Nigeria Content Online

A total of N133.11
billion has been disbursed under the N200 billion Commercial
Agriculture Credit Scheme as at April, 2010 to 139 beneficiaries across
the country. The beneficiaries include 115 individuals/private
promoters and 24 state governments. The federal government in 2009
launched the scheme to intervene in the agriculture sector which
currently contributes over 40 per cent to the country’s gross domestic
product (GDP).

Under the scheme,
which is funded from the proceeds of the N200 billion bond raised by
the Debt Management Office, participating banks can access for onward
lending to their customers while state governments and Abuja could also
borrow for on-lending to farmers in their domain.

The participating
states have accessed N1 billion each for lending to farmers. According
to data posted on the website of the Central Bank of Nigeria, the
states are Adamawa, Anambra, Bauchi, Enugu, Gombe, Kebbi, Kogi, Imo,
Kwara, Nasarawa, Niger, Ondo, Sokoto, Taraba Zamfara, Akwa Ibom,
Rivers, Plateau, Edo, Kano, Benue, Bayelsa, Ogun and the Federal
Capital Territory – Abuja.

The funds are
disbursed through participating banks. The 13 banks participating in
the scheme are Access Bank, Fidelity Bank, First Bank, Guaranty Trust
Bank, Oceanic Bank, Skye, Stanbic IBTC, Union Bank, UBA, Unity Bank and
Zenith Bank. UBA has made the highest disbursement of N37.46 billion to
36 projects followed by Union Bank with N16.15 billion to 18 projects.
Zenith bank disbursed N13.84 billion to 10 projects while First Bank
disbursed N11.92 to 29 projects.

The Central Bank
stated that for failure to abide by guidelines, the regulator withdrew
fund from five banks with respect to 22 projects. The banks are UBA
N12.053 billion, Guarantee Trust Bank N581 million, Skye Bank N2
billion, First Bank N1.6 billion and Union Bank N2.166 billion.

Fast track development

The scheme was
meant to provide cheap funds to fast track development of the
agricultural sector, enhance national food security by increasing food
supply, reduce the cost of credit in agricultural production and
generate employment in the sector.

According to the
Central Bank, the key agricultural commodities to be covered under the
scheme are cultivation of target crops (rice, cassava, cotton, oil
palm, wheat, rubber, sugar cane, fruits and vegetable), Livestock
(dairy, poultry, and piggery), and fisheries.

Agriculture potential

The Managing
director of the World Bank, Ngozi Okonjo-Iweala stated recently that
African countries need to improve on agriculture potentials in order to
boost its growth trajectory and reduce poverty. “I think African
countries really have to sustain their efforts to use agriculture funds
to ensure food security,” she said.

According to her,
Nigeria needs “to think of agriculture in a modern way,” since,
according to her, it is a sector that can provide so much employment.

The
ambitious target to be among the top 20 economies by the year 2020 may
be farfetched after all, as Nigeria’s current growth trajectory does
not support such climb. World Bank country director for Nigeria, Onno
Ruhl, said Nigeria’s current gross domestic product growth of around
seven percent is not enough to achieve that feat.

“Vision
2020 is not about if it can be achieved by 2020, because any economist
will tell you at this point that would take you about 15 percent growth
every year and that has not happened in the history of mankind anyway.”

Do things differently

He
said instead of striving to be among the top 20 economies within the
time frame, the country should begin to do things differently in order
to grow the economy. “The point is, Nigeria should be among the 20
largest economies. Whether it is 2023 or 2024, it doesn’t matter. What
matters is that Nigeria should be ambitious and not accept second best.
Nigeria should aspire to be the best in everything it does on the
continent. That is the destiny of the largest country on the continent
as far as I can see.”

The
federal government in 2008, launched the Vision 2020 with a mandate
that “by 2020, Nigeria will be one of the 20 largest economies in the
world, able to consolidate its leadership role in Africa and establish
itself as a significant player in the global economic and political
arena.”

Implementing plans and visions

Mr
Ruhl said rather than discussing why Nigeria has not succeeded, the
emphasis should be on what the country needs to do in order to be where
it belongs.

“The
best example is China which achieved ten percent growth consistently
for 30 years. There is no reason Nigeria cannot achieve that and if it
does, it would be a different country very quickly and a much better
country by the year 2020.”

He
said the major challenge facing the country was implementing the plans
and visions that have been drawn over the years. “There is nobody that
does not know how to solve the power problems in Nigeria. It is not
rocket science. The issue is how we are going to do what needs to be
done.”

The
major focus of implementation of the vision include agriculture and
food security, business environment and competitiveness, corporate
governance, culture, tourism and national re-orientation, education,
employment, energy, health, housing, human development, information and
communications technology, judiciary and the rule of law and
manufacturing, among other.

Mr Ruhl said within the next few years, Nigeria will grow to be the
largest economy in Africa and must begin to position for that role.

Some Nigerian
businesses that took part in the just concluded World Economic Forum
(WEF) in Cape Town, South Africa, have proffered suggestions they hope
would help facilitate inclusive economic growth, not only in Nigeria,
but throughout Africa.

Group chief
executive, Oando Group, Wale Tinubu, who featured as one of the
co-chairs at the three-day forum, called for the removal of all
artificial trade barriers in the way of businesses in Africa, while the
group deputy managing director, BGL Plc, Chibundu Edozie, sees the
expansion of the scope of businesses beyond the Nigerian market as the
way to build inclusive economic growth in the continent.

Strong African strategy

Mr Edozie said
Nigerians should abandon the fixation with the size of the Nigerian
market and focus attention on the entire continent, in view of the
increasing global interest in Africa’s potentials.

“As against the
Nigerian market of about 150 million people, the African market is a
billion people, with an already existing catchment of trades and
products. Though Nigeria should remain the core focus of their business
operations, Nigerians should start looking at very strong African
strategy, considering that the market is largely African, with the
world beginning to wake up to the reality of the need for Africa’s
economic integration,” he said.

Mr Tinubu, who was
invited to by the organizers to showcase the potentials of homegrown
companies that do business to world class standards and are identified
as emerging regional champions, said removal of all artificial
bottlenecks by governments to trade facilitation in the continent is
the fastest way to achieve economic integration in the continent.

He listed those
bottlenecks to include imposition of visa restrictions to citizens of
Africa; closure of national borders between countries in Africa, and
dearth of infrastructure, like roads and rail lines for easy movement
of persons and goods as well as protectionist policies by governments
barring African companies from doing businesses in other African states.

Inclusive economic growth

“The issue of
inclusive economic growth is all about regional integration. But, there
is the urgent need to open up the borders between countries in Africa
to facilitate movement of goods and services. If Africa is to create
one big market for goods and services, people have got to be able to
move around,” he said.

“There is also the
need for the rehabilitation of the infrastructure, like roads and
railway systems, to link the countries of Africa, to ensure easy
movement of persons and goods for business. One cannot create a global
market by erecting artificial barriers.”

While commending
the common passport by the Economic Community of West African States as
a big step in the right direction to achieve regional economic
integration, Mr Tinubu said governments in the region should move
quickly to consolidate on the gains of that policy by establishing a
common currency regime.

On the home front,
the Oando boss urged government to create a path for the growth of the
downstream sector of the country’s petroleum industry, by allowing full
deregulation policy, pointing out the plan to spend about $6 billion
this year on petroleum products subsidies will continue to hurt the
economy, as it will amount to merely managing the symptoms of the decay
in the economy, rather proffer concrete solutions.

Subsidy removal

“If $6 billion to
be used in petroleum subsidy is saved for one year, the country can
build a mass transit railway system that would help solve the
transportation problem of the country, which will serve the people for
a lifetime,” he noted.

Though he
acknowledged that the decision to quickly remove the subsidy would
create shock among consumers, Mr Tinubu suggested a two to three-year
plan by government, that can outline the achievement of demonstrable
capital-intensive infrastructure that Nigerians can identify with,
using the savings from the withdrawal of petroleum subsidy.

He identified Oando as a growth business that is continually
exploring new ways to satisfy the need of the economy, adding that the
company’s growth is driven by the demand for its services and products
in the different sectors of the economy, which is not going to be
satisfied by multinationals.

While a team of
young entrepreneurs recently embarked on a financial literacy campaign
to some parts of the country under the umbrella of ‘Financial IQ’
programme, one of the campaign contributors, Segun Olu of AirDock
Services Limited, an export trading company said there are enormous
opportunities awaiting entrepreneurs who would venture into export
trading.

Mr Olu said many
people look out of the way when export business is suggested to them as
a business venture. “This is because people believe export is a
business for the rich, forgetting that business is about generation of
ideas which are well packaged, delivered and experimented over a period
of time,” he said.

Explaining further,
Mr Olu said export business expenses are determined by the nature of
the goods. Citing an example, he said perishable goods are costly to
export than non-perishable goods.

“Export is a
business that can be started small and expanded over a period of time.
Some of the local foods in Nigeria have a high demand in the
international market.

Goods such as fish,
vegetable leaves, spices and other items found around us are in high
demand outside the shores of the country,” he said, adding that if
people look around, these goods are readily available and affordable
with respect to the quantity that is needed to kick-start an export
business.

Financing export business

On financing export
business, Mr Olu said, “I advise that an export business should be
financed internally. A beginner should avoid the banks because banks
normally give loans to businesses with operating record and history.
Secondly, the interest rate from banks might make the business to be
unprofitable and unattractive.” He said an exporter needs to look for,
locate and attract prospective buyers either from the Internet or
through phone calls to friends with same business interest. He also
advised that foreign academic institutions and biology departments in
countries where those species are not available are also good
prospects. “An exporter can attend exhibitions to build a network both
locally and internationally. There are also export clubs made up with
people with same interests. An exporter can study the geographical
distribution, demand and supply of each item and species to be
exported,” Mr Olu said.

Time management

He said timing is
an important aspect of export business especially when dealing with
perishable goods as all transactions must be brought to conclusion on
time.

Time management
should also include the processing and packaging part of the business
activities; this will prevent the business owner from running into a
loss.

Exporters have also
been advised to deliver their products to clients through an airport
export agent for the onward delivery to the client in any part of the
world,

adding that as
businesses grows, it is advisable that exporters should join export
association in order to have more control over their expenses.

Mr Olu said export
business is a profitable venture for entrepreneurs that could bring
weekly return on investment if well managed. “For your company’s
capital base to grow, you must grow your client base. This can be
achieved by fostering a cordial working relationship with both new and
existing clients. If your service is impressive, it can make your
satisfied clients to see themselves as your partners and this will open
doors to more referrals, more business leads and more business
opportunities,” he said.

Innovation in business

Meanwhile, Seun
Shoyelu, a project officer at European Union with the aim of assisting
new companies in Africa, said entrepreneurs have to be innovative in
doing business. “Innovation simply means to bring something new into
existence. This means that entrepreneurs, in order to be successful,
must learn to utilise or exploit change as a foundation for generating
new businesses or services,” Mr Shoyelu said.

He added that a
product-based innovation generally results in totally new or improved
old products and services, adding that new products have been
demonstrated to help firms capture and retain market shares and
ultimately help businesses increase their profitability in the market
place.

Mr Shoyelu said
entrepreneurs need to engage in creative thinking because “it is widely
believed to be the first step to creativity and innovation” in business
success. He added that business owners must also do strategic planning
beyond just generating business ideas. He said entrepreneurs need “a
coherent business strategy combining clearly-defined goals with adequate
outcome.”

Entrepreneurship development

Shola Olaleye, the
chief executive officer of Financial IQ, an entrepreneurship campaign
organisation, said graduates that do not see the need for personal
development in entrepreneurship after graduation “may be in for a long
journey to nowhere because they would not fit into the job society.” Mr
Olaleye said he believe that new set of entrepreneurs will produce
“massive wealth and job opportunities” in Nigeria in few years time.
However, he said to achieve this, Nigerians must be “sincerely
interested in job creation and continually look for opportunities to
learn modern entrepreneurial skills,” adding that employment by
government agencies and multinationals cannot solve the problem of
unemployment in the country.

The boards of directors of First City Monument Bank (FCMB) and FinBank yesterday announced the signing of a Memorandum of Understanding (MoU) for the recapitalisation of FinBank and the combination of both banks.

FCMB, in a statement yesterday, said the MoU execution followed a competitive process supervised and approved by the board of directors of FinBank, adding that the proposed transaction also has the full approval of FCMB’s board of directors. Finbank is one of the rescued banks by the Central Bank of Nigeria.

Meanwhile, FCMB, which also notified the management of the Nigerian Stock Exchange of the MoU on Thursday, said the completion of the transaction “is subject to the approval of the Central Bank, other regulatory agencies, the Federal High Court and the shareholders of both banks.” According to the statement, the combined bank would be a significant player in the Nigerian Banking industry with substantial enhancement to share of industry assets and revenues. “The bank will offer a comprehensive suite of banking services, drawing from both FCMB’s capabilities in investment banking, corporate banking and retail finance, and FinBank’s complementary capabilities in commercial and retail banking.” Commenting on the proposed union, Ladi Balogun, FCMB’s group managing director and chief executive officer, said,

“This transaction is consistent with FCMB’s strategic objectives and has a compelling rationale from a risk and financial perspective. Strategically, it allows us strengthen our commercial banking business and develop a more robust platform for retail growth.” “FinBank also enhances our market reach through additional capabilities such as its remarkably effective mobile and electronic banking platforms. Furthermore, given FCMB’s highly capitalised balance sheet, it provides further opportunities to leverage our capital in a highly efficient manner to the benefit of the shareholders of both organizations,” Mr Balogun said.

The bank also said it expect that the merger should enable the realisation of synergies which will further drive the profitability of the bank, adding that the integration process will benefit from FCMB’s experience in successfully and swiftly integrating several banks and delivering improved returns to shareholders of both organisations.

Vine Capital

This lays to rest the earlier attempt by Vine Capital Limited to acquire the bank. The cancellation may not be unconnected to the concerns raised by the Central Bank of Nigeria (CBN) on the memorandum of understanding entered by both institutions. The CBN opposed the move since Vine Capital had also made a similar move to acquire Afribank, another rescued institution.

“The central bank would have difficulties with approving the acquisition of more than one recently distressed bank by a private equity firm with a relatively untested track record in banking business,” stated a letter signed by Kingsley Moghalu, CBN deputy governor to Deutsche Bank, one of the CBN appointed advisers to Finbank.

This effectively opened the way for FCMB to actualize its bid, which was initially rejected on account of low valuation. FinBank is a commercial bank founded in 2006 from the merger of First Atlantic Bank, First Inland Bank, NUB International Bank and IMB International Bank.

Recent merger talks

Recently, Access Bank announced its intention to go into mergers with Intercontinental Bank while Afribank announced that it has gone into an agreement with Vine Capital Partners Limited and Phoenix Acquisition Company Limited. Meanwhile, First Bank and Oceanic Bank aborted their merger talks when the banks could not reach an agreement.

In the meantime, Adesoji Solanke, a bank analyst at Renaissance Capital, an investment bank, said while the recent mergers talks are a welcome development in the banking sector, companies involved in the process should give more clarity on their deals. “While we note that it is a buyer’s market, mergers are never easy and on-balance, mostly earnings dilutive. We (analysts) look to get more clarity on the specifics of any deal announcement in the near term, to further shape our bank-specific views,” Mr Solanke said.

He added that analysts expect 2011 to be mixed in terms of financial performance across the intervened banks, “but with an incremental profitability run-rate through the quarters.”

The federal government yesterday said it would deliver an additional 750 mega watts of electricity to the national grid from the multi-million dollar Olorunsogo Phase 11 National Integrated Power (NIPP) by November this year.

The construction cost of the Olorunsogo NIPP is pegged at about $600 million by the federal government.

Other onging NIPPs are Omotosho, Ondo State; Ihovbo, Edo state; Alaoje, Abia state; Egbema, Imo state; Gbaran, Bayelsa state; Calabar, Cross River state; Omoku, Rivers state; Geregu, Kogi state and Sapele, Delta state.

Fielding questions from journalists after a working tour of the project, in Olorunsogo, Ogun state, Vice President Nnamadi Sambo said the government was committed to delivering stable electricity supply to Nigerians before the end of President Goodluck Jonathan’s administration.

“In another six months from now, the entire project would be completed and have 750MW added to the national grid,” he told journalists.

Improving the economy

Mr Sambo said, “We have just signed a contract with Nigerians and that is why we have to ensure that we deliver power to Nigerians”, adding that the government of Mr. Jonathan was in a hurry to improve the social and economic lives of the citizenry. He said “We have no time to waste to improve our social staus and change the fortunes of Nigerians,” reassuring the electorate of government’s commitment to delivering on their election promises.

“I want to say to Nigerians that we are not resting. And that we have done our studies and we shall deliver on our promises and not fail Nigerians,” he added. The VP expressed satisfaction over the progress of the work so far and said he was pleased to note that three of the four gas turbines had already been test run.

While thanking the Ogun State governor, Gbenga Daniel, who accompanied him on a tour of the project, the VP assured him of the federal government’s commitment to ensuring that the state benefits maximally from the power project.

In his welcome remarks, Mr Daniel said the people of the state “are happy for this project because the people have been told that they will get priority attention”.

The governor maintained that power remained central to the economic growth of a nation and urged the federal government to do more to put smiles on the faces of the electorate. He further expressed hope that the NIPP project would be completed in order to make electricity available to “our people”.

Stable power supply

Nuhu Wya, minister of state power told our correspondent, during the inspection of the project, that the contract for the execution of the project was signed in 2007 by the federal government to boost power generation in the country.

While also reassuring the Ogun State government of government’s commitment to ensuring that the people of the state are the primary beneficiary of the power project was doing everything possible to deliver stable power supply to Nigerians. The Olorunsogo NIPP is a combined circle facility with four gas and two steam turbines designed for maximum power generation efficiency. He further explained that “combined circle means that the exhaust gas from the gas turbines is recovered at about 650 degrees centigrade and used through the heat recovery steam generator to fire a steam turbine to generate additional power”.

The effect, he said, “is that the exhaust heat that would otherwise be lost is recovered and used to generate additional electricity without bearing more gas”.

According to him, the process increases the efficiency from about 35 percent to 50 percent. Mr Wya added that three of the four gas turbines were already running, stating that the 750MW will “contribute additional 20 percent of the total power available to Nigeria. This is a significant contribution to the available 4000MW”.

One major thing I find surprising as a professional is that our country is not data driven. There is no data bank where you can readily access information on a specific project. This clearly explains the absence of periodical research that seeks to gain brand related knowledge, attitudes and behavioural intentions of the consumers. Consumer research is one area that some companies have not adopted to measure the ratings and performance of their brands. Consumer research is a potent tool to measure consumer perception and views about the brand and its performance in the market place.

Consumer research assists to determine the ratings of the brand in terms of awareness, consumer preference, consumer purchase intention and other key variables that impact on the brand. It determines the value consumers give the brand and build relationships and touch points that are fundamental to the brand health.

The good thing about consumer research is that it uncovers some unique information that the brand custodians are unaware of. I remember during a focus group discussion for O!Noodles several years ago in the north, some of the students stated that noodles was not only food to them but a breakfast cereal before going for lectures. This provided another angle to the consumer consumption pattern for noodles. This demonstrates, to a large extent, the important role of consumer research in developing the brand message. Spontaneous consumer insights are key to delivering brand promise and ultimately meeting consumer needs.

Consumer research also helps in establishing the key benefits and values of the imperative to measure the brand communication campaign and determine the next level. In communicating to an identified audience, through specific brand messages, consumer research tests the ease of recall and also ascertains whether the brand message resonates with the consumers. Consumers can and do create links between brands and their self concepts as this makes them engage their favourite brands.

A brand needs to assess the current reality. How does the consumer view the brand? What does its symbol represent to the various segments of the target audience; does the brand identity accurately reflect the consumer perception? These are key questions that consumer research helps in proffering solutions to.

It is time for brands to give voice to the consumer through direct interface to gain deep insights and views about brand performance. Brand goals and visions can only be achieved when consumer views are properly analysed and utilized to impact the overall performance of the brand.

Consumer research assists brands to refocus communication and marketing activities in line with consumer thinking. Insights generated go a long way in aligning brand communication to fit into the needs and aspirations of consumers. Brands can indeed win emotional commitment with consumers through the concrete platforms that consumer research provides.

It has become expedient for companies to know the consumers, feel their pulse and seek to influence their behaviour. Consumer research is a detailed process of embarking on extensive brand information search, brand evaluation and other activities to properly position the brand. It is crucial to know the specific needs consumers want satisfied, and how consumers gather information to select the brand amongst competitors.

Like I stated earlier, we are not data driven in this country and there should be an urgent way out of this. We need to develop a consistent approach to periodical consumer research. We need to understand the consumer behaviour, the decision-making process, and understand the various internal and psychological processes that influence the consumers. The major goal should also be to study the consumer and generate insights with direct implications for the brand communication campaigns.

We need to do a lot more in research because we still lag behind other countries in terms of research information and data gathering. The needs and motivations of consumers should be given utmost priority. Our brand communication efforts should not be based on assumptions and half truths. Even though the cost of conducting research may be high, companies get value for it in the long run in positioning brands appropriately.

The

World Bank has said it is prepared to provide support to any foreign

investor interested in Nigeria’s power sector. Onno Ruhl, World Bank

country director for Nigeria said the Bretton Woods institution

realises that the power sector is critical to the future of the

economy.

“We will do what we can to give comfort to investors who have the courage to come to invest in the sector in Nigeria,” he said.

According to him, private participation in the power sector was critical in order to see improvement.

“We

will focus on power generation effort and will also focus on getting

private participation in distribution companies especially key

distribution companies that have short term viability in their

horizon.”

He

said key distribution centres include Ikeja and Abuja distribution

centres. According to him, the major issue with Nigeria is the

implementation of the plans that have been drawn up over the years.

Speaking yesterday in Lagos at the bi-monthly breakfast meeting of the

Nigeria British Chamber of Commerce, the World Bank official said it

would be erroneous to think that solving the power problem would

translate to solving other issues in the country.

“It

is government’s business to make it easy for people to do business.

Should the government be more concerned about the power sector or

should it be concerned about social inclusion which is indeed very

important, the power sector is the simplest story as far as I am

concerned.”

Frightening statistics

Reeling

out statistics, he said the Nigeria has over 100 million people under

30 years of age which is more than the entire population of Libya,

Egypt and Tunisia combined. “Nigeria has 75 million people under 20.

Nigeria has 46 percent unemployment between 16 to 24 years of age.

Every year, 800,000 Nigerians pass their JAMB exams and do not get

admission into the university because there is no space for them.” He

said government has to find ways of including these people in the

economic space or they could be sources of social disorder in the years

ahead. He cited the Brazilian example where the government dedicated

about one percent of the country’s gross domestic product to cater for

the bottom 20 percent of the population. He said procedures at the

country’s ports need to be overhauled in order to make it easier for

goods to be cleared at the point of entry. According to him, the

country would achieve more progress by improving the business climate

than it would in the power sector which would take several years to

accomplish.

Improving business climate

“You

can achieve more in the short term by making the business climate

better than in power because power will still take time. Improving the

business climate would have more impact on job creation. We need

government with political guts to do this,” he said.

On the future prospects of Nigeria, he said the country can get it

right if the implementation strategy is well thought out. “Nigeria is a

country with enormous potentials not because it has oil but because of

it has a good balance sheet, because it has a large market which cannot

be ignored and because it has more money in its pocket more than

before,” he said.

The
World Bank has said it is prepared to provide support to any foreign
investor interested in Nigeria’s power sector. Onno Ruhl, World Bank
country director for Nigeria said the Bretton Woods institution
realises that the power sector is critical to the future of the
economy.

“We will do what we can to give comfort to investors who have the courage to come to invest in the sector in Nigeria,” he said.

According to him, private participation in the power sector was critical in order to see improvement.

“We
will focus on power generation effort and will also focus on getting
private participation in distribution companies especially key
distribution companies that have short term viability in their
horizon.”

He
said key distribution centres include Ikeja and Abuja distribution
centres. According to him, the major issue with Nigeria is the
implementation of the plans that have been drawn up over the years.
Speaking yesterday in Lagos at the bi-monthly breakfast meeting of the
Nigeria British Chamber of Commerce, the World Bank official said it
would be erroneous to think that solving the power problem would
translate to solving other issues in the country.

“It
is government’s business to make it easy for people to do business.
Should the government be more concerned about the power sector or
should it be concerned about social inclusion which is indeed very
important, the power sector is the simplest story as far as I am
concerned.”

Frightening statistics

Reeling
out statistics, he said the Nigeria has over 100 million people under
30 years of age which is more than the entire population of Libya,
Egypt and Tunisia combined. “Nigeria has 75 million people under 20.
Nigeria has 46 percent unemployment between 16 to 24 years of age.
Every year, 800,000 Nigerians pass their JAMB exams and do not get
admission into the university because there is no space for them.” He
said government has to find ways of including these people in the
economic space or they could be sources of social disorder in the years
ahead. He cited the Brazilian example where the government dedicated
about one percent of the country’s gross domestic product to cater for
the bottom 20 percent of the population. He said procedures at the
country’s ports need to be overhauled in order to make it easier for
goods to be cleared at the point of entry. According to him, the
country would achieve more progress by improving the business climate
than it would in the power sector which would take several years to
accomplish.

Improving business climate

“You
can achieve more in the short term by making the business climate
better than in power because power will still take time. Improving the
business climate would have more impact on job creation. We need
government with political guts to do this,” he said.

On the future prospects of Nigeria, he said the country can get it
right if the implementation strategy is well thought out. “Nigeria is a
country with enormous potentials not because it has oil but because of
it has a good balance sheet, because it has a large market which cannot
be ignored and because it has more money in its pocket more than
before,” he said.

The boards of directors of First City Monument Bank (FCMB) and FinBank yesterday announced the signing of a Memorandum of Understanding (MoU) for the recapitalisation of FinBank and the combination of both banks.

FCMB, in a statement yesterday, said the MoU execution followed a competitive process supervised and approved by the board of directors of FinBank, adding that the proposed transaction also has the full approval of FCMB’s board of directors. Finbank is one of the rescued banks by the Central Bank of Nigeria.

Meanwhile, FCMB, which also notified the management of the Nigerian Stock Exchange of the MoU on Thursday, said the completion of the transaction “is subject to the approval of the Central Bank, other regulatory agencies, the Federal High Court and the shareholders of both banks.” According to the statement, the combined bank would be a significant player in the Nigerian Banking industry with substantial enhancement to share of industry assets and revenues. “The bank will offer a comprehensive suite of banking services, drawing from both FCMB’s capabilities in investment banking, corporate banking and retail finance, and FinBank’s complementary capabilities in commercial and retail banking.” Commenting on the proposed union, Ladi Balogun, FCMB’s group managing director and chief executive officer, said,

“This transaction is consistent with FCMB’s strategic objectives and has a compelling rationale from a risk and financial perspective. Strategically, it allows us strengthen our commercial banking business and develop a more robust platform for retail growth.” “FinBank also enhances our market reach through additional capabilities such as its remarkably effective mobile and electronic banking platforms. Furthermore, given FCMB’s highly capitalised balance sheet, it provides further opportunities to leverage our capital in a highly efficient manner to the benefit of the shareholders of both organizations,” Mr Balogun said.

The bank also said it expect that the merger should enable the realisation of synergies which will further drive the profitability of the bank, adding that the integration process will benefit from FCMB’s experience in successfully and swiftly integrating several banks and delivering improved returns to shareholders of both organisations.

Vine Capital

This lays to rest the earlier attempt by Vine Capital Limited to acquire the bank. The cancellation may not be unconnected to the concerns raised by the Central Bank of Nigeria (CBN) on the memorandum of understanding entered by both institutions. The CBN opposed the move since Vine Capital had also made a similar move to acquire Afribank, another rescued institution.

“The central bank would have difficulties with approving the acquisition of more than one recently distressed bank by a private equity firm with a relatively untested track record in banking business,” stated a letter signed by Kingsley Moghalu, CBN deputy governor to Deutsche Bank, one of the CBN appointed advisers to Finbank.

This effectively opened the way for FCMB to actualize its bid, which was initially rejected on account of low valuation. FinBank is a commercial bank founded in 2006 from the merger of First Atlantic Bank, First Inland Bank, NUB International Bank and IMB International Bank.

Recent merger talks

Recently, Access Bank announced its intention to go into mergers with Intercontinental Bank while Afribank announced that it has gone into an agreement with Vine Capital Partners Limited and Phoenix Acquisition Company Limited. Meanwhile, First Bank and Oceanic Bank aborted their merger talks when the banks could not reach an agreement.

In the meantime, Adesoji Solanke, a bank analyst at Renaissance Capital, an investment bank, said while the recent mergers talks are a welcome development in the banking sector, companies involved in the process should give more clarity on their deals. “While we note that it is a buyer’s market, mergers are never easy and on-balance, mostly earnings dilutive. We (analysts) look to get more clarity on the specifics of any deal announcement in the near term, to further shape our bank-specific views,” Mr Solanke said.

He added that analysts expect 2011 to be mixed in terms of financial performance across the intervened banks, “but with an incremental profitability run-rate through the quarters.”