President Yar’adua’s cabinet has been in place for more than eight months now. Since 2003, this columnist has adopted a “watching brief” on the management of the economy. We have monitored and commented on economic issues, particularly since the Ngozi Okonjo-Iweala and Charles Soludo led economic team were brought on board by former President Obasanjo. Having allowed the Yar’adua regime more than enough time to settle down, and with the Presidential Election Tribunal’s dismissal of the electoral petition against the President’s election and his effective take-over of the party structure at the recent PDP Convention, it is probably time to turn the spotlight on economic management under the Yar’adua Presidency especially as it is clear that under Yar’adua, there is likely to be much less media engagement and public policy advocacy by Ministers and other public officers.
The President strategy, at least regarding policy debate is much more low-keyed. The implication of this, if columnists, the media and the general public allow it, is that policy formulation may frequently present the public with fait accompli. This column has thus decided to commence a feature on the four principal economic functionaries in the Yar’adua presidency. These are Dr Shamsudeen Usman, the Finance Minister and leader of the Economic Management Team (EMT), Mr Remi Babalola, the Minister of State for Finance, Senator Sanusi Daggash, the Minister for National Planning and Head of the National Planning Commission (as well as deputy leader of EMT) and Mr Tanimu Yakubu, who is the President’s Chief Economic Adviser and reputedly quite close to the President. These are currently the main drivers of economic thinking. If they fail, the economy will probably fail.
These features may not necessarily be consecutive and we commence with Mr Remi Babalola. Babalola came to the Finance Ministry from the banking sector where he was an Executive Director at First Bank in charge of the Lagos/West Directorate. He had previously carried out planning responsibilities in the same bank before his appointment to the Board, and was a General Manager at Zenith Bank. Babalola graduated as an Agricultural Economist from the University of Ibadan, and trained as a Chartered Accountant at both Price Waterhouse (now Price Waterhouse Coopers) and Arthur Anderson (now KPMG). Evidently there is no doubt that he came to public economic management well prepared with a blend of appropriate academic and professional training and accounting and financial sector experience.
I have always believed that there are three critical qualifications for success in public office, especially in economic related positions-the appropriate technical and professional background, qualitative private sector or development finance background and having the right integrity and motivation for coming into public office. The best professor of Economics or Bank CEO will not succeed in an economic portfolio, if his primary motivation is either to secure a large enough pension for his retirement or some other interest different from the public good. I think Remi Babalola scores quite highly on this integrity and motivation scale. Those who knew him as a banker (and I must disclose that I am one of such) and those who have observed his disposition since his appointment as Minister of State for Finance believe that he seeks only to leave a legacy of service and to make an impact on the management of Nigeria’s public finances.
So what has he done since his appointment as Minister of State for Finance? I have criticised this regime for not having a clear-cut economic policy framework that can serve as a compass for economic management like the NEEDS document was under the former regime. I have seen media reports that the EMT has fashioned a framework for Vision 2020 which integrates the government’s economic priorities including the seven-point agenda and Vision 2020 into a coherent document. If this document is promptly released by government, it will eliminate one of the reservations about economic management under the Yar’adua Presidency. I also believe that Babalola as a key member of EMT will have to design a new framework for the Policy Support Instrument (PSI) that will preserve the support of the multilateral partners as well as guarantee that economic growth continues unabated, but social spending on infrastructure, education and health amongst others is emphasized. The Ministry of Finance has also fashioned a Medium Term Fiscal Policy (MTFP) a three-year budget framework which will be particularly useful in the absence of an overall economic framework.
One of Babalola’s most significant actions in office, has also been perhaps the most controversial-his efforts to resolve the outstanding issue of insurance sector recapitalisation. From the point of view of overall public interest, his efforts have been commendable-ending the stalemate over which firms are authorised to carry out insurance business or not, and re-invigorating the insurance sub-sector of the capital market such that many firms in that sector have secured renewed investor interest. But there are reservations over the handling of the NICON Insurance matter, especially the matter of the legal injunctions that appeared to restrain the type of actions taken in respect of the management of the company. Most insurance people I have spoken to however (perhaps naturally) are supportive of the actions taken by the Ministry of Finance in that matter.
As Minister of State, Babalola chairs the Federation Account Allocation Committee (FAAC) which is an important element of the country’s fiscal structure. Given the abuses of the constitution by all sorts of deductions and mandatory contributions from the states and local governments under the erstwhile regime-such as building primary health centres all over the country and the National Integrated Power Projects-the handling of the Federation Account under this regime has been more transparent and sensible, reflecting the government’s emphasis on the rule of law. This columnist however was a strong supporter of the CBN’s policy of making payments to states in Dollars, a policy which it appears the CBN and EMT agreed to, but which was torpedoed based on objections from the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC). I still believe the decision to stop those dollar payments was a missed opportunity.
The 2008 budget is not yet out due to disagreements with the legislature over spending increases. For me the signal from the Presidency and the Ministry of Finance that they are not in support of profligate spending is a good and commendable one.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC) a Strategy, Consultancy and Business Advisory Firm. RTC POLICY is the policy, government and political consultancy arm of RTC.
Thursday, March 27, 2008
Wednesday, March 19, 2008
The Significance of Easter
The Significance of Easter
This is the week of Easter variously referred to as the Holy Week, or the Passion Week. Indeed some days ago, I came across a beautiful literature which called it, “8 Days that Changed the World Forever”. Whatever it is called, it is Easter, rather than the more popular Christmas that defines the Christian Faith, for faith in Christ rests on the events that characterised those critical eight days-The Triumphal Entry into Jerusalem; the teachings at the Temple in Jerusalem, the Last Supper, his travails in the Garden of Gethsemane and the denial by Peter; and the climax-his crucifixion and resurrection for which Good Friday and Easter Sunday are today celebrated all over the world.
As a little child, I never could understand why they called the day Christ was so brutally killed on the cross a ‘good’ Friday, and I believe I tormented many adults with persistent questions in that regard. If Jesus was such a good man, who came to the world to save us from sin, and to heal and preach, how can it be a good day the day he was murdered? I don’t think any one quite persuaded me with the answers they attempted to give, and in the end, I guess I just gave up, and concluded that the world did not understand the difference between good and bad! Well today, knowing that but for that death, there could not have been a resurrection; knowing that but for the manner of his death, the scriptures would not have been fulfilled; and but for his resurrection, the Christian faith would have been basically pointless, I now fully understand.
The story of those marvellous eight days is well known, but still remains an epic of courage and sacrifice. The story which is included in the four gospels of Mathew, Mark, Luke and John is of a Christ who knew and indeed predicted several times his imminent betrayal and delivery to the Gentiles, his scourging and mocking and his eventual crucifixion and yet walked steadfastly towards the cross, in order that he may do the will of God, and thereby fulfil his mission of creating a permanent plan of salvation for man. As he drew near to Jerusalem, at Bethphage on the Mount of Olives, he instructed them to fetch a donkey upon which he rode into Jerusalem. His disciples put their clothes on the donkey, and many laid their garments on the floor, while others cut tree branches and all proclaimed, “Hosanna…, Blessed is he that cometh in the name of the Lord”
He went into the Temple and chased out the commercial people who had taken over the House of God (perhaps if he came into some of the Temples of the world today, he would have to repeat this purification rite) and healed the blind and the lame; he cursed the unproductive fig tree (oh that we may be productive with the talents he has deposited in us); he preached about faith, told them several parables and taught them; as usual he criticised the Scribes and Pharisees, the religious men of the day, and condemned them as hypocrites who “shut up the kingdom of heaven against men; for ye neither go in yourselves, neither suffer ye them that are entering to go in”-in Jesus’ view they merely prevented many from worshipping God, while not worshipping him themselves (how many of us would Jesus condemn as Pharisees if he came into the Church today?).
In a sense, Jesus was a revolutionary, a non-conformist who challenged the powerful people of his time, and these can be vengeful, unforgiving and violent people, as they indeed turned out to be! It is not usual in today’s theology to stress this attribute of Christ-the disdain with which he related to the Pharisees and Scribes, his total lack of sycophancy and double-speak, his firm renunciation of those who had turned the house of prayer into a den of thieves, his often undiplomatic but truthful assertions of his kingship and his courage and boldness at his subsequent trial. Today, Jesus would have been accused of a lack of wisdom!
In those last days, he instituted the Holy Communion, the breaking of bread, and drinking of wine in commemoration of his new testament, a rite which remains a cornerstone of the Christian faith till this day. He foretold of Peter’s denial and then the end game (as his persecutors imagined) began in the Garden of Gethsemane. Christ was heavy and sorrowful even as the moment of his death approached. He declared to his disciples, “My soul is exceedingly sorrowful, even unto death…” and prayed asking the Father to “…if it be possible, let this cup pass from me” but yet submitted to the will of God, “…nevertheless not as I will, but as thou wilt” It was while this ordeal lasted in the Garden that Judas one of the twelve disciples who betrayed him for money led in the soldiers, chief priests and elders who seized him and led him to the cross.
The rest of the story is of course well known-his trial before the High Priest and before Pontius Pilate, the governor. In one of the most amazing turns, the people were so hateful of Christ that they preferred the release of a notorious prisoner, Barabbas who had robbed, raped and killed to Jesus Christ who had not killed anyone, who had only healed the sick and even raised up the dead to life. The extent of that self-destructive hatred illustrates how far the world can go in spiteful wickedness even till this day, and was a classic case of cutting the nose to spite the face. They insisted that Jesus must be crucified, while Barabbas be released. And he was led to Golgotha, bearing his own cross, with a crown of thorns on his head, and they spit upon him, mocked him, and crucified him, with the inscription, “THIS IS JESUS THE KING OF THE JEWS”-a prophetic statement which they thought they were making in jest. But then, the scriptures had to be fulfilled. Jesus had to die, in order that he would rise again, and give the millions, indeed billions who are called by his name a hope of salvation and of eternal life.
Those events gave rise to the Christian faith subscribed to today, by a large proportion of the citizens of the world, and a major social and spiritual influence even on those that are non-adherents of the Christian faith. Can you imagine what may have happened if Jesus had chickened out of his divine mission and had turned away from Jerusalem or recanted before the High Priest? What if Judas had not betrayed Christ? Could the story had evolved differently-perhaps the High Priest or Pilate could have ruled in favour of Jesus, or perhaps the people realising the terrible crimes that Barabbas had committed, had asked for Jesus’ release instead of the vagabond. But then, if all those had happened, a great world faith would not have been birthed. Jesus would have ended up a great prophet like Moses, Isaiah, Elisha, or Jeremiah. Any concept of eternal life, salvation by the blood of Jesus, divine healing or resurrection will be non-existent or simply fanciful. There would not be Good Friday or Easter Sunday.
This is the week of Easter variously referred to as the Holy Week, or the Passion Week. Indeed some days ago, I came across a beautiful literature which called it, “8 Days that Changed the World Forever”. Whatever it is called, it is Easter, rather than the more popular Christmas that defines the Christian Faith, for faith in Christ rests on the events that characterised those critical eight days-The Triumphal Entry into Jerusalem; the teachings at the Temple in Jerusalem, the Last Supper, his travails in the Garden of Gethsemane and the denial by Peter; and the climax-his crucifixion and resurrection for which Good Friday and Easter Sunday are today celebrated all over the world.
As a little child, I never could understand why they called the day Christ was so brutally killed on the cross a ‘good’ Friday, and I believe I tormented many adults with persistent questions in that regard. If Jesus was such a good man, who came to the world to save us from sin, and to heal and preach, how can it be a good day the day he was murdered? I don’t think any one quite persuaded me with the answers they attempted to give, and in the end, I guess I just gave up, and concluded that the world did not understand the difference between good and bad! Well today, knowing that but for that death, there could not have been a resurrection; knowing that but for the manner of his death, the scriptures would not have been fulfilled; and but for his resurrection, the Christian faith would have been basically pointless, I now fully understand.
The story of those marvellous eight days is well known, but still remains an epic of courage and sacrifice. The story which is included in the four gospels of Mathew, Mark, Luke and John is of a Christ who knew and indeed predicted several times his imminent betrayal and delivery to the Gentiles, his scourging and mocking and his eventual crucifixion and yet walked steadfastly towards the cross, in order that he may do the will of God, and thereby fulfil his mission of creating a permanent plan of salvation for man. As he drew near to Jerusalem, at Bethphage on the Mount of Olives, he instructed them to fetch a donkey upon which he rode into Jerusalem. His disciples put their clothes on the donkey, and many laid their garments on the floor, while others cut tree branches and all proclaimed, “Hosanna…, Blessed is he that cometh in the name of the Lord”
He went into the Temple and chased out the commercial people who had taken over the House of God (perhaps if he came into some of the Temples of the world today, he would have to repeat this purification rite) and healed the blind and the lame; he cursed the unproductive fig tree (oh that we may be productive with the talents he has deposited in us); he preached about faith, told them several parables and taught them; as usual he criticised the Scribes and Pharisees, the religious men of the day, and condemned them as hypocrites who “shut up the kingdom of heaven against men; for ye neither go in yourselves, neither suffer ye them that are entering to go in”-in Jesus’ view they merely prevented many from worshipping God, while not worshipping him themselves (how many of us would Jesus condemn as Pharisees if he came into the Church today?).
In a sense, Jesus was a revolutionary, a non-conformist who challenged the powerful people of his time, and these can be vengeful, unforgiving and violent people, as they indeed turned out to be! It is not usual in today’s theology to stress this attribute of Christ-the disdain with which he related to the Pharisees and Scribes, his total lack of sycophancy and double-speak, his firm renunciation of those who had turned the house of prayer into a den of thieves, his often undiplomatic but truthful assertions of his kingship and his courage and boldness at his subsequent trial. Today, Jesus would have been accused of a lack of wisdom!
In those last days, he instituted the Holy Communion, the breaking of bread, and drinking of wine in commemoration of his new testament, a rite which remains a cornerstone of the Christian faith till this day. He foretold of Peter’s denial and then the end game (as his persecutors imagined) began in the Garden of Gethsemane. Christ was heavy and sorrowful even as the moment of his death approached. He declared to his disciples, “My soul is exceedingly sorrowful, even unto death…” and prayed asking the Father to “…if it be possible, let this cup pass from me” but yet submitted to the will of God, “…nevertheless not as I will, but as thou wilt” It was while this ordeal lasted in the Garden that Judas one of the twelve disciples who betrayed him for money led in the soldiers, chief priests and elders who seized him and led him to the cross.
The rest of the story is of course well known-his trial before the High Priest and before Pontius Pilate, the governor. In one of the most amazing turns, the people were so hateful of Christ that they preferred the release of a notorious prisoner, Barabbas who had robbed, raped and killed to Jesus Christ who had not killed anyone, who had only healed the sick and even raised up the dead to life. The extent of that self-destructive hatred illustrates how far the world can go in spiteful wickedness even till this day, and was a classic case of cutting the nose to spite the face. They insisted that Jesus must be crucified, while Barabbas be released. And he was led to Golgotha, bearing his own cross, with a crown of thorns on his head, and they spit upon him, mocked him, and crucified him, with the inscription, “THIS IS JESUS THE KING OF THE JEWS”-a prophetic statement which they thought they were making in jest. But then, the scriptures had to be fulfilled. Jesus had to die, in order that he would rise again, and give the millions, indeed billions who are called by his name a hope of salvation and of eternal life.
Those events gave rise to the Christian faith subscribed to today, by a large proportion of the citizens of the world, and a major social and spiritual influence even on those that are non-adherents of the Christian faith. Can you imagine what may have happened if Jesus had chickened out of his divine mission and had turned away from Jerusalem or recanted before the High Priest? What if Judas had not betrayed Christ? Could the story had evolved differently-perhaps the High Priest or Pilate could have ruled in favour of Jesus, or perhaps the people realising the terrible crimes that Barabbas had committed, had asked for Jesus’ release instead of the vagabond. But then, if all those had happened, a great world faith would not have been birthed. Jesus would have ended up a great prophet like Moses, Isaiah, Elisha, or Jeremiah. Any concept of eternal life, salvation by the blood of Jesus, divine healing or resurrection will be non-existent or simply fanciful. There would not be Good Friday or Easter Sunday.
Reviewing the PDP Convention
Reviewing the PDP Convention
I found it interesting watching the Peoples Democratic Party (PDP) conduct its recently concluded convention. The PDP is Nigeria’s ruling party, and whatever one’s disposition to it, the party is currently in control (subject to God of course) of Nigeria’s destiny, and that of the 140 million of us citizens of this nation. So we are interested in how the party conducts itself, because that shapes how it runs our country. One of the exercises I was engaged in leading up to the convention was comparing the PDP Convention to the on-going primaries in the Democratic and Republican parties in the US. Now I am not completely idealistic about what to expect of Nigerian politics, at least in relation to more developed democratic nations, but I nevertheless was interested in observing whether in the post-Obasanjo days, the PDP was going to become more or less democratic.
I actually thought either of the leading candidates for the party chair-former Ebonyi state governor, Sam Egwu and former Senate President, Anyim Pius Anyim were very good choices, if you put aside the internal power calculations behind their candidacies. For one thing, both of them were civilian politicians, who understand the politics of negotiation, persuasion and consensus, unlike the military triad of Obasanjo, Ahmadu Ali and Bode George who had taken control of the PDP, in much the same manner as they and their colleagues seized control of Nigeria. Egwu in my view was not one of the worst members of the 1999-2007 governors’ class. He was reasonably level-headed and conciliatory and was at worst average in his governance of Ebonyi State. Anyim on the other hand, as Senate President, scored some points for standing up against Obasanjo’s creeping dictatorship.
But of course, the internal power configurations are more important in intra-party offices, so I wasn’t surprised that eventually the governors and President Yar’adua opted for neither of the two. A vote for either candidate would have polarised the party, and probably led to its split or alternatively the permanent subjugation of the losing side. As it was, Egwu had evolved as the candidate of the pro-Obasanjo wing of the party, while Anyim was the candidate of the anti-Obasanjo elements. I believe that Egwu in particular would have easily won the contest, but for Obasanjo’s over-enthusiastic support, and campaign, which in the end proved to be a kiss of death.
I was very optimistic in the days leading up to the convention that the PDP was at last going to have a transparent democratic contest in the mould of its inaugural Jos Convention, in which Obasanjo was elected as presidential candidate over Alex Ekwueme. Given President Yar’adua’s studied refusal to endorse any of the candidates on offer, and his insistence on allowing all contenders free reign to contest, my optimism seemed justified, but in the end the PDP proved that it is just unable to act like a truly democratic organisation. Now what was wrong given the governors’ endorsement of Prince Vincent Ogbulafor and Alhaji Baraje, the Kwara candidate for Secretary, in allowing these candidates secure an overwhelming victory through the ballot box? Can a party which is so untrusting of the ballot box, ever preside successfully over a truly democratic nation?
In the end, President Yar’adua’s posture of non-interference proved to be consistent with a now-emerging pattern-in which the President says one thing publicly, but allows his very trusted allies to implement the execution of his preferred agenda, leaving the President free to disavow the agenda if it fails. There is no doubt in my mind that the President’s allies-Bukola Saraki being leader of that group in the end implemented an agenda that was either explicitly endorsed, or implicitly accepted by President Yar’ adua. Now there is absolutely nothing wrong with a sitting President influencing the choice of his party executive, especially in a presidential system of government, but what is now inexplicable is the party’s unwillingness to have such influence affirmed through the ballot box.
In comparing the PDP Convention with the US Democratic Party primaries, the important point is that the Democratic Party establishment has its preferred candidate-Hillary Clinton. But in spite of that, Barack Obama has put up a strong showing, and if he were to win the nomination, he would in time re-shape the party leadership in line with his mandate. John McCain is not the favourite of the Republican conservative establishment, yet they could not prevent his campaign which is now virtually assured of the party ticket. This way, the two parties renew themselves in line with the popular will, and guarantee that they remain aligned with voter preferences. In the PDP however, the party leadership makes all the decisions, and are unwilling to even test ratification of those decisions from their followers. The result is party primaries in which there is no voting, and eventually general elections which have to be massively rigged since if you cannot trust your own party members, you certainly will not trust the general electorate.
One consequence of the PDP Convention is that the transition to a post-Obasanjo era may have finally commenced. Vincent Ogbulafor owes his emergence to Yar’adua and the PDP governors. The new Secretary owes his position to Governor Buki Saraki. Apart from the South-West members of the new national executive, others will be beholden not to Obasanjo, but to new masters. Even the South-West members will in due course (like typical politicians) discover new allegiances. Obasanjo will of course remain influential as Chairman of the party’s Trustees and as a former President, but the balance of power has certainly shifted.
One question is what the new PDP leadership is likely to stand for in terms of policy and governance, and beyond just politics? Unfortunately we cannot yet say with any assurance. I think Vincent Ogbulafor appears to be a decent politician, who can unite the party, but he will have little impact on governance. The governors who are the new power brokers are not known for any policy advocacy, so in our view, the policy direction will not come from the party, but from the Presidency or elsewhere. Accordingly the PDP is unlikely to evolve into a vehicle for ideas about how the Nigerian society should be governed, at least not very soon. Until a party leadership emerges which derives from within the inner caucuses of the party’s power equation, the party will not lead the development of policy and ideas like the British Labour Party in the United Kingdom or even the African National Congress (ANC) in South Africa.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC) a Strategy, Consultancy and Business Advisory Firm. RTC POLICY is the policy, government and political consultancy arm of RTC.
I found it interesting watching the Peoples Democratic Party (PDP) conduct its recently concluded convention. The PDP is Nigeria’s ruling party, and whatever one’s disposition to it, the party is currently in control (subject to God of course) of Nigeria’s destiny, and that of the 140 million of us citizens of this nation. So we are interested in how the party conducts itself, because that shapes how it runs our country. One of the exercises I was engaged in leading up to the convention was comparing the PDP Convention to the on-going primaries in the Democratic and Republican parties in the US. Now I am not completely idealistic about what to expect of Nigerian politics, at least in relation to more developed democratic nations, but I nevertheless was interested in observing whether in the post-Obasanjo days, the PDP was going to become more or less democratic.
I actually thought either of the leading candidates for the party chair-former Ebonyi state governor, Sam Egwu and former Senate President, Anyim Pius Anyim were very good choices, if you put aside the internal power calculations behind their candidacies. For one thing, both of them were civilian politicians, who understand the politics of negotiation, persuasion and consensus, unlike the military triad of Obasanjo, Ahmadu Ali and Bode George who had taken control of the PDP, in much the same manner as they and their colleagues seized control of Nigeria. Egwu in my view was not one of the worst members of the 1999-2007 governors’ class. He was reasonably level-headed and conciliatory and was at worst average in his governance of Ebonyi State. Anyim on the other hand, as Senate President, scored some points for standing up against Obasanjo’s creeping dictatorship.
But of course, the internal power configurations are more important in intra-party offices, so I wasn’t surprised that eventually the governors and President Yar’adua opted for neither of the two. A vote for either candidate would have polarised the party, and probably led to its split or alternatively the permanent subjugation of the losing side. As it was, Egwu had evolved as the candidate of the pro-Obasanjo wing of the party, while Anyim was the candidate of the anti-Obasanjo elements. I believe that Egwu in particular would have easily won the contest, but for Obasanjo’s over-enthusiastic support, and campaign, which in the end proved to be a kiss of death.
I was very optimistic in the days leading up to the convention that the PDP was at last going to have a transparent democratic contest in the mould of its inaugural Jos Convention, in which Obasanjo was elected as presidential candidate over Alex Ekwueme. Given President Yar’adua’s studied refusal to endorse any of the candidates on offer, and his insistence on allowing all contenders free reign to contest, my optimism seemed justified, but in the end the PDP proved that it is just unable to act like a truly democratic organisation. Now what was wrong given the governors’ endorsement of Prince Vincent Ogbulafor and Alhaji Baraje, the Kwara candidate for Secretary, in allowing these candidates secure an overwhelming victory through the ballot box? Can a party which is so untrusting of the ballot box, ever preside successfully over a truly democratic nation?
In the end, President Yar’adua’s posture of non-interference proved to be consistent with a now-emerging pattern-in which the President says one thing publicly, but allows his very trusted allies to implement the execution of his preferred agenda, leaving the President free to disavow the agenda if it fails. There is no doubt in my mind that the President’s allies-Bukola Saraki being leader of that group in the end implemented an agenda that was either explicitly endorsed, or implicitly accepted by President Yar’ adua. Now there is absolutely nothing wrong with a sitting President influencing the choice of his party executive, especially in a presidential system of government, but what is now inexplicable is the party’s unwillingness to have such influence affirmed through the ballot box.
In comparing the PDP Convention with the US Democratic Party primaries, the important point is that the Democratic Party establishment has its preferred candidate-Hillary Clinton. But in spite of that, Barack Obama has put up a strong showing, and if he were to win the nomination, he would in time re-shape the party leadership in line with his mandate. John McCain is not the favourite of the Republican conservative establishment, yet they could not prevent his campaign which is now virtually assured of the party ticket. This way, the two parties renew themselves in line with the popular will, and guarantee that they remain aligned with voter preferences. In the PDP however, the party leadership makes all the decisions, and are unwilling to even test ratification of those decisions from their followers. The result is party primaries in which there is no voting, and eventually general elections which have to be massively rigged since if you cannot trust your own party members, you certainly will not trust the general electorate.
One consequence of the PDP Convention is that the transition to a post-Obasanjo era may have finally commenced. Vincent Ogbulafor owes his emergence to Yar’adua and the PDP governors. The new Secretary owes his position to Governor Buki Saraki. Apart from the South-West members of the new national executive, others will be beholden not to Obasanjo, but to new masters. Even the South-West members will in due course (like typical politicians) discover new allegiances. Obasanjo will of course remain influential as Chairman of the party’s Trustees and as a former President, but the balance of power has certainly shifted.
One question is what the new PDP leadership is likely to stand for in terms of policy and governance, and beyond just politics? Unfortunately we cannot yet say with any assurance. I think Vincent Ogbulafor appears to be a decent politician, who can unite the party, but he will have little impact on governance. The governors who are the new power brokers are not known for any policy advocacy, so in our view, the policy direction will not come from the party, but from the Presidency or elsewhere. Accordingly the PDP is unlikely to evolve into a vehicle for ideas about how the Nigerian society should be governed, at least not very soon. Until a party leadership emerges which derives from within the inner caucuses of the party’s power equation, the party will not lead the development of policy and ideas like the British Labour Party in the United Kingdom or even the African National Congress (ANC) in South Africa.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC) a Strategy, Consultancy and Business Advisory Firm. RTC POLICY is the policy, government and political consultancy arm of RTC.
Unlocking Power and Solid Minerals Sectors
Unlocking Power and Solid Minerals Sectors
Last week, writing about the explosive growth in Nigerians telecommunications, I lamented the self-imposed economic retardation which our policy makers have imposed on Nigerians, unfortunately often with our quiet connivance or sometimes even uninformed support. One very good illustration is the way we have denied the Nigerian economy of power, and acted as if generating power is a special and mysterious activity that requires a peculiarly Nigerian solution.
In 2001, sector specialists at the Bureau of Public Enterprsies (BPE) apparently wrote two documents-a telecommunications and a power policy. That same year, the Obasanjo government commenced implementation of the telecommunications policy. Even before the policy became law, the BPE and the Presidency had commenced those activities which could be handled administratively, including strengthening the National Communications Commission (NCC) and the famed Digital Mobile Licence (GSM) spectrum auctions that resulted in Econet (now Celtel), MTN and M-Tel acquiring exclusive GSM licenses. The policy later secured legislative backing two years later, and was encapsulated in the NCC Act of 2003.
On the other hand, rather than implement the power policy with the same speed displayed in telecommunications, we began a round of ‘government magic’ and elaborate abracadabra which ensured that the more we looked, the less power we saw! The Electric Power Sector Reform Bill which was sent to the National Assembly in the same year-2001-stayed there until it was passed into law in 2005, four whole years later, which is equivalent to the full term in office of a democratic regime! Meanwhile the government made motions of carrying out the preliminary steps which could be executed administratively, before the Bill was passed into law, such as the administrative unbundling of NEPA as a precedent to the legal unbundling after the bill became law.
The significant thing is that while the Bill was held down at the National Assembly seemingly by mutual consent of the Presidency, the people in charge of the power sector and the legislature, contracts could be awarded by the bureaucrats in NEPA and the Ministry of Power and Steel. Today while we know that huge sums of money were expended, it is less clear where the money went, or what value Nigeria has derived there from. Eventually when the Power Sector Reform Act was passed, industry watchers (such as your columnist) naively heaved a sigh of relief thinking alas, we had a sustainable model for power sector reform that government was legally mandated to implement. Well we should have known better! Since that Act was passed, the matter has gotten curiouser and curiouser.
The same government which had sent the bill, and waited four years to get it passed spent a while constituting the National Electricity Regulatory Commission (NERC) which was supposed to regulate the sector, began to talk about altering the composition of the to-be-unbundled entities mandated by the Act, and eventually stopped implementation of the Act. Instead as the 2007 elections and the ‘third term’ objective crystallized, talk of an emergency approach to the problems of the power sector emerged, and before we knew what was going on billions of dollars had been spent in a haphazard manner, and in not-a-little hurry on the so-called National Integrated Power Project. Today whether it was $5 billion, $10billion or $15 billion that was spent on that exercise, what all Nigerians will agree on is that there is likely to be significantly eroded value-for-money in relation to that spending.
Now one thing I am certain of is that if $5billion had been spent by the private sector on power or anything else for that matter, it is very unlikely that we would all be standing askance wondering where all the money went! Indeed the fact that we are arguing about how much was spent (such that one important functionary had to be relieved of his duties) demonstrates the peculiar nature of spending in the Nigerian public sector. Surely MTN and Celtel, Oando, GTBank and Dangote Group all know exactly how much they have spent on any one initiative, in any time period. Meanwhile rather than implement the carefully thought-out provisions of the Power Sector Reform Act, we have spent the years since 2005, and since the coming to office of the Yar’adua regime in May last year, pretending to be searching for a policy framework to address the sector.
Under the Act we should be proceeding to privatisation of the unbundled units of PHCN. The old NEPA has today been broken up into one transmission company, 11 distribution companies and 6 power generating companies, making a total of 18 entities in all. The Act deals with the fundamental issue of pricing. In the absence of a sustainable revenue structure, no sensible investor will invest in any sector. That is why no one except government will build refineries (except for exports) and that is why private power stations are problematic. So the Act contains the Multi-Year Tariff Adjustment (MYTA) which was meant to ensure that over a period of time electricity tariffs are adjusted to a level where there are reasonable returns to investors, and therefore a realistic prospect of foreign and domestic investment from the private sector.
The Act provides for independent regulation by NERC, provides for rural electrification which may not be commercially attractive and concessioning of the sole transmission company to competent private management. We have so far failed to proceed with any of these stipulations (which by the way are legally mandatory ala rule of law) and instead are prolonging the notion that no one knows what is to be done to remedy power failure in Nigeria. It is the same with the solid minerals sector, another sector that offers the prospect of huge investment, wealth generation, employment and taxes to the Nigerian nation. Early in 2007, I was a speaker on Channels Television’s Sunrise Programme, and the topic was education reform.
My sincere opinion was that in the time available, it would be unlikely that Oby Ezekwesili who had moved from Solid Minerals to Education in the twilight of the Obasanjo regime, would be able to complete the ambitious reforms she had conceived in the education sector. I commended her for bringing up the important subject of education reform, but expressed my preference- it would have been useful if she had stayed in solid minerals to finish the reforms she had initiated in that sector. I recall that I was not yet out of the TV studio when Oby’s call registered on my phone, and we had a long debate on the appropriateness of my views. Unfortunately since Oby’s exit from Solid Minerals, the reforms in that sector have stagnated in spite of the fact that a Mines and Minerals Act was also passed, and the uncompleted education reforms have been discarded. Today no one knows for certain what is going on in solid minerals as conflicting reports of cancellation or non-cancellation of mining licenses are bandied about. Sensible investors will stay away until the confusion is resolved.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
Last week, writing about the explosive growth in Nigerians telecommunications, I lamented the self-imposed economic retardation which our policy makers have imposed on Nigerians, unfortunately often with our quiet connivance or sometimes even uninformed support. One very good illustration is the way we have denied the Nigerian economy of power, and acted as if generating power is a special and mysterious activity that requires a peculiarly Nigerian solution.
In 2001, sector specialists at the Bureau of Public Enterprsies (BPE) apparently wrote two documents-a telecommunications and a power policy. That same year, the Obasanjo government commenced implementation of the telecommunications policy. Even before the policy became law, the BPE and the Presidency had commenced those activities which could be handled administratively, including strengthening the National Communications Commission (NCC) and the famed Digital Mobile Licence (GSM) spectrum auctions that resulted in Econet (now Celtel), MTN and M-Tel acquiring exclusive GSM licenses. The policy later secured legislative backing two years later, and was encapsulated in the NCC Act of 2003.
On the other hand, rather than implement the power policy with the same speed displayed in telecommunications, we began a round of ‘government magic’ and elaborate abracadabra which ensured that the more we looked, the less power we saw! The Electric Power Sector Reform Bill which was sent to the National Assembly in the same year-2001-stayed there until it was passed into law in 2005, four whole years later, which is equivalent to the full term in office of a democratic regime! Meanwhile the government made motions of carrying out the preliminary steps which could be executed administratively, before the Bill was passed into law, such as the administrative unbundling of NEPA as a precedent to the legal unbundling after the bill became law.
The significant thing is that while the Bill was held down at the National Assembly seemingly by mutual consent of the Presidency, the people in charge of the power sector and the legislature, contracts could be awarded by the bureaucrats in NEPA and the Ministry of Power and Steel. Today while we know that huge sums of money were expended, it is less clear where the money went, or what value Nigeria has derived there from. Eventually when the Power Sector Reform Act was passed, industry watchers (such as your columnist) naively heaved a sigh of relief thinking alas, we had a sustainable model for power sector reform that government was legally mandated to implement. Well we should have known better! Since that Act was passed, the matter has gotten curiouser and curiouser.
The same government which had sent the bill, and waited four years to get it passed spent a while constituting the National Electricity Regulatory Commission (NERC) which was supposed to regulate the sector, began to talk about altering the composition of the to-be-unbundled entities mandated by the Act, and eventually stopped implementation of the Act. Instead as the 2007 elections and the ‘third term’ objective crystallized, talk of an emergency approach to the problems of the power sector emerged, and before we knew what was going on billions of dollars had been spent in a haphazard manner, and in not-a-little hurry on the so-called National Integrated Power Project. Today whether it was $5 billion, $10billion or $15 billion that was spent on that exercise, what all Nigerians will agree on is that there is likely to be significantly eroded value-for-money in relation to that spending.
Now one thing I am certain of is that if $5billion had been spent by the private sector on power or anything else for that matter, it is very unlikely that we would all be standing askance wondering where all the money went! Indeed the fact that we are arguing about how much was spent (such that one important functionary had to be relieved of his duties) demonstrates the peculiar nature of spending in the Nigerian public sector. Surely MTN and Celtel, Oando, GTBank and Dangote Group all know exactly how much they have spent on any one initiative, in any time period. Meanwhile rather than implement the carefully thought-out provisions of the Power Sector Reform Act, we have spent the years since 2005, and since the coming to office of the Yar’adua regime in May last year, pretending to be searching for a policy framework to address the sector.
Under the Act we should be proceeding to privatisation of the unbundled units of PHCN. The old NEPA has today been broken up into one transmission company, 11 distribution companies and 6 power generating companies, making a total of 18 entities in all. The Act deals with the fundamental issue of pricing. In the absence of a sustainable revenue structure, no sensible investor will invest in any sector. That is why no one except government will build refineries (except for exports) and that is why private power stations are problematic. So the Act contains the Multi-Year Tariff Adjustment (MYTA) which was meant to ensure that over a period of time electricity tariffs are adjusted to a level where there are reasonable returns to investors, and therefore a realistic prospect of foreign and domestic investment from the private sector.
The Act provides for independent regulation by NERC, provides for rural electrification which may not be commercially attractive and concessioning of the sole transmission company to competent private management. We have so far failed to proceed with any of these stipulations (which by the way are legally mandatory ala rule of law) and instead are prolonging the notion that no one knows what is to be done to remedy power failure in Nigeria. It is the same with the solid minerals sector, another sector that offers the prospect of huge investment, wealth generation, employment and taxes to the Nigerian nation. Early in 2007, I was a speaker on Channels Television’s Sunrise Programme, and the topic was education reform.
My sincere opinion was that in the time available, it would be unlikely that Oby Ezekwesili who had moved from Solid Minerals to Education in the twilight of the Obasanjo regime, would be able to complete the ambitious reforms she had conceived in the education sector. I commended her for bringing up the important subject of education reform, but expressed my preference- it would have been useful if she had stayed in solid minerals to finish the reforms she had initiated in that sector. I recall that I was not yet out of the TV studio when Oby’s call registered on my phone, and we had a long debate on the appropriateness of my views. Unfortunately since Oby’s exit from Solid Minerals, the reforms in that sector have stagnated in spite of the fact that a Mines and Minerals Act was also passed, and the uncompleted education reforms have been discarded. Today no one knows for certain what is going on in solid minerals as conflicting reports of cancellation or non-cancellation of mining licenses are bandied about. Sensible investors will stay away until the confusion is resolved.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
The Evolving Telecommunications Sector
The Evolving Telecommunications Sector
For some days last week, I imagined that we would have to discuss the controversial NITEL “Revocation” announced by the Minister of Information and Communications, instead of our continuing focus on business outlook and industry conditions across key industries and sectors. But since it appears the revocation was actually a non-revocation and the whole mis-adventure has (hopefully) been laid to rest, we can usefully deploy our energies reviewing the evolving telecommunications sector in Nigeria. Co-incidentally, NITEL is itself a part of that industry, even though unfortunately an increasingly marginal part thereof. Fortunately I had the opportunity of expressing my views on the revocation saga on Channels Television’s Sunrise programme last Monday.
The summary of those views is that creating the impression that any transaction concluded by the former regime is a potential candidate for revocation is not good for the Nigerian economy. The other point is to stress the increasing appearance that this regime may not be totally convinced of the merits of a private-sector led economy. The Nigerian telecommunications sector proves that a mix of private sector capital and management, a sustainable industry structure and revenue model, free competition and sensible regulation, all encompassed in appropriate legislation may be the answer to the infrastructural deficiencies that Nigeria currently faces. If we recall for how many years NITEL laboured only to provide Nigeria with about 450,000 telephone lines by May 1999;
If we remember the cost (in time and money) of acquisition of those scarce lines in the NITEL days; if we recall that we have since gone from those miserable 450,000 lines reportedly to over 38million telephone lines by July 2007 (and probably over 40million by now) just seven years after the digital mobile license auctions without any significant government spending (rather government has received over $1billion in license income, and a lot more in taxes, rates, duties and changes); if we note that tele-density has now increased from just 0.4 per 100 persons to 24 per 100 in the same period; it all just illustrates the self-imposed economic retardation that our policy makers often impose on the rest of us.
In spite of the evidence from the telecommunications sector, (and other fully or partially private-sector funded sectors such as banking, upstream petroleum, aviation, broadcasting, education etc) we insisted in the power sector (and some even insist ridiculously concerning funding of sports) that only government spending would solve the problem in the power sector. Now $5billion…$10billion….or $15billion later (depending on whose figures you believe), our power generation figures have actually declined and the economy continues to suffer from an acute energy crisis. But then that is another story. The Obasanjo regime clearly got it right in telecommunications, and we now need to extend the lessons from that sector to other areas of infrastructural development.
The Nigerian telecommunications industry is now engaged in a race for market share. Of course this is the only time when 100 percent of the market will not have been taken. After this era, to gain market share, you will have to take it from other players. The industry space has been spiced up by two significant developments-the end of the exclusivity period that the initial GSM licensees of 2001 enjoyed-which led directly to the grant of a new GSM license to Mubadala (EMC) which has now selected Etisalat as its operator. The other is the advent of unified licensing and the award of unified licenses to several operators, including new ones like Dangote Group’s Alheri Engineering and existing (so-called) Private Telecommunication Operators (PTOs) such as Starcomms, and Reltel Wireless. Some operators have also begun to upgrade their networks to be able to provide third generation (3G) or 3.5G services.
The entry some years ago, of a better-resourced and strategically-focused player-Celtel, by acquisition of V Mobile also meant that the industry front-runners MTN and Glo have had to face competition on more fronts. The erstwhile PTOs who have found that their competitive ability may have been eroded by the bigger entrants have not folded their arms in frustration. Multilinks has found a suitor-Telkom of South Africa, by no means a minnow in the game, and Intercellular is tying up with Sudatel, which is demonstrating some ambition across Africa. Others where ownership has not changed hands have enjoyed better access to local and international financing enabling them to acquire the unified licenses and scale-up their operations.
Visafone has the financial muscle of Zenith Bank and the entrepreneurial vision and execution ability of Jim Ovia behind it and is claiming an ambitious roll-out in multiple locations across the country. And someone just pointed out to me that Visafone does not have to seek new locations for cell cites and masts-it can locate them in Zenith Bank branches all over the country! Recent developments also make it clear that sooner than later NITEL/M-Tel will be transferred to a competent technical partner, most likely another regional or international player. And Aliko Dangote is not accustomed to playing a marginal role in any industry he gets involved in, meaning Alheri will also have some big things under their sleeves. And doesn’t NIGCOMSAT now have a mainstream telecommunications license?
What does these all mean? Intense or at least intensifying competition is imminent in Nigerian telecommunications! What I described earlier as a race for market share will more accurately resemble a scramble and fierce battle as the evolving scenario fully unfolds. Higher levels of investments-in infrastructure, fibre-optic or satellite links and competences and skills-will be required. Meanwhile complaints about service quality and network problems mean that capacity in existing served locations have to be strengthened. All these as margins (Average Revenue Per user-ARPU) should begin to drop and as the demand for value-added services begins to rise. Fortunately however I believe telecommunications demand has proven to be deeper and more robust than anyone ever imagined so average industry profitability in our view should remain acceptable, in the short and medium term.
But most certainly many executives in the sector will grow a little bit more white hair, and should take their regular medical check-ups more regularly. Their jobs have just become tougher and more stressful. But perhaps also more rewarding and fulfilling.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
For some days last week, I imagined that we would have to discuss the controversial NITEL “Revocation” announced by the Minister of Information and Communications, instead of our continuing focus on business outlook and industry conditions across key industries and sectors. But since it appears the revocation was actually a non-revocation and the whole mis-adventure has (hopefully) been laid to rest, we can usefully deploy our energies reviewing the evolving telecommunications sector in Nigeria. Co-incidentally, NITEL is itself a part of that industry, even though unfortunately an increasingly marginal part thereof. Fortunately I had the opportunity of expressing my views on the revocation saga on Channels Television’s Sunrise programme last Monday.
The summary of those views is that creating the impression that any transaction concluded by the former regime is a potential candidate for revocation is not good for the Nigerian economy. The other point is to stress the increasing appearance that this regime may not be totally convinced of the merits of a private-sector led economy. The Nigerian telecommunications sector proves that a mix of private sector capital and management, a sustainable industry structure and revenue model, free competition and sensible regulation, all encompassed in appropriate legislation may be the answer to the infrastructural deficiencies that Nigeria currently faces. If we recall for how many years NITEL laboured only to provide Nigeria with about 450,000 telephone lines by May 1999;
If we remember the cost (in time and money) of acquisition of those scarce lines in the NITEL days; if we recall that we have since gone from those miserable 450,000 lines reportedly to over 38million telephone lines by July 2007 (and probably over 40million by now) just seven years after the digital mobile license auctions without any significant government spending (rather government has received over $1billion in license income, and a lot more in taxes, rates, duties and changes); if we note that tele-density has now increased from just 0.4 per 100 persons to 24 per 100 in the same period; it all just illustrates the self-imposed economic retardation that our policy makers often impose on the rest of us.
In spite of the evidence from the telecommunications sector, (and other fully or partially private-sector funded sectors such as banking, upstream petroleum, aviation, broadcasting, education etc) we insisted in the power sector (and some even insist ridiculously concerning funding of sports) that only government spending would solve the problem in the power sector. Now $5billion…$10billion….or $15billion later (depending on whose figures you believe), our power generation figures have actually declined and the economy continues to suffer from an acute energy crisis. But then that is another story. The Obasanjo regime clearly got it right in telecommunications, and we now need to extend the lessons from that sector to other areas of infrastructural development.
The Nigerian telecommunications industry is now engaged in a race for market share. Of course this is the only time when 100 percent of the market will not have been taken. After this era, to gain market share, you will have to take it from other players. The industry space has been spiced up by two significant developments-the end of the exclusivity period that the initial GSM licensees of 2001 enjoyed-which led directly to the grant of a new GSM license to Mubadala (EMC) which has now selected Etisalat as its operator. The other is the advent of unified licensing and the award of unified licenses to several operators, including new ones like Dangote Group’s Alheri Engineering and existing (so-called) Private Telecommunication Operators (PTOs) such as Starcomms, and Reltel Wireless. Some operators have also begun to upgrade their networks to be able to provide third generation (3G) or 3.5G services.
The entry some years ago, of a better-resourced and strategically-focused player-Celtel, by acquisition of V Mobile also meant that the industry front-runners MTN and Glo have had to face competition on more fronts. The erstwhile PTOs who have found that their competitive ability may have been eroded by the bigger entrants have not folded their arms in frustration. Multilinks has found a suitor-Telkom of South Africa, by no means a minnow in the game, and Intercellular is tying up with Sudatel, which is demonstrating some ambition across Africa. Others where ownership has not changed hands have enjoyed better access to local and international financing enabling them to acquire the unified licenses and scale-up their operations.
Visafone has the financial muscle of Zenith Bank and the entrepreneurial vision and execution ability of Jim Ovia behind it and is claiming an ambitious roll-out in multiple locations across the country. And someone just pointed out to me that Visafone does not have to seek new locations for cell cites and masts-it can locate them in Zenith Bank branches all over the country! Recent developments also make it clear that sooner than later NITEL/M-Tel will be transferred to a competent technical partner, most likely another regional or international player. And Aliko Dangote is not accustomed to playing a marginal role in any industry he gets involved in, meaning Alheri will also have some big things under their sleeves. And doesn’t NIGCOMSAT now have a mainstream telecommunications license?
What does these all mean? Intense or at least intensifying competition is imminent in Nigerian telecommunications! What I described earlier as a race for market share will more accurately resemble a scramble and fierce battle as the evolving scenario fully unfolds. Higher levels of investments-in infrastructure, fibre-optic or satellite links and competences and skills-will be required. Meanwhile complaints about service quality and network problems mean that capacity in existing served locations have to be strengthened. All these as margins (Average Revenue Per user-ARPU) should begin to drop and as the demand for value-added services begins to rise. Fortunately however I believe telecommunications demand has proven to be deeper and more robust than anyone ever imagined so average industry profitability in our view should remain acceptable, in the short and medium term.
But most certainly many executives in the sector will grow a little bit more white hair, and should take their regular medical check-ups more regularly. Their jobs have just become tougher and more stressful. But perhaps also more rewarding and fulfilling.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
The Banking Industry in 2008
The Banking Industry in 2008
For about two decades since the liberalisation of financial services brought about under General Ibrahim Babangida’s Structural Adjustment Programme (SAP), the banking sector has been one of the few sources of growth in Nigeria’s economy. The policy environment under SAP brought about a tripling of the number of banks (from around 40 to almost 120), entailed the deregulation of interest and exchange rates, the licensing of non-bank financial institutions such as mortgage, finance houses and bureaux de change (many of which failed in the atmosphere of acute macro-economic instability and mismanagement in the mid-1990s) and a general change in the atmosphere around Nigerian banking from a laid-back, conservative, and process-focused manual systems to a more entrepreneurial, dynamic, and market-centred automated banking system.
The banking sector benefited from the return to civil rule in 1999, with increase in economic activity in private sector and government business, increased access to international credit and a more stable macro-economic and political environment. But it was the consolidation exercise announced in July 2004 that radically altered the face of the Nigerian banking industry reducing the number of players from 89 to 25 through mergers, acquisitions and liquidations, and stimulating an unprecedented inflow of foreign and domestic capital into the sector. At the end of the consolidation in December 2005, the industry reflected a two-tier industry structure with a top-tier of legacy, global (and regional) and entrepreneurial players who did not have to endure complex post-merger integration and a lower-tier of more marginal institutions.
I thought the imperatives for the industry at the end of consolidation included stronger corporate governance, professional ethics and transparency in financial reporting, stronger regulation, tighter credit standards, regional and continental expansion, putting in place institutional mechanisms for consumer finance (such as credit bureaus, abolishing the Land Use Act, instituting a national identity management system and faster commercial adjudication) and strengthening capacity-human, risk management, information technology and systems and processes-in the industry. I also thought that further consolidation was required in the industry to eliminate the two-tier structure such that the more marginal entities could be acquired by stronger local players or international banks and to guarantee sustainable levels of investment returns.
In the last two years, some of these imperatives have been addressed. But the emphasis in the industry has been a second round of capital raising, rather than further consolidation through mergers and acquisitions. The only notable merger transaction was the IBTC Chartered tie-up with Standard Bank of South Africa, while a prospective deal between Ecobank and Sterling Bank may still be on the cards. Instead the other significant industry development was the CBN rules on acquisition of shares of Nigerian banks by foreign interests. Those guidelines effectively rule out the possibility of a take-over of any of the remaining twenty-four Nigerian banks by foreign banks. The CBN position appears to have evolved from at first suggesting that foreign interests will not be allowed to control our top three…then top ten…, and now none of the existing Nigerian banks.
The Bank justifies this position with the spread (actually lack of it) by the foreign-controlled banks in Nigeria, and their perceived minimal contribution to Nigerian economic development, as well as examples from Singapore and other countries. On the other hand, perhaps the new policy does not do much to advance the CBN’s objective of building an International Financial Centre in Lagos under its FSS 2020 strategy. One could in fact have argued that it may have been in the interest of our financial system if the second tier of banks (say the weakest 10 out of 24) were encouraged to seek strong international mergers or acquisitions, so that they could be strengthened and more international players could be attracted into our market. In any event, the market share of players in this tier could never threaten the CBN’s apparent objective of ensuring local control of our banking sector.
Indeed the argument that foreign banks have shied away from domestic branch expansion and aggressive growth is correct only if the analysis starts from the post-indigenisation era. First Bank (Standard Bank), Union Bank (Barclays Bank), UBA and Afribank (IBWA) and several others were all foreign-owned banks in the days when they expanded their operations all over Nigeria. Perhaps the conservative expansion posture of the successor institutions was a carry-over of the fears generated by nationalization and other institutional weaknesses in the Nigerian economy. The substantive question however is whether the Nigerian economy will benefit in any way from the presence of more international banks, and whether as a nation we should encourage or place impediments in the way of any interested institutions?
What is the outlook for the industry in 2008? Of course all the local banks which have not raised additional capital may have no alternative but to do so, since the capital threshold has now been implicitly raised to around N150 billion. But questions will remain (and may generate heightened attention in the years to come) about the efficiency of the increased capital and assets that the banks now carry and their returns on investment. Some have argued that rather than move towards greater efficiency driven by tighter processes and systems, the industry has actually moved to greater slack as entities, subsidiaries and branches are built and headcount is rapidly increased. It remains to be seen however whether this point will be supported by sector’s performance in future. I still believe the imperatives for the industry are not so different now than in January 2006 when the consolidation exercise was concluded.
Nevertheless the larger financial services industry will continue to deepen with increased specialisation and capacity building in various parts of capital markets activities-pensions and asset management, corporate finance, bonds trading and fixed income securities, real estate and infrastructure financing and hopefully continued expansion in retail financial services. Of course the institutional constraints militating against a boom in retail finance largely remain unaddressed so the astronomical volumes may not yet happen, but the gradual re-emergence of a semblance of a middle class means opportunities continue to exist in that space. I believe the industry should also accelerate the pace of regional and continental expansion before barriers begin to go up against Nigerian banks in African markets. But the serious work remains at home-dealing with governance issues, capacity building, strengthening institutional processes and systems, and improving regulatory oversight.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
For about two decades since the liberalisation of financial services brought about under General Ibrahim Babangida’s Structural Adjustment Programme (SAP), the banking sector has been one of the few sources of growth in Nigeria’s economy. The policy environment under SAP brought about a tripling of the number of banks (from around 40 to almost 120), entailed the deregulation of interest and exchange rates, the licensing of non-bank financial institutions such as mortgage, finance houses and bureaux de change (many of which failed in the atmosphere of acute macro-economic instability and mismanagement in the mid-1990s) and a general change in the atmosphere around Nigerian banking from a laid-back, conservative, and process-focused manual systems to a more entrepreneurial, dynamic, and market-centred automated banking system.
The banking sector benefited from the return to civil rule in 1999, with increase in economic activity in private sector and government business, increased access to international credit and a more stable macro-economic and political environment. But it was the consolidation exercise announced in July 2004 that radically altered the face of the Nigerian banking industry reducing the number of players from 89 to 25 through mergers, acquisitions and liquidations, and stimulating an unprecedented inflow of foreign and domestic capital into the sector. At the end of the consolidation in December 2005, the industry reflected a two-tier industry structure with a top-tier of legacy, global (and regional) and entrepreneurial players who did not have to endure complex post-merger integration and a lower-tier of more marginal institutions.
I thought the imperatives for the industry at the end of consolidation included stronger corporate governance, professional ethics and transparency in financial reporting, stronger regulation, tighter credit standards, regional and continental expansion, putting in place institutional mechanisms for consumer finance (such as credit bureaus, abolishing the Land Use Act, instituting a national identity management system and faster commercial adjudication) and strengthening capacity-human, risk management, information technology and systems and processes-in the industry. I also thought that further consolidation was required in the industry to eliminate the two-tier structure such that the more marginal entities could be acquired by stronger local players or international banks and to guarantee sustainable levels of investment returns.
In the last two years, some of these imperatives have been addressed. But the emphasis in the industry has been a second round of capital raising, rather than further consolidation through mergers and acquisitions. The only notable merger transaction was the IBTC Chartered tie-up with Standard Bank of South Africa, while a prospective deal between Ecobank and Sterling Bank may still be on the cards. Instead the other significant industry development was the CBN rules on acquisition of shares of Nigerian banks by foreign interests. Those guidelines effectively rule out the possibility of a take-over of any of the remaining twenty-four Nigerian banks by foreign banks. The CBN position appears to have evolved from at first suggesting that foreign interests will not be allowed to control our top three…then top ten…, and now none of the existing Nigerian banks.
The Bank justifies this position with the spread (actually lack of it) by the foreign-controlled banks in Nigeria, and their perceived minimal contribution to Nigerian economic development, as well as examples from Singapore and other countries. On the other hand, perhaps the new policy does not do much to advance the CBN’s objective of building an International Financial Centre in Lagos under its FSS 2020 strategy. One could in fact have argued that it may have been in the interest of our financial system if the second tier of banks (say the weakest 10 out of 24) were encouraged to seek strong international mergers or acquisitions, so that they could be strengthened and more international players could be attracted into our market. In any event, the market share of players in this tier could never threaten the CBN’s apparent objective of ensuring local control of our banking sector.
Indeed the argument that foreign banks have shied away from domestic branch expansion and aggressive growth is correct only if the analysis starts from the post-indigenisation era. First Bank (Standard Bank), Union Bank (Barclays Bank), UBA and Afribank (IBWA) and several others were all foreign-owned banks in the days when they expanded their operations all over Nigeria. Perhaps the conservative expansion posture of the successor institutions was a carry-over of the fears generated by nationalization and other institutional weaknesses in the Nigerian economy. The substantive question however is whether the Nigerian economy will benefit in any way from the presence of more international banks, and whether as a nation we should encourage or place impediments in the way of any interested institutions?
What is the outlook for the industry in 2008? Of course all the local banks which have not raised additional capital may have no alternative but to do so, since the capital threshold has now been implicitly raised to around N150 billion. But questions will remain (and may generate heightened attention in the years to come) about the efficiency of the increased capital and assets that the banks now carry and their returns on investment. Some have argued that rather than move towards greater efficiency driven by tighter processes and systems, the industry has actually moved to greater slack as entities, subsidiaries and branches are built and headcount is rapidly increased. It remains to be seen however whether this point will be supported by sector’s performance in future. I still believe the imperatives for the industry are not so different now than in January 2006 when the consolidation exercise was concluded.
Nevertheless the larger financial services industry will continue to deepen with increased specialisation and capacity building in various parts of capital markets activities-pensions and asset management, corporate finance, bonds trading and fixed income securities, real estate and infrastructure financing and hopefully continued expansion in retail financial services. Of course the institutional constraints militating against a boom in retail finance largely remain unaddressed so the astronomical volumes may not yet happen, but the gradual re-emergence of a semblance of a middle class means opportunities continue to exist in that space. I believe the industry should also accelerate the pace of regional and continental expansion before barriers begin to go up against Nigerian banks in African markets. But the serious work remains at home-dealing with governance issues, capacity building, strengthening institutional processes and systems, and improving regulatory oversight.
Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consultancy and Business Advisory Firm.
Business in 2008
Business In 2008
This column’s name describes its interests-economy, polity and society-but our centre of gravity is the economy. The polity is important because politics and government are very important drivers of economics, and society is important because the economy was made for man, and not man for economics. Our interest in society sometimes takes us into the realm of faith and religion, football, international relations etc, because man is not complete except all dimensions of his being are nourished. But from this week, and hopefully if there are no important distractions, for the next few weeks we want to focus on the economy and business. What are the issues that will define business activity, and what is the outlook in 2008?
One major concern as 2008 already enters its second month and the Yar’adua regime its ninth month is the continued absence of clarity over the government economic and policy preferences. As I have mentioned on this page, the ‘Seven-Point Agenda’ is yet to be clearly articulated in an economic strategy and plan document that can provide a compass for all government activities, decisions and spending. The fact that the 2008 budget was prepared in this environment of policy vacuum may in our view already have compromised the quality (but not quantity) of spending in that plan. The speed with which the government completes its harmonisation of NEEDS 1 and 2 with the 7-Point Agenda and the Vision 2020 intent will be important in shaping economic and business direction in 2008 and beyond.
Unfortunately there are those who argue with some support that the pace of needed economic and governance initiatives from the public sector will not pick up until the electoral petitions against the President are resolved and the PDP convention is satisfactorily conducted. One could also add the on-going review of oil and gas policy, and the search for a policy to address the critical challenges in the power sector. The fact that virtually all other sectors-education, mines and minerals, health, FCT etc-are in review mode rather than inclined to entrench and extend the successful reforms carried out under the previous regime, while fine-tuning and adding integrity and transparency where these were lacking means that very little will be done to create a business-friendly environment in 2008.
In fact far from creating a business-friendly environment, some actually detect worrying snippets of a nationalistic, perhaps even socialist orientation towards the return of state-owned economic players. For instance, can the government’s policy preferences be discerned from the imminent licensing of NIGCOMSAT as essentially a state-owned telecommunications company, while the government raises its criticisms of the privately-owned GSM service providers purportedly on ‘quality of service’ concerns?; Are the on-going reforms in the oil and gas sector designed to strengthen the government’s hold on the upstream sector of Nigeria’s oil and gas activities, in addition to the downstream which government already controls?;
Do the reversals of the refineries’ privatisation without any announcement of a fresh privatisation process suggest a lack of faith in deregulated and privatised markets? What are the implications of the ongoing reversals of policy across board, most of which appear designed to roll back the private sector take-over of the ‘commanding heights’ of the Nigerian economy? Some even suggest that the banking sector consolidation which in our view was a huge success (although we believe the regulators and operators are gradually leaving the substance for the shadows) may also be up for review. Do all of these reflect an anti-free market policy orientation or as others argue simply a desire for regional and geo-political repositioning to regain lost ground? The answers to all these questions which will hopefully unravel explicitly or by conduct in 2008 will be a significant signal to local and foreign investors in the months ahead.
It is clear as we await passage of the 2008 budget that we are in for a period of inflationary or at least reflationary spending. The key budget price benchmark is likely to be fixed in the $59-65 range, up from $40 in 2007 and $35 in 2006. In addition the government proposes to release $4billion in prior savings from the so-called excess crude accounts for the states. Even before these releases, most of the states’ budgets have been significantly higher than the 2007 spending proposals. The implications of these are likely to include higher consumer demand and spending as government reflates the entire economy and the threat of higher levels of inflation. I certainly suspect that 2008 will end up with higher inflation figures than 2007 except the CBN can struggle through monetary measures to constrain the liquidity which the politicians will be releasing into the economy across the nation. This is more so, as a Supplementary Budget to address the power sector is also likely in the course of the year.
Which makes it all the more auspicious that the CBN is moving ahead with the development and implementation of an inflation-targeting framework as part of its previously stalled ‘4-Point Naira Agenda’. The bank should have an interesting time battling inflation in the next few years! One likely area of good news is the exchange rates which should stabilise or even appreciate, especially as the government implements the payment of states allocations in dollars, another one of the stalled Naira agenda. Readers will recall that this column supported those two particular proposals, and believes in a third element of that agenda-Naira convertibility-in principle, but not with regards to the Bank’s proposed timing.
With regard to economic outlook in 2008, we anticipate a lower GDP growth rate than the government hopes to see, in our view in the range of 7-7.5%, as oil prices remain around $80 per barrel, but with the critical energy constraints of business and economic competitiveness of Nigerian firms remaining unaddressed. The CBN policy of a uniform yearend for all banks will mean tighter liquidity not just for the banks but all borrowers and corporates as the banks all seek to call-in loans and strengthen their balance sheets at the same time of the year. Many economists continue to question the link between corporate earnings and the pricing of shares in the Nigerian Stock Exchange. If this concern becomes a mainstream one, then there may be risky times ahead for capital market investors. The more optimistic view is that perhaps those prices have factored in expectations of future profit growth, which in particular sectors may be justifiable. On the whole sensible investors will be cautious.
Mr Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consulting and Business Advisory Firm.
This column’s name describes its interests-economy, polity and society-but our centre of gravity is the economy. The polity is important because politics and government are very important drivers of economics, and society is important because the economy was made for man, and not man for economics. Our interest in society sometimes takes us into the realm of faith and religion, football, international relations etc, because man is not complete except all dimensions of his being are nourished. But from this week, and hopefully if there are no important distractions, for the next few weeks we want to focus on the economy and business. What are the issues that will define business activity, and what is the outlook in 2008?
One major concern as 2008 already enters its second month and the Yar’adua regime its ninth month is the continued absence of clarity over the government economic and policy preferences. As I have mentioned on this page, the ‘Seven-Point Agenda’ is yet to be clearly articulated in an economic strategy and plan document that can provide a compass for all government activities, decisions and spending. The fact that the 2008 budget was prepared in this environment of policy vacuum may in our view already have compromised the quality (but not quantity) of spending in that plan. The speed with which the government completes its harmonisation of NEEDS 1 and 2 with the 7-Point Agenda and the Vision 2020 intent will be important in shaping economic and business direction in 2008 and beyond.
Unfortunately there are those who argue with some support that the pace of needed economic and governance initiatives from the public sector will not pick up until the electoral petitions against the President are resolved and the PDP convention is satisfactorily conducted. One could also add the on-going review of oil and gas policy, and the search for a policy to address the critical challenges in the power sector. The fact that virtually all other sectors-education, mines and minerals, health, FCT etc-are in review mode rather than inclined to entrench and extend the successful reforms carried out under the previous regime, while fine-tuning and adding integrity and transparency where these were lacking means that very little will be done to create a business-friendly environment in 2008.
In fact far from creating a business-friendly environment, some actually detect worrying snippets of a nationalistic, perhaps even socialist orientation towards the return of state-owned economic players. For instance, can the government’s policy preferences be discerned from the imminent licensing of NIGCOMSAT as essentially a state-owned telecommunications company, while the government raises its criticisms of the privately-owned GSM service providers purportedly on ‘quality of service’ concerns?; Are the on-going reforms in the oil and gas sector designed to strengthen the government’s hold on the upstream sector of Nigeria’s oil and gas activities, in addition to the downstream which government already controls?;
Do the reversals of the refineries’ privatisation without any announcement of a fresh privatisation process suggest a lack of faith in deregulated and privatised markets? What are the implications of the ongoing reversals of policy across board, most of which appear designed to roll back the private sector take-over of the ‘commanding heights’ of the Nigerian economy? Some even suggest that the banking sector consolidation which in our view was a huge success (although we believe the regulators and operators are gradually leaving the substance for the shadows) may also be up for review. Do all of these reflect an anti-free market policy orientation or as others argue simply a desire for regional and geo-political repositioning to regain lost ground? The answers to all these questions which will hopefully unravel explicitly or by conduct in 2008 will be a significant signal to local and foreign investors in the months ahead.
It is clear as we await passage of the 2008 budget that we are in for a period of inflationary or at least reflationary spending. The key budget price benchmark is likely to be fixed in the $59-65 range, up from $40 in 2007 and $35 in 2006. In addition the government proposes to release $4billion in prior savings from the so-called excess crude accounts for the states. Even before these releases, most of the states’ budgets have been significantly higher than the 2007 spending proposals. The implications of these are likely to include higher consumer demand and spending as government reflates the entire economy and the threat of higher levels of inflation. I certainly suspect that 2008 will end up with higher inflation figures than 2007 except the CBN can struggle through monetary measures to constrain the liquidity which the politicians will be releasing into the economy across the nation. This is more so, as a Supplementary Budget to address the power sector is also likely in the course of the year.
Which makes it all the more auspicious that the CBN is moving ahead with the development and implementation of an inflation-targeting framework as part of its previously stalled ‘4-Point Naira Agenda’. The bank should have an interesting time battling inflation in the next few years! One likely area of good news is the exchange rates which should stabilise or even appreciate, especially as the government implements the payment of states allocations in dollars, another one of the stalled Naira agenda. Readers will recall that this column supported those two particular proposals, and believes in a third element of that agenda-Naira convertibility-in principle, but not with regards to the Bank’s proposed timing.
With regard to economic outlook in 2008, we anticipate a lower GDP growth rate than the government hopes to see, in our view in the range of 7-7.5%, as oil prices remain around $80 per barrel, but with the critical energy constraints of business and economic competitiveness of Nigerian firms remaining unaddressed. The CBN policy of a uniform yearend for all banks will mean tighter liquidity not just for the banks but all borrowers and corporates as the banks all seek to call-in loans and strengthen their balance sheets at the same time of the year. Many economists continue to question the link between corporate earnings and the pricing of shares in the Nigerian Stock Exchange. If this concern becomes a mainstream one, then there may be risky times ahead for capital market investors. The more optimistic view is that perhaps those prices have factored in expectations of future profit growth, which in particular sectors may be justifiable. On the whole sensible investors will be cautious.
Mr Agbaje is Senior Consultant/CEO of Resources and Trust Company (RTC), a Strategy, Consulting and Business Advisory Firm.
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