Nigeria Content Online

Technology
startups and big companies work together all the time – refining ideas,
seeking mutual advantage and accelerating the pace of development of
new products and services. But these odd-couple relationships can be
fraught with peril.

Steve A. Stone, a
veteran product manager at Microsoft, had an idea for an innovative way
to identify and track digital objects across the Web. So he set up shop
for a new company in his garage in suburban Seattle, and convinced a
few Microsoft colleagues to join him. They began building their
software, working late many nights, fuelled by homemade spaghetti and
takeout Subway and Quiznos sandwiches.

The startup,
Infoflows, began working with Corbis, the big photo library and
licensing company owned by Bill Gates, Microsoft’s chairman, and in
June 2006, the two signed a multimillion-dollar development agreement.

But four months
later, things fell apart, culminating in a Washington state jury
verdict against Corbis for misappropriation of trade secrets, fraud and
breach of contract. The court awarded damages of more than $20 million.

In a statement
last week, Corbis said it was “disappointed by the outcome in the trial
and believes that the trial court made substantial legal errors.” It
plans to appeal and said it was “confident that it will ultimately
prevail.”

The
Infoflows-Corbis story, it seems, is a striking case of a partnership
between a startup and a big company gone bad, and a catalog of pitfalls
to avoid – courtroom battles, millions in legal costs and a business in
limbo for years.

“What you want is
the business equivalent of no-fault divorce,” said Josh Lerner, a
professor at the Harvard Business School. “You want the ability to
experiment, fail and disengage, and move on, to keep the innovation
process moving forward.”

There was no amicable split between Infoflows and Corbis.

In court filings
and testimony, Corbis asserted that Infoflows was a poorly performing
contractor that Corbis had patiently tried to work with, but finally
gave up on. Except for a small sliver of technology belonging to
Infoflows, Corbis said, all the work produced and the intellectual
property was owned by Corbis.

Infoflows saw
things differently. “They took our ideas and tried to claim them as
their own,” Stone said. “And they tried to crush a little company.”

Settlement talks a
few months ago failed. Stone and his Infoflows colleagues were willing
to be interviewed now because, they say, they want their account of
events made public as they try to restart their business. They also say
they hope the court ruling in their favour may deter other big
companies tempted to bully a startup, as they say Corbis did.

It is also the
case that as a result of the ruling Gates – who owns Corbis, but is not
a party to the suit – had to personally put up a bond of more than $20
million for damages assessed. Infoflows will not get a penny of that
money until the appeal process concludes, if Infoflows prevails, or a
settlement is reached. A newspaper article on the suit and the ruling
could be a prod to settle the case, or harden positions on both sides.

In addition to its
statement, a lawyer representing Corbis offered an overview of the
company’s position, answered specific questions and supplied court
documents and testimony, on the condition that he would not be quoted.

Infoflows may hold
the upper hand now, but the protracted legal battle has taken a toll on
the founders, they say. Retirement accounts and personal savings, they
say, have been drained to pay legal fees. Still, unlike many startups,
the Infoflows founders did have resources to battle the big company.
And they say they had little choice.

In October 2006,
Corbis told Infoflows that it was terminating the contract it signed
four months earlier. Stone said he was stunned but just wanted to move
on. When Infoflows put up its public website in January 2007, Corbis
filed suit, claiming any Infoflows digital content-tracking product
would be illegally using Corbis’ proprietary technology. Infoflows
countersued the same day.

Infoflows, its
founders say, talked to potential customers and venture capital
backers. But the litigation with Corbis scared them away. “No one
wanted to come near us,” recalled Carlo Martin, a former engineer at
Microsoft. “It shut us down.”

Infoflows, which
had leased offices in Redmond, Wash., retreated to Stone’s garage. For
Stone, overseeing the legal battle with Corbis, which is based in
nearby Seattle, was a full-time job, but the other five founders sought
outside work, mainly as consultants and contractors.

For Infoflows, the
Corbis deal was a big bet on one customer. And the startup went into
the partnership without patenting any of its software or system for
tracking digital rights, a further risk.

Technology
startups that work with big companies, said Kevin Rivette, a Silicon
Valley consultant, should take care to protect their most valuable
ideas, even as they collaborate. “Innovation without protection is
philanthropy,” said Rivette, a former vice president of intellectual
property strategy for IBM.

Stone said he felt
no rush to patent because he wanted the joint work with Corbis to move
closer to a finished system. Infoflows, he said, would develop the
underlying system for identifying and tracking digital objects across
the Web, and Corbis would own the application for its photo-licensing
business.

In December 2006,
after Corbis terminated its agreement with Infoflows, Stone met with
Corbis managers to discuss details of the breakup. Corbis said the
intellectual property it claimed as its own was covered in the
non-public patent Corbis had filed back in January of that year. It was
the first time Stone had heard of Corbis patenting the work, he said.
“I was shocked,” he recalled.

The Corbis patent,
Infoflows said, was a move on its ideas. Stone said he had an oral
agreement with Corbis, supported by an e-mail exchange, that neither
side would file for patents until their work was well along. Corbis
denied there was any such agreement.

In court, a Corbis
lawyer and a software designer, neither of whom still works at Corbis,
testified that they had put the patent application together fairly
quickly over a weekend. The Infoflows lawyer called this the
“immaculate invention,” and submitted Infoflows documents intended to
show that Corbis had pilfered the startup’s trade secrets. Corbis
countered that most of what Infoflows claimed as its inventions was
already in the public domain.

The case, tried
over three weeks, included 26,000 pages of documents and 21
depositions. Much of the trial revolved around technical matters of
software and business methods. Each point was sharply disputed, as in
an interminable he said-she said argument.

For example,
Corbis asked Infoflows in 2006 to help it gather evidence on a digital
pirate, who was taking Corbis-licensed photos and illegally reselling
them. Infoflows did, and a Corbis manager sent an e-mail message of
thanks. “First of all, let me just say how friggin’ awesome you guys
are. Seriously, this is HUGE, and you guys ROCK!”

In court,
Infoflows presented the episode and the e-mail message as evidence that
its technology did indeed work. Corbis countered that Infoflows did a
good job, but mainly by putting in long hours and using software tools
made by other companies.

Despite the
mountains of documents in the case, some crucial ones – technical
drawings and certain contract details, for example – remain sealed,
though they were shown to the jury.

Legal experts say
accusations of misappropriation of trade secrets are often very
difficult to prove – more so than patent infringement – because such
business secrets can be hard to clearly identify and to show as being
under legal protection. “The court must have felt there was a real
injustice here,” observed Rivette, a former lawyer and litigator.

That is an issue for the appeals court.

© 2010 New York Times News Service

Customers
have expressed dissatisfaction in the manner in which some banks have
been handling reported fraud cases on internet banking and Automated
Teller Machines (ATM).

Tochukwu Onyiuke,
a lawyer at Punuka Attorneys & Solicitors, said of the over 1,000
internet banking fraud and ATM scam cases his firm is handling, “none
of the banks involved has shown genuine interest in rendering
assistance to the victims.”

Mr. Onyiuke said many of these victims are customers of Intercontinental Bank, Bank PHB, and Union Bank.

Moses Adeogun, a
postgraduate student in a university in the United Kingdom and an
Intercontinental customer, recently narrated how he lost all his
savings of N429, 000 in the bank to online fraud.

“On Tuesday, 27
July, I just discovered that all my savings at Intercontinental Bank to
the tune of N429, 000 had been stolen through internet banking,” said
Mr. Adeogun.

“I have two
accounts at the bank, one is current and the other is savings. I have
been using these two accounts since 2008. I activated internet banking
on both of them so that I can have access to my accounts while I am
away for studies,” Mr. Adeogun said.

He said, “It
happened that I was trying to log into my account on 27 June; a Sunday
night, but I couldn’t. So I kept on trying until the account was
locked. I then sent a mail to the internet banking office that my
access has been locked. The following day, I got a message from the
office that my account has been unlocked. That was on Monday, 28th of
June.”

However, he said
that on 4 July, somebody transferred N100, 000 from his account to
another person’s account named Olufunmi Olusanya. Two days later,
another N100, 000 was removed. It went on until the last N29, 000 was
removed on the July 14.

Mr. Adeogun said
while all these was happening, he didn’t receive any alert from the
bank as he usually do on any transaction. He said he didn’t touch his
account after it was unlocked until July 27 when he tried to confirm
his statement of account after transferring money into it that he
discovered all his money had gone. “I have mailed the bank severally
since it happened but all I get from them is we are investigating. I
was hoping that the matter would be resolved on time so that I can use
my money. But as it stands, the bank is only dragging the issue,” he
said.

Pushing blames

Experts say the
perpetrator must have had access to Mr. Adeogun’s username, password
and transaction code -the three details needed in internet banking
-before money could be successfully transferred from his account.

Meanwhile, the
victim said he never disclosed any of those information to anyone as
“all these details are only known by me and the internet banking
office.”

Findings revealed
that the Olufunmi Olusanya’s account belongs to a female youth corps
member. A transaction was made from Mr. Adeogun’s account to hers and
she later withdrew the money through an ATM.

However, Mr.
Onyiuke said how fraudsters managed to get into people’s accounts
through internet banking is a question banks should answer since the
position of law says “banks have a mandatory duty to protect customer’s
fund.”

The legal
practitioner said banks are to protect their customers’ money by
ensuring that there is no manipulation on customers’ account or
unauthorised withdrawal. “In the event that customer losses money, or
occasions that the bank fails to protect the fund, the customer can
bring a legal action of a breach of contract against the bank,” he said.

“Banks in Nigeria
are fond of pushing blames to the customers even before investigating.
Banks always claim that the customers compromised their passwords. But
most times, we have discovered through investigations, that the claims
were false,” said Mr. Onyiuke

Contacted over Mr
Adeogun’s allegation, after several phone calls and electronic mails to
the Intercontinental Bank went unreturned, Bridget Chinasa, a
receptionist at the bank front office who tried to cover her name tag,
said a reporter cannot speak to any official in the bank’s Corporate
Communication office since no appointment was made. “Just keep trying
the office number to book an appointment,” Ms. Chinasa said.

Suspicious move

Meanwhile, Mr.
Adeogun said he suspects insider abuse. “I really believe that she (Ms.
Olusanya) colluded with someone at the Internet banking office to get
into my account for the reasons being that the person who unlocked my
access on the 28th of June failed to attach his or her name,” he said,
adding that “most times when I receive messages from the bank, there is
usually the name of the sender attached to the message. But the message
I got after unlocking my access just read: Good day, your account has
been unlocked now. Thanks. Internet Banking Unit, Web Services/I-Mobile
Dept., Intercontinental Bank Plc… Happy Customer Happy Bank.”

Another suspicious
act, according to Mr. Adeogun, was that the perpetrator disabled the
alert on his transaction so that he won’t get any message while the
theft was going on. “All these can only be done by an insider with
priority access,” he said.

Last October, at a consumer advocacy forum, Akeem Awe, a business
man and a customer of Zenith Bank, also shared his experience on how he
lost his savings of v1. 06 million to an ATM fraudster in less than 20
minutes, and how the bank failed to fully investigate the matter.

I have never been a snooker fan and was
never particularly interested in the sport but one couldn’t help but
notice the flamboyant star of snooker Alex “Hurricane” Higgins. After
turning professional, he became the youngest World Championship winner
at his first attempt in 1972. It is reported that Higgins earned and
lost a fortune to alcohol and a string of poor investments spending his
last years broke and living in homeless shelters in Northern Ireland
until sadly, he died last month from throat cancer.

This is only one more sorry tale that
graphically illustrates the far too common “riches to rags” saga. In an
interview in 1991 about the reasons why so many high earning
celebrities such as musicians, actors, and sportsmen go broke,
billionaire investor Warren Buffett told an audience that “liqueur and
leverage” were ever-present culprits in financial demise.

It looks like it’s never going to end.

Artistes and sportsmen are particularly
vulnerable when it comes to their personal finances as they face unique
challenges. When celebrity hits and the cheques start coming in, those
who find themselves in this daunting position of wealth don’t realise
that they may be earning a lifetime of income within a relatively short
time frame. Careers are often uncertain and brief particularly for
sports men whose careers come to an end in their 30s or sooner, and one
serious injury could cut short a career overnight. Musicians cannot
predict when their music will stop selling, and an actress or actor
doesn’t know when they will stop getting regular roles.

Don’t neglect your education

It is very easy
when the money starts rolling in to view education as a waste of
precious time that could be used making money. This is a huge mistake,
as the benefits of education will remain long after a career has ended.
Many celebrities shortchange themselves by dropping out of school to
pursue their career and many more fail to return to complete their
education. By getting a qualification, there is a better chance of
earning income even when their celebrity is waning.

Overspending

Excessive spending
is a big reason for celebrities suffering financial misfortune.
Regardless of whether someone is making N500,000 or N50 million a year
there is the possibility of going broke. There are reports of a
Hollywood star that lived a lavish lifestyle far beyond his earning
capacity; he had 22 cars, four yachts, and 15 expensive homes all over
the world some of which he never visited; all came with significant
bills and costs of upkeep.

Mike Tyson, earned
several millions of dollars from his boxing career. It is reported that
he was in debt to the tune of over £25 million including about $13
million in unpaid taxes and about $174,000 for a diamond-studded gold
chain. We are all familiar with Michael Jackson’s story and reports of
his spending over $6 million within a few hours. He eventually lost
Neverland Ranch to foreclosure in 2008.

Hangers on and overheads

Along with their
large incomes, celebrities, including some Nigerians, are no different.
They also have enormous overheads that include: large homes, managers,
agents, stylists, publicists, bodyguards, and other assistants; they
are besieged by family members and friends who regularly require
assistance. Some are naïve and as they become very popular, they fall
victim to those who are willing to pander to their celebrity for
financial gain. Many have entourage; these people constantly surround
them and insulate them from reality, feeding their egos. “Untidy”
personal lives are also a common feature with multiple relationships
resulting in multiple children.

Invest wisely

Their lack of
financial knowledge makes celebrities vulnerable to business owners,
financial advisors, bankers and stockbrokers some of whom may take
advantage of them and who are eager to help them “invest” their
fortunes. Most have never learned the basics of financial management
and end up making poor investments and lose millions.

George Foreman
appears to stand out from many sportsmen; he turned professional at 20
and displayed much financial acumen relatively early. He claims to have
learnt from the financial predicament of boxing legend Joe Louis and
put aside about 25 per cent of what he earned at every fight into a
pension plan. In spite of his commitment to investing he did expose
most of his assets to significant risk in poor investments losing a
fortune.

In later years he
was to become wealthier than he ever was during his boxing career. In
1999, he sold his name and image to the manufacturer of George
Foreman’s Lean Mean Fat-Reducing Grilling Machine for $137.5 million in
cash and stock. His earlier experience of nearly going bankrupt made
him a more cautious investor.

It is hard to cut back

When celebrities
are in their earning prime, spending rises to meet income levels. When
income falls, it becomes difficult to curb expenses quickly enough
either because they cannot break the spending cycle, or because they
have already committed to large purchases and cannot meet debt
payments. It doesn’t take long for one to be broke if income stops and
spending continues for another six months. Sometimes one may be in
denial and may be unwilling to accept the fact that the lifestyle must
change.

One watches with
rapt attention, the exciting growth of the Nigerian entertainment
industry, an increasing crop of outstanding musicians, actors and
actresses, comedians, producers and directors, sports men and women. A
word of caution is important, however. Artistes and sportsmen must plan
for what could be an uncertain future by diversifying earning streams,
investing and protecting the large sums of money earned today. Do not
be complacent. Learn from past examples and protect your future to
avoid the road from riches to rags.

Write to
personalfinance@234next.com with your questions and comments. We would
love to hear from you. All letters will be considered for publication,
and if selected, may be edited.

When
the story of the Obasanjo years is written, one bit that will stand out
is his alleged and much-debated tenure-extension bid. Not much has been
documented about it, due to the fact that it existed mostly in the
murky realms of conjecture, allegation, and strident denial. It will
however be impossible not to see the attempt in a new light after
reading a recent report by the international think-tank, Chatham House.
The report, “Thirst for African Oil – Asian National Oil Companies in
Nigeria and Angola”, published in 2009, and launched last Thursday at
the Nigerian Institute of International Affairs (NIIA), Lagos, examines
why Asian National Oil companies (ANOCs) largely failed in their
initial foray into Nigeria’s oil industry, while managing to succeed in
Angola. The report sheds light on the unprecedented strategy utilised
by former President Obasanjo in dealing with the Asians. Mr. Obasanjo
offered unprecedented ‘oil-for-infrastructure deals’ – characterised by
preferential, and sometimes discretionary, allocations of oil blocks in
exchange for investment pledges – to the Chinese, South Koreans,
Indians, Taiwanese, and Malaysians.

The Chinese for example signed a
deal to construct a double-track, standard gauge railway from Lagos to
Kano, and to construct a hydroelectric complex in Mambilla, Adamawa
state. “The concept of the ‘oil-for-infrastructure’ deal was novel but
its introduction compromised the much-proclaimed transparency of the
oil licensing rounds of 2005, 2006 and 2007,” the report states in its
introduction. “There is a widespread perception in Nigeria that the
timing of the deals had a strong political undertone… The unspoken
need to generate funds for President Obasanjo’s (ultimately
unsuccessful) bid to change the Constitution to allow him to run for a
third term is seen as the key to the unravelling of the deals.”
According to the report, the oil-licensing rounds of those three years
were manipulated to favour the Asians.

Relying on interviews with
“several cabinet ministers of the Obasanjo Government” the report
reveals that “oil matters were never discussed in cabinet.” Mr
Obasanjo’s role as petroleum minister guaranteed this utter lack of
transparency. On assumption of office, Mr Obasanjo’s successor, Umar
Yar’Adua ordered a comprehensive review of many of the Obasanjo-era
deals with the Asians, and eventually revoked most of them.

Asian investments in West Africa

The launch was
accompanied by a public lecture, “Asian Investments in West Africa:
Impacts and Opportunities.” The lecture was delivered by three
speakers: Markus Weimer, one of the authors (the others were Alex
Vines, Lillian Wong and Indira Campos), Charles Dokubo, research fellow
at the NIIA, and Tom Burgis, West Africa correspondent of the Financial
Times. In his introduction, the moderator, Osita Agbu, noted that in
the face of rising demand for energy in its various forms, Nigeria and
other resource-rich countries “must insist on the maximization of our
national interest.” Mr. Weimer, in his remarks, restated the report’s
findings regarding the mismanagement of the ‘oil-for-infrastructure’
scheme by the Obasanjo administration. In addition he blamed the “lack
of predictability” that characterises policy-making in Nigeria, as well
as the dismal security situation in the delta, which saw Nigeria
briefly lose its place as Africa’s largest producer of crude oil, to
Angola. He quoted a South Korean government official as saying (this
quote is included in the report): “In Nigeria we found that a change of
government results in a change of business partners… It’s more
difficult to get a foothold in Angola, but we now believe safer and
more profitable in the long term.”

The report chronicles the Angola
success story, highlighting the fact that oil-for-infrastructure deals
with China succeeded impressively enough in the country for the World
Bank to christen them “Angola-mode.” It also attributes the success of
China-Angola oil dealings to the familiarity that China built with
Angola in the aftermath of the civil war. China, according to it “has
played a particularly important role” in the Angolan post-war
reconstruction effort. Mr Weimer went on to confront the “emotional
image of Africa being recolonised” by Asia. “It is wrong to assume that
African states are weak; actually African countries are very much in
control of the relationship with ANOCs,” he said. He also noted that
China has “injected a sense of pragmatism” into the relationship
between the West and Africa.

In his remarks, NIIA researcher Charles
Dokubo, highlighted the problems that foreign investors have to deal
with in Nigeria. “The political terrain of Nigeria is not
straightforward,” he said; adding that it is an environment
characterised by “personalisation of authority”, “concentration of
power”, and “institutional problems.” Mr. Dokubo said that despite
Angola’s extensive civil war, its institutions are “a bit firmer on
ground” than Nigeria’s. Journalist Tom Burgis dismissed the ongoing
wave of “China-bashing” – accusations by Western governments and media
that China does not have the interest of African countries at heart- as
“complete nonsense.” Mr. Burgis pointed to the French record in Gabon
and Niger, and BP’s legacy in Libya as evidence that the West lacks the
moral standing to criticize the Chinese. “Everyone has primarily
interests, not friends,” he said, adding that “the Western-Eastern
standoff is exactly like the Cold War.” He suggested that African
countries take advantage of the rivalry to extract commitments from
both partners and “rewrite the rules for the benefit of the African
economy, not [the] elite.” A question and answer session followed. How
have we fared with our so-called traditional partners?” queried Ngozi
Ugo, Professor of International Law at the NIIA. “The time has come:
out of two evils we should expand our scope… I think we have been
used long enough.”Bolade Eyinla, International Relations expert and
Professor of History at the University of Ilorin, asked a pointed
question: “When the price of oil collapses again will this interest
still be there?” Mr. Eyinla also wanted to know why the Nigerian
‘oil-for-infrastructure’ deal failed with the Chinese but worked in the
case of the Germans, reminding the audience that much of Nigeria’s
Federal Capital Territory, Abuja was built by German construction firm
Julius Berger in exchange for oil concessions. Olubunmi Martins of
Petroland, an oil and gas industry consultancy, suggested the creation
of a Nigeria Oil and Gas Chamber of Commerce to serve as a “business
pressure group to articulate Nigeria’s interests” and to “drive private
sector engagement.” Ejike Onyia, pioneer Managing Director of the
Nigerian Liquefied Natural Gas (NLNG) Limited, called for a radical
reform of the Nigerian oil industry. “The problem we have starts and
ends in Nigeria.”

The Chatham House report essentially corroborates
this view. In the concluding part of the section on Nigeria, it states:
“The oil-for-infrastructure concept has succeeded elsewhere in Africa.
But in Nigeria it was poorly conceived and poorly implemented – and
above all, it was distorted by political considerations. What should
have been a ‘win-win’ situation turned into a ‘lose-lose’ situation,”
an apt description of a nation’s penchant for squeezing defeat from the
jaws of triumph.

Sanusi
Lamido Sanusi’s reform strives to cover the gaps left in a similar
exercise carried out between 2004 and 2005, under which banks were
required to embrace consolidation and raise their capital base to a
minimum of N25 billion.

To meet the
condition, there were series of mergers and acquisitions in a scale
considered unprecedented in global banking history. The significant
increase in banks’ fresh capital, boosted by a historic rally in stock
prices, raised banking sector asset as a percentage of the country’s
gross domestic product (GDP) from 30 percent in 2004 to 60.

With such
phenomenal leap in capital and liquidity growth, banks came under
serious pressure to create risk assets amid limited innovation and
products diversification, which worsened the poor risk management as
well as weak corporate governance structures.

This, according to
Uju Ogubunka, a former registrar of the Chartered Institute of Bankers
of Nigeria (CIBN), led to the concentration of assets, particularly
margin lending and trading in petroleum products, with total exposure
to these two sectors put at about N1.6 trillion by December 2008.

Specifically,
issues of inadequate economic and macro-prudential management; poor
corporate governance; lack of disclosure and transparency; poor
regulatory framework, and prudential regulation characterised banking
then.

But, the global
financial and economic crisis around the same period was what worsened
the impact of the decay on the country’s economy.

The injection of
N620 billion into the nine distressed banks last October, was part of
the effort to boost their capital base and provide the capacity for
them to provide normal banking services, while the removal of their
chief executives was to make them accountable for their misdeeds in the
abuse of depositors’ funds.

To enhance
improved supervisory framework, the Central Bank has reactivated the
Financial Services Regulation Coordinating Committee (FSRCC) in line
with the CBN Act of 2007, while prudential guidelines were reviewed to
enhance the capacity to handle risk management, corporate governance,
obligor limits and anti-money laundering, loan loss provisioning as
well as strengthen regulatory/supervisory framework.

Besides, fresh
guidelines on margin lending is expected to guide market operators and
enhance the oversight functions of regulatory agencies as well as limit
the risk inherent in margin lending.

To ensure that
real sector impact positively on the economy, a N500 billion
infrastructure development fund was established last April to provide
long term support to finance the development of critical infrastructure
projects, particularly in the power, agricultural manufacturing sectors.

The recent
establishment of the Asset Management Corporation of Nigeria (AMCON)
will help free the banks of the burden of toxic assets and provide them
a renewed vista to extend credits to the real sector of the economy.

To enable AMCON
meet any shortfall in its activities, the CBN has mobilized the
nation’s 24 banks to allocate 0.3 percent of the value of their balance
sheets into a common pool in the next 10 years.

“Anybody
can say anything against the way I handle the business, but the major
thing they need to remember is that I have a job to do to save the
banking system and protect depositors’ funds. Nigeria is one of the few
countries in the world that has had a banking crisis and is being
resolved without anybody losing a kobo. This is the first time it is
happening in the history of the Nigerian banking system.

“In the last one
year, there have been big issues, particularly under-capitalisation and
poor governance, yet not a single banker defaulted on its obligations
to either depositors or creditors. That, for me, overrides every other
consideration, because banks are supposed to hold depositors’ funds on
absolute trust. Would anybody deny that that has not been achieved?

“Many people told
us we would not be able to get legislation to support what we are
doing. But, we have proved them wrong. But we got it even at a time the
country was going through a most difficult political period. We now
have a rare opportunity through the AMCON Act to recapitalise the banks.

“Nobody is saying
there are no difficulties and challenges, but the important thing is
that we have been able to change the mindset of the entire banking
system, which people had thought their balance sheet was for
speculation than for activities that would boost the economy. We have
shown that if one is imaginative and bold enough, one can deliver
single digits long term money to the productive sector, as we have done
with the mobilisation of the 24 banks to pool together about
N130billion for manufacturers to access at the rate of about seven
percent. Before now, that could not be done in this country.

“We are providing
imaginative solutions to long term cheap money for the development of
critical infrastructure in the power sector. We are making significant
progress towards signing a memorandum of understanding (MOU) with
Alliance for a Green Revolution in Africa (AGRA) on unlocking the
agricultural financial value chain. We are working towards getting
finance into the different value chain to boost agriculture.

“My challenge is to
sustain the momentum, to lay a solid foundation for a new banking
system that actually does what it is supposed to do – lend to the real
economy and create jobs and employment and not just make money. If
there is anything we have achieved, it is that the bankers have started
thinking of themselves not as bankers, but as Nigerians.

“This means they cannot sit back to complain that the environment is
not conducive for them to lend to manufacturers because there is no
power and other infrastructure, or that is not profitable. The next
generation of bankers may not do all these. Our generation would have
to do them, so that the next generation would simply find the projects.
That is why we are doing what we are doing.”

Nigerian interbank lending rates climbed to 1.66 percent on average this week from 1.08 percent last week due to large cash outflows to forex and treasury bills purchases by commercial banks, traders said.

They said cash withdrawals by state energy firm NNPC from some retail banks to its central bank account also helped drain liquidity from the system.

The secured Open Buy Back (OBB) rose 45 basis points to 1.50 percent, 50 basis points above the Standing Deposit Facility (SDF) rate and 4.50 percentage points below the central bank benchmark rate.

Overnight placement and call money each climbed to 1.75 percent from 1.10 percent last week.

“The opening balance (of lenders) with the central bank fell to 226 billion naira on Friday (from 339 billion naira last week) due to funding pressure for forex and treasury bills purchases and the wihtdrawal by the NNPC,” one dealer said.

The central bank sold 96.7 billion naira in 364-day, 182-day and 91-day treasury bills this week, while it sold $339 million at its bi-weekly foreign exchange auctions.

Traders said the NNPC recalled about 50 billion naira, being local currency proceeds of the dollars it sold to some banks in the last two weeks.

Nigeria said on Friday it has distributed 704 billion naira from the central accounts to the three tiers of government — federal, state and local — for the month of July, but bankers about half of the amount is expected to hit the banking system on Tuesday to buoy liquidity.

“We expect the rates to crash immediately part of monthly budgetary allocations to state and local governments hit the system latest by Tuesday,” another dealer said.

REUTERS

Nigeria has distributed $4.7 billion in revenues and windfall oil savings to government for July, a massive disbursal which is likely to trigger a drop in bond yields and interbank rates next week, dealers said.

Africa’s biggest oil and gas producer shares its revenues among three tiers of government each month — federal, state and local — and tops the disbursal up with a withdrawal from its windfall oil savings if there is a shortfall.

Accountant General Ibrahim Dankwambo said Nigeria had distributed 404.27 billion naira in revenues and $2 billion from its crude oil savings for last month, making up one of the largest monthly disbursals ever.

Around 80 percent of the liquidity in sub-Saharan Africa’s second-biggest economy comes from public cash flows and the monthly allocations can trigger significant shifts in bond yields and interbank rates.

“We expect (interbank) rates to crash immediately part of monthly budgetary allocations to state and local governments hit the system, latest by Tuesday,” one money market dealer said.

The disbursal comes five months before presidential and parliamentary elections in Africa’s most populous nation. Government spending has traditionally risen in election years, leading analysts to question the quality of the expenditure.

Among the major recipients of the monthly revenue distributions are the country’s 36 states, whose governors form a powerful caucus within the ruling People’s Democratic Party (PDP) and who will be key to the outcome of the polls.

President Goodluck Jonathan, who is from the southern Niger Delta, has not yet announced whether he plans to contest but a bid would be controversial because a “zoning agreement” within the PDP dictates that power should rotate between the Christian south and Muslim north every two terms.

Jonathan inherited the presidency when northern President Umaru Yar’Adua died part way through his first term earlier this year, meaning the next term should go to a northerner.

The PDP said on Friday its national executive council had “unanimously endorsed the retention of the zoning principle” but also said Jonathan had the right to contest because he was on a joint ticket with Yar’Adua, effectively hedging its bets.

“FINANCIAL INDIGESTION”

Government spending is set to rise sharply this year.

Parliament last month approved 445 billion naira in extra spending on top of the main 4.4 trillion naira 2010 budget, likely to push Nigeria’s fiscal deficit beyond 5.4 percent of GDP, above a 3 pct target set three years ago.

“It raises eyebrows,” Bismarck Rewane, head of Lagos-based consultancy Financial Derivatives, said of the latest disbursal.

“Do we have the capacity to absorb this amount of spending in such a short period, what are the inflationary aspects of this? Apart from the propensity of government to waste, there is also the question of financial indigestion,” he said.

Cabinet this week approved the $150 million purchase of three new presidential jets and parliament passed an 88 billion naira budget for the electoral commission to overhaul voter lists, funds to be raised through a government debt issue.

Dankwambo said a further $1 billion had been withdrawn from the excess crude account, a pillar of IMF-backed reforms into which Nigeria saves oil revenues above a benchmark price, to be set aside for the creation of a sovereign wealth fund.

The withdrawal leaves just $460 million in the excess crude account, compared to around $20 billion in early 2007, the start of the current presidential term.

Finance Minister Olusegun Aganga, a former Goldman Sachs executive appointed in March, has said he wants a sovereign wealth fund to replace the excess crude account, which has no clear constitutional basis.

But the fund has not yet been created and it was unclear where the $1 billion would be held in the interim.

REUTERS