Nigeria Content Online

The
federal government on Friday announced that it has set aside the sum of
$1billion (about N150billion), in preparation for the Sovereign Wealth
Fund (SWF) take off.

The Accountant
General of the Federation, Ibrahim Dankwambo, who disclosed this in
Abuja at the end of the Federation Accounts Allocation Committee (FAAC)
meeting on Friday, said the three tiers of government agreed to share a
total of about N704.3billion for the month of July.

Details of the
allocations include a statutory revenue allocation of N404.3billion,
which includes earnings from value added tax (VAT) of N42.8billion, and
additional $2billion (about N300billion) withdrawn from the Excess
Crude Account (ECA) for undisclosed purposes.

The statutory
revenue allocation, according to Mr Dankwambo, include N361.4billion,
which is higher than the previous month’s figure by N183million, or
0.05 per cent, attributable to higher crude oil prices in the
international oil markets and improved tax drive. Earning from VAT was
lower than previous month’s figure by about N9billion, or 2.3 per cent.

At the end of the
meeting, Mr Dankwambo said the balance in the ECA stands at about
$460million, while that of the new Excess Revenue Account has increased
to over N112billion.

Process already in motion

Mr Dankwambo
explained that though the Nigerian National Petroleum Corporation
(NNPC) paid revenues in excess of N500billion into the Federation
Account, only N365billion was shared, with the balance transferred to
the Excess Revenue Account, in line with the new fiscal rule requiring
that any revenue in excess of that ceiling every month be saved.

Though he said
government is yet to firm up the decision on when the Sovereign Wealth
Fund will take off, Mr Dankwambo indicated that the process has already
been set in motion to lay the structural foundation on how the fund
will be operated whenever it takes off in the near future as soon as
the enabling laws setting it have been passed by the National Assembly.

The wealth fund is
a pool fund being proposed by the federal government for the
accumulation of excess revenue from trade and crude oil exports for
investments and development of critical infrastructure that will
benefit the country’s economy.

Reforms will be initiated

Minister of State
for Finance, Yawaba Lawan-Wabi, who was attending the meeting for the
first time since her appointment early this week, said issues
concerning the controversial N450billion NNPC debt to the Federation
Account is still being processed and would soon be resolved.

She solicited the
cooperation of members and representatives of agencies towards
successful meetings, noting that some reforms will be initiated in the
future to make the work of the committee beneficial to all the three
tiers of government.

Chairman,
Commissioners Forum, Rebo Usman, expressed the hope that the fund will
be better managed than the Excess Crude Account when it finally takes
off, noting that the FAAC will not have anything to do with revenues
saved under the fund whenever work on the operational structures and
legal framework are in place.

“The SWF will be a great cushion for the country’s economy when it finally takes off,” he said.

Mr Usman, who is
also the Taraba State Commissioner for Finance, said it will be
difficult for the impact of the Excess Revenue Account, which was set
up more than two months ago, to become obvious, considering the
prevailing global economic crisis, which Nigeria is not immune.

“If the big economies, like China and Japan, are crying as a result
of the negative impact of the global economic situation, why should it
be different for Nigeria? Whatever the federal government is doing is
to ensure that Nigeria surmounts the impact of this global economic
challenge, which is something one cannot tackle overnight. It is unfair
for Nigerians to think that it is a Nigerian problem alone,” he said.

Trading
activities at the Nigerian Stock Exchange (NSE) remained negative as
measuring parameters of market performance closed down throughout last
week’s trading.

The NSE All-Share
Index depreciated by 753.99 points or 3 per cent to close on Friday at
24,984.80 while the market capitalization of the 199 First -Tier
equities closed lower at N6.11 trillion, after opening the week at
25,738.79 basis points and N6.294 trillion, respectively. The All-Share
Index also depreciated by 0.4 per cent last week.

Three of the four
sectorial indices depreciated during the week. The NSE Food/Beverage
Index depreciated by 23.33 points or 2.82 per cent to close at 811.62,
the NSE Banking Index depreciated by 14.56 points or 3.8 per cent to
close at 373.50 and the NSE Insurance Index depreciated by 2.18 points
or 1.2 per cent to close at 177.22. However, the NSE Oil/Gas Index
appreciated by 0.87 points or 0.23 per cent to close at 376.28.

A total turnover of
1.23 billion shares worth N11.3 billion in 33,065 deals was recorded at
the close of last week, in contrast to a total of 1.1 billion shares
valued at N9.11 billion exchanged in 27,401 deals the previous week.

Banking leads

The Banking
subsector was the most active during the week, measuring by turnover
volume, with 544.01 million shares worth N4.4 billion exchanged by
investors in 16,608 deals. Volume in the Banking subsector was largely
driven by activity in the shares of UBA Plc, Zenith Bank Plc, Fidelity
Bank Plc and Guaranty Trust Bank Plc. Trading in the shares of the four
Banks accounted for 250.22 million shares, representing 46.0 per cent
and 20.3 per cent of the subsector’s turnover and total volume traded
during the week, respectively.

The Construction
subsector, boosted by activity in the shares of Multiverse Resources
Plc, followed on the week’s activity chart with a turnover of
94.51million shares valued at N130.4 million in 298 deals. Last week,
the Banking subsector led on the activity chart and was followed by the
Insurance subsector.

Gainers reduce

A total of 28
stocks appreciated in price during the week, lower than the 30 of the
preceding week. Northern Nigeria Flour Mills Plc led on the gainers’
table with a gain of N3.43 to close at N37.01 per share while Nestle
Nigeria Plc followed with N2.00 to close at N371.00 per share.

On the losers’
chart, a total of 64 stocks depreciated in price during the week,
higher than the 59 of the preceding week. Nigerian Breweries Plc led on
the price losers’ table, shedding N7.04 to close at N68.01 per share
while Flour Mills of Nigeria Plc followed with a loss of N1.99 to close
at N74.01 per share.

Two equity prices
were adjusted for dividend or bonus as recommended by the Board of
Directors. Poly Products Nigeria Plc was adjusted for dividend of N0.08
per share while Unity Kapital Assurance Plc was adjusted for bonus of
one for every 19 units of shares own.

Bond market

A turnover of
166.74 million units worth N170.761 billion in 1,762 deals was recorded
last week, in contrast to a total of 273.73 million units valued at
N293.907 billion exchanged in 2,705 deals during the previous week.

The most active bond, in terms of turnover volume, was the 10.00 per
cent FGN July 2030 with a traded volume of 47.65 million units valued
at N45.879 billion in 876 deals. This was followed by 4.00 per cent FGN
April 2015 with a traded volume of 24.6 million units valued at N20.400
billion in 189 deals. Only 20 of the available 37 FGN Bonds were traded
during the week, compared with the 22 in the in the preceding week.

Recent
developments in that bit of the economy usually referred to as the
“corporate sector” confirm some of our worst fears. Nigeria does have a
very serious governance problem.

If principals
cannot trust their agents to act in the best interest of the former,
what recourse remains? Conceivably, it ought to be more difficult to
unwind the accoutrements of civilisation especially the devise of the
legally enforceable contract, than it would be to find solutions to
this problem.

However, we have
seen attempts to align the interests of managers of businesses with the
goals of the firms they run (in the United States of America, at least)
through share options and a cornucopia of other fancy incentive plans,
result in companies focusing on short-term increases in share values to
the apparent detriment of sustainable growth in shareholder value.

Erosion of trust

So, even this expedient is no longer available as remedy to our problems.

The consequent
erosion of trust represents a real and present threat to all efforts to
grow this economy. I have no doubt that until the requisite levels of
trust for running a modern economy are in place, we would want for the
right quantity of investment in just about every sector of the economy.
This again goes beyond our familiar plaint about the constraining
effects of poor infrastructure. It is instead best addressed by a
workable response to this question. Why would anyone put money in any
sector of this economy, without a clear indication of where the returns
will come from, and how?

I have listened to
advocates of the economic opportunities available in emerging markets
admonish would-be (non-resident) investors to seek partnerships with
trusted nationals with the right connections if they expect to make a
good fist of their investments in such places. And always, I wonder by
how much such counsel reinforces the odious traditions of related-party
transactions that lie at the heart of these economies’ underdevelopment.

Obviously, this
trust deficit plays fast and loose with the supply of investment to
economies like ours. There is though, an added dimension to it. It also
pushes available investment to the speculative end of the continuum. If
you cannot trust your investment partners in any economy further than
you can throw them; if their value as partners depends not on
institutional guarantees, but on their often fickle connections to
local centres of influence and power; then invariably, one would seek
out business opportunities with shorter investment cycles, and returns
that compensate for the capricious transaction base. Not surprisingly,
therefore, most investment in this country is of a speculative variety.

This sadly is not
all. As an economic jurisdiction, we also suffer from an enforcement
problem. One explanation for the rise of meta-state institutions (such
as the mafia in Sicily) is the need – in the absence of competent state
authorities – for some agency to guarantee the integrity of
transactions between individuals/institutions. The police find excuses
for the breakdown of law and order. And only those who court trouble
attend to the courts of law.

Acting in restraint

In the run up to
another general election, not much is being said about all this. There
is the argument that further commentary might be rendered superfluous
by the fact that the responsible regulators are acting in restraint of
the excesses that the earlier passages describe. But I do not see a
consensus on the causes of these infractions. Nor am I convinced that
we are agreed that infractions indeed they are. What to make of the
local aphorism that “one eats where one works”? Is there a national
sense of the tension between what is moral and what the laws allow?
Moreover, how much agreement is there on the notion that not all is
expedient that is legal? Besides, what do these mean?

Arguably, around the issues that we may claim to have reached
agreement on (the need for government to hands-off certain sectors of
the economy, and the need to correct the biggest shortcoming of this
economy – the want of public infrastructure) not much has happened on
the current government’s watch. In the absence then of the failure of
serious engagement around the contribution of the failure of our social
infrastructure to our lack of economic development, any chance that the
government that will take office in 2011 would find the resources and
the will to address these challenges?

Corruption
in Uganda will swallow billions of dollars in revenue from the East
African nation’s budding oil industry that is needed to build schools,
hospitals and roads, says a Ugandan opposition leader. Olara Otunnu, a
former U.N. under secretary-general who heads the Uganda Peoples
Congress party, said there had been no transparency on plans to develop
the oil found in 2006 along Uganda’s border with the Democratic
Republic of Congo.
Otunnu, Uganda’s
foreign minister from 1985-86, hopes to topple longtime President
Yoweri Museveni when the country goes to the polls in February ahead of
the start of commercial oil production late next year. British firms
Tullow Oil and Heritage Oil have found up to 2 billion barrels of oil
in the Albertine Rift Basin and experts say the reserves could be four
times bigger. Uganda stands to earn about $2 billion a year in oil
revenue. “Based on the current record all that money would be
swindled,” Otunnu told Reuters in an interview in New York. “All this
is being handled personally and exclusively at the kitchen table of the
president. We know nothing about it.” “We don’t need to wait until oil
begins to flow. We already know … the oil revenue will become part of
his personal ATM machine,” said Otunnu, who could be arrested when he
returns to Uganda for failing to appear in court this week on sedition
charges related to radio show comments made earlier this year. He says
the charges are a bid by Museveni to silence him. Ugandan Minister for
Information Kabakumba Matsiko said it was widely accepted that East
Africa’s third largest economy has been blighted by corruption, but the
government has systems and institutions in place to combat it.
Oil money for infrastructure
“Otunnu is entitled
to his opinion. Unfortunately he’s blinded by his own hatred,” Matsiko
said. “This oil has always been there, but no previous government
including the one in which Otunnu served ever thought about starting
exploration. The president has stated on several occasions that the oil
money will not be used for recurrent expenditure but long-term
infrastructure development in the health, transport and other sectors.”
Museveni won power
in 1986 and was credited with returning stability and economic vitality
to Uganda, ravaged by dictatorship and civil wars in the 1970s and
early 1980s. The country’s economy is seen growing between 7-8 percent
in 2010/11 from 5.6 percent in 2009/10.
But donors and
global civil society groups accuse Museveni of suppressing opposition
and free speech, tightening his grip on power and failing to rein in
rampant corruption. International donors said this week that they would
trim at least 10 percent off their $360 million contribution to
Uganda’s budget in the year to June 2011 because of concerns over
corruption.
Opposition parties have refused to work with the electoral
commission, because they say it is corrupt, but Otunnu said that does
not mean there will be a boycott of the election. He also said
negotiations continue among leading opposition parties to form an
Inter-Party Cooperation coalition to field a single candidate against
Museveni. “Everything is turned into this corrupt enterprise,” said
Otunnu. “We must make sure … that there is change, there’s
accountability, there’s transparency … that this oil will be a
blessing for the people of Uganda.”

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

“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.”

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.

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.

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.

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.