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Wednesday, October 17, 2012


    Last Saturday, North East leaders under the banner of NORTH EAST FORUM FOR UNITY AND DEVELOPMENT (NEFUD) met in Bauchi to proffer solutions to the region unending problems that range from poverty, illiteracy, deceases to the mother of all 'Insecurity' that already crippled the region.  But, like most such forums from the region the deliberations of the meeting could not hold due to perceived politics and absence of commitment on the part of leaders from the region. The major casualty for the lack of united front and purposeful leaders from that part of Nigeria is the poor masses who continue to wallow in abject poverty. In all the major indicators of human development, North East is the worst in the whole country. Some of the most poverty stricken states in the country are concentrated in the region, in addition to being the incubating ground for Boko Haram and its insurgency activities. The biggest city in the region, and its commercial nerve centre, Maiduguri has since lost it vibrancy and dynamisms to other place such as Gombe due to the insecurity of the place. Maiduguri that have some of the richest people from the region and known for it peace and accommodation of strangers has since lost that, forcing thousands of people to migrate elsewhere where there is calm and siren atmosphere for business to prosper. What remains now of Maiduguri is a shadow of its former self. The same, to a lesser extent, is true with other major towns in the region such as Bauchi and Yola that are being ravaged by the same security threat on daily basis. In a response to the apparent underdevelopment and marginalization of the region, former Yobe state governor Bukar Abba Ibrahim threaten of more violence from the region if Federal government does not change it policy toward the region. The marginalization of the region can be seen in the 2013 budget presented to the national assembly by Mr. President. The former governor now Senator rightly observed that Boko Haram is a product of poverty, but the question is who and who are to blame. Is the federal government the only one to take the blame? 

  The first group of people to blame are the leaders from the region, that produced Nigeria’s first prime minister Tafawa Balewa (the golden voice) and such great people like Sir Kashim Ibrahim, Alhaji Muhammadu Ribadu,  and Brig. Zakari Maimalari. But the leaders of today, from the same region that produced these giants of humanity, are busy accumulating wealth for themselves and their children. Ask yourself how many of them are living in the region before the advent of Boko Haram crisis? They are very few, most of them have relocated to places such as Kano, Kaduna, Abuja, Lagos and Dubai (UAE) since before the advent of something called Boko Haram. Preferring to visit their states during Sallah festivals and Turbaning ceremonies. The region is left for the poor masses and street beggars to sort things out by themselves. Let compare some figures, in term of number of universities the North east has the least number (about 11) when compare with other two regions in the North, North West (16) and North Central (about 22 including FCT). Tertiary health facilities (Teaching hospitals), North East (2), North West (3), and North Central (4). The same is true with top government officers and political office holders: North East has head of service of the federation, chief of air staff, minister of FCT, Women affairs minister, EFCC chairman, PDP chairman; North West gets Vice President, Speaker, CBN governor, National planning minister, Security adviser, NDIC boss, PTDF chairman, IG of police, Custom boss, NNPC boss, acting FIRS chairman, Education minister; North Central boast of Senate President, Chief of Defence staff, Interior minister, information minister, Attorney General of the federation and so on. But, do not forget the fact that during Obasanjo first tenure the region got most of the juicy positions that were allocated to the North, including Vice President, Defence and Finance ministries.

  One major federal project that the region elders should have hurried Jonathan administration to complete is Kano to Maiduguri express way. This road in the whole North (when completed) can only be compared to Abuja to Kano express way that have in no small way boost the economy of the areas linked to it. The completion of Kano to Maiduguri will do the same to the region by reducing transport fare, increasing the availability of needed good and human resources to the region. Increasing movement of Agricultural products produce in the region to other parts of the country, and serving as link to other parts of Africa such as Chad, Niger, Cameroun, Central Africa Republic and Sudan. While the work on Lagos to Kano railway line continue albeit slowly, no one talk of that of Maiduguri to Port Harcourt; or linking areas such as Yola and Jalingo to Abuja by means of an express way. Then coming back to the issue of Boko Haram, it seems the federal government is not doing enough apart from the use of force. Like we have seen in the case of Niger Delta insurgency in the South-South, brutal use of force never solves any crisis anywhere around the world, dialogue and rehabilitation is the better alternative. There is need for massive job creation in the region to reduce the number of jobless youth who are easy target for those with dubious motives. Just like in the Niger Delta, youth from the region should be selected, thereafter, sponsored by the federal government for training abroad or somewhere in the country. Finally, politics of rigging and imposition of candidates on voters should be avoided, as some of the violence we are witnessing today are traceable to these ugly practices very common in the region and other sections of the country.

Monday, October 8, 2012


It was Karl max, the 19th century German Philosopher cum Economist, who in a reaction to a book written on poverty title, ‘the economics of poverty’, quipped that the right title should have been, ‘poverty of economics’. The same drama is playing in Nigeria today with our grow model, a situation of growth with wide spread poverty; caused by a failed economic model that sees nothing wrong with poverty in the mid of plenty. While the World Bank and IMF inclined economic management team of Jonathan’s regime talk of economic growth of more than 7%, critical commentators talk of high poverty rate that Nigeria never experienced in its entire 52 years history. What an irony! While the so called growth inducing economic model used by Nigeria that champion rapid economic growth over equality, development of urban centres at the detriment of the rural areas (that hold most of Nigeria’s population), consumption over production, individual over community, and exceptional drive for the accumulation of wealth by all means including fraud. Poverty has today become part and parcel of Nigerian existence, many Nigerian poor thinks it is natural and God destined that Nigerian masses should remain in abject poverty. Chronic poverty where a whole family of more than five lives on less than $2 per day is very visible in Nigeria’s rural areas that carried most of Nigeria population. But for economic growth, the country has abundance of it, it is forecasted that in the next two to three years Nigeria is going to become the biggest economy in Africa, a head of South Africa. According to the Independence Day speech of President Jonathan this October, Nigeria is now the top foreign direct investment destination in Africa, accounting for some 20% of incoming FDI into the continent. The richest man on the continent is from Nigeria; likewise the biggest oil reserve. But all these notwithstanding, poverty remains a Nigerian phenomenon. While in welfare states of Europe unemployed people received monthly payment from government to relieve their jobless condition, there is no such thing for a Nigerian unemployed graduate who resort to kidnapping and all sort of crime to make ends meet.
  Nigeria a land of many contrasts! Nigeria has some of the most corrupt leaders on the continent. This is not to talk of corrupt business people who connive with those in the position of authority to steal the country dry. With all the resources that God has endowed Nigeria with, it is a pity that Nigerian masses have to endow the kind of hardship they are presently going through. Less endowed countries around the world are making it and their people are happy for it. But for the Nigerian poor (sorry!), the elite that colonized (like colonial Britain) all resources will not allow him such a luxury. The conventional economic model we are using is very unsympathetic to the plight of the poor; but who cares, is it not all about ‘survival of the fittest’ and ‘the ends justify the means’? In the World Bank-IMF neo-classical grow model we are using (under the anchorship of Dr. Ngozi Okonjo-Iweala formerly of the same World Bank), the wicked model assumes that the poor are not to be taken care of until in the long run (the very end) when the rich and the powerful had enough. But, the poor is dead by that time, as the famous British economist John Maynard Keynes famously observed. Thus, any right thinking person will see why the Nigerian elite enjoys this model so much; that has no room for kindness, benevolence, sympathy, and generosity. Oop! I have forgotten, this our model is a scientific model that did not mixed ethical considerations such as equity, generosity, and sympathy with scientific consideration such as wealth accumulation by few. But, the same model is happy to romance together with corruption and electoral manipulations. It is in this up and down of life that all Nigerians should expect their country to enter the league of twenty largest economies in the world by 2020. As she race up with growth rate of 7-9% none stop, the BRICS (Brazil, Russia, India, China, and South Africa) here we come.
   In term of resourceful individuals in all human endeavors Nigeria has plenty, both within and outside the country. Natural resources? We have that too, across all geographical parts of the country. The only important ingredient that is missing in the equation is leadership. This alone is what the country is deficient in, because without good leadership there is nowhere you can make effective use of the resources I have made mention of above, that Nigeria is endowed with. In a country where poverty meets insecurity, what you should expect is break down of law and order, exactly the situation we are in today. Boko Haram suicide bombers mixed with Niger Delta militants, South East kidnappers and South West area thieves, the result is total insecurity of lives and property and confusion. Insecurity, notwithstanding, the Nigerian economy continues on its growth pass; in the last eight months of this year alone the economy grow at the rate of about 7.5%. As we move to become the economic super power we aspire to be, our economic engine drivers must change gear, because high grow rate that do nothing to reduce poverty and unemployment will in the end result in the generation of violence; that will certainly not argue well for the country. The earlier the authorities begin to include poor in their grow agenda the better, for growth without development tantamount to none Balance Growth as is the case with a human body. When a part of man body system grows at the expense of other parts, we say the body is ill; Balance Growth entails equal development of all parts of that body. Let there be justice, for where there is no justice, anything is possible including our present condition.

Thursday, October 4, 2012


    Ja'iz Bank Nigeria plc, the first fully pledge Islamic bank in Nigeria, is planning to go to the market in order to rise eight billion Naira to be used for the expansion of the bank operation across the country. The announcement came during the ninth annual general meeting of the bank earlier in July, held in Abuja the Nigerian capital. Currently, Ja’iz bank operates three branches in Abuja, Kano, and Kaduna making the bank to be regional bank, according to the new CBN classification of the banking sector. With the plan expansion the bank will apply for national banking license to enable it open branches in other vibrant commercial cities of the country such as Lagos, Ibadan, Port Harcourt, Maiduguri, Sokoto and Enugu. According to the chairman of the bank Umar Mutallab (a former chairman of First Bank Nigeria plc) the placement will be divided into two segments, where one segment will be issues through the Islamic development bank (who is a long time partner in the development of the bank) and the other to the Nigerian public. But, it seems like Ja’iz Bank has already generated the required sum needed to apply for national license, going by the interview it Managing Director gave to journalist recently. In that interview Mohammed Bintube made it known that his bank has about N10 billion at that time, which made the bank to hit the national banking target. That number, according to the management of the bank, was realized through private placement. The bank promised to sell it shares not in public offering but private placements so as to make it hit the target of N13 billion the proceed of which is to be used for the expansion process of the Bank. Recently, there were a lot of criticisms of the style of management of the current leadership of the bank under Mr. Bintube, where it is argued that the bank is moving at a slow phase which is affecting it acceptability to the Nigerian public; and therefore it future survival. There were even some text messages going around asking for the Nigerian public (especially the Muslim population, to open accounts with the bank in order to assist the young institution in the face of competition from conventional banks). Though, in that interview the bank MD denied that the bank had ever send any such text and call on the public to ignore the text messages.

                                    Nigerian economy
    This article will look at the grow potentials of Islamic financial institutions in Nigeria; from there analyze the prospect of Ja’iz bank making it in Nigeria’s turbulent banking environment. According to the CIA world fact book 2012, about 50% of Nigeria population comprises of Muslims; that roughly put the population of the Muslims at about 85 million people. That number is more than the population of South Africa the largest economy on the continent. The Nigerian economy is the second largest economy on the continent after that of South Africa; and according to some estimates it is expected to surpass that of South Africa by next year. The 2011 gross domestic product (GDP) of the country is put at about $ 420 billion (at purchasing power parity, PPP) but when you calculated the GDP per head you still found out that Nigeria is a poor country when compare to it rivals on the continent. According to the recent inflation outlook from the Central bank of Nigeria, the inflation rate is now at about 12% still higher than that of South Africa 5% Or Ghana 9.5%. There is general death of infrastructures in the Nigerian economy; roads are in bad shapes, rail transportation dead, air transportation below potentials, power supply very poor. Though, there are recent improvements in term of power supply around the country, the hope is that it will be sustainable. The rate of unemployment is very high, higher than the official figure of 24% give by the authorities. The financial sector which is the focus of this article is yet to recover fully since the global financial crisis of 2008, where Nigerian authorities spent billions of Dollars in bail out money. The industry saw the setting up of Assets Management Company of Nigeria (AMCON) to buy toxic assets from the banks, merging of some other banks, and nationalization of others.  Currently, AMCON through CBN has to issue a list of bad debtors of the banking crisis era who refused to settle their outstanding with it; in which case CBN warns banks against issuing further credit to any one on the list. There is still shortage of credit in the economy compared with the period before the crisis; banks are reluctant to give out credit to the private sector. Because of that about 60% of banks lending in the economy is to the public sector; a kind of crowding out of the private sector. The contribution of the sector to the GDP has slow down since that crisis, where many blame the massive lost sustain by the banks and the tightening of regulatory procedure on the part of the Central bank.

         A look at operational and management structure of Ja’iz Bank
    Though, Ja’iz Bank started operation in January this year and received its licenses on November 11, 2011, the story about it establishment date back to 2003 when the first public offering of the shares of the proposed bank was made. Before it transformation into a fully fledged bank Ja’iz was a kind of special purpose vehicle (SPV) called Ja’iz international formed to help realized the dream of establishing Nigeria’s first Islamic Bank. But, it took almost a decade for that dream to become a reality, when the bank opens it doors to the public in January this year. The Bank is in partnership with Islamic bank Bangladesh (IBB) who is to help Ja’iz in term of technical and managerial know-how. The chief operating officer (COO) of Ja’iz Bank Md Setaur Rahman is a Bangladeshi who has over two decade of Islamic banking experience. The Managing Director of the bank who has been with the bank since it initiating period is Alhaji Mohammed Mustapha Bintube who started his core banking career with Commercial Bank (Credit Lyonnais) Nigeria and from there he moved to join FSB international bank where he retired as Executive Director in 2004 in order to join the management team of Ja’iz International. Other season bankers on the management board are Hassan Usman who is General Manager Investment Banking and Abdu Sa’id the General Manager Corporate services. The Shariah advisory committee of the bank is under the chairmanship of respected Islamic Economist and finance expert Professor Monzer Kahf who is recognized as one of the leading contributors to the field.   Other Islamic economists and Shariah scholars on the committee are Professor Mohammed Lawal Bashar of Department of Economics Usman Dan Fodio University Sokoto and Dr. Muhammad Alhaji Abubakar, a Shariah expert with faculty of law university of Maiduguri. 
      Currently, Ja’iz is set to finance Kano geographical information system (KANGIS) in a kind of public private partnership (PPP). Under the arrangement Ja’iz will provide the fund (about N500 million) for the setting up of the project and act as the lead collecting bank for KANGIS. In it drive toward boosting it revenue base, Kano state government hope to effectively develop it land administration like is found in such cities like Abuja and Lagos. Apart from this, it has already provided funds to many businesses including small and medium enterprises. But, the fact that Ja’iz is the first in this field couple with slow evolving financial infrastructures specifically required by Islamic banks, contributed in the slow phase of development of the bank; where some people accused the management of the bank of not developing it at faster rate like (for example) GTBank. But, this argument is wrong because conventional banks have been existing in Nigeria for over hundred years, while Islamic banking is not even one year in existence.  There is no way the bank can move pass the available ethical channels of investing it assets without contravening Islamic banking rules. But, the fact that the central Bank is very committed on developing the needed infrastructures for Islamic Banks allay any fear raised by these arguments. The rate at which the bank is growing at the moment is commendable taking into consideration the bank plan to expand into other part of the country at the end of this year. And, according to the MD, just three month into it current private offering all the shares are fully subscribed.


                  A brief overview of the Nigerian capital market
  Since the last global financial crisis which has affected Nigerian financial sector in many ways, the number of public offerings in Nigerian capital market has come down compare to pre-crisis period. Not only that even the Nigerian stock exchange in itself has been affected by the crisis leading to fall in the capitalization of the market of billion of dollars. For the few years before the global financial crisis of 2008, the Nigerian stock exchange was celebrated as one of the fastest growing exchange in the world. In the last one decade before the crisis the returns in the market moved up by 96%1. According to (Osaze, 2007), over 91% of the gross fixed capital formation in Nigeria was sourced from outside the capital market, making insignificant the contribution of the market to the funding of the Nigerian economy. The market value of publicly traded shares between 2009, 2010 and 2011 is as follows: $33.32 billion, $50.88 billion, and $39.27 billion, respectively (CIA World fact Book 2012). According to Ms Aruma Oteh DG Security and Exchange Commission, the Nigerian capital market is currently contributing about 20% of Nigeria’s GDP2. As at 2011, the stock of direct foreign investment in the country stood at $76.18 Billion3. At it peak in 2007 the market capitalization was the third biggest in Africa after that of South Africa and Egypt. Like many developing stock markets around the world, the Nigerian stock exchange is dominated by equity trading, accounting for some substantial number of transactions on the market floor. It is interesting to notice the link that exist between the performance of the Nigerian economy and the growth of the capital market, as the economy grow during the last one decade the market develop with it. Though, the market capsized as a result of the last global crisis it continues with it long term grow movement consistent with the potentiality of the Nigerian economy. With market capitalization of about N9.5 trillion (as at the middle of this year) the Nigerian capital market is still shallow, and many analysts believe that it will take the listing of a big sector like the telecommunication sector to increase the deepness of the market.

         Previous public offerings by Islamic financial institutions in Nigeria
  Apart from Ja’iz plc, other Islamic financial institution that is active in the market is lotus capital whose initial share offering was done in 2008. The Lotus initial public offering opened on February 25, 2008 and closed on April 2, 2008; with total of one billion ordinary shares at N1.00 per unit. According to the management of the fund, that IPO was successful as the offering was over subscribed; to tell you how eager the Nigerian public are for ethical finance such as the one provided by Islamic financial institutions. A year before that offering, lotus investment yielded returns of about 38.9% according to the management of the fund. According to Hajara Adeola4, the Managing Director of the fund, in the year 2008 and 2009 lotus capital is the best performing fund in Nigeria beating the Nigerian stock exchange all share index. But, the first initial public offering of any Islamic financial institution is that of Ja’iz international plc in 2003 when it tried to rise the N2.5 billion needed at that time to acquire licenses for commercial banking in Nigeria, before it was later inflated to N25 billion by the new Central bank governor of the time Charles Soludo, with the introduction of his controversial capitalization program. The IPO, like that of lotus capital later, was oversubscribed by the Nigerian public who are eager for such kind of banking arrangement. But, the bank could not start operation because of the sudden introduction of higher capital ratio by the Central bank. All the two public offerings of shares of Islamic financial institutions in Nigeria (so far) were oversubscribed; that is why many people, this writer inclusive, support CBN governor Sanusi Lamido plan to issue Nigeria first Islamic Bond (Sukuk). For more on the issue of the introduction of Sukuk into the Nigerian capital market you can read my article, title: ‘SUKUK AS AN ALTERNATIVE SOURCE OF FUND FOR NIGERIAN GOVERNMENT’ on my blog ( A more expanded version of this paper is included as a chapter in the book "Essentials of Islamic banking and finance in Nigeria" (2013) edited by Kabir Isa Dandago, Aliyu Dahiru Muhammed and Umar A. Oseni. Thus, from the two previous sales of Islamic companies’ shares, one can conclude that the future sale of Nigerian government first Sukuk bond to the public will be oversubscribed too.

                                 Islamic banking in the world
   Islamic finance around the world is now a trillion dollar industry; and is forecasted to reach $5 trillion in the next few years according Reuters news. For over four decades Islamic banking growth at a double digit rate making it to growth and adopt very fast as it moves to acquire larger market share. Islamic Banking is increasingly being recognized as a novel banking model with great potential to contribute to the growth and stability of the global finance. There are over three hundred Islamic banks operating around the world, from Indonesia to United State, South Africa to Germany. The rate at which Islamic finance is encroaching into Western and Eastern countries is highly commendable. The two major hubs of Islamic banking in the world are the Gulf Cooperation Countries (GCC) and South East Asia, these two region account for majority of the big Islamic Bank in the World. Other regions of the world where Islamic banking has witnessed growth like a wildfire includes the Indian subcontinent, Africa, and Europe; and it is still making incursion into new territories. According to Ernest and young (2011), the global combine assets of Islamic commercial banks is to cross $1.1 trillion mark by 2012, this is excluding other sector of the Islamic finance industry such as Sukuk, fund management, Insurance, etc. In Africa South of the Sahara, the potential of the system is enormous and it is spreading across the countries of the continent. For example, in South Africa, though, Muslims are a minority in the rain bow nation, Islamic banking has grown over the last decade. Islamic banking is growing in such countries as Kenya, Senegal, Ghana, and Guinea. Nigeria is a new entrant into the industry, though, the agitation for the adaptation of the system in the country started over twenty years ago. But, the fact that the country has a fast growing financial industry is a great plus for Islamic finance as it makes it debut in the country.
      The first fully pledge commercially oriented Islamic Bank  in the world started in UAE some time in 1975, though, other attempt at establishing an Islamic Bank were made in the past (in Egypt and Malaysia) none succeeded as this Dubai Islamic Bank. During the last global financial crisis in 2008, Islamic banks show resilience that has impressed everyone including it mainstream conventional critics; as it was not very much affected by the crisis like their conventional counterparts. The performance of Islamic funds in Malaysia in a 2007 study5 was found to be better than their conventional counterparts during a bearish period, while the reverse is the case during bullish period. In a 2010 working paper by IMF title, ‘the effect of the global crisis on Islamic and conventional banks: A comparative study’, the study observed that credit and assets grow in the Islamic banking industry during the period 2008-09 perform better than there conventional counterparts and contributed to financial and economic stability6.  At the root of the concept of Islamic banking is the removal of interest and its replacement with profit and lost sharing. This is in contrast with the conventional banking model that is built around the charging of interest without which the whole system collapses. This explains why some conventional economists, in the early years of Islamic banking, argued that the system will not work simply because interest is eliminated from the equation. The strategic alliance between bankers and Ulama (Shariah scholars) is one of the important factors that contributed to the rapid development of Islamic finance around the world7. It enabled the Islamic banking system to evolve a financing and deposit sourcing model that differs from the traditional models developed in the early Islamic economic literature. Therefore, enabling Islamic banks to compete with conventional banks in the same environment; today, the level of financial engineering in the Islamic banking industry (though, still below the level obtains in the conventional system) is impressive. 

   The entrance of Ja’iz bank into Nigeria’s banking landscape has opened a new vista in the history and development of financial sector in Nigeria, by for the first time in the history of the nation providing an alternative funding and saving channel that is different from conventional model that dominated the country since independence. With millions of people in Nigeria that are eager for this kind of banking system, the coming of Ja’iz is long over due. As the Islamic finance industry develop in other climes around the world with substantial population of Muslims in them it is logical that it does the same in Nigeria, taking into consideration the population of Muslims and the potentialities of the largest Black Country in the world. In the last eight months of this year, Nigeria is Africa’s largest receiver of foreign direct investment, ahead of South Africa generating about 20% of the continent total8. But, other things remain to be put in place to enable the nascent industry develop in the country. Two of such things as the chairman of Ja’iz Bank, Umar Mutallab observed during the bank recent annual meeting are taxation and liquidity management. But they are not the only ones, the whole financial super structure favours the conventional banks; and nobody want to do anything substantial to change the arrangement to what is obtainable in countries such Malaysia, because of the fear of the anger of those still oppose to the introduction of the novel scheme.

  1.  Osaze, E. B., (2007), “Capital Market: African & Global”, The Book House Company, Lagos, pp  21 
  2.     Daily Trust newspaper, September 28, 2012 
  3.     CIA World fact Book, 2012
  4.    Hajara, A. (2009), “Islamic Finance: the answer to financial inclusion in Nigeria”, A presentation at EFInA Conference July 2009 
  5.     Abdullah, F., Hassan, T., Mohamad, S. (2007), “Investigation of performance of Malaysian Islamic unit trust funds: Comparison with conventional unit trust funds”, Managerial Finance Vol. 33 No.2, 2007 pp 142-153
  6.       Hasan, M. and Dridi, J. (2010), “The effects of the Global financial crisis on Islamic and     conventional Banks: A Comparative Study”, IMF Working paper WP/10/201
  7.       Kahf, M. (2002), “Strategic Trends in the Islamic Banking and Finance Movement”, A paper presented at the Harvard Forum on Islamic Finance and banking, Harvard University, Cambridge, Boston, April 6-7 2002
  8.       Text of speech of president Good Luck Jonathan during Nigeria’s 52nd independence, October 1, 2012