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Monday, May 16, 2011


       As the controversies generated by the April general election continues, where the popular opinions in the North is that the election is not free and fair as is portrayed to the outside world while the southern section of the country see the election as bringing to an end the North clinch on power. An attempt is made in this piece to see how this new Jonathan mandate (what ever your opinion of its) will impact the northern agriculture and from there the whole of its economy. The last election is very unique when compare to any previous election, as it brought into the limelight the major division in the country’s super structure, that between the Christian South and the Muslim North. The unambiguous differences between the densely populated urban live found in the South and the sparsely populated but mostly rural live that is dominance in the North. This can be clearer when one makes a careful analysis of the post election violence, its genesis, the distribution of the youth who undertook it, and the different victims of the riot. Post election riot of this nature has (in the past) been linked with the South, especially the South West (taking into cognizant the post election riot that occurred after the general elections of 1964, 1983 and the June 12 election), the last one coming from the North of all places has come as a surprise to many analysts. To my knowledge Jonathan has not put in place any concrete master plan for the transformation of our agriculture, what we have in the last one year is short outbursts and promises to calm minds given during conferences and interviews.  To have a grasp of the non importance of agriculture in Jonathan agenda, just have a look at his 2011 budget, the percentage given to the sector and the areas where the amount is to be spent will tell you more about his government. Many people are of the view that agricultural sector will not witness any serious transformation in the next four years of Jonathan government, as they believed that he will be preoccupied with the attempt to reverse the injustice people from his region believe were meted to them. His own part of the country that produces most of Nigeria’s crude oil has no agricultural base, the little agriculture they have has been killed by the oil industry. For example, unlike Obasanjo (who himself is a farmer) Jonathan is not known to have practiced any serious agriculture, though he got his degrees in Zoology or it is Botany? Being in possession of degree in a field is not a guarantee that the area of study will benefit thereafter; we have in Nigeria PhD holders in engineering that have not invented a needle. But still much depend on the composition of his next cabinet because as the Hausa man will say ‘ba a mugun sarki sai mugun bafade’ (meaning there is no bad ruler but bad courtiers).

      While in many countries around the world agriculture is held in high esteem and protected like defense sector, the reverse is the case here in Nigeria. Successive administrations have neglected the sector focusing instead on how to spend the easy money that is coming from the oil sector. In what is belief to be oil curse Nigerian government inclusive of its people have become lazy people who have blinded themselves to the numerous opportunities that exist around them. Not very far from us, South Africa that is believed to be the largest economy in Africa, still earns substantial amount of its foreign exchange from agriculture, despite the fact that they are the largest producer of Gold in the world. Economies like Argentina, Brazil, Holland, Thailand to mention just a few that are far ahead of Nigeria still depend to a larger extent on agriculture. With population of over 150 millions people, I do not know of any country with the size of our population that neglected its agriculture the way we do. With population of this size our preoccupation should have been not only to feed this people but how to export the excess we produce so as to make this people (majority of whom are farmers) occupied. Nigeria’s agriculture still produces over 40% of our gross domestic product (GDP), asks yourself this simple question, does it get up to half of that number from the allocations from our annual budget? I was on the road from Kano to Maiduguri when the last post election violence caught up with me, from what I have seen with my own eyes, most of the rioters we encountered on the road were rural dwellers who depend on agriculture for their livelihood; but because they do not have anything better to do they poured on the street. To me any explanation for the cause of the last post election violence that do not address  economic factors is nonsensical, the cause is not religious neither it is ethnic only that some victims of the riot happened to come from other parts of the country where the rioters belief PDP (the party in power) is strong. Northern rural dwellers (majority of them farmers) belief the government in Abuja is the main reason for their poverty. As I said at the beginning, while the South is mostly urban the North is dominated by rural dwellers, to prevent any future occurrence of social disturbances PDP’s government must do something about this sector that provides job for the teeming rural people. We should not forget that it is the same rural dwellers that are pouring into the cities, not only in the North but inclusive of the South, looking for something to do; and have so far become the habitual first recruit for any disturbance to the law and order in this country.

(Published on site on 1/06/2011)

Saturday, May 14, 2011


       With financial Tsunamis hitting the world main financial centres, the much acclaimed triumph of capitalism over other economic models is nothing more than euphoria. The happenings of recent days have been characterized as the worst financial crisis since the great depression. During the last few days, two financial power houses have gone under. The investment giant Lehman brothers had to file for bankruptcy protection from the US authorities. The world biggest insurance group AIG was demoralized and bankrupt to such an extent that US government was left with no alternative but to dole out a whopping $85 Billion of tax payers money as a bail out. This was done to avoid lost of confidence in the financial system that can lead to run on other financial institutions. While price of shares traded on the world major stock exchanges collapsed. This is happening ten years after one of the most devastating financial Tsunami hit Asian economies. In what is today term ‘Asian financial crisis’, whose impact is still being felt in Asia. Signs of the present financial imbroglio started to manifest years ago. Like four years back, major financial indicators have shown that the boom in the US housing Market has reached saturation level, but banks continue to doll out depositors’ money to
Mortgage finance.  Regulators on their part kept a blind eye. There was debate then on whether central bank [The Fed] should regulate asset price inflation, or should restricted itself to conventional inflation i.e. consumer price inflation. Alan Greenspan, the then chairman of the Federal Reserve and his team, were buried in his now famous ‘Irrational exuberance’, to lend a listening ear to call for a brake on the other Exuberance in the housing market. When the market boosted banks were left with valueless papers as collateral against their loans. The countries of US and UK who are advocate of shareholders capitalism are most hit by the crisis. Last Year, the British bank Northern rock was forced to declare bankruptcy, in what observers See as aftermath of excessive exposure in mortgage lending. Thus started the beginning of a serious housing market crisis. To put a stop to it, in April this year the bank of England had to lunch the special liquidity scheme of $100 Billion in an attempt to arrest the problem. A costly rescue with tax payers’ money. As one financial analyst has rightly Observed, in capitalism profits are private affairs, while risk like the present impending doom on the world economy, are social matters, to be settle with tax payers money. In the US, in March this year, the government had to lunch a rescue plan for Bear Stern, another actor in the financial market. In July, another giant Indy Mac Bancorp, a Californian thrift was taken over by regulators, to avoid a contagion. In midst of the Bear Stern crisis, the Fed in a desperate attempt to show the public they are on top of their job, injected $200 Billion term securities lending facility into the economy, with little to show after. Bank of England adopted the same method the following month, when it lunched the special liquidity scheme.

          Fed rescue plan notwithstanding, the two biggest mortgage institution in the US Fannie Mac and Freddie Mac were swept away in that financial hurricane. In July the American treasury led another emergency rescue plan to save them. The twins giant owe or Guarantee outstanding mortgage worth some $5.2 Trillion. The European banks, UBS and Credit Suisse were affected, in some ways, by the crisis. In the last one year, UBS wrote down bad loan worth $38 Billion. One thing that is clear all through the crisis, is the intensity of the crisis in UK and US compare to other developed countries like France, Germany, Holland, Denmark and Finland. One of the many explanations for this is that their economies are not controlled by greedy unethical capitalist found in the Anglo-Saxon countries. The European countries mentioned, are advocate of the soft capitalism; in which, though private sector is the major actor, government do intervene to guide economic activities. But even in the US, there is an intense debate on whether government should actively regulate economic activities. The Democrats favour regulation, while most Republicans are in favour of deregulating the Economy a bit further. This is not new, for many years there has been a serious debate between the neo-liberal economists who call for sidelining government from economic activities and the neo-Keynesians and their offshoots who support government participation. Some overzealous advocates of deregulation even called for abolition of central bank and with it central banking all together. This is not realizable in this our era. It was the deregulation of the financial market in Asia in the 80s and 90s that Caused the Asian financial crisis I made mentioned of. We should not forget how Russia burnt it fingers in 1998, when it tried to experiment with deregulation. There was also the Mexican financial crisis of 1994.Those countries that went contrary to deregulation, during the Asian crisis, fair better than those that followed, religiously, the IMF/WORLD Bank prescriptions to deregulate their economies. Instead of leaving her economy at the Mercy of speculators, China introduced heavy capital control measures and pegs her currency to the Dollar. At the end of the crisis, it is China that rejected the Britton wood institutions Tsunamic advice that escaped the crisis. Malaysia quickly adopted the same method to save herself from falling into the same trap as Indonesia and Thailand. Trillion Dollars of tax payers’ money have been lost to financial crisis around the world, over the years. Despite that some greedy individual speculators still call on government to allow individual capitalists to do as they like; to be their own self regulators. How do you expect a hungry and salivating Tiger to control herself away from attacking it prey. Many studies have shown the devastating impact of financial crisis on economic growth. It has been demonstrated, how financial crisis washes away years of hard earn economic growth. These should have acted as lessons to our policy makers, but because they have their own interest to protect, they never care. Which other countries will join the US and UK? Which financial institution will be next on the queue of collapse banks? Are questions, whose answers are not far fetched. The great depression of 1930s was caused by government inability to control the haste and greed of investors. The same crops of ruthless investors are at work today. What we are witnessing today is only a glimpse of the drama to come.
(Published in September 2008 editions of Daily Trust and All website)


       Nigeria is fifty years old, or half century old as others will put it. This is in one of the most difficult of journeys to nationhood. When the journey begun on October 1, 1960, there were a lot of pessimists who doubt the success of this journey. The multi ethnic composition of the country, the suspicion between the Christian South and the Muslim North, and the absence of mutual trust among the elite of the country made the journey looked one destined to fail. With more potential than any other African country, abundant natural resources like Coal, Tin, Columbite, Limestone, Iron ore, Gold, and Crude oil; agricultural resources like Groundnut, Cotton, Palm oil, Cocoa, Rubber, as well as Hide and Skin; the optimists of the period saw a giant nation in the making. But what we have today is a different picture from the ones foresaw by both the optimists and pessimists. A nation that is on the run from been described a failed state, but far away from it potentiality and God given important position among the League of Nations. The fifty years anniversary of our great nation has coincided with one of it most difficult moment in it history. Since the return to civilian rule in 1999, tens of thousands of people have lost their live to socio-economic and religious crisis. The level of poverty in the country have multiplied. It was estimated that about 70 percent of its citizen live below poverty threshold. Insecurity is rampant in the country with arm robbers and kidnappers having field days. The decay of moral and social base of the society is so severe that some segments of the country have began to forget their cultural roots. Human trafficking has become a big lucrative industry that thousands of girls are exported every month out of the country to Western Europe for prostitution. Corruption has become so common place that if you do not receive or give you are out of place - a stranger. In those days people turned to rituals when they found themselves in extreme poverty, but in today Nigeria it is the rich and the most powerful that are the vanguard of such practices. In the economic sphere the country has found itself in one of it most difficult and unpredictable moments since the days of Structural Adjustment Program (SAP). The global economy is in big trouble, what is been described as the biggest economic crisis since the great depression. Economies everywhere around the world from Peru to Vietnam, Iceland to South Africa are in serious trouble, the out come of the financial crisis that originated from Wall Street. Here in Nigeria the story is not different, from weak stock exchange, deteriorating exchange rate, high interest rate, growing fear about the health of the banking system, unfavorable term of trade, rising inflation, unemployment, to increasing poverty level. Governments everywhere are taking concrete measures aim at tackling the many problems that arise from the global economic meltdown. From Barack Obama economic stimulus in the US to interest rate cuts across Europe and eastern Asia, Economists and policy makers are alerted.
            Up till now, Nigeria long term response to economic crisis like the current one, and it other socio-economic challenges is vision 20:2020. Vision 20:2020 is a long term plan that provided the road map to lunch Nigeria into the league of twenty largest economies in the world by the year 2020. I don’t want to pronounce Vision 2020 dead but since the start of Jonathan administration little, if at all is heard about the program. The same minister who is responsible for supervising the implementation of the vision, minister of national planning Shamsuddeen Usman, is still the same person in the same ministry. Whether Vision 2020 is what we need in Nigeria is a different matter, but, to have a plan in place is better than no plan. The main problem with Nigeria is discontinuity and absent of the will to see a policy to it final implementation. Abacha’s vision 2010 made the same promised of taking Nigeria to the league of developed countries, but like with other policies before it the Vision went with Abacha to his grave. I pray that this 2020 Vision will not share the same fate as 2010, or go the way of Obasanjo NEEDS that promised heaven and earth. “Over the next few years (2003-07),” wrote Obasanjo in his forward to NEEDS,”NEEDS will consolidate the achievements of the previous four years and lay a solid foundation for sustainable poverty reduction, employment generation, wealth creation, and value reorientation”.  At the end Obasanjo was able to double the number of poor people, though he succeeded in producing few billionaires. Sometime during the final days of Obasanjo term in office, Goldman Sachs (a US global investment bank) in it usual global survey and forecast come out with a report that look at the world by the year 2020. In the report Nigeria was included among 11 economies in the world with the potential to be among the twenty largest economies in the world by year 2020.This is how Vision 2020 originated; an American inspired economic blue print like others such as SAP. The main difference been SAP is more of an economic order forced on Nigeria by the IMF and World Bank, while V2020 is a mere projection, how we achieved it, is left to us.   The projection like SAP was built on the underlying assumptions of Free Market enterprises. The realization of the vision hangs on many premises, that include maintenance of GDP growth of more than 6%, annual investment of 10 Billions Dollars in infrastructures, Macroeconomic stability among others. I strongly belief that this Goldman fore cast was inspired by the astronomical growth in the global price of Crude Oil before the last economic crisis.  It was crude oil export that helped to explain the outstanding growth in Russia during the same period. And the same Russia was included among the BRICs (Brazil, Russia, India, and China), coined by Goldman Sachs, as countries with potentials to rival US economy. Now that price of Crude Oil has crashed, Russia is no longer seen as part of BRICs by the same people who made noise about the potentials of the BRICs.
       Coming down to global economic melt down and how it affects Nigeria, the crisis in the banking industry, the depreciating foreign reserve and declining Naira, our bearish stock market and the falling price of crude oil in the International market are all symptoms of global melt down.  The number of bank staffs who lost their jobs in the last one year are in thousands. While in more advanced countries anniversary moments like this one are periods to showcase economic success stories, the story is different here in Nigeria. Apart from the share we received from the global crisis, we have our own home grown economic problems. Even the Goldman Sachs, with a track record of over seventy years of investment banking, was devastated by the global economic crisis, forced to convert into Retail bank, and go begging for money from the US economic Stimulus package. If not of recent, Goldman Sachs was partially nationalized and forced to rethink its business model. According to some forecast Euro zone and EU economies are expected to have negative GDP growth this year. This together with contractions experienced in the US and Japan will leave the world economy with a negative growth. The only good news is the one about emerging economies like China and India who are expected to have positive growth, though less than what had been realized in the recent past. Their increasing use of raw materials like iron, copper and crude oil has led to the current increase in the price of these materials. Millions of jobs have been lost to this economic crisis around the world. Manufacturing jobs are in shambles, likewise jobs in primary industries. Events such as this have continue to drag back the little progress made by emerging economies in Africa and else where. With the developed economies in trouble, the foreign investment needed to streamline Africa’s growth have stop coming, calling for serious economic reform and change of direction. Wall Street that is at the center stage of the crisis, have come under heavy scrutiny from the US authorities. It is no longer business as usual, the fat cats that caused the present mess, should be made to pay for their callous attitude. The global order in the financial industry today is that of draconian re-regulation. The expansionist era that is clouded with the obsession for growth caused by the previous economic bubble is over. Critics have argued that it is the destructive innovations in the industry and laxity on the part of regulators that caused the present state of affairs. Because of the lost incurred in the last one year, investors have become more risk averse and demand for strict risk management regime before committing their money in any institution or country.

        The Nigerian banking sector at it fifty anniversary has gone along way, from a sector dominated by foreign institution at independence to one almost 90 percent dominated by Nigerians. The financial sector has recorded a substantial growth in the last one decade: fueled by money from the last oil boom and reforms in the banking sector. Now that big institutions have been created, the task for Sanusi Lamido is to continue to guard against possible risk of default. Nigeria cannot afford a systemic crisis or any bank failure at this time of global melt down. According to CBN, banks in the country have total asset base of about N 14.93 trillion, half the size of the country GDP. The recent scenario in Iceland where over bloated credit structure(many times the country’s GDP) led to the whipping away of the country financial structure and entire economy, call for caution on the part of Nigerian regulators.  Despite the global crisis, it is expected that banking industry in emerging economies such as Nigeria’s will continue to experience growth. Though the growth is expected to be below potential, given the right atmosphere the industry can grow faster than GDP. Banking reform alone cannot achieve Vision 2020; concerted effort is needed in other areas. The growth experience in India and China is being driven by the real sector. In fact the financial industry in china is one of the most underdeveloped in Asia, yet its economy is one of fastest growing in the world. On how these economies and others in Asia commonly referred to as Asian tigers were able to achieve these economic feats? None of these economies rely on one export commodity as sourced of growth. They are highly diversified economies who moved from reliance on primary industry to diversify export of manufacture products. During the three decades preceding this century, these economies experienced phenomenal growth in infrastructures, and primary and secondary school enrollment. Agriculture experienced rapid growth in both output and productivity that led to improvements in the living standard of rural dwellers.  There was effective public administration devoid of corruption. These were augmented by government investment in applied research, good macroeconomic management, and effective subsidy to key industries.

(Earlier Published on site on October, 2010)

Tuesday, May 10, 2011


Public finance, the art of government revenues and how it spend them, like the discipline of economics itself was conceived to put sense in to countries management of their resources. In Nigeria the sub-Saharan Africa second largest economy, public finance or elite finance is both the art and science of how government and the elite that control it manage their resources. In Nigeria there is little that differentiate the government source of revenue and expenditures from that of the elite on the helm of affairs, in fact, they are one and the same. Government sources of revenue in Nigeria include (primarily) revenues from oil export, custom duties, taxes especially corporate taxes, and royalties from other mining activities. While it expenditures included among other things capital expenditures on infrastructures, day to day government expenses, and financing of government officials loots. Debt is another source of government money, albeit, a different source. In highly democratic and prudent climes, debt money can be an important source of most needed money to bridge the gap between government revenues and expenditures. That is not the case with Nigeria; debt money is use for something else.
     The current government attempt to borrow another $500 million dollars from external sources, in addition to current debt of $32.8 billion it owe both domestic and foreign lenders, is another source of concerned. As at September 2010, Nigeria’s total debt profile stands at $32.8 billion out of which external borrowing is $4.5 billion representing 14 percent, while domestic debt is $28.2 billion representing 86 percent. If you look back three decades before, the 1980s and 1990s were very unique in the history of Nigeria. They were two decades during which Nigeria experienced falling revenues, due to falling price of crude oil and the decline of agriculture as a source of foreign exchange. Throughout that period price of crude oil hardly rise above $20 per barrel. Buhari regime (1984-85) despite the falling revenue of his time, for instance, had tried to repay the debt Nigeria owed foreign creditors. He was removed by Babangida regime (1985-92) that was notorious for its mismanagement of our foreign debt position. Massive corruption was the major factor behind continuing deterioration of our economy at that time, where government foreign earnings and borrowings were put into questionable uses.  The introduction of structural adjustment program (SAP) by that regime with the main aim of removing Nigeria from the fiscal mess it found itself did not help matters.
     The coming of civilian regime coincided with the period of rising price of crude oil in the international market, when crude oil price moved from $18 per barrel to as high as $146.  It is said that the money earned from 1999 to 2007 is more than all the oil money earned from 1960 to 1999. Despite that oil wind fall, Nigeria situation did not change. Out of the oil money realized, the civilian regime did indeed secured debt relief for the country in exchange for payment of about $16 billion to our foreign creditors. From then on Nigeria was relief of it foreign debt obligations; here we are, going back to where we were. Currently the price of crude oil is high, at around $85 per barrel, and Nigeria daily export of about two million barrel per day is stable. But look at this, Nigeria excess crude account has depleted between the periods of January 2009 to July 2010, from $20 billion to $460 million. Our foreign reserves have drop from $64 billion in August 2008 to $33.71 billion in October 2010. What was that money used for? This is the question one should ask, before looking for the justification for borrowing additional money from abroad. The billions of Dollars Nigeria borrowed in the 80s and 90s were not used to assist Nigeria to realize her aspiration of becoming one of the biggest economies of the world. Instead the money was stolen through award of dubious contracts and execution of white elephant projects.
    The argument been put forward by the economists in the current administration is that since about 86 percent of the government debt is from domestic borrowing there is no cause for alarm. They argue that the debt can be repaid at ease, because it does not involves any of the major constraints found in external borrowing which account for bulk of government borrowing in the 70s, 80s, and 90s. Another argument is that the combine total of internal and external government borrowing is only about 16 percent of the countries Gross Domestic Products (GDP), which they argued is healthy as it did not exceed the 25 percent limit set by the country. Finance minister Olusegun Aganga, for example, recently argues that the money is needed to finance the execution of much needed infrastructural projects like power generation and so on. Looking at these points from the angle of cost-benefit analysis, one can see that the benefits it is said Nigeria will derived from the loan did not compare to the cost that will come from taking that additional loan, both directly and indirectly.
    Let review these benefits one after the other, financing of the most needed infrastructural projects in the country, this was the same argument put forward by the previous regimes when they were borrowing. Take power supply, for instance, the regime of Obasanjo (1999-2007) has spend over $16 billion in the generation of electric power in the country without changing anything in the power supply to the country, if not for buying us more darkness. If that regime is to be called to account for that money they cannot do it. China, from last year to this year, has increased her power supply by more than the combine total of all the power generated on the African continent without spending that much. There is no way this regime can convince people like me by arguing that they are using the money to buy power for us. The regime of Late Yar’adua had taken a facility of over $1 billion from china to finance railway project in the country, tell me where is part of that money or the rail line mean for it? A single stadium built in Abuja is said to have cost more than what far better stadiums were paid for in South Africa to prepare for the hosting of last world cup. I know of a case where ordinary fridges of not more than N35, 000 were supplied at about N250, 000 per one. These are the reasons why we have failed to improve on the transparency international corruption index despites the anti corruption rhetoric of our civilian regimes.
     There are costs as well as benefits from borrowing within a country’s own borders. By restricting borrowing to internal sources a country is avoiding the risks that arise with the borrowing in foreign currency, the most important of which is exchange rate risk. For instance in a situation whereby Nigeria debt is in Dollars, that means we have to repay back in that currency, any depreciation in Naira or appreciation in Dollar will increase the cost of repaying that debt. Unlike when you borrow in Naira (like federal government bonds) you repay in Naira without any thinking of exchange risk. External borrowing also comes with strings attached. Borrowing from institution like IMF and World Bank come with conditionalities some of which are not favorable to the borrowing country. And the fact that debt transfer power from borrower to lender make foreign borrowing very tricky, as the debtor country become subservient to external powers mostly Western countries.
        Then come interest rate risk, the interest risk that goes with borrowing from international lenders is of two kinds, the cost that goes with unfavorable rating from international rating agencies, Nigeria is recently down graded by Fitch, an international rating agency. The implication of that down grading is that Nigeria will now borrow at higher rate than when it received favourable ratings, therefore, making the present borrowing very costly for the country. Then the rate itself, whether it is fixed or variable, a fixed rate means that a country will be paying certain fixed rate no matter the economic circumstances, while variable rate vary with economic environment. In determining the nature of the rate the lender has upper hand, as the saying goes a beggar have no choice. In general, the rate charged by international lenders is not favourable to a developing country like Nigeria as it is very exploitative. High interest rate was the major cause of third world debt crisis of the 80s when debtor countries mostly in Africa, Latin America and South Asia failed to service their debt.
        Borrowing internally has one major defect “crowding out effect”, which is particularly serious in capital starved economy like that of Nigeria. It can rightly be argued that the massive government domestic borrowing of the last few years has contributed in making capital very expensive in the country. That means CBN reform and global crisis are not the only ones to blame for the scarcity of capital in the country. People prefer the safety of government bonds to the uncertainty of Nigerian equity market and banks. Thus, the argument of not reaching the minimum of borrowing limit of 25% do not arises, in as much as any substantial borrowing will contribute in reducing private sector rate of growth. It has been shown in many studies that increase accumulation of debts have the tendency to slow the rate of economic growth in a country. And in many cases, countries borrow thinking that favourable economic conditions would allow them to service the debt no matter the rate charged, and it will turn out that their forecasts are wrong ending up with dry sources of revenue, thus failing to service the debt.
     Instead of foreign debt, this government should have concentrated on searching for more sources of revenue generation. Look at the abundant mineral deposit scattered all over this country, from Gold, Iron ore, Coal, limestone, Uranium to Tin; Nigeria is richly endow. Natural mineral resources are the major sources of foreign exchange for countries like Australia, Chile and Norway. In agriculture the potentials are there, why not explore them instead of looking for burden for yet to be born children of this country.  We have Cocoa, Cotton, Groundnut, Rubber, Coffee, Sesame, Gum Arabic, as well as hide and skin; they are all very good sources of revenue. What are we doing with the money we are borrowing? Why not put our house in order and attract foreign direct investment in these areas. These are better alternatives to debt because taking debt did not help us in the past and it will not do now. Simply because debt money is easy money at the time of borrowing does not means we shall always resort to it. My advice to this regime is that it should look beyond self gratification and the attractions that come with having money at the tip of your finger, and, gauge both the immediate and long term implications of taking more debt before making the leap.

ISLAMIC BANKING IN NIGERIA: the journey so far

        The path to Islamic banking revolution in Nigeria has been very rough right from the inception, unlike in other parts of the world where the program implementation got supports from different angles: the government, the academia, the professional cycle and the general public. In Nigeria the situation provides a difficult case study of it own; where some sections of the country see the move as a way of given preference to one religion over others. While the other side see it as their legitimate right given their own non adaptability to the main conventional banking system in use in the country. The same thing is true in the academia, while the southern intellectuals approach the new system with skepticism; those in the north see it as a positive move capable of bridging the economic gap between the two major sections of the country. The government and the central bank in particular did not help matters in this case; if not of recent some of the Central bank plethora of policies are the major stumbling block to the take off of Islamic banking in Nigeria. Surprisingly, the banking and finance professionals in Nigeria constitute an important segment of Nigerians ignorant of the system; their hatred for the system has so far driven them to oppose its successful implementation. Since the start of official mutterings about the introduction of Islamic banking, that began in the 80’s, the program has remained as it was: a government’s tool use when ever appropriate to achieve political goals. At different times the governments of Babangida, Abacha and Obasanjo had promised the actualization of this dream only to turn out as normal policy pronouncements. Since the promulgation of Bank and other financial institutions acts (BOFIA) in the early 90’s, and the attempt by the former HABIB Bank to open a kind of window to cater for the need of Islamic banking public, there was no any other major land mark. The recent efforts at setting up of JAIZ, significant as it was, has remained a mirage. The entire Soludo pronouncements about Islamic banking has ended up in producing one piece of policy book, the so called guide, while the nitty-gritty of laying a solid foundation for establishing Islamic Banking like the recruitment and training of the necessary manpower to take care of the basic jobs and the operationalization of the required Money and Capital markets infrastructures were neglected.   

         While in other countries the laws were reviewed to allowed for the establishment of Islamic banks by foreigners, only in recent time do the Nigerian monetary authorities start to look in that direction. Since wealthy Nigerians are reluctant to put their money in the sector, this should have been a perfect course for kick starting Islamic banking in Nigeria. But as mentioned before the policy and the existing infrastructures will not allowed it. Our so called banking professionals have failed to understand the enormous foreign investment potentials provided by Islamic banking which the economically advanced Western world have used to their own advantage for sometime now. Or we could have used the Malaysian model where existing conventional banks were encouraged by the Central Bank to start an independent Islamic bank, as a kind of subsidiary. The enormous amount of resources at the disposal of Islamic Development Bank (IDB) based in Jeddah, Saudi Arabia, to provide assistance to countries trying to establish their own Islamic banking system, was never put to a good used by our monetary authorities. Likewise the various opportunities for collaboration, with countries that have already made substantial progress in the area, were not used.

           There were efforts, particularly coming from Usmanu Dan Fodio University Sokoto and Bayero University Kano, towards research and training of manpower in the area of Islamic Banking and finance during the 80’s and 90’s. Usmanu Dan Fodio University is the first university in Nigeria to introduce courses in Islamic Economic and finance. The initial enthusiasm of the university toward the development of the field was killed by the apparent lack of concerned for the field shown by the government. Through collaborations with other institutions around the world, Usmanu Dan Fodio University was able to organize and hosted international conferences that gathered some of the pioneers in the field of Islamic economic and finance from around the world. The like of the late Sule Ahmed Gusau and Professor Mohammed lawan Bashar of the university were the brains behind some  earlier feasibility studies on the practicability of the system in the country. Currently, Bayero University Kano is in the process of establishing an Institute for Islamic Banking and Finance for the training of manpower in the area. Courses to be offered will include both undergraduate and postgraduate programs to be done in collaboration with some institutions from around the world.
  Nigeria’s Central bank under Sanusi Lamido has made pledge to see to the actualization of the system in the country. But, despite the zeal with which current efforts are been persuaded, people remain skeptic of the process until when they started to see it bearing fruits. The categorization of the Nigerian banking system into groups will go along way in helping the course of Islamic banking in the country. But if Central bank is indeed serious and decided to move a bit faster than it does now, the skepticism on the part of the public will subside. In a country like Nigeria where more than half of the population is outside the formal banking system, for reasons that included economic and socio-religious, any set of programs that will help reduce the percentage of unbanked people should have been welcome and not treated the way Islamic banking have been treated over the years.  Despite obstacles, Islamic finance has so far become important segment of global finance that cannot be simply ignored. We are watching things to see how Nigeria’s aspiration to become a regional hub for global finance in Sub Saharan Africa will be achieved without revisiting the role of Islamic finance in this.