the
provisions of the Code which are contrary to CAMA are likely to be declared
null and void by a court of law. The FRCN therefore needs to engage with
all stakeholders with a view to revising the Code to identify the conflicting
provisions highlighted above.
Disclaimer:
This piece represents the view of the writer and does not constitute legal
opinion. We welcome comments and questions regarding the issues raised.
[1]
See the Long Title to the Act.
[2]These
are:
“a.   Develop and
publish accounting and financial reporting standards to be observed in the
preparation of financial statement of public interest entities;
1.    
Review, promote and enforce compliance with
the accounting and financial reporting standards adopted by the Council;
2.    
Receive notices of non-compliance with
approved standards from preparers, users, other third parties or auditors of
financial statements;
3.    
Receive copies of annual reports and
financial statements of public interest entities from preparers within 60 days
of the approval of the Board;
4.    
Advise the Federal Government on matters
relating to accounting and financial reporting standards;
5.    
Maintain a register of professional
accountants and other professionals engaged in the financial reporting process;
g   Monitor
compliance with the reporting requirements specified in the adopted code of
corporate governance;
h   
Promote compliance with the adopted standards issued by the International
Federation of Accountants and International Accounting Standards Board;
i    
Monitor and promote education, research and training in the fields of
accounting, auditing, financial reporting and corporate governance;
j   Conduct practice reviews of registered professionals ;
k Review financial statements and reports of public interest entities;
l Enforce compliance with the Act and the rules of the Council on registered
professionals and the affected public interest entities;
m  Establish such systems, schemes or engage in any relevant activity, either
alone or in conjunction with any other organization or agency, whether local or
international, for the discharge of its functions;
n Receive copies of all qualified reports together with detailed explanations for
such qualifications from auditors of the financial statements within a period
of 30 days from the date of such qualification and such reports shall not be
announced to the public until all accounting issues relating to the reports are
resolved by the Council;
o Adopt and keep up-to-date accounting and financial reporting standards, and
ensure consistency between standards issued and the International Financial
Reporting Standards;
p. Specify, in the accounting and financial reporting standards, the minimum
requirements for recognition, measurement, presentation and disclosure in
annual financial statements, group annual financial statements or other
financial reports which every public interest entity shall comply with, in the
preparation of financial statements and reports;
q     
Develop or adopt and keep up-to-date auditing standards issued by relevant
professional bodies and ensure consistency between the standards issued and the
auditing standards and pronouncements of the International Auditing and
Assurance Standards Board; and
r    
Perform such other functions which in the opinion of the Board are necessary or
expedient to ensure the efficient performance of the functions of the Council.
[2]
[3]
Section 7(2) (a) Ibid.
[4]
Sections 49 and 50 Ibid.
[5]
“Public Interest Entities” under the Act means governments, government
organizations, quoted and unquoted companies and all other organizations which
are required by law to file returns with regulatory authorities and this
excludes private companies that routinely file returns only with the Corporate
Affairs Commission and the Federal Inland Revenue Service.
[6]
(Unreported: Suit No. FHC/L/CS/1430/2012 delivered on 21/03/2014)
[7]
See Vaswani v. Savalakh (1972) 12 SC 77.
[8]In
Njoku v Iheanatu (2008) LPELR-3871(CA) the Court of Appeal held that:
 “A
subsidiary legislation or enactment is one that was subsequently made or
enacted under and pursuant to the power conferred by the principal legislation
or enactment. It derives its force and efficacy from the principal legislation
to which it is therefore secondary and complimentary’. 
[9]
(1978) 6-7 S.C
[10] See
section 2.1 of the Code viz Section 77 of the Act
[11]
Cap C20 LFN 2004.
Ed’s Note: This article was
originally published here.
Time Has Come To Open Up Our Railway Sector To Private Sector Participation- Senator Gbenga B. Ashafa.

Time Has Come To Open Up Our Railway Sector To Private Sector Participation- Senator Gbenga B. Ashafa.

by | Jul 8, 2016 | Uncategorized



Senator Gbenga B. Ashafa
representing Lagos East Senatorial District at the 8th Senate, is
the Chairman Senate Committee on Land Transport. Through this feature, he
renders his opinion on how to transform the Nigerian Railway Sector and a
report on the efforts of the Senate Committee on Land Transport towards
ensuring a transformed railway Sector beneficial to all Nigerians. 

“The Nigerian Railway
Corporation traces its history to the year 1898, when the first railroad in
Nigeria was constructed by the British colonial government. On October 3, 1912
the Lagos Government Railway and the Baro-Kano Railway were amalgamated,
starting nationwide rail service under the name Government Department of
Railways. With the passing of the Nigerian Railway Corporation Act of 1955, the
company gained its current name as well as the exclusive legal right to
construct and operate rail service in Nigeria. The rail network reached its
maximum extent shortly after Nigerian independence, in 1964. Shortly after
that, the NRC entered a long period of decline, inept management, and
eventually a complete lack of maintenance of rail and locomotive assets. In
1988, NRC declared bankruptcy, and all rail traffic stopped for six months.
After that, trains resumed, where the tracks were usable. By 2002, passenger
service was again discontinued altogether. Starting in 2006, plans were made to
restore the rail lines and add new locomotives with foreign assistance. In
December 2012 regular, scheduled passenger service was restored on the Lagos to
Kano line.”– Wikepedia
I have chosen to start
this article with the foregoing quote from Wikepedia to give you all a
background of the history of the Nigerian Railway Corporation and by extension
the Nigerian Rail Sector. This quote will also put in proper perspective the
urgent need to open up our railway sector to Public/Private Sector
Participation. 
In the recent past,
Nigeria particularly has learnt that private participation drives effectiveness
and Accountability in most service/utility sectors. We have learnt that the
Government cannot carry the burden of delivering every service or utility.
Successive governments in Nigeria have over the years burdened itself with the
task of providing power, water, a National Carrier, Telecommunications,
Railways etc.
What we have experienced
till recently has been a steady decline in the functionality of Government-run
social utility services. This has led to the change in disposition of
Government towards extending a hand of partnership to the private sector to
come and invest in some of these sectors. Sectors that have benefitted from the
Private Sector Participation in Government Business include the
Telecommunications Sector and the Power Sector.
Since the introduction of
private sector participation in the Telecommunications Sector, the service has
become more affordable, effective and accessible to every single Nigerian. The
Telecommunications value chain also employs Millions of Nigerians with
investment in the Sector set at about $32 Billion as at the first quarter of
2016.
Till the Telecoms sector
was opened up in 2001, it was an untapped gold mine with unfathomable
potential. It is this same quantum of potential that we seek to replicate by
introducing the requisite CHANGE into the Nigerian Railway Sector.
Now, to achieve this
change in disposition of any critical sector, there has to be a critical change
in the Legislation that drives the Sector. Legislation forms the fulcrum of
human, government and business interrelationship in every society. Hence what
we need to and seek to do is to drastically change the legislation that guides
the Nigerian Rail Sector to ensure that we maximize the full yet untapped
potential inherent therein. For the sake of emphasis, the legislation that
guides the Nigerian Railway Corporation was promulgated in 1955 (61 years ago).
Till now, you will agree
with me that the country has focused primarily on road transportation in
ferrying persons, goods and services from one point to the other. What this has
led to over the years has been an influx of cars, congested roads,
over-burdened road infrastructure, loss of lives to accidents and reduction in
the productivity of manpower due to unending hours spent in traffic jams.
Government after
government has invested even more in road expansion projects. The result as can
be observed in the case of Lagos and Abuja has been a gradual occupation of the
expanded roads with more cars. This is attributable to rural-urban migration as
well as population explosion across the nation.
Mass transit remains a
very pivotal aspect of the development of any city. It plays a critical role in
enhancing productivity of the state by ensuring the movement of the largest
number of people from point A to Point B within the shortest possible time. It
also reflects the quality of life and the value placed on the unit citizen by
any responsible government.
You will agree with me
that the most effective means of transporting large quantities of humans, goods
and services within any country is via rail. This is why whenever the topic of
mass transit is discussed; rail transportation must be given its pride of
place.
In the light of the
foregoing, When I was appointed the Chairman of the Senate Committee on Land
Transport, my humble self and committee members held interactive sessions with
the Ministry of Transport and the Nigerian Railway Corporation to listen to the
challenges facing the rail sector. We also at other different fora interfaced
with stakeholders in the Rail Sector to feel their pulse on what needs to
change to enable the Sector thrive. Our intention was to ascertaining how we as
legislators could be of assistance to the Federal Government and fellow
Nigerians through creating an enabling environment to revamp the rail sector
through the instrumentality of legislation.
Upon our interaction with
the Stakeholders, we discovered that there is an urgent need to open up the
Sector to active private participation, predicated upon both State and Private
Sector Participation on a level playing field.  To achieve this, we zeroed-in
an urgent need to amend or repeal the existing Nigerian Railway
Corporation Act, 1955, which does not contemplate private participation in
the rail sector. I am therefore convinced that the time has come for us to open
up our railway sector to private sector participation.
Just in good time, the
Senate at Plenary forwarded the Nigerian Railway Corporation Repeal and
Reenactment Bill 2015, sponsored by Distinguished Senator Andy Uba to the
Senate Committee on Land Transport. Shortly after that, the National Transport
commission Bill 2016 was equally forwarded to the Committee on Land
Transport. 
With regard to the
Nigerian Railway Corporation Repeal and Reenactment bill, the Senate Committee
on Land Transport successfully held a public hearing, which had in attendance
all the important stakeholders in the sector. This culminated in the setting up
of a technical committee made up of stakeholders with the legal and technical
expertise to further advise the Senate committee on the desirable disposition
of the proposed legislation. On Wednesday, 24th May, 2015, the
report of the technical committee was submitted to us and I had the privilege
of presenting the said report to His Excellency, the President of the 8th Senate,
Dr. Abubakar Bukola Saraki on the same date.
Based on the
recommendation of both the Senate Committee on Land Transport and the Technical
Committee on the Nigerian Railway Corporation Act Repeal and Reenactment Bill
2015, it was agreed that due to the extensive recommended changes, the tittle of
the Bill should be changed to the Nigerian Railway bill, 2016.
Consideration of the
report of the Senate committee on Land Transport with regard to the said Bill
has equally commenced before the Senate at plenary. The Third and Final Reading
of the Bill, which will include the line-by-line consideration of the committee
recommendations with regard to the Bill will be completed upon the resumption
of the Senate from its recess. With regard to the National Transport Commission
Bill, preparations are currently in full gear to hold a public hearing as
well. 
It is very important to
note that up until 1993, the British also ran a state model of ownership and
operation of the Railways and they faced similar challenges in funding and
efficiency of the service. In a speech titled Rail growth through
competition: the success of the UK model delivered by The
Rt Hon Patrick McLoughlin MP on 12 November 2013 at the European Rail
Congress, McLoughling pointed out as follows: “In fact the
Railways Act came into effect on November 5 1993, breaking up the state-run
British Rail, and transforming the face of our railway for ever. Nobody back
then could have predicted the extraordinary changes that have taken place over
the subsequent 2 decades.”
McLoughling stated further
that “Rail travel had dwindled to such an extent that most
people thought the private train operators would manage a decline in both
passenger and freight traffic. How wrong they were. Privatisation sparked a
railway renaissance. Since 1993, passenger journeys have doubled in the UK to a
level not seen since the 1920s. On a network roughly the same size as 15 years
ago, today our railway is running 4,000 more services a day. And rail freight
has grown by 60%. Revenue is up more than £3 billion since privatisation,
almost all of it due to higher passenger numbers rather than fare rises Safety
levels are at an all time high. Punctuality is at near record levels. And passenger
satisfaction is up by 10% over the past decade. None of this would have
happened without privatization, without competition, without franchises
investing in better services. Without an industry structure promoting
accountability and incentivising growth.”
What we seek to achieve by
these legislations is to replicate in Nigeria what started in the United
Kingdom a bit over 20 years ago and as succinctly captured by the quotes from
McLoughlin MP, just above. 
This radical departure
from the norm will make the sector more attractive to investors, by separating
the roles of the operators and the regulator. A whole lot of investors have
over time complained about the role of the Nigerian Railway Corporation as both
the operator and the regulator in the sector. With the
upcoming legislation, we expect to see a completely re-positioned Rail
Transport Sector, open to private sector participation.
Once the rail sector is
opened up to Private Sector Participation, we would have achieved two principal
things, which are; Creation of Millions of jobs on one hand and also we would
have successfully solved the challenge of inter/intra city mass transit.
Further more, in respect
to Public Private Partnerships in the Rail Sector, the World Bank Group’s
Public-Private-Partnership in Infrastructure Resource Center has also
recommended the shared infrastructure model, which the upcoming legislation
proposes when it stated that, “PPPs in railways can bring
opportunities for investment, operating efficiency and modern and clean
technology. PPP railway projects providing for shared use of rail tracks may
lead to efficiency gains
and
an increased revenue basis for states”
Having said these, I must
thoroughly commend the effort of the Muhammadu Buhari led APC Government through
the Ministry of Transportation headed by H.E Rt. Hon Rotimi Amaechi in
consolidating the infrastructure relevant to drive our renewed rail sector, the
Senate President who ab-initio showed interest in this vital sector by
convening the National Assembly Business Environment Roundtable for the first
time. I also commend the various states that have begun laudable intra-city
rail lines, of particular note is the Government of Lagos State ably led by H.E
Governor Akinwunmi Ambode. The Nigerian Railway Bill 2016 will essentially
become the Bill that will bring all these brilliant initiatives by the Federal
government and soon- to- be investors together to ease the Mass Transportation
challenges across the Nation and as such help to increase the collective
productivity of our work force.
In the same vein, I would
like to seize this opportunity to commend all those who have worked tirelessly
and pro-bono with the Senate Committee on Land transport, particularly the
members of the Technical Committee on the Railway bill, ably chaired by
Engineer C.C Okoye, the Chairman Body of Fellows, Nigerian Society of
Engineers, the Nigerian Infrastructure Advisory Fund, Nigerian Economic Summit
Group, Ministry of Transport, Office of the Senate President, the Nigerian Railway
Corporation and all those who time and space would not allow me to mention
here. We are indeed grateful.
It is our earnest hope,
that these laws garner support across board and that upon the passage of these
new legislations by this 8th National Assembly, we would have
contributed in no small measure in opening up the rail sector, thereby
attracting both Local and Foreign investments, creating millions of jobs and
also establish a beneficial platform for the transportation of humans, goods
and services alike.