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Saturday, November 23, 2013


        The health of Nigerian economy was again the focus during the last week investors’ forum in London, which has President Jonathan in attendance and numerous other business individuals with eyes on the country. All the key actors in the management of the Nigerian economy were in attendance with the exception of few prominent faces. Just like during last week first Bank annual Conference in Lagos were speakers such as Finance minister Mrs. Ngozi Okonjo-Iweala and Investment Minister Olusegun Aganga announced to the world that Nigeria is on verge of achieving double digit growth, the London ‘get together’ echoed the same optimism on the Nigerian economy, deliberately de-emphasizing the risks ahead. Looking at nationwide economic barometers such as the Nigerian stock exchange index, GDP growth rate, and growth in assets of notable Nigerian business people like Aliko Dangote a lot many business savvy individuals will agree that Nigerian economy is doing well; thus giving it a pass mark, but deep down there are many questions that are begging for answers.

       But before looking at some of these issues, the positive parts of the Nigerian economy need to be re-echoed here; Nigerian stock exchange is currently the second largest on the continent after that of South Africa and remains among the most buoyant of the emerging market stock exchanges around the world. The all share index currently stand at its highest  peak a spectacular increase when one compared it to the bottom it sink during the financial crisis of 2008/9; achieving annual average growth rate at  increasing dimension from the crisis period to this year. The Nigerian banking landscape has stabilized over the same period of time from the near disaster level it was in 2009 to current period of growth albeit at slow phase. Credit to private sector has started a slow movement up from the flat position it was in the past. Inflation has been brought down to a single digit the lowest in the last five years. The nation’s GDP growth rate currently hovers around 6% with a lot of contribution to achieving the rate coming from the growth been experienced over the years in the non oil sectors. Domestic investors such as Dangote, Elumelu, and Abdussamad Rabiu etc. have at various times in the recent past made announcements of investments worth billions of Dollars in the Nigerian economy. Forecasts by some few world renowned institutions such as Goldman Sachs put the growth in the Nigerian economy as being on course to make the country the biggest economy on the continent ahead of South Africa in few years time.

     Coming to the risky side, two classes of risk stand out as most prominent of all the risks facing Nigerian economy: security and political risks ahead of 2015 election. Since the resumption of office of the current regime of President Goodluck Jonathan after 2011 general elections, it has been battling with different types of security challenges for its own survival. Most prominent of these challenges being Boko Haram security treats that originated from the North Eastern part of the country. Recently, when many Nigerians were happy that the hydra headed Boko Haram group has been brought to it knees, the group made surprising comeback with its leader Shekau coming out on the net to deny the claim by some sections of the Nigerian security apparatus that he has been killed as a result of an encounter in Sambisa forest of Borno state. While it is to the credit of this regime that the Boko Haram activities have been restricted to one corner of the country, it is still a real threat to the economy of the country. In the oil rich Niger Delta, Ijaw Militants operations still remain a threat, though at a more subdue level compared to what obtained before this regime, which also came from the same Niger Delta. Of recent, a number of foreign expatriates have been kidnapped in the region, with demands for ransom of millions of Dollars coming immediately after the kidnappings. Arm robbery and kidnapping for money still remains a major challenge in other sections of the country, especially the South East and South West. 

    As we approach 2015 general elections, the intensity and probability of incidences of heighten political risk has been increasing, rising the level of tension in the relatively calm political atmosphere of the last two years into another height; and if care is not taken putting it (political risk) at par with the security risk the country is currently battling with. Two major changes help brought about this heighten atmosphere: the formation of the mega party All Progress Congress (APC) with strength to march the ruling People Democratic Party (PDP), and the current crisis that is threatening to develop into a bigger explosion within the ruling party. Transition from one election period to another in Nigeria is not assuring and stable as is the case in other countries such as the US or South Africa here on the continent, where there are some relative certainties. Elections in Nigeria are full of controversies, the most intense of which is allegations of massive riggings in the elections conducted so far; that have continued to develop into crisis, killing of lives and destructions of properties. For the first time in the history of democratic transition in the country it now looks increasingly possible for the opposition to grab power from the ruling PDP come 2015. That in itself is a big risk as nobody knows which type policy the next regime after Jonathan and PDP will pursue. And if Jonathan were to win the 2015 election with the usual rigging, as the opposition alleges, there is possibility of  some kind of upheavals like we have seen after 2011 election or something more serious than that.

Wednesday, November 13, 2013


First, micro finance in Nigeria, if not of recent years, is an area that Nigerian authorities have never given much serious consideration to; the focus of Nigerian authorities have always been on the major commercial banks who churns out bulk of their credit to government cronies and powerful business individuals. Apart from government agencies such as Central Bank of Nigeria (CBN) who turn their focus away from microfinancing (as at that period), Nigerian media itself is guilty of neglect and failure to turn their cameras on the industry thereby drawing the attention of the authorities to the need to develop the sector. Instead Nigerian media houses were busy with their long romantic relationship, that exist between them and big commercial banks who after all patronized these media outfit by given them billions of Naira worth of advertisement, not to mention the cheap credit they issued to them in order to keep their mouth shut from reporting negative stories about them. While the general public on their part are ignorant of the working and importance of microfinance to the socioeconomic development of the majority of Nigerian population who are poor and unbanked; it was under this condition that Nigeria’s microfinance industry come to be what it is today. 

     The efforts by the military regime of General Ibrahim Babangida to spread the adaptation of community banking failed due to the insincerity of the regime, faulty foundation, neglect and absence of regulatory mechanism to control the community banks. What is today formal microfinance sector in the larger Nigerian financial landscape came into being in 2005 with the formulation of national microfinance policy by CBN in line with Millennium Development Goals (MDGs); thus Nigerian authorities were forced by external pressure particularly from such bodies as the United Nations to seriously consider taken microfinancing a bit further as part of what is needed to achieved MDGs of the United Nations. Unlike in the case of Bangladesh where the authorities and other non governmental organisations saw the need to spread the novel scheme all over the country as a way of solving the country’s developmental challenges. This explain the pioneering role played by the Nobel prize winning Bangladeshi economist Muhammad Yunus in establishing Grameen Bank and revolutionizing the concept of microcredit not only in Bangladesh but worldwide.
   During his last visit to Nigeria in 2011 on invitation from First bank of Nigeria on occasion of its ‘Impact conference series’, Muhammad Yunus criticized CBN for not understanding what it is regulating as far as microfinancing is concerned. He faulted the Nigerian microfinance sector as not for the poor but for traders and suppliers,   that they are only found in cities and towns not villages and other rural communities, they lend base on collateral and not for starting business, they are not for women, charged exorbitant interest rate more than what is charged by commercial banks, and that Nigerian microfinance banks are owned by the rich instead of being own by the poor who are its main customers. In short what obtained in Nigeria as microfinance institutions are nothing but ‘micro-commercial banks’. All these are contrary to what obtain in the microfinance industry of Bangladesh where in addition to other good qualities banks go to the door step of the poor to provide their services instead of the poor coming to them. Yunus advocated the changing of the whole framework from the current profit oriented microfinance banks to that of a social business aim at reducing poverty that is everywhere in the land. 

       Because of the pioneering contributions of people such as Yunus, Bangladesh is no longer seen as ‘Basket case’ by the development community worldwide; live expectancy of an average Bangladeshi has increased from what it was in the 1970s, and poverty has been reduced drastically. It is up to Nigeria to do the same considering the percentage of people living below poverty line in the country, despite the enormous amount of wealth that has been cornered by the minority who are rich and the political class in the country. CBN, NDIC, SEC and all other stakeholders in the Nigerian microfinance industry must realized that not much change will be realized within the current state the industry is in, to move the Nigerian poor out of poverty microfinance should not be only about profit. Federal and state governments must provide large amount of capital to help provide cheap loan to the poor as well as bring more non governmental bodies to participate in the industry. Nobody is condemning profit motive in businesses such as microfinancing, but government has to put an eye on how the industry is run, with the view to prevent unethical practice by market participants.

Sunday, November 10, 2013


What Dangote, Shoprite, and Chinese civil engineering giants have in common…

   In recent time the only main story coming from the north is that of Boko Haram obliterating all other sources of potential positive news. This is not surprising looking at the preoccupation of the media industry the world over, that feeds on bad news such as war and natural disasters. Thus, both local and international media has been concerned with only Boko Haram as no any other thing coming from the North is worth reporting. Though, there is some element of true that (world wide) where there is war and other civil disturbances positive activities in other spheres of live slow down or cease to continue. That notwithstanding there are some positives things going on in the north, after all who says Boko Haram activities have not been reduced in the last one year which is a credit to the regime in power. Apart from that is this insecurity problem not restricted to a particular corner of the vast region that constitute more than two-third of the land area of Nigeria? 

                                                        Obajana cement plant, Kogi state
   Before I start to mention these investments opportunities I will start with the giant investment strides Alhaji Aliko Dangote is making in the region (who is currently one of the richest people in the world) that runs into billions of Dollars. In Sokoto and Kebbi state alone he plan to invest money worth 871.3 million Euros in building four sugar plants over an area of 120,000 hectares. Another sugar plant is to be built in Kwara state another northern state. Already Dangote own Savanna sugar factory in Numan Adamawa state after purchasing it from the federal government. His plan is to replicate what he did in the cement industry in sugar business, making the area one of his major sources of wealth. Other states in the North that are hoping for the billionaire to come and invest in their sugar industry include Jigawa, Yobe and Bauchi states. Dangote plan to turn Nigeria into a big sugar exporter worldwide in the next coming years with these investments in the north.
   Agriculture is one vast area that any substantial investment in it is bound to generate a good turnover. Already state such as Kwara and Taraba have invited foreign investors who have put their money in the area. The fact that billionaires such as Dangote, Abdus Samad Rabiu and Mutallab have put their money into the sector is a positive indicator of the potential of the sector. According to estimates from the Central Bank of Nigeria, agriculture (despite the underinvestment in the sector) contributed nearly half of the GDP of Nigeria. In the retail business already South African companies such as Shoprite have been rushing to open shops in Northern states with two in Kwara and Kano and more states coming up. With the vast population of the region and growing rank of middle class modern retailing is an area worth investing in in the North. For a start an investor should consider retail business in these state capitals, Kano, Kaduna, Ilorin, Sokoto, Maiduguri, Minna, Jos, Yola, and Bauchi; the reasons for chosen these places are size of middle class, level of infrastructures, and their socioeconomic compositions.
   Real estate is an area that is suffering from growing lack of investment and any investor that is wise enough to notice this opportunity and creatively utilize it will reap the benefit of good returns on his money. Unlike Lagos in the South where there is growing investment in the real estate sector, in the north the only state that commercial real estate business is rapidly growing up is Kano followed by Kaduna. Chinese have so far discovered the opportunities in the Civil engineering business in the North, a lot of road constructions, building and other civil engineering works in the north are now been awarded to these Chinese companies. Because of the growing demands for modern infrastructures in the region the market for civil engineering in the region is bound to continue growing in double digit for a long time to come. 

    States such as Zamfara, Gombe, and Niger have been keen on inviting foreign investors to invest in the vast mineral deposit that nature endowed them with. Already Chinese investors have invested substantial amount of money in gold processing in Zamfara. There is still large untapped deposit of limestone (use in making cement) in many parts of the region just like Dangote found out with his investment in Kogi state. Islamic finance is an area worth investing; northern region has the most concentration of Muslim faithful of any region of West Africa. This, naturally, mean a vast market for Islamic finance particularly Islamic Banking products; currently there is only one financial institution that serve this large market, any investor wise enough to see this potential and make arrangements for tapping it will benefit from its untapped wealth. Kano alone needs such products as Musharakah, Mudarabah, Ijarah, etc, to finance the businesses of it inhabitants who make their living out of trade for hundreds of years.

Sunday, November 3, 2013


Official deposit insurance originated from the former Czechoslovakia in 1924, but United States popularized it during the great depression's banking crisis of 1933 (Wikipedia);  in Nigeria deposit insurance started in the 1988 following SAP implementation that led to the liberalization of the country's banking system. With about 25 years of existence deposit insurance in Nigeria has not changed much from what it was at its inception. Just like the whole (private) insurance market in the country, deposit insurance as provided by Nigerian Deposit Insurance Corporation (NDIC) has remain underdeveloped. The Nigerian private insurance market is still a shadow of the much bigger banking industry, with no near-future prospect of catching up just like we have seen in more advanced countries.  Its public sector (government) equivalent as provided by NDIC is not much better. Many critics of official deposit insurance schemes blame them for causing moral hazard and encouraging banks to take excessive risk that later cause the next round of banking crisis. 

  Many Nigerian depositors do not know anything about NDIC or her insuring of their little deposits in the banks, the wealthy Nigerians with huge interest in the system that are not supposed to be insured (in most cases) by the corporation are the one who knows of the existence of the institution. Just last Thursday the management of NDIC unveiled a new corporate identity aim at 'deepening trust, improving communication with depositors and providing greater protection'. But, i am surprise that it is now that the management of NDIC under Mr. Umaru Ibrahim is coming to the realization that it needs to communicate more with the people it is insuring. All this while NDIC has been sleeping behind the shadow of mighty CBN and its publicity hungry governor. An institution that is purposely established in order to strengthen openness and transparency on the part of deposit taken banks is locked-Inside behind it own lack of openness and transparency.

   The institution does routine assessment of the soundness of the Nigerian banks, but in most cases as they come out with their ratings, CBN come out with theirs to contradict them and nobody give a damn because most stakeholders in the industry care only about what CBN says. NDIC people just look like they are there to do the bidding of CBN governor and that of the minister of finance, nothing more. They lack independence to do their own things their way, they lack highly effective personalities to steer the institution in revolutionary way just like it happens with the CBN and finance ministry, and they do not move fast with the changes that are taken place in the global banking market place. As  a matter of advice, NDIC has to look at it recruitment process with the view to recruiting the most qualified applicants so as not to be like any other government parastatal and ministry who over the years have become a dumping ground of unqualified applicant with connections at the top.