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The Institute of
Chartered Secretaries and Administrators of Nigeria (ICSAN) has said it
would prosecute its members who violate corporate governance rules in
the country. ICSAN, which membership comprises lawyers and
administrative managers, is the recognised professional body in Nigeria
dedicated to enhancing the status and practice of corporate governance
and public administration.

Moses Adeisa, the
institute president, said corporate governance was the important
challenge facing public and private businesses in the world today.

“Our members are always expected to adhere to the rules of corporate governance,” Mr. Adeisa said.

“Anyone of them
found wanting will be brought before the disciplinary committee, which
tries them to give them fair hearing. Anyone found wanting will be made
to face sanction of either a fine or other punishment under the law.”

He, however, said
the institute does not have the power of enforcement under the law, but
would rather subject its members to the disciplinary rules of the body.

Collaborating with regulators

He said the
institute was collaborating with regulatory authorities in the training
and retraining of their staff, in order to strengthen the enforcement
of corporate governance in the country.

In his address at
the institute’s 34th annual conference with the theme, ‘Managing Growth
in Challenging Times: The Significance of Corporate Governance’ held in
Lagos yesterday, Adeisa said the current economic recovery, which has
begun by government, must be made to work in order to build the
confidence of investors.

“The shakeup in the
financial sector is not really as a result of failure of corporate
governance, but it emphasises the need to enforce corporate governance
practices,” he said.

He said company
secretaries are expected to advise the board of directors on changes in
laws as it affects the operations of the sector.

“He must keep up
with changes in the laws, business, and finance and understand their
implications for better decision making,” he further said.

Cause of distress

Tunde Lemo, deputy
governor, banking and payment systems department of the Central Bank of
Nigeria (CBN), said poor corporate governance has been one of the
primary causes of all known distress in the Nigerian banking industry,
including the latest incidence which required the direct intervention
of the CBN in some banks last year.

“Banks’ reports to
Central Bank and investors were seldom accurate, thus depriving the
Central Bank of the right information to take timely and effective
regulatory decisions. Investors and other stakeholders were also misled
by this distorted information supplied by the banks,” Mr. Lemo said.

In his keynote address, Mr. Lemo said that a safe and sound system is predicated on good corporate governance practices.

“The achievement of
vision and mission of your respective organisations would remain a
mirage without good corporate governance. The various professional
bodies must promote and enforce ethical behavior that will reinforce
strong corporate governance practices,” he said.

Mr. Lemo added that
instituting corporate governance was important for private sector
companies, as well as public sector firms where it has begun to receive
increased attention. “This is particularly the case when countries are
attempting to curb widespread corruption within the public sector, or
when they are preparing public enterprises for privatisation. In either
scenario, sound corporate governance helps to ensure that the public
gets fair return on their national assets,” he added.

George Oguntade, a
retired Supreme Court justice, who chaired the conference, observed
that poor corporate governance was the foundation for corrupt
practices.

“There is huge unemployment; growth is a mirage in Nigeria due to the problem of corruption,” Mr. Oguntade said.

“Our educational
system is deeply troubled. We worry everyday whether we can survive as
a nation. Put bluntly, this country is in a state of self doubt,” he
added.

He said Nigerians must begin to consider the negative influence of corruption in order to curb the menace.

I recently learnt a lesson in basic capitalism from two hawkers on the streets of Antigua, Guatemala.

The first hawker
approached me, selling wooden flutes that I had no particular interest
in. He urged me to part with US$25 for one. For a moment, I thought of
my youngest son who has a passion for playing the flute and the
trumpet.

The hawker’s basic
commercial English would tickle your ears. But then, my Spanish is not
enough to get anywhere beyond basic greetings. I offered to pay US$5,
and the guy lowered his price to 15. Eventually, I dished out $10 to
this guy who took the cash and promptly moved to search for another
‘tourist.’

The flute under my
armpit, I swaggered with friends for dinner in a beautiful restaurant.
Not too long after, another hawker caught up with me. Guess what? He
had flutes to sell and without any bargaining, he announced they went
for $1 apiece. That was the end of lesson one: never rush the
celebration of a bargain.

Some evenings
later, my friends and I decided to sample the culinary delights of
Antigua again. A young girl soon made an approach with a collection of
pendants and scarves for sale. I was not ready to be sucked in a second
time.

When she pushed her
pendants at me I showed her one I had bought earlier in the day
dangling from my neck. Next, she brought a scarf. Too bad, I already
had one around my neck to ward off the cold. She looked at me for a
while and asked in impeccable English, “Why don’t you want to spend
money?” Taken aback, my response was laughter. Then she fired a second
salvo: “open the other wallet!”

She taught me a
sound lesson in basic capitalism. First, you must spend money. Is that
not the logic about how to stimulate recovery from the financial crisis
the world has been plunged into? More money into the hands of private
sector operators is expected to bring efficiency over profligacy
caskets.

Open the other
wallet? It was later on it dawned on me that some tourists probably
always carried two wallets: one with the local currency and another
with dollars or some similar currencies, but I had only one wallet.

With the
reflections from Antigua hawkers, it was time for us to visit San Juan
Sacatepéquez, a municipality in Guatemala whose local people engage
mainly in agriculture and production of flowers. The visit to a region
of 12 communities with a population of 75,000 revealed an iconic
struggle between local peoples on the one side, and combined teams of
governments and industry on the other.

After listening to
the people at a community meeting and then to the minister of energy
and mines of the country, I saw similarities with community struggles
in Nigeria. A major source of conflict has often been the peoples
demand for dialogue.

Shattered peace

The people recalled
that peace was shattered in 2006 when Cementos Progreso moved in to
commence exploratory activities for mineral exploitation for cement
production. Cementos Progresso is embarking on this project in
partnership with Holcin, the world’s second largest multinational
cement company, which is raising environmental dusts in other
countries, including South Africa.

The people insisted
they were not consulted and that an Environmental Impact Assessment
(EIA) prepared for the project was not participatory. Also, when they
asked for consultative meetings with the company and the government,
they were rebuffed. At a point, a state of emergency was declared in
the area and initial works on the project took off under that cover.

Community people
insist that this denial of consultation violates their rights, as
established under International Labour Organisation’s convention 169,
which requires that affected communities be consulted on projects that
will affect their territories. Guatemalan constitutional court ruled in
December 2009 that licences issued by the ministry of energy and mines
for the recognition, exploration, and mining and hydropower licences
without consultation, is unlawful and arbitrary and violates the
constitutional right of consultation.

With official
rejection of dialogue, the people went ahead and voted against the
project. The official response was repression, heavy-handed attacks,
deaths, and also imprisonment of three local people.

The people believe
their territory has over 34 different solid minerals and that the
cement company’s move is a ploy to open the area to mining of these
other minerals. They fear that the dust from cement operations would
damage their flower production and cripple the local economy.

Moreover, they
believe a road the company plans to build will only benefit the company
by providing it a link to the inter-America highway and would ignore
the community’s earth road that is in sore need for upgrading and
repairs.

When the issues
were tabled before the minister, the answers were telling. Of course,
they had the best intentions. They needed to fight poverty. Poverty
causes environmental degradation. An EIA was conducted and approved by
the relevant ministry.

A United Nations
agency also reviewed the EIA and cited the potential for heavy dusts as
an impact that needed action. Then he added that there was a
constitutional gap with regard to consultations. There is no clarity
about the meaning of popular consultations and who would be involved
and what the scope of such consultations should be. The ILO Convention
169 does not confer the power of veto to any consultative forum that
may be set up.

At the moment, the
project is stalled and there is an uneasy calm in the communities. The
government said mining works would commence only when a “friendly”
agreement is reached with the community.

This reminded me of
the lesson I got from the hawker about the approach of governments to
mining and other projects: open the other wallet – exploit anything
that can be exploited, whether you need it or not.

Lesson over!

The directive by the Central Bank of Nigeria (CBN) that banks should migrate to the Nigerian Central Switch has elicited reactions from operators in the sector. According to them, the directive will affect the business of some payment companies currently operating.

In a circular titled ‘Interoperability and Interconnectivity of the Payment System Infrastructure in Nigeria,’ dated August 25, to all banks, switching companies, and other parties in the Nigerian payment system, the Central Bank directed that all automated teller machines (ATM) and point of sale (POS) terminals should be configured to accept and process all payment card schemes and other electronic payment instruments that are acceptable in Nigeria.

“The deadline for compliance is December 1, 2010,” the circular added. The aim, according to the CBN, is to achieve an effective and robust payment system in line with best practice.

By the circular, the Central Bank stated that the Nigerian Central Switch (NCS) system exists to address the issue of interconnectivity and insisted that private switches shall not connect to each other.

All banks were instructed to adjust “their switching systems connect to the Nigerian central switch and only one other private switch of their choice as determined by the type of business. All participants with multiple connections to private switches are hereby given till December 1, 2010 to terminate all multiple connections as appropriate,” the circular stated.

Policy somersault

A number of operators who spoke off record said the directive was contrary to the expectation in a free market economy.

“Nothing I am going to say about this matter is going to be complimentary about the CBN,” said a staff of one of the new switching companies.

“A few years after licencing more switching companies and collected huge sums from them, you now create another company that all other switching companies must connect to.”

Another industry operator said the NCS does not have the technology to play the role that the Central Bank is thrusting upon it.

“Right now, even the central switch is not yet in full operation. They do not have the capacity and they are yet to fully take off. Now, how can the Central Bank lump every payment system operator into a central switch, when our operations are different. Each one has its own business model with its own area of specialisation.”

He said the directive will end up limiting the options available to consumers.

However, Evans Woherem, executive director, operations and IT for Unity Bank, said Nigeria was in need of a central switching system in order to enhance interoperability in the payment system.

“I think it is a good thing because of the need for proper convergence. There was that need for proper interconnectivity and the way the country chose to do it was through the NIBSS (Nigeria Inter-Bank Settlement System),” he said.

Mr. Woherem, who was the former chairman of Interswitch, said there was nothing wrong if the CBN reverses an earlier decision, so long as it was for the common good.

“I think it is understandable that you might proceed on a particular path only to realise that you ought to have done it differently. l think it is okay. It shows that we are making progress,” he said.

Operational guidelines

The CBN in 2009 released the operational guidelines for the National Central Switch for all card and electronic funds transfer transactions in the country, with the directive to all switching companies in the country to connect to it. The NCS, which is operated by the NIBSS to provide interconnectivity and interoperability amongst approved electronic funds transfer switch platforms in the country.

Paul Lawal, CEO of NIBSS, said recently that, “The successful deployment of the Nigeria Central Switch is of national importance, as a successful national payments infrastructure has been proven to be crucial to the economic development and GDP growth of a country.”

He said it will create a more efficient national payment infrastructure by electronically switching retail payment transactions between commercial banks.

There are a number of companies which offer payment switching services for the Nigerian financial industry. Companies like Interswitch, eTranzact, Chams Switch, Card Technologies, and ValueCard all operate payment card scheme which are not often compatible with each other.