Last Christmas, I wrote Part 1 of this article in which I reviewed church history and postulated a tentative hypothesis-that the enemies of the church appeared to have changed their erstwhile strategy of persecution but are now fighting from inside, in effect suggesting that the devil and his agents may have infiltrated the church. Some days ago, some friends and I were gathered discussing sundry matters, and the discussion turned to matters of faith.
Many of those gathered had horror stories to tell. These people were having serious challenges in their walk with God, amazingly coming not from outside the church, but from within. Kayode had the first horror experience to share. Apparently he was a member of a respectable Pentecostal church-he had been for over 10 years. He had never gotten involved in inner workings of the church however, as in popular parlance, he had not become a ‘worker’. He considered himself a child of God, but he had been susceptible to the occasional sin, so he didn’t quite consider himself a candidate. As Kayode advanced in age and career however he recognised a need to get closer to God. He attended Bible School and thoroughly enjoyed the experience, but he still chose not to join the church workforce. On the other hand, his growing profile meant he could no longer be anonymous in church, or any other context for that matter.
Kayode usually worshipped in the branch of the church closest to wherever he lived, and went about his business quietly. After moving to the island, he moved to a proximate branch as usual. In this new church his wife became a worker. Surprisingly, within weeks she was made a head of department, above more qualified, longstanding members. Kayode had his reservations as he wondered in what way she had earned the promotion. He felt the appointment was somehow linked to him. But he felt it was inappropriate to stop her from serving God in any capacity so he kept quiet. A few weeks afterwards, the local pastor approached Kayode with a loan request to buy a property in a choice part of Lagos Island. Kayode obliged. Weeks later, Kayode had cause to mention his plans for a change of career to his local pastor.
The pastor who at that point in time was also in career transition requested to see Kayode’s business plan! Kayode did not feel obliged to share such proprietary business information with someone in a similar career line, so he diplomatically denied the request thinking that was the end of the matter, but was he mistaken? A few weeks later, the local pastor declared to a workers retreat that the calling of the Lord was upon Kayode and appointed him a Minister. Kayode had not become a worker and was not present at the retreat! The stage was set for blackmail-if Kayode declined he would be accused of shirking the call of God; if he accepted he would come under the direct spiritual authority of an individual he now had cause to be wary of! Kayode hoped for the best and decided to honour the ministerial appointment. Well he wasn’t so lucky. Not more than a few days afterwards, the gentleman who proclaimed the call of God on his life began spreading malicious gossip about Kayode. He was careful to keep the gossip ‘below the radar’ so Kayode had no opportunity to respond.
Moji a teacher shared another horror tale. Her colleague, had been considering returning to her profession which she had not had the opportunity of practicing since graduation. Moji’s friend was not so sure she could cope with some of the things she heard happened in the industry. She then met an apparently fervent minister who ran a firm in that profession. Surely this was God answering her prayer? She arranged to spend her next vacation in the minister’s firm to test her interest in her original profession. The practices in the minister’s firm were worse than all she had heard about. And the minister personally gave her instructions to carry out those activities (knowing her previous reservations about such) without any compunction.
Olu also shared his story. Olu’s pastor and his wife ran the church like a closely-held corporation, with the pastor as CEO, the wife as Chief Operating Officer, and their children as members of the Board of Directors. A few carefully selected cronies were permitted into the Board. Apparently a “third world war” had started when the church leaders transferred a new minister to preside over the territory. The “CEO” thoroughly isolated the poor fellow, tormenting him spiritually, physically, socially and otherwise, and boasted that he would show the hapless newcomer who owned the church! Soon petitions began to fly. Members of the congregation watched in confusion as the warfare began to manifest publicly.
These are real life experiences. Reflecting on these stories, I was reminded of my hypothesis about the infiltration of the church. Surely these are not the doings of people who know anything about Christ? My worry is how many people are being driven from the faith daily by these ministers from hell. My co-discussants were already settled in their relationship with God-no one could drive them away, but how about younger Christians and unbelievers? How do we explain to them that these people do not represent the reality of the Christian faith?
Tuesday, November 4, 2008
Tuesday, October 28, 2008
Renewing America and the World
Four years ago, just after the re-election of George W Bush, I was involved in a discussion with an American, an Indian and a Nigerian on US politics. I was surprised that America re-elected Bush in spite of what had become clear-his incompetence and lack of intellectual ability to handle that important office. But as someone who philosophically always looks for the good in any circumstances, I had reached a new, positive angle-Bush’s re-election would so damage America that it would isolate the US voters from the Republican party and lead to a long period of Democratic rule once his tenure was over. I suggested these viewpoints that day to vigorous debate by my dinner companions.
I never imagined then the degree George W Bush’s erosion of American power-economic, political, and military and its influence and respect in the world go. America under Dick Cheney, Donald Rumsfeld (until his position as Secretary for Defence became completely untenable), Karl Rove and the “neo-cons” (with Bush as surrogate) has behaved so irresponsibly that it has lost the respect of the rest of the world. America’s European allies and admirers from developing nations (like this columnist) who held the United States up as a model for democracy and constitutionalism have been embarrassed by American torture of prisoners of war, rigged elections in Florida and a government that seeks to project power by deception, propaganda, bluster and brute force.
The Republicans accuse democrats of being “tax and spend”, “big government” advocates, but have presided over the unprecedented expansion of the US budget deficits and national debt and are now having to nationalise the financial sector. In foreign policy their only strategy is war, and even that they handle poorly leading to unnecessary loss of lives and increase in global tension. They mouth poorly thought-out and out-dated ideologies and have now brought the US economy to its knees, weakened its leadership in education, science and technology, and potentially threatening to erode its military power as well. Unfortunately the world cannot gloat over American weakness! Would you prefer a world dominated by China, Russia, Iran, India or by the likes of Osama Bin Laden?
The world is disappointed by US behaviour over the last eight years precisely because enlightened observers recognise that the values of democracy, liberty, opportunity, free enterprise, personal responsibility, patriotism and civic citizenship, global cooperation and faith which America has come to symbolise are ideals to which the rest of the world should aim. America under Bush and the neo-cons have moved away from those ideals. Instead America has looked more and more like its enemies, as it abandons moral superiority in favour of force and unilateralism. If the neo-cons who have held the Republican Party hostage must hold on to power by all means, at least they could be a little bit more competent!
Amazingly they have learnt absolutely nothing over the last eight years. Seeing that the Republican brand is so badly damaged, they do a deal with John McCain, the only Republican who could plausibly claim to be different from Bush; take over and revive his floundering campaign; select Sarah Palin for him as running-mate (who like Bush does not have the intellectual capacity to function in high office and who can be manipulated and tele-guided in office) and cynically go about persuading America to continue in the same path that has brought that great country almost to its knees. Since McCain is 72 years old, it can be presumed that at best he will be a single-term leader, and may not even make it to the end of his first term. Against that background, the selection of Sarah Palin as McCain’s running mate is irresponsible and demonstrates all that is wrong with Bush’s America.
Competence does not matter-propaganda will take care of that, and it makes it easy for a shadowy group to control her; she is the candidate of the evangelical right and family values, even if her 17-year old daughter is pregnant and her sister has gone through a messy divorce-it doesn’t matter that Obama is happily married, with absolutely unimpeachable family values; she and McCain will reform Washington even if McCain has been there for twenty-six years and she is under investigation in Alaska for firing the man who refused to fire her former brother-in-law; it doesn’t matter that she just got an international passport and travelled outside the US in 2007-all she has to do is arrange some photo-ops with Kissinger, use the words “bless us” every now and then (to appeal to the Christian right), avoid direct media interviews, mock Barrack Obama, and appeal to cultural conservatives. It really is a shame.
The choice before American voters on November 4 goes beyond voting for president. Americans will be voting either to renew America or signal the beginning of the end of the American era. When great empires decline, it is often characterised by a succession of weak and incompetent leaders and a leadership elite that refuses to learn from initial errors. If America votes for Obama, it will be a vote for renewal, revival and re-invigoration. It will be a message to the world that its time for a world free of prejudice and divisiveness. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
I never imagined then the degree George W Bush’s erosion of American power-economic, political, and military and its influence and respect in the world go. America under Dick Cheney, Donald Rumsfeld (until his position as Secretary for Defence became completely untenable), Karl Rove and the “neo-cons” (with Bush as surrogate) has behaved so irresponsibly that it has lost the respect of the rest of the world. America’s European allies and admirers from developing nations (like this columnist) who held the United States up as a model for democracy and constitutionalism have been embarrassed by American torture of prisoners of war, rigged elections in Florida and a government that seeks to project power by deception, propaganda, bluster and brute force.
The Republicans accuse democrats of being “tax and spend”, “big government” advocates, but have presided over the unprecedented expansion of the US budget deficits and national debt and are now having to nationalise the financial sector. In foreign policy their only strategy is war, and even that they handle poorly leading to unnecessary loss of lives and increase in global tension. They mouth poorly thought-out and out-dated ideologies and have now brought the US economy to its knees, weakened its leadership in education, science and technology, and potentially threatening to erode its military power as well. Unfortunately the world cannot gloat over American weakness! Would you prefer a world dominated by China, Russia, Iran, India or by the likes of Osama Bin Laden?
The world is disappointed by US behaviour over the last eight years precisely because enlightened observers recognise that the values of democracy, liberty, opportunity, free enterprise, personal responsibility, patriotism and civic citizenship, global cooperation and faith which America has come to symbolise are ideals to which the rest of the world should aim. America under Bush and the neo-cons have moved away from those ideals. Instead America has looked more and more like its enemies, as it abandons moral superiority in favour of force and unilateralism. If the neo-cons who have held the Republican Party hostage must hold on to power by all means, at least they could be a little bit more competent!
Amazingly they have learnt absolutely nothing over the last eight years. Seeing that the Republican brand is so badly damaged, they do a deal with John McCain, the only Republican who could plausibly claim to be different from Bush; take over and revive his floundering campaign; select Sarah Palin for him as running-mate (who like Bush does not have the intellectual capacity to function in high office and who can be manipulated and tele-guided in office) and cynically go about persuading America to continue in the same path that has brought that great country almost to its knees. Since McCain is 72 years old, it can be presumed that at best he will be a single-term leader, and may not even make it to the end of his first term. Against that background, the selection of Sarah Palin as McCain’s running mate is irresponsible and demonstrates all that is wrong with Bush’s America.
Competence does not matter-propaganda will take care of that, and it makes it easy for a shadowy group to control her; she is the candidate of the evangelical right and family values, even if her 17-year old daughter is pregnant and her sister has gone through a messy divorce-it doesn’t matter that Obama is happily married, with absolutely unimpeachable family values; she and McCain will reform Washington even if McCain has been there for twenty-six years and she is under investigation in Alaska for firing the man who refused to fire her former brother-in-law; it doesn’t matter that she just got an international passport and travelled outside the US in 2007-all she has to do is arrange some photo-ops with Kissinger, use the words “bless us” every now and then (to appeal to the Christian right), avoid direct media interviews, mock Barrack Obama, and appeal to cultural conservatives. It really is a shame.
The choice before American voters on November 4 goes beyond voting for president. Americans will be voting either to renew America or signal the beginning of the end of the American era. When great empires decline, it is often characterised by a succession of weak and incompetent leaders and a leadership elite that refuses to learn from initial errors. If America votes for Obama, it will be a vote for renewal, revival and re-invigoration. It will be a message to the world that its time for a world free of prejudice and divisiveness. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
Monday, October 20, 2008
Nigeria and the Global Financial Crisis Part 2
Last week I argued that with the exception of our sound macroeconomic conditions, every other element of the current global financial crisis is present in Nigeria. These include the existence of asset bubbles (share prices and probably property values), excess banks’ capital, imprudent financial sector lending, excessive capital market exuberance, and weak regulation in the financial sector and capital markets. As I wrote this article, I thought it would be interesting to review some of the things said in relation to the economy and particularly the financial sector in this column over the last two years.
Business in 2008 (February 13, 2008)
“The CBN policy of a uniform year end 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…On the whole sensible investors will be cautious.”
The Banking Industry in 2008 (February 20, 2008)
“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… 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…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.”
Soludo Again!!...Well? (August 29, 2007)
“I think we have done well with macro-economic and banking reforms, but I think we are both over-celebrating and doing so too early! A large part of the macro-economic success has been “wind-assisted”, aided by extra-ordinarily high oil prices. We remain dependent on oil for export earnings, the economy is still import-dependent, infrastructure is still decrepit and domestic productivity is still weak….our economy is still highly susceptible to internal and external shocks-stock market bubbles and high oil prices being my biggest concerns.”
Nigerian Banking: Differentiating or Commoditising? (August 1, 2007)
“This trend may also be re-enforced if over capacity emerges as banks build overlapping branches, duplicate ATM locations, chase the same markets and acquire capital in excess of current requirements. The classic sequence then is for price competition to ensue, margins to drop, and in the specific context of banking, imprudent loans and transactions to be booked. These sequences will be amplified if the market is not growing or growing slower than the rate of capacity accumulation. There is nothing that suggests that Nigerian banking must follow this sequence, but nothing precludes the possibility.”
Conclusion
It does seem that if policy makers and market participants had taken a few of the things written on these pages seriously, we would at the very least not be surprised by much of what has happened-the liquidity implications, and consequent failure of the uniform bank year end policy; the capital market collapse; the implications of excess bank capital (one notable exception-Skye Bank went to the market to raise just as much capital as it needed rather than follow the Joneses!); the sequence leading to imprudent lending; and weak supervision; we might as well have recognised the real imperatives for the industry-such as regional and continental expansion (which Access Bank for instance seems to get) and strengthening capacity, governance and systems.
Nigeria is not completely immune from the global financial crisis as some have suggested. On the other hand, we are unlikely to suffer as severe a financial and economic crisis as the western economies, even though individual institutions may get into trouble. But we have common attributes which if not well managed can deteriorate into crisis. If macroeconomic management and regulatory capacity are not improved, adverse scenarios may develop. So far however the regulators are simply in denial. Deferring banks’ recognition of already bad loans is not a good idea-like merely covering a wound with plasters, it merely postpones the evil day, makes the wound fester, and makes the required treatment more radical and expensive. Restricting the downward price movement of shares is a similar regulatory error. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
Business in 2008 (February 13, 2008)
“The CBN policy of a uniform year end 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…On the whole sensible investors will be cautious.”
The Banking Industry in 2008 (February 20, 2008)
“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… 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…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.”
Soludo Again!!...Well? (August 29, 2007)
“I think we have done well with macro-economic and banking reforms, but I think we are both over-celebrating and doing so too early! A large part of the macro-economic success has been “wind-assisted”, aided by extra-ordinarily high oil prices. We remain dependent on oil for export earnings, the economy is still import-dependent, infrastructure is still decrepit and domestic productivity is still weak….our economy is still highly susceptible to internal and external shocks-stock market bubbles and high oil prices being my biggest concerns.”
Nigerian Banking: Differentiating or Commoditising? (August 1, 2007)
“This trend may also be re-enforced if over capacity emerges as banks build overlapping branches, duplicate ATM locations, chase the same markets and acquire capital in excess of current requirements. The classic sequence then is for price competition to ensue, margins to drop, and in the specific context of banking, imprudent loans and transactions to be booked. These sequences will be amplified if the market is not growing or growing slower than the rate of capacity accumulation. There is nothing that suggests that Nigerian banking must follow this sequence, but nothing precludes the possibility.”
Conclusion
It does seem that if policy makers and market participants had taken a few of the things written on these pages seriously, we would at the very least not be surprised by much of what has happened-the liquidity implications, and consequent failure of the uniform bank year end policy; the capital market collapse; the implications of excess bank capital (one notable exception-Skye Bank went to the market to raise just as much capital as it needed rather than follow the Joneses!); the sequence leading to imprudent lending; and weak supervision; we might as well have recognised the real imperatives for the industry-such as regional and continental expansion (which Access Bank for instance seems to get) and strengthening capacity, governance and systems.
Nigeria is not completely immune from the global financial crisis as some have suggested. On the other hand, we are unlikely to suffer as severe a financial and economic crisis as the western economies, even though individual institutions may get into trouble. But we have common attributes which if not well managed can deteriorate into crisis. If macroeconomic management and regulatory capacity are not improved, adverse scenarios may develop. So far however the regulators are simply in denial. Deferring banks’ recognition of already bad loans is not a good idea-like merely covering a wound with plasters, it merely postpones the evil day, makes the wound fester, and makes the required treatment more radical and expensive. Restricting the downward price movement of shares is a similar regulatory error. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
Wednesday, October 15, 2008
Nigeria and the Global Financial Crisis Part 1
The on-going global financial crisis has generated debates about the extent to which the Nigerian economy is at risk of contagion which is spreading all over the world. To sensibly answer this question, we must carefully diagnose the causes and critical elements of the US and European financial meltdown which have now degenerated into a cause for global concern. The root of the problem was the housing bubble which led to unrealistic property prices in the US. This led banks to lower lending standards and grant mortgages to borrowers who would otherwise not be qualified to access them. Those borrowers on their part were enticed to procure those mortgages because of easy initial terms and the presumed availability of refinancing options on more favourable terms.
Remember this all made sense because interest rates were low, and property values were rising dramatically on a seemingly sustained basis. However once housing prices started to stagnate or drop, and interest rates began to tighten, refinancing became more difficult, and defaults and foreclosures began to increase. Once that cycle was broken, the wheel would naturally turn in the opposite direction, and property prices began to plunge just as easy initial terms began to expire and adjustable rate mortgages were reset to higher interest rates leading to more defaults and foreclosures. Gradually concerns about the value of portfolios of financial institutions and corporates with exposure to housing and mortgage markets began to spread and credit to such institutions dried up.
That led consecutively to the failure of Northern Rock, INDYMAC and Bear Sterns a major US investment bank with exposure to securitized mortgages. Fears began to spread about Fannie Mae and Freddie Mac and American capital markets plunged leading to a government “bail out” of the two mortgage behemoths. By this time, a credit crisis had developed which eventually spread beyond mortgage and housing related businesses to the entire financial markets as no one knew which institution would follow. Huge veritable firms were threatened-Lehman Brothers, Merrill Lynch, AIG, HBOS, Washington Mutual and the top two investment banks, Morgan Stanley and Goldman Sachs had to convert to bank holding companies (essentially seeking access to retail deposits and FDIC insurance) to survive. In September everything hit the fan, leading to Henry Paulson’s famous $700billion bail-out plan as the credit squeeze now threatened a wider recession.
What were the critical elements that combined to produce this spectacular market failure? There were six major ones- weak macroeconomic conditions produced by an irresponsible US government under George Bush that incurred huge budget deficits and unsustainable debts while fighting two major wars; asset price bubbles (housing); excess capital in financial markets; imprudent lending by banks and the financial sector; “irrational exuberance” in capital and financial markets; and weak financial market regulation. With the exception of our very strong macroeconomics (huge foreign currency reserves and low external debt), each one of the other elements in present in the Nigerian case!
We have asset price bubbles (recently busted share prices and perhaps a developing property bubble as well); banks have been encouraged to amass capital in excess of their requirements (clearly there is an over-supply of bank stocks on the capital market and the talk about share buy-backs is an admission of over-capitalisation); there has been a wave of imprudent lending most notably (but not limited to) margin lending to purchase over-valued stocks; there has been a mass hysteria in the capital market with wholesale, institutional and retail investors alike rushing in and expecting 100 percent annual returns! I also believe there has not been sufficient or appropriate regulation in the financial sector as everyone focused on banking sector growth and capital market regulators did not display sufficient understanding of the underlying market risks.
It does seem that the major insulation from a domestic financial crisis is not the financial sector itself, but our very strong macroeconomic conditions. We must thank God for Ngozi Okonjo-Iweala (and debt forgiveness) and Olusegun Obasanjo (for leaving us $50billion in reserves). And even our macroeconomics while sound, are headed in the wrong direction-oil prices are plunging, spending is rising, infrastructure remains weak, and policy is stagnant or reversing. The outlook for Nigeria will depend on the answer to some critical questions-will government curtail spending and revise its oil price benchmark downwards in the face of plummeting oil prices? Will government put in play a more effective policy for power, transport and other infrastructure, as well as overall economic management? How large are the margin lending related (and other loan) losses in the banking sector? How significant are Nigerian bank exposures to international banks? Finally will regulatory capacity in the capital market be rapidly overhauled? opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
Remember this all made sense because interest rates were low, and property values were rising dramatically on a seemingly sustained basis. However once housing prices started to stagnate or drop, and interest rates began to tighten, refinancing became more difficult, and defaults and foreclosures began to increase. Once that cycle was broken, the wheel would naturally turn in the opposite direction, and property prices began to plunge just as easy initial terms began to expire and adjustable rate mortgages were reset to higher interest rates leading to more defaults and foreclosures. Gradually concerns about the value of portfolios of financial institutions and corporates with exposure to housing and mortgage markets began to spread and credit to such institutions dried up.
That led consecutively to the failure of Northern Rock, INDYMAC and Bear Sterns a major US investment bank with exposure to securitized mortgages. Fears began to spread about Fannie Mae and Freddie Mac and American capital markets plunged leading to a government “bail out” of the two mortgage behemoths. By this time, a credit crisis had developed which eventually spread beyond mortgage and housing related businesses to the entire financial markets as no one knew which institution would follow. Huge veritable firms were threatened-Lehman Brothers, Merrill Lynch, AIG, HBOS, Washington Mutual and the top two investment banks, Morgan Stanley and Goldman Sachs had to convert to bank holding companies (essentially seeking access to retail deposits and FDIC insurance) to survive. In September everything hit the fan, leading to Henry Paulson’s famous $700billion bail-out plan as the credit squeeze now threatened a wider recession.
What were the critical elements that combined to produce this spectacular market failure? There were six major ones- weak macroeconomic conditions produced by an irresponsible US government under George Bush that incurred huge budget deficits and unsustainable debts while fighting two major wars; asset price bubbles (housing); excess capital in financial markets; imprudent lending by banks and the financial sector; “irrational exuberance” in capital and financial markets; and weak financial market regulation. With the exception of our very strong macroeconomics (huge foreign currency reserves and low external debt), each one of the other elements in present in the Nigerian case!
We have asset price bubbles (recently busted share prices and perhaps a developing property bubble as well); banks have been encouraged to amass capital in excess of their requirements (clearly there is an over-supply of bank stocks on the capital market and the talk about share buy-backs is an admission of over-capitalisation); there has been a wave of imprudent lending most notably (but not limited to) margin lending to purchase over-valued stocks; there has been a mass hysteria in the capital market with wholesale, institutional and retail investors alike rushing in and expecting 100 percent annual returns! I also believe there has not been sufficient or appropriate regulation in the financial sector as everyone focused on banking sector growth and capital market regulators did not display sufficient understanding of the underlying market risks.
It does seem that the major insulation from a domestic financial crisis is not the financial sector itself, but our very strong macroeconomic conditions. We must thank God for Ngozi Okonjo-Iweala (and debt forgiveness) and Olusegun Obasanjo (for leaving us $50billion in reserves). And even our macroeconomics while sound, are headed in the wrong direction-oil prices are plunging, spending is rising, infrastructure remains weak, and policy is stagnant or reversing. The outlook for Nigeria will depend on the answer to some critical questions-will government curtail spending and revise its oil price benchmark downwards in the face of plummeting oil prices? Will government put in play a more effective policy for power, transport and other infrastructure, as well as overall economic management? How large are the margin lending related (and other loan) losses in the banking sector? How significant are Nigerian bank exposures to international banks? Finally will regulatory capacity in the capital market be rapidly overhauled? opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division while RTC Strategy and Advisory offers private sector advisory services.
Friday, October 10, 2008
Re: Freedom of Information Bill
I believe a freedom of Information Bill if passed (in an authentic form, rather than in a fundamentally diluted version-which we must guard against) will be an important element in restructuring our politics and democracy.
We have a political system that is not accountable to the people-votes do not necessarily determine who wins elections; parties are not internally democratic; the economy is not significantly dependent on taxes; corruption and abuse of office is endemic; and elected officers become masters rather than servants of the electorate, once in office.
I believe access to information is a fundamental plank in addressing this “colonial” political system.
Of course there must be other planks – civic citizenship, popular participation by elite and middle class groups, internal democracy within political parties, electoral reform, and strengthening INEC and judicial independence amongst others.
I believe that because our current class of political overlords understand the real possibility that greater access to government information can severely erode their political prerogatives and power and expose corruption and maladministration they will not willingly allow its passing.
So civil society must increase the pressure and seek international support.
We must also put individual legislators on the line to indicate whether they support FOI or not.
We have a political system that is not accountable to the people-votes do not necessarily determine who wins elections; parties are not internally democratic; the economy is not significantly dependent on taxes; corruption and abuse of office is endemic; and elected officers become masters rather than servants of the electorate, once in office.
I believe access to information is a fundamental plank in addressing this “colonial” political system.
Of course there must be other planks – civic citizenship, popular participation by elite and middle class groups, internal democracy within political parties, electoral reform, and strengthening INEC and judicial independence amongst others.
I believe that because our current class of political overlords understand the real possibility that greater access to government information can severely erode their political prerogatives and power and expose corruption and maladministration they will not willingly allow its passing.
So civil society must increase the pressure and seek international support.
We must also put individual legislators on the line to indicate whether they support FOI or not.
Wednesday, October 8, 2008
Is Nigeria a Colonial State?
A law firm organised a conference on freedom of information earlier this year to which I was invited. When time came to contribute to the discussions, I urged participants at the event to recognise the fundamental issues involved in passing a freedom of information bill. My argument was essentially that constitutional law in nation-states, and laws having a bearing on constitutional structure, political power and fundamental human rights usually reflect the balance of power within such states. The constitution of the United Kingdom for instance has evolved from a full monarchy to a titular monarchy within a parliamentary democracy essentially reflecting the shifting balance of power in that country.
The Americans constructed a constitution reflecting the aspirations of its founding fathers for a federal democracy in which all men would be free and in which no man would be all-powerful. Given that the US was founded by people in search of liberty and freedom, the US constitution reflects those realities and biases. It is the same for other countries. The existence of a freedom of information bill in a country reflects the fact that political power in those countries reside with the people. Only a truly democratic nation could enact a real freedom of information bill. China for instance, in spite of its economic success cannot afford to promulgate a freedom of information law. Neither can Saudi Arabia, Iran or Cuba. Nigerians I therefore argued should recognise that our real assignment would be to change the balance of power in the Nigerian state in favour of the people.
I agreed that passage of the freedom of information bill would be a big bonus in the journey towards altering that balance of power, but I cautioned that no one knows that better than the present custodians of the state, who know only too well the potential of such legislation in exposing corruption, deepening participatory democracy and expanding fundamental human rights. Accordingly given the corrupt and undemocratic nature of the Nigerian state, it would be very naive to expect an authentic freedom of information bill to be enacted. That was why ex-President Obasanjo did not sign the bill passed by the past National Assembly, and that was why I was pessimistic that the current Assembly would do the same.
Given the feedback I received during and after the seminar, I realised (quite to my surprise) that my hypothesis was a bit too complicated for some of the attendees and speakers, even for a gathering of lawyers and journalists. One particular learned gentleman asked whether I was a coup plotter! After the event Ms Valerie Ogbuah, Businessday’s late law editor (may her sweet gentle soul rest in peace) sent me an e-mail requesting me to document my views for Businessday’s law pages, which I did and which she published. In that publication, I added that Nigerians must be vigilant as to the contents of any freedom of information bill that would be passed by the current legislature. Again, knowing the nature of the Nigerian state, I suspected that when the state was cornered on the matter, the legislature would resort to subterfuge-enact a law that carries the title “Freedom of Information” but whose contents would be diametrically opposed to any such notion.
The day the Presidency gathered all its appointees into the Aso Rock banquet hall, brought in a judge, and made all of them swear publicly to an oath of secrecy, any notions that this government is supportive of free access to information by the citizens and the mass media became fanciful and unrealistic. It was significant that the presidency which could have asked those appointees to sign those oaths privately (like secret cults do) and inserted same in their files, chose to have the event done publicly perhaps to signal to those citizens who think Nigeria belongs to them that, “No, this country belongs to the government!” Now we hear that the Senate Committee on Information has re-drafted the Bill to actually make it virtually impossible to access information, much as I expected.
The roots of the problem go back to our colonial times. The colonial government created a state reflecting the needs of a government that had imposed itself on a conquered people-a colonial army and police “force” oriented towards maintaining public order by force of arms and brainwashed into regarding the citizenry as “bloody civilians”, Government Reservation Areas (GRAs) in which colonial officers could live in safety and seclusion from angry natives, Official Secrets Acts and “General Orders” which preserved the colonial masters’ secrets from exposure to citizens and nationalist leaders, and laws against sedition which prevented educated natives from inciting the populace against the colonialists. While these were perfectly understandable needs of a colonial regime, the tragedy is that at independence, nationalist politicians merely inherited the colonial state with little or no changes. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division of the company.
The Americans constructed a constitution reflecting the aspirations of its founding fathers for a federal democracy in which all men would be free and in which no man would be all-powerful. Given that the US was founded by people in search of liberty and freedom, the US constitution reflects those realities and biases. It is the same for other countries. The existence of a freedom of information bill in a country reflects the fact that political power in those countries reside with the people. Only a truly democratic nation could enact a real freedom of information bill. China for instance, in spite of its economic success cannot afford to promulgate a freedom of information law. Neither can Saudi Arabia, Iran or Cuba. Nigerians I therefore argued should recognise that our real assignment would be to change the balance of power in the Nigerian state in favour of the people.
I agreed that passage of the freedom of information bill would be a big bonus in the journey towards altering that balance of power, but I cautioned that no one knows that better than the present custodians of the state, who know only too well the potential of such legislation in exposing corruption, deepening participatory democracy and expanding fundamental human rights. Accordingly given the corrupt and undemocratic nature of the Nigerian state, it would be very naive to expect an authentic freedom of information bill to be enacted. That was why ex-President Obasanjo did not sign the bill passed by the past National Assembly, and that was why I was pessimistic that the current Assembly would do the same.
Given the feedback I received during and after the seminar, I realised (quite to my surprise) that my hypothesis was a bit too complicated for some of the attendees and speakers, even for a gathering of lawyers and journalists. One particular learned gentleman asked whether I was a coup plotter! After the event Ms Valerie Ogbuah, Businessday’s late law editor (may her sweet gentle soul rest in peace) sent me an e-mail requesting me to document my views for Businessday’s law pages, which I did and which she published. In that publication, I added that Nigerians must be vigilant as to the contents of any freedom of information bill that would be passed by the current legislature. Again, knowing the nature of the Nigerian state, I suspected that when the state was cornered on the matter, the legislature would resort to subterfuge-enact a law that carries the title “Freedom of Information” but whose contents would be diametrically opposed to any such notion.
The day the Presidency gathered all its appointees into the Aso Rock banquet hall, brought in a judge, and made all of them swear publicly to an oath of secrecy, any notions that this government is supportive of free access to information by the citizens and the mass media became fanciful and unrealistic. It was significant that the presidency which could have asked those appointees to sign those oaths privately (like secret cults do) and inserted same in their files, chose to have the event done publicly perhaps to signal to those citizens who think Nigeria belongs to them that, “No, this country belongs to the government!” Now we hear that the Senate Committee on Information has re-drafted the Bill to actually make it virtually impossible to access information, much as I expected.
The roots of the problem go back to our colonial times. The colonial government created a state reflecting the needs of a government that had imposed itself on a conquered people-a colonial army and police “force” oriented towards maintaining public order by force of arms and brainwashed into regarding the citizenry as “bloody civilians”, Government Reservation Areas (GRAs) in which colonial officers could live in safety and seclusion from angry natives, Official Secrets Acts and “General Orders” which preserved the colonial masters’ secrets from exposure to citizens and nationalist leaders, and laws against sedition which prevented educated natives from inciting the populace against the colonialists. While these were perfectly understandable needs of a colonial regime, the tragedy is that at independence, nationalist politicians merely inherited the colonial state with little or no changes. opeyemiagbaje.blogspot.com
Agbaje is CEO of Resources and Trust Company Ltd-a strategy, consultancy and business advisory firm. RTC POLICY is the policy, government and political consultancy division of the company.
Wednesday, September 24, 2008
Yar'adua's Renaissance Part 2
So it appears that since his return from Saudi Arabia, President Yar’adua is revving up his administration’s engines; he has asked his flight engineer (some will say control tower) out of the craft and selected a new one, he is engaging the gears and is now seeking to re-assemble a new flight crew. But he still has to define the destination. And the definition of the destination must also influence the choice of a crew. In simple terms, while it appears that the regime is looking more decisive, it is not yet clear in what direction that decisiveness proposes to go. The regime’s policy direction is yet to be fully clarified and in the absence of that clarification, it is not clear what type of people the regime would be looking for in its proposed cabinet re-shuffle.
One worrying indicator was the Channels Television closure which suggested a possible intent towards a more authoritarian inclination. It is clear like most commentators have noted that Channels TV made a professional error in not cross-checking the report that the president may resign before airing it. In spite of this error however, there was more than enough mitigation in the whole circumstances. The station quoted a third-party international news agency which had been similarly deceived by whoever sent those hoax reports. They immediately reported the rebuttal and apologised rather than stick to a wrong position. Clearly the government’s action was an over-reaction and reflects probably a desire to send a message of a tougher posture in relation to the media. Someone in government or the security agencies is clearly uncomfortable with the media’s open discussion of matters they would prefer to be handled behind closed doors. In any event, the resort to arbitary actions rather than an adherence to the rule of law, has damaged the regime’s democratic credentials.
More importantly, the Channels affair reminds us that there are some constituencies who are interested in formenting national disorder and who will do anything to achieve their desires. The real issue is, who were the people who sent the hoax e-mails in the name of the News Agency of Nigeria, and what was their objective? And why do the PDP national executives continue to make reckless allegations of treason in response to every press statement issued by opposition parties? My suspicion is that all we are seeing (including the scape-goating of Channels) are symptoms reflective of deeper tensions over more fundamental concerns relating to political power and succession scenarios.
But back to the Yar’adua regime and the prospects for policy invigoration. The most important role of a leader is to provide a vision and direction, and them to assemble a team that he can influence, manage, motivate, and lead to actualise that vision. And then the leader must communicate the vision and secure support of the people for the vision. And the leader must be bold, courageous and decisive in removing obstacles and facing challenges in the path. And the vision, direction and policies charted by the leader must be the right one. It is perfectly possible (as Hitler for instance demonstrated) for a leader to lead a whole nation on a path that is not quite right.
The 7-Point Agenda provides a basis for identifying areas of government priorities. But it does not define what is to be done with any of the matters contained in the agenda. Like the power sector for instance has demonstrated, a policy that understands the issues in the sector and that provides a road map for dealing with those issues is indispensable. The NEEDS document was an example of a detailed economic strategy document that analysed the issues, defined objectives, solutions and policies, provided an action plan and identified targets and deliverables. Underlying any vision or strategy is a philosophy-some coherent beliefs and first principles that provide a frame of reference for the details in the plan. So what is the regime’s philosophy of governance?
Does the regime believe in a private-sector driven economy? Does the regime want to see an economy operating on free enterprise principles but with strong regulation and an effective competition and anti-trust regime? What are its views about education, health and social services? What is President Yar’adua’s position on some of the major political and constitutional issues confronting Nigeria-devolution of power, fiscal federalism, Niger-Delta and other matters relating to the structure of our federal system? What does the President really think about corruption and economic crimes? What kind of nation does President Yar’adua want to create? What national identity does he hope to forge out of Nigeria’s many ethnic groups and peoples, if any? What is the regime’s attitude to the world that defines its thinking on foreign, defence and security policy? Government and leadership cannot operate in a philosophical vacuum and where there is no clarity about an entity’s philosophical orientation, something emerges to fill the space. Nature as they say abhors a vacuum!
The point of this all-the regime must urgently define its philosophy, vision and direction, and policy orientation and select ministers who understand and can implement actions to realise that vision.
One worrying indicator was the Channels Television closure which suggested a possible intent towards a more authoritarian inclination. It is clear like most commentators have noted that Channels TV made a professional error in not cross-checking the report that the president may resign before airing it. In spite of this error however, there was more than enough mitigation in the whole circumstances. The station quoted a third-party international news agency which had been similarly deceived by whoever sent those hoax reports. They immediately reported the rebuttal and apologised rather than stick to a wrong position. Clearly the government’s action was an over-reaction and reflects probably a desire to send a message of a tougher posture in relation to the media. Someone in government or the security agencies is clearly uncomfortable with the media’s open discussion of matters they would prefer to be handled behind closed doors. In any event, the resort to arbitary actions rather than an adherence to the rule of law, has damaged the regime’s democratic credentials.
More importantly, the Channels affair reminds us that there are some constituencies who are interested in formenting national disorder and who will do anything to achieve their desires. The real issue is, who were the people who sent the hoax e-mails in the name of the News Agency of Nigeria, and what was their objective? And why do the PDP national executives continue to make reckless allegations of treason in response to every press statement issued by opposition parties? My suspicion is that all we are seeing (including the scape-goating of Channels) are symptoms reflective of deeper tensions over more fundamental concerns relating to political power and succession scenarios.
But back to the Yar’adua regime and the prospects for policy invigoration. The most important role of a leader is to provide a vision and direction, and them to assemble a team that he can influence, manage, motivate, and lead to actualise that vision. And then the leader must communicate the vision and secure support of the people for the vision. And the leader must be bold, courageous and decisive in removing obstacles and facing challenges in the path. And the vision, direction and policies charted by the leader must be the right one. It is perfectly possible (as Hitler for instance demonstrated) for a leader to lead a whole nation on a path that is not quite right.
The 7-Point Agenda provides a basis for identifying areas of government priorities. But it does not define what is to be done with any of the matters contained in the agenda. Like the power sector for instance has demonstrated, a policy that understands the issues in the sector and that provides a road map for dealing with those issues is indispensable. The NEEDS document was an example of a detailed economic strategy document that analysed the issues, defined objectives, solutions and policies, provided an action plan and identified targets and deliverables. Underlying any vision or strategy is a philosophy-some coherent beliefs and first principles that provide a frame of reference for the details in the plan. So what is the regime’s philosophy of governance?
Does the regime believe in a private-sector driven economy? Does the regime want to see an economy operating on free enterprise principles but with strong regulation and an effective competition and anti-trust regime? What are its views about education, health and social services? What is President Yar’adua’s position on some of the major political and constitutional issues confronting Nigeria-devolution of power, fiscal federalism, Niger-Delta and other matters relating to the structure of our federal system? What does the President really think about corruption and economic crimes? What kind of nation does President Yar’adua want to create? What national identity does he hope to forge out of Nigeria’s many ethnic groups and peoples, if any? What is the regime’s attitude to the world that defines its thinking on foreign, defence and security policy? Government and leadership cannot operate in a philosophical vacuum and where there is no clarity about an entity’s philosophical orientation, something emerges to fill the space. Nature as they say abhors a vacuum!
The point of this all-the regime must urgently define its philosophy, vision and direction, and policy orientation and select ministers who understand and can implement actions to realise that vision.
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