BUSINESS ESSENTIALS Vol 4. No 8
Dear Esteemed Member,
The Future of Work is a matter of high priority for the employer community. Debates revolve around how to identify and interpret trends; how to prepare and adapt to meet challenges; as well as how to harness the new opportunities being presented for sustainable success. In this edition, we shared the summary of a recent publication by International Organisation of Employers (IOE) on new scenarios in understanding the future of work as it relates to employers of labour.
In economic analysis, we captured recent developments in the economy which gave an optimistic outlook of the economy in 2017 and the implications of the developments to business. We also shared a recently articulated policy by CBN to combat further collapse of the country’s currency, the Naira – this is already yielding fruits in the short term. We also took a look at the recently approved New National Tax Policy for the country, all these, for your kind information.
Our regular Labour and Employment Law Review and Upcoming Training Programmes were not left out.
Have a pleasant reading.
In this Issue:
- Understanding The Future Of Work
- Nigeria 2017 Economic Outlook Update
- Review of the New National Tax Policy
- CBN’s New Policy Actions In The Foreign Exchange Market
- Labour & Employment Law: Pension (Ibinabo Oyibo vs. CIL Risk and Asset Management Limited) (2014) 45 N.L.L.R. Pt 146, P. 724 NIC
- Upcoming Training Programmes
UNDERSTANDING THE FUTURE OF WORK
Industrial and technological revolutions have historically resulted in the growth of economies and productivity, as well as the creation of new jobs. Despite short-term challenges arising from the replacement of manual labour and the need to upscale skills and competencies, the pace of transformation allowed time for education and training to catch up, and to equip low and mid-skilled workers with the new skills and competencies required to function productively.
Today, many studies show that technology is being adopted at an exponential rate, replacing middle-level skills that were once considered uniquely human and placing the world of work in a state of flux. Dynamic processes such as digitalisation, the growth of the digital economy and technological advances, coupled with profound changes in the organisation of work, globalisation, demographic change, environmental challenges, as well as new ways of organising the production of goods and the delivery of services, provide a myriad of opportunities to society while at the same time presenting considerable challenges.
With the new and affordable capabilities made possible by automation, a significant number of new job opportunities and new markets will continue to be created. At the same time, existing jobs or tasks could disappear or be re-designed. These changes in capabilities and skills needs and the transformation in the organisation of work will better cater to the needs of individuals and companies. They will also provide for different work opportunities, accommodate better work-life balance and provide easier access to income opportunities, wherever they arise. But they also pose challenges arising from future forms of employment, the polarisation of skills, the adequacy of existing legal, institutional or social protection frameworks, among others.
Trends in the world of work
Rather than decisively predicting a future scenario of massive job losses, recent analysis indicates that in general terms new technological changes will not necessarily or directly lead to high unemployment, but will undoubtedly require workers to learn and update skills much more quickly than in the past. The key difference compared with earlier technological revolutions is the speed of transformation enabled by the pace of new learning capacities of machines and the fact that, this time around, automation is affecting the service sector intensively.
As was the case in past technological revolutions, it is difficult to predict with 100 per cent accuracy which skills will be more in demand in the future. However, it is becoming clearer that vulnerability to automation will not so much depend on whether the work concerned is manual or white-collar, high or low qualified, but whether it is routine. STEM skills as well as the intensive development of certain sectors, like health and social care, are emerging as future drivers of job opportunities. But many future tasks and jobs will also require more emotional and personal skills, such as persuasiveness, creativity, empathy, leadership, teamwork capacities, among others.
The way businesses are operating is also changing; new and innovative companies are already “operating globally without being big”. A powerful online network will make a critical difference to their development and the availability of appropriately tailored services will also be crucial. At the same time, autonomous, output/result-based and project-oriented tasks and jobs could be increasing, allowing people to shape their own career under less rigid structures and divisions and within constantly changing teams and networks.
This, together with the emergence and expansion of the on-demand economy, could mean that the classical employment relationship gives way to a more detached, mutual self-interested culture that is often more transient. In this context, workplace flexibility, both in terms of working time and location, is one of the most salient characteristics of the new world of work.
Institutions will need to be much more ambitious in providing enhanced access to lifelong learning and educational opportunities. To inform investment decisions on education and skills, as well as to inform individual career choices in an ongoing challenging environment, it will be essential to rely on more real-time, finely-tuned, holistic and dynamic data. Informal and online learning will grow in prominence and policies should be prepared to channel and stimulate it properly. The education sector will need to work much more closely with business to ensure that programmes are developed and continuously updated to meet future skills requirements.
Critical to avoiding structural unemployment will be public support for enabling job transitions and mobility. Depending on the geographical context, social protection schemes and benefits may need to be created or developed further to respond to this new reality without creating strains on sustainability or incurring unnecessary costs for business. At the same time, the evolution and penetration of the on-demand economy will need proper follow-up based on the collection of appropriate labour market statistics that provide policymakers with information on recent developments and how these are affecting the employment relationship.
Making progress towards a more globally recognised skills set can facilitate not just mobility, but also access to new opportunities for businesses and individuals worldwide. Maximising the skills development potential of the female workforce will also be a critical driver of success in many geographical contexts.
To harness the momentum of the digital era, many economies will have to improve access to both the internet and new digital tools substantially as they will be drivers of new income opportunities. However, the digital economy also requires a strong ‘analogue’ foundation of regulations that creates a vibrant business climate and lets firms leverage digital technologies to compete and innovate. It will be key therefore to modernise excessive regulatory burdens, including Employment Protection Legislation (EPL) and administrative regulations that hinder the uptake of income and jobs opportunities in the new scenario.
A remote and dispersed workforce will make working time less relevant as a monitoring tool from a legal and human resources perspective. At the same time, more sophisticated tools to monitor productivity will lead to improvement in overall workplace productivity, but will require careful and smart human resources policies. The intense increase in the amount of data collection at the workplace could also need careful approaches from management.
From an industrial relations perspective, the way workers communicate individually and collectively with management, using digital tools and in a more global labour market, could have significant consequences which call for further reflection. The future role of employers’ and business organisations and trade unions in this context will also need to be further thought through, as will the role of social dialogue.
Nigeria Economic Outlook
On the domestic scene, we witnessed the following;
- The $1 billion Eurobond issued by the FGN was 8 times oversubscribed ($7.8 billion). Coupon rate was reported at 7.87% to be repaid after 15 years (2032).
- Inflation continued its unabated upward movement, as prices across all sectors rose. Inflation rose in Jan’17 to 18.72% (y/y) from 18.55% (Dec’16). Month-on-month (m/m) inflation rose at a slower rate (1.01%) compared to 1.07% (Dec’15).
- The Naira continued its free fall at the parallel market declining by 1.96% from NGN506/$1(Feb. 10, 2017) to NGN516/$1 (Feb. 17, 2017). With the new forex policy, we expect an upward movement for the naira.
- Oil supplies to India declined 54% to 271,500bpd (y/y; Jan 2017) owing to continued militant attacks, as India sought supplies from Angola.
- The Government is set to issue a 2- 3 year Savings Bond. This encourages a savings culture, deepens the financial market while increasing the financial base of the government.
- The NNPC reported a loss of NGN197 billion in 2016 with the bulk of the losses coming from the refineries. Reported income from the refineries was NGN1.11 billion while expenditure was set at NGN78.95 billion.
- Nigeria’s debt profile for 2016 was reported at NGN17.36 trillion, up from NGN10.71 trillion (Dec. 2015)
- OPEC Basket prices and Brent Crude Oil increased slightly in the month of January averaging $52.40 and $54.58 respectively. This represents a 1.41% and 2.32% increase from December 2016. This is the second month since July 2015 in which prices averaged more than $50/b. The continued rise in prices in the month of January reflects OPEC and non-OPEC production cut deal.
- EIA projects US crude oil average production to increase to 9.0 million barrels per day in 2017, reflecting increases in federal offshore Gulf of Mexico production. Rising tight oil production, which results from increases in drilling activity, rig efficiency, and well-level productivity, also contributes to forecast U.S. production growth. However, Brent crude oil prices are forecast to average $53/b in 2017 and $56/b in 2018.
Implications for Business
- Uncertainty remains though outlook has improved slightly due to higher oil prices, rising FX reserves, successful Eurobond offer and expectations of GDP growth in 2017.
- Following the recently introduced policy in the Foreign Exchange market by CBN on 20th February, 2017, if followed through successfully, there is the tendency for a rapid appreciation of the Naira. Within two days of its introduction, Naira appreciated by 3.5%
- The Economic Recovery and Growth Plan (ERGP), if credibly implemented, it will resolve the problem of policy clarity and should also support better economic scenarios.
- The 2017 budget proposals, especially the proposed spending on capital expenditure in power, roads, housing and transportation is expected to improve infrastructure and assist in reflating the economy and stimulating employment.
- The positive move by the Acting President with the Niger Delta region, if sustained will lead to relative peace in the region, increase in production of crude oil which will reflect on the revenue accruing to the government as anticipated in the Budget.
OUTLOOK FOR 2017
- Nigeria will return to positive growth in 2017 following the economic contraction the country underwent in 2016, but this rebound will be far from spectacular. We project between 1.7% – 2.8% growth, we believe that the continued imposition of capital controls will weigh on growth and the improvement will be slow.
- We believe that CBN’s Monetary Policy Committee will maintain its benchmark interest rate at 14% throughout 2017, and probably to 2018. While hiking the key policy rate would be a positive for investor sentiment given that this would push real interest rates into positive territory, we expect that government pressure will prevent the bank from raising the benchmark rate further. Meanwhile, worries over high inflation will preclude any cuts to the interest rate despite government’s stated desire for cheaper borrowing costs.
- As oil revenues pick up, we expect that fiscal policy will become an increasingly important determinant of the country’s economic growth, especially as Foreign Investment will make only a tentative return. While it will provide some stimulus, we do not expect that the planned expansionary budget will be realised in full.
- While we believe that security risks the country faces on a number of fronts will eventually be contained, if the situation significantly deteriorates into a more intense level of conflict, this would potentially affect investment, exports, and growth.
- Power sector reforms are crucial for long term productivity gains. If these are slowed or stalled, this would lead to lower long term trend growth than we currently expect.
Review of the New National Tax Policy
The Federal Executive Council, the highest Executive decision making organ in Nigeria, recently approved a new National Tax Policy for the country. The Policy will now be endorsed by the National Economic Council to recognize the Federal System of Government, given the application of the Policy to all tiers of government.
The National Tax Policy (NTP) establishes fundamental principles to guide an orderly development of the Nigeria tax system and reinforces the need for tax laws and administrative practices to promote economic development.
When fully implemented, the Policy should address key challenges confronting the Nigeria tax system including:
- low tax to GDP ratio
- fragmented database of taxpayers and weak structure for exchange of information
- multiplicity of taxes and revenue agencies
- poor accountability for tax revenue
- use of aggressive and unorthodox methods for tax collection
- failure by tax authorities to honour refund obligations to taxpayers
- the non-regular review of tax legislation, which has led to obsolete laws, that do not reflect
- current economic realities
Some of the key recommendations include to address the challenges include:
- ensuring that there is only one revenue agency per level of government
- establishment of a tax court as an independent body to adjudicate in tax matters
- lower tax rate and VAT compliance threshold for SMEs
- establishment of an Office of Tax Simplification for continuous improvement to tax legislation and administration and develop Key Performance Indices for Nigeria to attain a top 50 position on the global index of ease of paying taxes by 2020 and consistently improve on the ranking
- administrative framework for amnesty and whistle blowing as part of the strategies for curbing evasion and widening the tax net
- INEC to mandate political parties to articulate, prepare, provide and make public their tax agenda before and during election campaigns
The approved Policy also contains and appendix of changes required to existing laws, repeals and new enactments.
Please, follow the link for a copy of the recently approved document www.neca.org.ng
CBN’s NEW POLICY ACTIONS IN THE FOREIGN EXCHANGE MARKET
The recent policy initiative of the Central Bank of Nigeria (CBN) in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions, was providing direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees. It was expected that such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate.
Breakdown of the New Policy Initiative:
- Foreign Exchange Sales:
The CBN shall commence the sale of foreign exchange on a weekly basis to banks classified into merchant banks, small banks, medium banks and big banks. The sales shall be for Personal Travel Allowance (PTA) and School fees. Forex would be sold every Tuesday.
- Sales for Personal Travel Allowance (PTA)
The following conditions shall henceforth apply for sales for PTA:
- Applicants shall be eighteen (18) years of age and above
- Applicants/beneficiaries shall be holders of Nigerian Passports
- Applicants shall be account holders in the chosen bank
- PTA shall only apply to journeys of not less than five (5) hours flight time
- The flight must originate from Nigeria
- Sale of PTA shall be for travel to be undertaken not more than 14 days from the day of the purchase of PTA
- Applicants shall be entitled to $4,000.00 per quarter
- Applicants shall present verifiable BVNs to their bankers
Under the new policy regime, FX for PTA:
- Would not be sold to people below 18 years of age.
- Holders of passports other than the Nigerian passport will not be able to access FX for their trip.
- If you want to buy FX from a Bank, you must be an account holder with the Bank before FX is sold to you.
- No FX for travels to almost all West African countries since the journeys was less than five hours flight time.
- FX can be purchased within 14 days of travel once you have the necessary documents.
- You cannot get FX of more than $4000 in 3 months.
- BVN: This can be obtained from your bank and it is advised to get this before you plan to apply in order to avoid delays.
- Sales for School Fees
- Remittances shall be made directly to the school’s account
- Applications shall be for not more than $15,000.00 or its equivalent per term/semester.
- Applicants shall be recognised, parents/guardians
- Applicants shall provide their Bank Verification Numbers (BVN) to their bankers
- Applicants shall present the following:
- Duly completed form “A”
- Admission letter from the school
- Invoice from the school
- Applicable to customers seeking to make payments, or purchase FX, for medical bills and paid directly to hospitals.
- Forward Sales Tenor
In order to further increase the availability of FX to all end-users, the CBN has decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.
- FX Sales at Major Airports
In order to further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN has directed all banks to open FX Retail Outlets at major airports as soon as logistics permit.
- In the quest to reduce the 40 percent premium that is paid for the dollar on the black market where most retail customers purchase their forex, the Apex Bank came-up with this directive to improve dollar sales so as to meet the pressing needs of travellers and overseas scholars.
- The policy will aid contracting the lag between the official and black market rates within the economy as CBN planned to sell $1million each week to the 21 commercial lenders at a rate of N375/$1 so as to wipe-off the excess of dollar demand.
- The policy direction is a welcome development and a progressive one which toes towards the implementation of a more flexible foreign currency administration.
LABOUR & EMPLOYMENT LAW: Pension (Ibinabo Oyibo vs. CIL Risk and Asset Management Limited, 2014) 45 N.L.L.R. Pt 146, P. 724 NIC
- The claimant (Ibinabo Oyibo) was employed by the defendant (CIL Risk and Asset Management Limited) as a Senior Analyst from July 2008 to October 2010, when she resigned from the services of the defendant. The letter of resignation incorporated a demand for the arrears owed her by the defendant in the sum of N4,607,689.89
- The claimant pleaded that the defendant accepted her resignation by a letter dated 25th November 2010 wherein it admitted being indebted to her in the sum of N4,257,671.31 and indicated its intention to off-set the sum due to her on a salary basis until liquidation of the total sum.
- The claimant rejected the defendant’s proposed mode of payment and requested for her money through her Solicitors.
- Furthermore, the claimant conducted an inquiry into her Pension Fund Administrator(PFA) Account and obtained her statement of account. The inquiry revealed that the defendant failed to pay her PFA contribution to the Pension Fund Managers where she registered, even after the defendant had deducted the amount from her monthly salary from the inception of her employment. The PFA contribution due to her, as admitted by the defendant was N1,270,208.42
- The defendant’s case was that it accepted the claimant’s resignation letter dated 25th November 2010 but did not admit indebtedness to the claimant to the tune of N4,257,671.31, rather the defendant only stated the sum due to the claimant resulting from her resignation as the defendant did not have control over pension fund.
- Furthermore, that at no time did the defendant enter into an agreement with the claimant to pay her pension contribution to her directly because it does not have control over pension contribution fund.
- That the claimant was part of the management that took decision to stop payment of salaries. And that the defendant mutually agreed with all its staff, including the claimant, to stop paying salaries because there was no money to pay salaries and the defendant was hoping that with good effort the fortune of the defendant will be turned around.
- Whether or not the Defendant was in compliance with the Pension Reform Act.
On Employees’ obligation to open a retirement saving account under Pension Reform Act:-
Under the pension contribution scheme, the Pension Reform Act mandates the employee to open a retirement savings account with a pension fund administrator of his/her choice into which his/her pension contributions will be paid. The claimant, in the instant case, complied with the said law.
On whether pension contribution is payable directly to the employee:-
Pension contribution under the Pension Reform Act is payable directly to the employee’s account domiciled at his or her pension fund administrator. Pension contribution is not payable directly to the claimant. In the instant case, the defendant failed to remit the pension contributions into the claimant’s pension fund administrator.
On whether employee is bound to bring any complaint against her employer before the Commission or join her Pension Fund Administrator in a suit:-
An employee is not bound to bring any complaint against her employer before the Pension Commission neither is he/she obliged to join his/her Pension Fund Administrator (PFA) where the PFA is not a necessary party. Its inclusion will not be fatal to his/her case, as there is no cause of action against it and the judgment or order of court can be effective without such joinder.
The claimant in this suit does not have any complaint against her pension fund administrator neither is she bound to bring any complaint against employer before the Commission. There is no cause of action in this suit against the PFA. Her PFA need not be a party in this suit before the order of this court can be effective as it is the responsibility of the defendant under the Pension Reform Act to pay the claimant’s pension contribution into her Retirement Saving Account (RSA).
The Court ruled that the argument of the defendant was baseless, and a misconception of the law and it was, therefore, discountenanced. The case of the claimant succeeded and the court ordered, that:
- The defendant shall pay to the claimant the sum of N2,287,462.89 being her outstanding salaries up to November 2010 and 13th month salary for 2009
- The defendant shall pay to the claimant the sum of N700,000 being the claimant’s Medical Allowance up to 2010
- The defendant shall pay the sum of N1,270,208.42 into the claimant’s retirement saving account being her contributory pension
- The above sums are to be paid within 30 days from the date of the judgment
The sum of N25,000 was also awarded in favour of the claimant – to be paid by the defendant, being litigation cost or cost of the action.
Under the Pension Reform Act, an employer is bound by law to pay employees’ pension into his/her pension fund administrator.
Management Skills Development for New Managers
Date: 16 – 17 March 2017
Duration: 2 Days
Venue: NECA Learning Centre
Course Fee: Members: N82,500; Non- Members: N87,500
Emotional Intelligence for Business Advantage: For Team Leaders, Managers
Date: 19 – 20 April 2017
Duration: 2 Days
Venue: NECA Learning Centre
Course Fee: Members: N82,500; Non- Members: N87,500
For further details please contact Adewale (08069720364) email@example.com