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Following the positive trend recorded by non intervened banks, shares of the seven rescued banks at the Nigerian Stock Exchange have shown significant improvement since the beginning of the year.

However, while the total market capitalisation has grown by 7.59 per cent from N7.91 trillion at the beginning of the year to 8.51 trillion as at the close of trading on Friday, shares of some of the rescued banks doubled during the review period.

From January 4th to February 17th, the share prices of all the seven rescued banks recorded growth within the range of one to 100 per cent; while the healthier banks rose by an average of 10 to 40 per cent.

Spring Bank recorded the highest growth by 100 per cent; Finbank rose by 33 per cent increase; BankPHB grew by 12 per cent; Afribank followed with 14 per cent increase; while Oceanic Bank and Intercontinental Bank recorded increase of 9 per cent and 12 per cent, respectively. However, Union Bank was the least gainer with one per cent growth.

Dimeji Akintayo, an equity analyst at Resource Cap, a portfolio management firm, said the performance of the banking sector generally showed that “both local and foreign investors are beginning to have confidence in the industry following the various reform programmes by the Central Bank.”

“The rescued banks especially are attracting the attention of some foreign investors because they understand that the government has taken steps to stabilise their operations,” Mr. Akintayo said.

Boniface Okezie, the national chairman of the Progressive Shareholders Association of Nigeria, said while other rescued banks’ shares are becoming the toast of investors, “the recent crisis in Union Bank may discourage some investors from investing in the bank’s stock.”

The banking crisis started over a year ago, when the Central Bank sacked the former chief executive officers and top managements of the seven banks for various misdemeanor. The banks’ heads were immediately replaced with new ones. The intervention, and the stringent regulatory control by the Central Bank of Nigeria led to crash in the price of banking stock, a trend that reverberated throughout the market.

Asset Management

Asset and Resource Management Company (ARM), a fund management firm, in its first quarter report, said the creation of the Asset Management Company of Nigeria (AMCON) was key to the recent attraction by some investors in the shares of rescued banks because “AMCON was eagerly anticipated by both investors and the banking system.”

The report said although the recovery in the banking sector from the depression of the last two years was generally slow, it was steady.

“Key indicators of performance and stability are showing signs of improvement across the sector. Of course, this has largely been made possible by the forbearance of the Central Bank. The regulatory body has not only kept all rescued banks alive until now, but has also prevented the situation in the healthy banks, especially the marginal ones, from deteriorating,” the report further said.

However, ARM said while provisioning moderated significantly within the industry aftermath, the crisis “profitability fell short of our expectations. In fact, for a number of banks, write-backs have constituted a significant portion of total profits so far in 2010,” adding that “for the rescued banks, even if the full face value of the AMCON bonds fully impacts balance sheets, most will retain a negative equity position.”

It said significant lending is impossible for the rescued banks without further recapitalisation and attendant dilution of equity.

How would you explain Islamic finance to an ordinary Nigerian?

To explain to a layman, you have to look at what the background of the premise is and the premise is really one of fundamental economic principle.

Money, as we have come to know it today, is only a means of exchange. What has value is something real; a real asset or a real service and the only way we can make sustainable money and build a sustainable economy is to take something real and convert it into a productive asset.

I can use money, but I can’t eat it. But I can buy rice at a cost and trade it at a premium and make my profit. Or I can build a house, and I can rent or lease it out. The fact that I have N7,000 for a bag of rice, I should not earn money just for having it in cash, as you do in the bank which is what interest is. You get a rate on money and that is what is forbidden in Islam.

However, nobody says you are not allowed to make money and that is another fallacy about Islamic finance. A lot of people feel Islamic finance is free finance. It is not. It is just finance around reality; real trade, real service, real added value.

Difference between profit and interest

It is about the value. There are three ways in which people make money in Islamic finance. The first one is trade. You buy something at a cost, you put your mark up, and sell it at a profit, just like every trader does. And you can even do that in a way that looks like a banking transaction.

A manufacturer comes and says I need to buy a machine for my factory. Normally, if it is N1 million, a bank would give him N1 million. But an Islamic financial institution will buy the machine and sell it to you for N1.1 million and you can pay over one year. Every month you pay in installment.

The difference is that while a bank will give you the N1 million and charge 10 per cent, in this case I bought something, I owned it for a few days, and I sold it and I am allowing you to pay me over time. So, I took the risk of ownership and I am selling you something that I owned. I am not lending you money. Lending money is not a business in Islamic finance.

The second area is leasing, which is not very different from the conventional system except that the financial institution must buy the asset and then lease it to you. You want to buy a car for N1 million, we can’t just give you the money. We will buy the car and then lease it to you. So we own the car. That’s the difference.

The third area is partnership. A person comes with a business idea and says come to partner with me. Bring your money, I bring my money, let’s do this business together. If we make profit, we share it together and if we make a loss, we share it together.

So those are the three core areas of how Islamic finance works and everything else is built around these three models essentially.

How viable is Islamic finance, since exclusion from some sectors curtails your investment outlets?

I want to say that this principle of business not based on reality has been the cause of financial crisis. When you look at what was the reality of the transactions that created these bubble, it is because they were allowed to trade on things that didn’t exist, margin lending, and all that.

If we had stuck with reality, the bubble cannot grow much. You have to have something real to back it up. The question of being curtailed in investment outlet is not entirely true. We don’t invest in banking sector, we don’t invest in breweries, we don’t invest in gambling and people say to us, what else is there to invest in.

But what is the percentage contribution of banking, breweries and gambling to our GDP (gross domestic product) and what else do we do in Nigeria? There are other sectors that we could invest in like oil marketing, agriculture, telecoms, manufacturing, food, beverages, pharmaceuticals, transportation, building materials, real estate, and infrastructure. Islamic finance is very well suited for these kind of financing.

What do you have to say about the new CBN guideline on non-interest banking?

As pioneers in this area, I think we are the only institution today that has the entire requirements that the CBN requires. We are compliant with the guidelines as we have it today.

So you can float a bank?

Well, floating a bank is a business decision that we are not really considering at this time. But in terms of the structure of our organisation and system procedures and committee that we have in place, we are compliant with CBN guidelines. We have a lot of experience under our belt and we have everything that it takes.

The guidelines require institutions to set up a shariah advisory council. What will be their role?

It is so that companies do not misrepresent themselves. When you are doing Islamic finance, part of what you come across is that for many people, it is an emotional decision. Many people are excluded from the banks by personal choice. They don’t go to the conventional banks because they feel it is wrong for them to engage in interest, either receiving it or giving it.

So for them, if a bank comes to them and says we are now a non interest bank and in actual fact they are not, then we have a case of public being deceived and that would be very unfortunate. So what the shariah advisory board does is an extra layer of oversight. They ensure and verify that indeed, you are not engaged in any activity or structures that are not compliant with them. In addition, as you are rolling out new products, they review and certify that these new products are actually compliant and are Islamic finance structures that can pass before you roll out.

They are not in your organisation as spiritual leaders in terms of personal counseling. They have to be well versed in shariah of commerce, called Fiqh al-Muamalat; they have to know commerce, accounting, economics, finance and even Law, because this is all about drafting contract at the end of the day.

They have to be up to date with the latest financial instrument, even in the conventional industry. We have a shariah board and it has been fruitful.

Why do you not invest in banks?

The obvious reason is that one of the tenets of Islamic finance is that we don’t invest in interest and banks make their money from giving and receiving interest.

So does that mean that you monitor the companies you invest in to ensure they do not violate your investment principles?

That’s right. We can’t invest in just any company.

But how far can you monitor to ensure that these companies comply with these principles?

There is an internationally accepted framework where you have limits and you make sure that things are not within certain limits of materiality. So you satisfy yourself to the extent of materiality. You can never be 100 per cent sure. In fact, there is no such thing as 100 per cent purity.

So there are internationally accepted standard of the percentage of purity that would be acceptable for an investment for the simple reason that if you want to be absolutely strict, you would not do anything.

Secondly, there is what we call degrees of separation. If you came to invest with me for example, I have my own responsibilities. I have to make sure that you are asking me to invest in something that is ethical. So you can’t come to me and ask me to invest your capital in a brewery. We would not do that.

I have to ensure that your investment is not in cash. It has to go through the banking system, I have your KYC (know-your-customer), I have your address, I know where you come from, and all other relevant information. There is a level of separation that you have to keep yourself to making sure you have met your own responsibility in terms of Islamic finance and in terms of the expectation from a financial institution. There is only so much that you can know about a person.

Limit yourself so that the interaction between you and the person is correct and anything else the person is doing with his life cannot be too much of your concern.

Do you worry about capacity in this field?

In this field, that is a global problem and the only concern I had with the CBN guideline was the insistence that the shariah council advisers can only work for one institution. I felt that should be reconsidered because if there is less capacity as operators, there is even less capacity of the advisers with the qualities that I mentioned.

Globally, it is a problem and the way they have addressed it is you find many of the same people serve on different banks’ shariah advisory council. They are like consultants and only act when they require it and when they need to come and audit an organisation. It is like asking an accounting firm to work for one company at a time. This is even more specialised than accountants.

I think the capacity crunch is even more crucial, even at that shariah advisory board level. At the operator level, training can take care of it. It will take time, so I don’t think any institution should rush into this business. The guidelines have come out, which is great.

You studied Islamic financing several years ago at a time when it was not popular in Nigeria. Did you see this coming?

I was at a training recently and the gentle man was talking about business planning and he said if you want to succeed in business, ask yourself what problems are people grappling with that they need solutions to. Are there things that people need that nobody is supplying today?

For me, that was why I went into Islamic finance. It started out as a personal need. I didn’t want to buy a house on an interest based mortgage but I aspired to own a house. And I felt strongly about it so I said if I feel like this, there must be others that may feel like this; there could be a market for this. We did our survey, did questionnaires, sampled the country and found there were other people that desired this service. That’s why we went into it five years ago now.

I studied Islamic finance 10 years in anticipation. Yes, it has taken Nigeria 10 years to have a guideline, but we now have a guideline and that’s progress. Nigeria has a real opportunity to put its stamp on the international financial community by establishing a hub for Islamic finance, given our population, given the size of our economy, given the importance of our country in West Africa and even in Africa.

The European countries, particularly United Kingdom, are scrambling to be known as Islamic finance hub because they know the implication. They finance major infrastructure and major real estate in their economy with Islamic finance and they have attracted foreign direct investment. At the end of the day, it is a financial product and with good returns structured in a way that it does not offend anybody.

How well do your products perform compared to the rest of the market?

It is a challenging question to answer because we don’t have a direct benchmark with which to measure our performance. In the UK and US, they have the FTSE Islamic Index and the Dow Jones Islamic Index, and so Islamic finance fund managers measure themselves against these indices.

We are measured against the industry, even though the structure of our funds is very different. What we found, which is very interesting, is that we have a very low correlation with the general market, which is fund portfolio diversification. For example, during the financial crisis, our funds outperformed the conventional market. During times of market bubble when you had margin lending and things shifting, particularly the banking sector, it becomes a challenge because we don’t invest in the banking sector. For us, it is the learning curve.

We have struggled with a lack of certain instruments that we require to build a balanced portfolio. I mean regulatory instruments from the CBN like non interest bonds, non interest treasury bills, which would allow us to build a more robust portfolio. We are beginning to create them on our own and based on that, we are beginning to do very well.

Our own target now is to work with the Nigerian Stock Exchange. We have an Islamic index that we have created in-house and we want to work with the NSE to publish it so that even if somebody wants to create their own Islamic portfolio, they have the kind of stocks that they can benchmark against.

To make the Calabar
seaport viable and busy all year round, the federal government should
implement a deliberate policy of diverting smaller vessels from Lagos
and other ports prone to congestion to Calabar.

General manager of
Eco-Marine Plc, Kingsley Iheanacho, said the lack of some basic
facilities has made the Calabar Port unattractive to importers.
Eco-Marine is one of the concessionaires of the port.

Speaking yesterday
at a one-day stakeholder workshop organised by the Nigerian Shippers’
Council, South-South zone, Mr. Iheanacho listed a six-point agenda for
the federal government to consider in order to make the Calabar port
viable.

Top on his proposal
is completion of the dredging of the Calabar river channel within a
defined time frame to the 9.4m, as contained in the agreement;
immediate removal of shipwrecks from the quays, in view of the
environmental and security risk they pose to the terminal; completion
of the rehabilitation of the public power supply to the port;
restoration of the 30 per cent rebate on ship dues hitherto granted to
container vessels; and federal government fulfilling its promise on
road construction.

Mr. Iheanacho said
port reforms can only work where the enabling environment is created,
noting that “Cross River State government has been assisting in
reaching out to the federal government on the need to make Calabar port
work.” He regretted that the port is yet to attain its full potential
as a hub for importers.

“The terminal
operators have regularly demonstrated their commitment to the success
of the port concession exercise, as can be seen in their commitment
towards repositioning the terminal for efficient service delivery,” Mr.
Iheanacho said.

He said when his
company took over the port from the federal government in August 2007,
the terminal was in dismal state where container vessel turnaround time
was measured in days and weeks as a result of the appalling state of
the facilities.

“All the equipment
taken over were bad and mostly beyond repair and nothing reasonable
could be done on those equipment other than to junk them and procure
new ones, if the objectives of the privatization were to be met,” he
further said.

Zonal coordinator,
South-South zone, Nigerian Shippers Council, Maurice Effanga, in his
speech, said the council would continue to protect the interest of
Nigerian shippers and the national cargo interest in matters relating
to the shipment of goods to and from Nigeria, and to offer advice to
the federal government.

“We receive
complaints from our members against lack of vessels to bring their
cargoes to Calabar or to evacuate their exports to foreign importers.
The dredging of the access channel and rehabilitation of roads linking
the port to neighbouring towns, amongst others, are challenges facing
the shippers with respect to access to shipping services,” Mr. Effanga
said.

According to him, the poor condition of the port has made
import/export trade difficult “as members have to ship their
consignments through other ports and later truck them to Calabar, at a
high freight cost.”

I have over the
years taken pains to read more about our so called celebrities in the
entertainment and showbiz world. Whenever I read a piece on such
celebrities, I find their portrayal in the pieces of information about
them shocking. Only last week, I read about an actress who said she
flaunts her breasts as the only way to express gratitude to God. Others
are divorced, while some are involved in questionable deals.

Who are
celebrities? It is saddening that in Nigeria, the word ‘celebrity’ is
only limited to people in showbiz, entertainment, music, fashion etc.
However, to me, celebrities are people who have made their marks in
their chosen fields of human endeavour without necessarily having their
private lives splashed on the pages of newspapers. They even make more
impact in promoting brand values and influencing consumers.

A good case in
point is the Intern Reality Show sponsored by Bank PHB where a leading
Advertising practitioner and towering role model, Biodun Sobanjo, was
the moderator. Mr. Sobanjo’s personality rubbed off positively on the
brand and its initiative due to his inimitable clout within the
industry. Several people indicated interest in the programme when he
was announced as the anchor person. This is one man who has proved his
mettle in his chosen field.

Celebrity
endorsement remains a popular tool for marketers; its relevance is
increasing over the years as marketers acknowledge the power of
celebrities in influencing purchase decisions of consumers. This can
bestow special attributes upon a brand. A celebrity can indeed be a
powerful tool in promoting a brand, as s/he brings distinct identity
and added value to it.

However, there
should be a link between the brand and the celebrity. In the case of
Sobanjo, his personality clearly matched the brand, as young men were
tutored on how to make boardroom and business decisions. His own skills
in these were key parameters which qualified him for the task.

It is important to
reiterate that the popularity rating of Bank PHB Intern Show increased
considerably with the presence of Sobanjo, who is synonymous with a
great deal of business acumen and professional expertise. Companies
should see this as a good way to make use of celebrities in enhancing
brand image. There was a higher degree of recall for the intern show
and it equally enjoyed mass appeal while it lasted.

These and many more
are the advantages of celebrity endorsements that are done the right
way. It was also a good public relations campaign for Bank PHB, as the
bank cannot be rated amongst the leading banks. The programme sustained
the visibility ratings of the bank and promoted favourable perception.

There is another
instance of a juice brand that made use of a popular actor, which to me
is not a match for the brand. This is because the celebrity was
situated within the context of fun, entertainment, and excitement for
children. The personality of the celebrity has never been synonymous
with relating with children, even though the area of fun in home video
is noted. Such a brand needs a celebrity that has consistently
associated with children, to influence young ones to connect to the
brand.

Despite all the
enormous benefits of celebrity endorsements, brand managers should be
wary of some celebrities. The fact is that while companies need
celebrities to promote their brands, there is the need to exercise a
great deal of caution. Some celebrities may derogate after endorsing
the brand. There can also be inconsistencies in their professional
ratings. They are human too, and can also create image problems for the
brand.

When the right celebrity is sourced for the brand, it leads to
instant brand awareness, as celebrities define and refresh brand image.

Several hundred of
cocoa growers chanting anti-European slogans marched to the European
Union (EU) offices in Cote d’Ivoire on Thursday and burned a pile of
cocoa sacks to protest against sanctions crippling the industry.

A pile of several
60-kg sacks of beans were set ablaze as planters carried banners
reading ‘Shame on the EU’ and ‘No to economic slavery’, and gathered
outside the European Union’s Abidjan headquarters in the late morning.

There were no reports of violence. The cocoa industry in the country
is grinding to a halt, partly because of the EU sanctions on incumbent
leader, Laurent Gbagbo, and his supporters after his refusal to quit
power.

SODIC, Egypt’s
third-biggest listed developer, said it is assuming zero sales for 2011
after three weeks of political unrest had unnerved investors.

The high-end real
estate firm, which does not fully recognise revenue until it delivers
units, has a strong cash position, limited outstanding debt and land
debt, as well as strong cash flows, its chief executive said.

“To be totally
conservative in working out cash flows, is our objective – to make sure
our cash flows are more than sufficient to tide us through – we are
assuming zero sales for 2011,” Maher Maksoud told Reuters, adding that
he remained optimistic about the long-term outlook.

Whether the voters’
registration exercise has ended or not is not the issue many Nigerians
are talking about these days. The concerns about that exercise are
largely about the huge sums spent on its execution compared to the
number of voters actually registered.

The electoral
commission informed us that about 60 million Nigerians have been
registered to vote in the April 2010 elections. That is not too bad
considering that they had a target of about 70 million. What may sour
the statistics would be if the cases of multiple registrations were
identified, weeded out, and the total number is big enough to reduce
the overall number of voters substantially.

Some analysts claim
that the electoral commission spent N1, 500 per voter if they
registered 60 million. If this number gets whittled down, it would mean
that the cost of registering one voter might actually be higher than
this estimate.

Some preliminary
questions that come to mind are with regard to the actual value of a
voter’s card. Is it worth N1, 500 or more? Can the value be enhanced by
certain factors or is it plain crazy trying to price the card at all?
If voting is a right, can you price your right?

The second layers
of questions are to do with the reasons why some people engaged in
multiple registrations with one person getting caught with as many as
four cards! One can only imagine how many times they had their finger
prints captured and how they must have laughed at the high tech system
that was not networked and thus could be fooled at will. The electoral
commission says they will weed out multiple registrations when all
captured data are downloaded into their central system. We shall see.

What will happen to
those who are still in possession of multiple cards and are far from
getting caught? When will they know that they have been weeded out? It
is possible that some may even get through to the voting period without
being caught at any time. If that happens, what will be the value of
their stock of cards? Will they choose to sell the cards or would they
vote for all candidates and so stand a chance of claiming that they
voted for whosoever won?

It is not likely
that a voter who risked all to obtain multiple cards would want to use
them for fun. It is reasonable to assume that the intention is to make
merchandise of the cards and sell to the highest bidder, who would
probably not pay the owner to carry out the multiple voting but would
simply purchase the cards and find some ways of using them in more
reliable ways that would eliminate the treachery that could occur in
the voting booth away from watchful eyes.

Although vote
buying may be entrenched in Nigeria, it is not a peculiarly Nigerian
phenomenon or invention. When one looks back into history, there are
several cases where vote buying was entrenched and was openly
advertised. Such cases can be found in the history of the United States
of America and in several other places.

In 1812 Britain, a
certain noble man, George Venables-Vernon, left his son-in-law, “one
sum not exceeding £5,000 towards the purchase of a seat in Parliament.”
Office purchases and related practices were eventually halted through a
1883 Corrupt and Illegal Practices Prevention Act.

In the
nineteen-century USA, the price of votes were often quoted, even in
newspapers. One paper, The Elizabethtown Post, reportedly quoted the
price of a vote in Ulster County as being $25.

Whereas vote
selling and buying has transformed into other phenomena in the Western
world, such as campaign donations and lobbying, it is still possible to
see it in many countries in Africa. In fact, in some African countries,
where vote buying does not suffice, an incumbent loser can simply
refuse to vacate office. After much haggling, they may decide to share
offices with presumed winners and carry on as if nothing happened. Or
you may end up with two presidents.

Analysts have seen
that the price of a vote could vary even within the same country and
the office for which the politician is seeking. For example, where the
national legislature is more powerful in terms of determining the
direction of the state and the office of the president is merely
ceremonial, then the vote for a legislator becomes more costly.

The average cost of
a vote for those seeking election to the national assembly in Sao Tome
and Principe in their 2006 election was said to be about $7.10,
although in the capital this was five times more costly. The price of a
vote for the presidency was slightly more than half of that for the
national assembly because the president wields power mainly on issues
of foreign affairs and defence. With oil revenue’s floodgates opening
up, those who have more influence over the economy pay more to garner
the needed votes to sit over the pie.

In Nigeria, the
votes can easily be arranged in a hierarchy of prices starting from the
vote for a local government councillor to that for the president. What
may be a bit tricky to rank would be the price differential between the
vote for a senator and that for a governor. The confusion comes from
the fact that many former governors forget that they had governed whole
states and often angle to represent a third of their states as senators.

However, in terms
of which office is more lucrative (via corruption), that of the
governor takes the cake, no matter how much salaries and perks the
senators legislate for themselves. If people got elected to provide
selfless service, vote buying, ballot box snatching (a form of
wholesale purchase of votes), and electoral violence would not be the
norm.

What is the price of your vote?