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The
Central Bank of Nigeria (CBN) has said its intervention in some sectors
of the economy is not going to cost the federal government money since
the funds are fully provided for. This clarification comes amidst
concerns about the legality of the CBN disbursing such huge funds
without legislative approval.

Lamido
Sanusi, the CBN governor said recently that the funds which would be
disbursed through commercial banks would be recovered at the end of the
day. “We are lending to BOI (Bank of Industry) and BOI is lending to
banks and the lending is secured by government security,” said Mr.
Sanusi.

“So
for a power project to benefit from this, the bank has to be convinced
that it is commercially viable and that it can repay the loan. If it is
a bad loan the bank makes the provision. All we do is sell the
government bond and recover our money.”

The
Central Bank is releasing N500 billion to companies in power, aviation,
and manufacturing sectors in its bid to encourage economic growth and
infrastructure development to refinance their loans. On Monday, it also
announced plans to intervene in the agricultural sector with the
signing of agreement with the Alliance for a Green Revolution in Africa
(AGRA) to develop a mechanism for unlocking billions of naira of
financing to serve the needs of all farmers, especially smallholder
farmers, agro-processors, agribusinesses and input suppliers in the
agricultural value chain.

CBN needs to do more

Razia
Khan, Regional Head of Research, Africa at Standard Chartered Bank said
the Central Bank would need to do more in order to encourage banks to
lend their money to the real sector of the economy. Ms. Khan said there
is little prospect of a meaningful rise in credit until the non
performing loans constraining new credit growth have been removed from
banks’ balance sheets. “Given the imminent establishment of an Asset
Management Company to do precisely this, Nigeria may not have to wait
too much longer to see this excess liquidity transformed into
private-sector credit,” she said.

A
treasury manager in one of the banks who spoke on condition of
anonymity said the CBN intervention though laudable, was tantamount to
rewarding companies that have not been prudent in managing their
resources.

“What
you are saying is that those whose assets are performing are being
punished since those who have not managed their funds well now have
access to cheap funds,” he added.

Haphazard approach

He
added that the manner the Central Bank was going about it suggests a
haphazard approach to tackling economic issues. “Initially it was power
alone, then aviation, then manufacturing. It does not suggest that it
is part of a coherent economic policy at the macro level. So the
criticism is that it is adhoc instead of situating it as part of a
broader policy,” he said.

He
however explained that the move was in line with the CBN mandate as
lender of last resort and does not require the consent of the National
Assembly to appropriate such funds.

This
tally with the view of Bamidele Aturu, a lawyer, who said the Central
Bank intervention was akin to rewarding government cronies. “If the
government is serious about stimulating the economy all it has to do is
to create jobs, fix the infrastructure, mechanise and support farming
and farmers and of course fight corruption. No country can develop by
giving free money to a lazy and dissolute class,” Mr. Aturu said.

But analysts at Afrinvest West Africa Limited, an investment banking
firm said the banking industry would benefit from the intervention.
“With specific reference to the CBN/BOI N500 billion infrastructure
fund, our understanding is that the CBN seeks to stimulate credit to
real sectors of the economy while immunizing its balance sheet from
credit risks.”

The value of
equities at the Nigerian Stock Exchange (NSE) which plunged on Monday,
the first day in office of the newly appointed interim administrator of
the NSE, Emmanuel Ikhazobo, further depreciated at the close of
Tuesday’s trading.

The Exchange market
capitalisation closed yesterday at N6.199 trillion after opening the
day at N6.262 trillion, reflecting a one per cent decline or over N63
billion loss. The market also lost over N32 billion on Monday while
about N5 billion was gained last Friday on the announcement of Mr.
Ikhazobo as the new head.

The All-Share
Index, on Tuesday, shed one per cent whic was a loss of 255.11 units
from Monday’s figures of 25,606.09 basis points, to close at 25,350.98.

Mr. Ikhazobo, a
former managing partner of Akintola Williams Deloitte, who rang the
Exchange’s trading bell on Monday, said he’s in the market to foster
restoration of investors’ confidence.

However, Femi
Awoyemi, the chief executive officer of Proshare Nigeria Limited, an
investment advisory firm, said the need for the recent intervention by
the Securities and Exchange Commission should not be confused with the
means by which it was achieved.

“There are a few
missing links which I understand those responsible for the market are
seriously looking at and I understand that those affected have also had
time to reflect on developments and recognise that things needed to
change,” Mr. Awoyemi said.

Gainers and losers

At the close of
Tuesday’s trading, a total of 22 stocks appreciated in value, lower
than the 30 recorded on Monday; while 48 stocks depreciated in value,
higher than the preceding day’s 37.

Julius Berger and
Northern Nigeria Flour Mills topped the price gainers’ table with an
increase of N2.61 and N1.76 on their initial prices of N52.28 and
N35.25 per share. Ashaka Cement and UAC Nigeria followed in the chart
with an increase of 60 kobo each, to close at N20.00 and N44.00 per
share.

On the flip side,
Nigerian Breweries and Benue Cement Company led the price losers’ chart
with a loss of N1.50 and N1.00, from their opening prices of N74.00 and
N65.00 per share. Despite leading among top traded stocks on Tuesday,
Guaranty Trust Bank and Zenith Bank followed in the losers’ chart with
80 kobo and 53 kobo losses, to close at N16 and N13.77 per share.

Financial accounts

At the Exchange’s floor yesterday, Skye Bank and Oando presented their financial accounts to market operators.

Skye Bank Plc’s
unaudited financial result for the second quarter ended 30 June shows a
1.21 per cent increase in gross earning, from N51.334 billion to
N51.953 billion. However, the bank’s profit after tax fell by 32.44 per
cent from N7.531 billion to N5.088 billion and its total net asset for
the period in review appreciated by 8.09 per cent, from N88.086 billion
to N95.210 billion.

In its second
quarter result ended June 30, Oando Plc recorded a turnover of N172.859
billion from N165.036 billion; representing a 4.74 per cent increase.
The profit after tax, however, dipped by 2.43 per cent from N6.737
billion to N6.573 billion, just as net asset for the period went up by
46.24 per cent from N53.520 billion to N78.268 billion.

Beyond some crucial
first steps, the necessity for the regulator to define its message as
narrowly as possible, and keep to the message through the execution
phase, remains a major requirement for the success of the Central Bank
of Nigeria’s (CBN) reform of the financial services sector.

A sense that the
central bank knows what it is about is necessary if the aim is to
restore the markets’ confidence in the financial services sector to
pre-crisis level, at least. And the appropriate market responses are
vital if – the necessary lapses permitting – the bank’s intervention in
the economy is to have the desired result. This requirement is as
important for the task of linking deposit taking institutions’ retail
rates to the policy rate, as it is for reforming the domestic financial
system and returning the banking system to good health.

However, the
extensive deterioration in domestic financial conditions has provided a
poor background against which to judge the CBN’s work. This is of
course not about the central bank’s culpability for the poor state of
the country’s financial services sector. You do not need too much
hindsight to recall that the sector was already in freefall, long
before the CBN discovered its present reforming zeal.

Nonetheless, the
implosion of the market for bank credit has hindered the regulator’s
ability to maintain domestic financial stability. We have seen it worry
about the humongous liquidity in the financial system, only to see its
intervention in support of continued interbank transactions create more
of such liquidity. With any luck, another such panacea, the Asset
Management Corporation (AMCON), in addition to its beneficial effects
on the economy, will exacerbate the financial sector’s current battle
with low-earning funds.

The “credit crunch”
has had other less than helpful effects too: on urban unemployment;
final domestic demand; and national output growth. Until recently, all
of these have had the tendency to divert the CBN from its core task. It
was a relief therefore, when some months back, the rate-setting
committee of the bank made a clear distinction between domestic
responsibility for credit supply (the remit of monetary policy), and
the responsibility for ensuring that the domestic demand for credit
keeps ticking (fiscal policy, and government’s continuing pursuit of
reforms to the economy).

After all is said,
and not much is done, how does all of these sit with the central bank’s
recent claim that it has commenced an 18-month plan to address the
contraction of the credit supply pipeline in the nation’s financial
institutions? According to Kingsley Moghalu, the CBN’s Deputy Governor
in charge of Financial System Stability, the newly discovered process
will help allay investors’ concern over the banks’ credit allocation
process. If it knew of this nostrum all this while, why did the central
bank wait until the credit-creation infrastructure collapsed, before it
bestirred itself? And why wait 18 months before this process yields
results?

There is a certain
noxious, albeit familiar, odour to this new claim by the central bank!
Strange isn’t it, that after having described the process of
stimulating credit demand in the country as the sole preserve of
government, including issues with the domestic cost of doing business,
the CBN should want to turn that logic on its head, by accepting that
it has a magic wand that will allow us witness “significant growth in
credit in the banks” only because the reforms embarked on by it were
“in consultation with the stakeholders and players in the banking
sector”.

We do not need the
Power Holding Company of Nigeria to work again. We do not need
government to resume reforms to the domestic economy, including passing
on some of the service functions that it currently discharges most
inefficiently to the private sector. No! All that matters is that the
CBN has its reform architecture right, and in 18 months time, the
credit taps will open once again. “To who?” would have been such a nice
question to ask Mr Kingsley. And it is a wonder that his audience at
the Financial Institutions Training Centre function where he made these
assertions did not enquire thus.

One other query, how much of the central bank’s newly discovered
competence is a pandering to suggestions from the executive arm of
government, keen to deflect attention away from its competence deficits
in an election year? The 18 months implementation horizon appears very
significant within this context.

There are several factors that people consider in
choosing their next of kin. Here are some responses by Nigerians to the
question “Who is your Next of Kin?”

Florence Dottie A business woman (Married)

“I chose my husband as my next of kin because he
should be the first person to know whatever happens to me. The meaning of next
of kin is someone that can be reached quickly in case of any emergencies or
issues and that person to me is my husband. And he is the closest person to
me.”

Oluwatuyi Oluwole A business man (Single)

“My younger sister is my next of kin. I chose her
because we are very close and I think she is the only person I can trust for
now, as I am not married. All my documents such as my life insurance policy and
bank details have her as my next of kin although she is not aware of this.”

Mrs. Sobo A banker (Married)

“My first son is my next of kin because he is the
heir. If I choose my daughters, they will get married one day and their
husbands could take over all that they have and family property will then end
up in a strange family. I can never choose my husband; that’s how he will go
and marry again and the woman will use all my property to benefit her own
children and neglect mine.”

Chike (Trader)

“I will put my brother. I know him well – we grew
up together. I wouldn’t make my wife my next of kin, though I love her so much.
If I put one of her children, she will influence them. Women can change. It is
better to be safe than sorry.”

Mrs. Danlami (Teacher)

“My daughters are my next of kin. If you notice,
female children always look after their parents in old age. Your daughter will
never abandon you even if she marries and lives far away. Woe, betide you if
your son marries a wicked woman. You are finished.”

Mr. Johnson (Taxi driver)

“Ah! I will put my first son. I expect him to
take care of all the family if I am not there. I can never put my wife – that’s
how she will go and marry and then some other man will be enjoying all my sweat
and blood. Just the thought that she might be enjoying my money with another
man after my death puts me off.

Mrs. Erinle (Lawyer)

“It depends. I can put my husband down but I have
to watch him closely for some years. I will look at how he behaves. If I see
that he is unfaithful, and I can no longer trust him, I will take him off and
put my sister.”

Mr. Iyamabo (Teacher)

I have already put my father – he is very wise
and can only do what is right for me. He will make sure my wife and children do
not suffer.”

Ekaete A trader (married)

“My husband is my next of kin. We love and trust
each other and are building everything together. He was there before any
children came, so whatever affects me will affect him. I am sure he too will
choose me as his next of kin.”

The word ‘Kin” in the traditional sense means
family, which apart from a spouse and children goes on to include the extended
family, parents, siblings, cousins, uncles, aunts, and so on. The term
“Next-of-kin” is rather ambiguous and is usually used to describe a person’s
closest living blood relative. In its broadest sense it indicates the person
who should be notified in case of any eventualities of life such as an
accident, emergency or death. It also has implications as to who would be
legally entitled to a deceased’s property where there is no will.

At some time or the other, you have probably had
to fill a form or some other documentation where you had to clearly state your
next of kin. Many people don’t take this designation seriously and sometimes
even forget whom they designated as time goes by. This is an important issue
particularly where the documentation you are completing relates to money
matters such as investments in stocks, real estate, banking transactions,
insurance transactions and so on.

If you were to die intestate, that is, without
leaving a will, your property won’t simply pass to your spouse as you might
think; strict rules rank your next of kin and your property will be distributed
according to laws of intestacy.

If there is no will, or other credible document
in place, then this is likely to be the order: If you are married, it would be
your spouse. If you are a single parent or are widowed, your children will be
your next of kin. If you are unmarried and without children, your parents will
be legal heirs to your estate; your property will be distributed to siblings
and other close blood relatives, if your parents are deceased.

In Western culture, the choice of the spouse as
next of kin, is the most obvious one as the mother of his children is generally
the person in whom a man places the most trust. It is more common in Nigeria,
however, for a man to choose his brother as next of kin. In the event of your
death making your wife your next of kin will save her and your children a lot
of hardship given our extended family system where other family members often
forcefully claim their brother’s property. There are numerous examples of
widows having to cope with not only the loss of their spouse, but also of all
their personal possessions and property.

Bear in mind that the status of next-of-kin does not in any way imply that
those designated stand to inherit any of the individual’s estate in the event
of their death. It is only by having a valid will in place that you can protect
your immediate family including your wife and children and ensure that your
investments and property do not go into wrong hands after your death.