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The Central Bank of
Nigeria (CBN) says it has expanded the number of departments under its
establishment to 25, up from previous 17 departments, due to the
ongoing banking reforms industry.

The new organisational structure becomes effective on March 1.

It is uncertain
what factors necessitated the expansion rather than cutting down on the
number of its departments, and workforce, which many believe are
already over-bloated and responsible for the lax supervision and
monitoring of financial operations leading to the crisis in the
industry.

The spokesman for
the CBN, Mohammed Abdullahi, could not give explanations to these, as
he refused to pick his calls when NEXT contacted him.

But the Central
Bank said in the statement that the move is the product of an exercise
it carried out in July last year, with the view to promoting efficient
and effective operations and in conformity with global best practise,
among others.

Announcing the cuts
in a statement issued online yesterday, the banking industry regulator
explained, “As part of the ongoing efforts aimed at improving
accountability, communication and efficiency as well as effectiveness
in actualising CBN’s strategic objectives (ACE), the Board of CBN has
approved a new organisation structure for the Bank, effective March
1st, 2010.”

The CBN statement
listed the objectives of the new structure to include “The development
of a more functional organisation structure, alignment of the structure
in line with the Bank’s mandate and strategy, promotion of efficient
and effective operations, building synergy with both internal and
external stakeholders of the Bank, facilitation of information flow and
integrated data management, and facilitation of the achievement of key
deliverables of management in conformity with global best practice.”

The new structure

According to the
Central Bank, the new structure will be run under the leadership of
five directorates which include the Governors, Corporate Services,
Economic Policy, Financial System Stability and Operations, which, in
turn will be divided into 25 departments under their respective
leadership, adding that there will now be 91 divisions and 198 offices.

The Central Bank of Nigeria embarked on an industry wide reforms
last year, under the leadership of Sanusi Lamido Sanusi in June 2009.
The reforms have so far seen some bank chiefs exit their positions and
about $4 billion invested to bailout ailing banks on grounds of
excessively high level of non-performing loans in the five banks which
was attributable to poor corporate governance practices, lax credit
administration processes and the absence or non-adherence to the bank’s
credit risk management practices.

The newspaper headlines, as usual, differed from the content of
the news stories they pointed to. However, the gist of it all was that at a
recent conference in Lagos, the Minister of State for Finance, and the Governor
of the Central Bank of Nigeria (CBN), did not quite see eye-to-eye on the apex
bank’s current reform initiatives.

I seriously doubt, to begin with, that as the media reported,
the honourable minister questioned the necessity for the CBN’s operational and
statutory independence. Despite the sundry dislocations occasioned by the
global financial crisis, a central bank’s independence is not one of the values
that have been called to question. Even in economies such as ours, where
governments have made a good fist of their work, this concept has played a key
role in achieving low inflation.

Still, we could differ on the chances that we would always get
competent hands to run the central bank to ensure that its medium-term take on
price directions in the domestic economy are robust enough to act as a foil to
the politicians’ narrow focus on the short-term imperatives of the four-year
electoral cycle.

Nevertheless, we ought no longer to tolerate a situation where
fiscal and monetary policies are decided in the same room, by the same people
(especially, when this latter lot are beholden to political interests). Of
course, one lesson from the current crisis comes out of the fact that fiscal
policy did take up the slack once monetary policy reached its limits. I would
thus be in the vanguard of any call to strengthen collaboration between
monetary, regulatory, and fiscal policies going forward.

On the question of the central bank’s competence, it is hard to
conclude otherwise than that the incumbent governor has done this economy a
world of good. It is so illogical that we should clamour to trade in a final
cure (because of a near-term allergic reaction) for a major ailment. Of course
we now know that it is proper policy to maintain a firewall between regulators
and the industry they regulate. It is obvious too, that banks occupy a hallowed
place in the economy; although we’d always suspected this from the relationship
that existed between demand deposits, which sit on the liabilities side of
banks’ balance sheets, and the credits they create which sit on the asset side.
Once impaired, especially by the markets’ beginning to question the soundness
and stability of the system, the resulting runs on deposits, affects the
industry’s ability to create loans. Unfortunately, banks’ ability to create
loans on a sustainable basis does matter for any economy’s growth.

The central bank governor

What about the person of the central bank governor? Sanusi
Lamido Sanusi has been described as too showy; a caudillo. In mitigation, we’ve
heard arguments in favour of “stronger institutions”; and inscrutability as a
preferred attribute. Now, I cannot recall many strong institutions that have
been built on the back of invertebrate leadership. Conversely, the gnomic Alan
Greenspan is often indicated as the ultimate model of a central bank governor.
How useful is this? If any financial market took its cue from the coordinates
of its central bank governor’s eyebrow, this was undoubtedly because the market
works well, and that this semaphore had been integrated in its signalling
mechanisms.

But the point of the CBN’s current work is the fact that the
domestic industry had become a burlesque of bank practices. Markets were skewed
so badly that the price mechanism worked selectively, and interested party
transactions held sway over many business decisions.

Financial accounting was a joke. The flipside of this is that as
we make our way tentatively out of the current crisis, we can no longer argue
that financial regulation should remain outside the macroeconomic framework.

When the CBN governor says the reforms are a process, not a
destination, it is my understanding that the apex bank is moving from financial
regulation as a tool for addressing the failings it has since discovered in the
industry, towards using its capacity to design prudential rules for the
industry, to address broader macroeconomic questions, including using it to
moderate the boom-bust cycle.

How do we get the
banks to resume lending to key sectors of the economy? And how do we
reverse market sentiments (capital and funding markets to be precise)
in favour of the financial services industry? These questions have
furtively moved to the top of the list of the average Nigerian’s
worries over how to move this economy away from its addiction to oil,
and into rehab. Apparently, in respect of financial sector worries, not
much will be achieved before something is done about the banks’ loan
books.

At the height of
the last economic bubble, banks were lending as if the funds they were
holding would burn a hole in their vaults otherwise. With the massive
increase in access to retail credit, consumer spending jumped as a
proportion of domestic output. Domestic output growth in turn drove
increases in banks’ deposits, allowing the banks to lend more over the
next cycle, and so on. When the floor came off the home mortgage market
in the United States, this virtuous cycle turned vicious very quickly.
The bottom fell off the local stock market, and with stock prices
plummeting, most bets on the trajectory of the equities market came
unstuck. Since a goodly number of retail investors had piled into the
market with nothing but the prospects of the virtuous cycle supporting
their punts, the nation’s nest egg ended up trapped in the equities
market.

Loans default

With borrowers
unable to meet their obligations, the downturn has meant that banks
have a portfolio of loans on which they haven’t earned anything in a
long while. Even when most banks in the country have taken losses on
the unprecedented levels of provisioning they have had to make to clean
their balance sheets, they cannot create new assets until they have
sorted this mess out. And the markets, investors largely, will not take
this group of businesses seriously, as long as their balance sheets
still contain so much dross.

Enter the Central
Bank of Nigeria. If the central bank governor is to be believed, the
bank’s intervention in the market thus far is anchored on four pillars:
enhancing the quality of banking in the country; ensuring financial
stability; ensuring healthy financial sector evolution; and making sure
that the financial sector contributes to the development of the
economy. Its proposal to clean up the banks’ balance sheets with the
Asset Management Company (AMC) must thus be interrogated within this
context. The plan is for banks with large non-performing loan burdens,
to move these assets off their balance sheets and onto the books of the
Asset Management Company. The company then bears all the risks of the
assets transferred, and arranges to deconsolidate the bad loans through
sale to external investors. Meanwhile, the banks obtain a fresh lease
on life from the ability to use their newly clean balance sheets to
restore their profit and loss accounts.

Commentaries on the asset company

Most commentators
on this proposal have focused on the cost of this process. For
instance, given the trillion naira estimates of the size of the
non-performing section of the banking sub-sector’s loan book, how
adequate would the N10 billion proposed as initial capital for the
asset company be? There are other costs: legal, tax, regulatory, and
accounting. How much forbearance would government and the regulatory
authorities have to offer banks to ease the proposed asset transfers?
Then, there are governance matters. Would the process be better served
by establishing an independent valuation process/agency? What other
incentives would the banks have to sell these assets, after providing
fully for them? The eventual look of the banks will depend on how the
final structure of the company combines these variables.

Important, though
all these are, one point is sorely missed: Transparency. It is the lack
of transparency on the books of the severely burdened banks arising
from their bad loans portfolios that interferes with the capital and
funding markets’ interest in these institutions. The value of the
banks’ loan books, the risk transfer process, and the rationale for the
forbearances that the regulators offer to sweeten the transfer process
must be as plain as a pikestaff if the process is to result in a
re-opening of the banks’ access to new funding sources. This
requirement is even more crucial in the context of the CBN’s barely
concealed desire to have new capital come into the industry.

The Central Bank of Nigeria (CBN) said the new phase of reforms
will positively impact on the provisions and requirement of Islamic banking,
and hasten the progress of that arm of banking.

Mohammed Abdullahi, spokesperson for the CBN, said that Islamic
banking is not a Sanusi Lamido Sanusi programme, but started by his
predecessor, Chukwuma Charles Soludo.

“This policy has been on for about three years and has been
approved in principle for some time now. I can recall that Jaiz International
Bank Plc has been given approval in principle to operate as an Islamic Bank.
All that the Central Bank is waiting for them to do is to mobilise their
capital base of ₦25 billion required for operations in the Nigerian banking
system.”

He also noted that under the current reforms, banks have been
falling in line with the CBN requirement, adding that the recent announcement
on the categorisation of Nigerian banks for bank specific solutions will boost
Islamic banking operations.

“I believe that Islamic banking or Zero interest banking would
fare very well under that arrangement and it is possible that they may not be
required to raise exactly ₦25 billion before they can start operating. Islamic
banking and the Central Bank are trying to introduce a supervisory framework
for easy supervision,” he said.

Interests are growing

Mr. Abdullahi said few banks have also indicated interest and
indeed have actually started processing their setup for Islamic banking in Nigeria,
without disclosing their identities. He added that the CBN will rely much on
the success and experience of the Negara of Malaysia. “They have gone far in
the operations of Islamic banking and I believe we have a lot to learn from
them, and we hope to use their experience to develop our own locally. As soon
as that is done, everything would become clearer. Islamic banking has been
provided for in the Banks Act and Approval-in-Principle has already been given
during Soludo’s time,” he said.

Apart from Jaiz International, he also revealed that BankPHB was
also given approval in principle to operate Islamic banking, and has been
operating the system for some time now.

Bank PHB offers the classic Bank PHB interest free account. A
statement on the bank’s website said, “This product is designed for Muslim
faithful desiring banking services without compromising their religious
beliefs.”

The interest-free banking offer the following products: Current
Account, Savings account, Investment account, and Hajj Target Savings account,
with minimum account opening balances ranging from ₦2,000, and attracts no
penalty for account closing.”

The statement also added that with simplified account opening
procedures, the interest-free products are expected to accommodate all Muslim
faithful of bankable age group, irrespective of gender or income level,
including women in Purdah.

No Knowledge, no banking

A non-interest bank, according to the Central Bank of Nigeria,
means a bank which transacts banking business, engages in trading, investments
and commercial activities, as well as the provision of financial products and
services, in accordance with the principles and rules of Islamic commercial
jurisprudence.

Last year, the CBN governor, Sanusi Lamido Sanusi, said
operators needed to have the knowledge of modern banking and of Islamic banking
before they can participate in the system because, “The services would be
available to Muslims and non-Muslims. It is not a religion; it is a product
available to the public. If things are set in place, I would be in support.”

In March 2009, the Central Bank released a framework for
non-interest banking. It also expressed the desire to collaborate with the
Securities and Exchange Commission (SEC), Nigerian Stock Exchange (NSE),
National Insurance Commission (NAICOM), Economic and Financial Crimes
Commission (EFCC) among others, to ensure the successful implementation of
Islamic banking system in the country.

Many of the banks are still weary of delving into this branch of banking
because according to them, the framework states that the funds cannot be mixed
and the institutions should be treated as separate entities, even if they are
owned by the same bank.

The Central Bank of Nigeria (CBN) says the basis of the current
banking reforms is to improve on corporate governance and risks management in
the financial services sector.

Sanusi Lamido Sanusi, the CBN Governor, who was represented by
Kingsley Maghalu, his deputy in charge of Financial System Stability, said that
the reform is projected to enhance the quality of the banks, to ensure
financial stabilisation through the proposed Asset Management Company (AMC), to
encourage sound evolutions of the financial system, and to connect the
financial sector to the real economy.

Speaking on the topic, ‘Financial System Fallout in West
Africa,’ at the third EuroFinance Annual Conference on Treasury, Risk and Cash
Management, in Lagos on Wednesday, Mr. Sanusi noted, “Most of the banks in
Nigeria did not really understand how important corporate governance is to
their business continuity.”

One-man shows

He said many banks took this for granted because “a lot of the
banks were essentially one- man shows,” adding,

“When you do not have a sound corporate governance frame work,
the reliance on the judgement or the views of one person or a small group of
persons becomes a very fundamental risk exposure for the bank’s survival.”

Accordingly, he said, risk management is important in practice.
“It is a matter of life and death. Risk management is not just an exoteric
thing. It is the conscious management of risk, reward, and business processes
to prevent untoward events that could disrupt the business.

“We found a situation where a lot of banks went into business
without proper risk analysis, just because other banks are doing it or because
they felt the need to grow big. Their ambitions led to a misalignment in risk
capacity and tolerance.” Not absolving the regulatory agencies from blame, the
chief industry regulator also admitted, “There was a very weak regulatory and
supervised environment caused mainly by the failure of the Central Bank as a
lead regulator to enforce the rules already in existence,” which he said are
now being addressed.

Reviewing governance code

In agreement with the CBN governor, Fabian Ajogwu, a legal
practitioner and Managing Partner of Kenna & Associate, called for the
review of corporate governance code in the financial and non-financial sectors
of the country.

Mr. Ajogwu, who spoke on ‘Towards all round corporate governance
best practice,’ said that the current corporate governance code has been
“weakened.” The Senior Lecturer at Lagos Business School said that the weakness
of the code is “forcing all regulators to come up with their own codes” which
may not wholly meet international practice.

No other way

Speaking generally on the reforms, Mr. Sanusi noted that
majority of the people had concentrated more on the removal of some banks’
Chief Executive Officers than on the findings of the bank audit, which “revealed
a serious systematic stress threatened by these banks.” In his own
presentation, Roland Ebelt, Managing Director, Nigerian Bottling Company Plc,
who spoke on ‘Financing trade in a tricky economy environment,’ insisted that
that the Nigerian economy has remained tricky for a while now.

Identifying some of the challenges confronting the company, Mr.
Ebelt said that the NBC needs “a lot of cash to finance growth (investments in
capital expenditure and working capital); has to reduce costs and drive bottom
line; wants to continue to simplify its products; needs reliable and audit
robust processes.”

Lately, it seems like every day the headlines talk about thousands of people facing retrenchment. What would you do if your boss called you aside to let you know that due to the recent restructuring, your position no longer exists and they are letting you go? Are you financially prepared for this type of news?

The days of “job security” are a thing of the past. In an era of downsizing, restructuring and retrenchment, no one is assured of long-term employment any longer, so it is important to have a plan of action in case you are suddenly laid off. Many employees see some warning signs that their jobs may be at risk but it is so easy to brush this aside when you don’t feel any immediate threat or are not under undue pressure.

The future is largely uncertain and the threat of sudden unemployment is all too real for many people. Whether you are 25 or 55, chances are that at some point in your life you could find yourself out of work. Even if you feel secure in your job right now, it is best to be financially prepared rather than to be caught off guard. Consider the following tips:

Review your expenses

When you are in a “secure” job you tend not to dwell on what you spend each month and where you can cut back. Do you know how much you spend on your weekly grocery bill or eating out? Are your utility bills exorbitant? Can you reduce your mobile phone bill? Are you paying subscriptions or membership fees for services you don’t even use?

While the job outlook is uncertain, it is important to try to live below your means and avoid unnecessary spending. Try to determine the minimum sum that you may need to cover basic expenses, such as rent or mortgage payments, utility bills, food, transportation and health insurance. Develop a budget that reins in most non essential spending until the job outlook improves. If you had already been on a budget, it would be much easier to cope financially if you have to look for another job.

Start to save

If savings have never been a priority for you, now is the time to start to set some money aside. It is recommended that you have the equivalent of three to six months’ income to tide you over if you lose your job, but given the current state of the job market, it is wise to save more especially if you have a family to support. This for many might seem like an impossible amount to accumulate but by tracking your expenses you can start to work towards this goal rather than to do nothing at all.

Even if you do not have the entire amount saved, whatever you manage to save could go towards your rent, mortgage, food and debt. It will also help to protect your retirement savings. Place such emergency savings in a high yield money market account where it is easily accessible.

Be cautious about debt

Are you in debt? A poor credit profile can negatively impact upon a future job search and limit your financial options. If you sense that redundancy might be in the offing, be cautious about taking on any new debt. Credit card and other high interest debt should become your first priority and should be reduced or paid down immediately. If you were to lose your job while paying thousands of naira in interest and principle, it would be challenging to get yourself out of this difficulty.

Review your health insurance policy

One of the big pitfalls of retrenchment is the loss of health insurance. Review the health benefits at your current job and check what options will be available to you in the event of a lay off. How much would cost you to maintain your insurance cover privately? Remember that you would have to pay both the employer and employee shares of the premiums in order to keep the same coverage.

Improve your skills

You should continually be looking for opportunities for self-development to improve your knowledge, skills and certifications. Do not depend totally on your current employer to put this in place for you; you owe it to yourself to develop yourself. Constantly update your CV to reflect your new skills so that you will always be able to present the most updated version.

It is also worth exploring other income earning opportunities that you can pursue without their having any impact on your present job. This must not become a distraction as if you do not stay totally focused on the job at hand you might actually be accelerating your retrenchment!

Network, network, network

Take networking seriously as some of the contacts you make may well end up being your potential employers in the future. Reactivate your network if you have been a bit lax about keeping in touch with acquaintances and associates; it is much easier to call someone just to say hello than it is to call them to ask for a job, especially when you haven’t spoken to them in several months.

Don’t get unduly stressed by the possibility of being made redundant as this is largely out of your control. As you continue to work with a positive attitude, build a sound business reputation and give your job your very best commitment, you are less likely to face this prospect. But no matter how good your prospects may be, it does no harm to be prepared and to get your finances in order.

Job loss ranks as one of life’s most
challenging events. Some of the issues involved include, adjusting your
finances, looking for a new job, and coping with the emotional and
social impact of your new situation. It would be much easier to deal
with it financially and emotionally if you’ve prepared for the worst by
planning ahead, but even if you failed to anticipate this sudden change
in your circumstances, here are some practical steps to take if the
worst does happen.

Don’t panic

When you think about all the bills and
monthly expenses you have to face without a steady income, it is easy
to despair. Try to remain calm and do not rush into any major financial
decisions whilst you assess your situation; you need a clear positive
outlook. Even if you are eligible, be cautious about dipping into your
retirement savings account.

Do you have any savings?

How much money have you saved? How long
will it last based on your monthly bills? The importance of an
emergency fund becomes glaring in situations like this. If you have
been able to set aside say 6 months of income in a high yield money
market account, you will be able to pay some of your bills and relieve
some of the financial stress while you look for new job. But if you
have always lived from month to month, this may not be an option.

What are your entitlements?

What do your full entitlements amount
to? If you have no savings at all and you are fortunate enough to
receive severance pay or other benefits, use this as a bridge to tide
you over the difficult period. Spend carefully, and do not use all of
your entitlements to make large payments such as your mortgage as you
might have to live off that money for what could be an extended period
of time. Don’t let such funds lull you into complacency; you need to
actively seek a new job or other income generating opportunity.

Revise your budget

How best can you adjust your budget to
suit your new circumstances? Develop a new written budget to cover
several months based on what you have saved and any expected income.
How much will it cost to maintain your family, your home and lifestyle?
Keep your family members fully in the picture so that they too can
adjust their expectations about what you can afford. You will have to
control your spending by cutting back on nonessential expenses.
Naturally your priority will be for housing, food, utility bills. Of
major concern would be the lack of access to affordable insurance and
appropriate health care. This must also be planned for.

Be cautious about borrowing

It is tempting for credit card holders
to start to load day-to-day expenses on their cards. Try to avoid doing
this unless absolutely necessary and only for critically important
expenses that cannot be delayed. Taking on additional debt can keep you
in denial about your true financial situation and can make things worse.

If you are unable to fulfill your
financial obligations, such as your mortgage or car loan, contact your
lenders immediately and inform them that you have lost your job and are
actively seeking new employment. It may be possible to negotiate new
terms and come to an arrangement to adjust your payments for a limited
period of time. It is better to be approach them upfront rather than to
fall behind with your payments. If you default on your home or vehicle
loan, your bank will take steps to re-possess your property.

Stay socially connected

Some people feel embarrassed or
inadequate after losing a job. Don’t withdraw and let negative feelings
stop you from taking important steps; you need your network now more
than ever before. Reach out to family, friends, ex-colleagues and your
network and spread the word that you are in the job market. By seeking
support you may find they may be aware of new opportunities for you.
Your CV should be carefully updated and circulated.

Seek alternative sources of income

With the sheer number of people
currently searching for jobs, you need to cast your net wide, and not
just for the same type of job. Be practical and flexible and don’t
pigeonhole yourself into a specific role or job so you can increase
your chances of finding work. Consider temporary or part time work that
will generate income and give you the time and flexibility to attend
job interviews and actively pursue a more permanent position. This
might be a time to upgrade your skills, or go back to school which will
all add to an impressive resume.

If you have alternate sources of
income, you will be in a much more comfortable position if you lose
your job. Your hobbies, talents and skills and other interests may be
converted to a business and offer serious possibilities for income.

Be Positive

Apart from the financial issues
associated with job loss, there are usually emotional and personal
aspects that are too often ignored. Whether yours was the only position
that was cut, or an entire unit or department, the feelings caused by
being laid off are largely the same regardless of the circumstances.
Many people experience a loss of self esteem, a sense of failure and
even depression after retrenchment. But it’s important to take your
next steps based on clear rational thought, devoid of emotion.

As difficult as this may sound, one should try to think of losing
your job as a positive event, an opportunity to re-evaluate your future
and, potentially change your career or start a new business. Losing
your present employment may well be the impetus, just what you need, to
take a fresh look at your life and re-define your goals. Often, it is
times like this that propel people into greater things.

So
the Central Bank of Nigeria (CBN) would like to see credit to the
private sector grow by more than it has done in the past year?

Credit has strong
uses in most modern economies. Just before the last global crisis
broke, credit-based consumer spending accounted for about 75% of output
growth in the United States. Moreover, current International Monetary
Fund (IMF) estimates indicate that stronger consumption in the US has
been part of the new recovery. Credit works for business investment
too; and when government borrows, it drives government spending.

The apex bank is
thus justified trying to resuscitate bank lending. To this end, it has
tied itself up in several knots. It has eased monetary conditions, only
to find banks building up liquidity in the wrong places, including
balances with it. It has tinkered with the corridor around the policy
rate, trying to discourage banks from warehousing surplus funds in the
CBN’s vaults.

Still, the banks
would rather keep such money with the apex bank, and earn 2% on it,
than lend to sectors of the economy where higher returns might be met
with. When you consider as fact that one of the main responses in the
markets to the current crisis has been for depositors to demand higher
returns on their funds with the banks, then the banks’ behaviour
becomes harder to explain. Surely, there must be better ways to lose
money?

Put differently, is
it enough for banks to have a surfeit of cash in order that they may
lend money? In response to the global and local shocks that have hit
the industry, most banks have tightened their risk acceptance criteria.
They have not only shortened the maturity profile of new loans, they
are more prone to demand that would-be debtors meet requirements that
were not in place nine months ago. Again, we imagine that further down
the road, these loan covenants will firm even more. This would follow
naturally, as risk management frameworks are strengthened in response
to the lapses unearthed by the CBN’s recent special audit.

There are other
worries, not least of which is the fact that most of the banks that
have been at the receiving end of the apex bank’s monetary forbearances
are still in the process of rebuilding their capital. Add to this, the
on-off debate over the extent to which current levels of provisioning
may have sufficiently addressed the industry’s portfolio of
non-performing loans, and the effect on bank lending of current
proposals by the Basle process to raise the industry’s capital adequacy
ratio.

But none of these
attend to the question of how strong the demand for credit is. Current
concern with the supply side of the market for credit is all very well.
However, no less crucial is the need to establish whether there is a
market out there for loans. Are there investment vehicles?

Did the stock
market bubble not inflate largely because the banks had no other place
to put these funds? And what has happened to non-bank sources of
credit? Why have these not taken up the slack from the failure of bank
credit?

The more probable
cause of the credit market problem is that there are major structural
policy challenges constraining the supply and demand sides of the
market.

Until recently, the
downstream sector of the oil industry was a major market for bank
credit. Apparently, the central bank’s intervention at some point dried
this market up. Now, the banks are asking that would-be importers of
fuel obtain promissory notes from the federal government before they
provide the necessary trade finance cover. Because government has
refused to meet this demand, oil importers haven’t had access to the
credit necessary to remove the unsightly fuel queues from our roads. Of
course, government’s practice in the past of not paying these importers
on time was the one reason why their bank facilities did not perform.

Until issues of
this nature are addressed, and you want to add the difficulty with
passing the petroleum industry bill to this list, I am not sure that
the market for credit in this economy will pick up.

The
Anti-Counterfeit Collaboration, Nigeria (a non-governmental
organisation) and concerned brands in the country have called on
federal and state governments to address the problem of counterfeit
products, which they say is threatening the Nigerian market. The
concerns were raised at a media roundtable held in Lagos at the weekend.

Marcel
Van de pas, head of retail, Nokia West Africa, the host brand at the
event, said the brand was glad to partner with the government and local
agencies to ensure consumers have access to genuine products.

“Counterfeit
products are not only potentially harmful to consumers but also have a
negative impact on the local economy and on supporting local
innovation. We will continue to support government efforts to reduce
the proliferation of counterfeit products in our market,” he said.

“The counterfeit market in the technology sector is over 18% and still
growing and from all these, the government does not get anything in
terms of tax or anything in form of revenue.”

Uche
Nwokocha, a senior member of the Anti-Counterfeit Collaboration,
Nigeria said the organisation was formed in October 2006 as an
initiative by Aluko & Oyebode, a law firm, to bring brand owners,
enforcement agencies and interested parties together to fight the
already rampant counterfeiting and piracy in Nigeria.

Mrs. Nwokocha said factors that contribute to counterfeiting in Nigeria
range from the lack of consumer enlightenment on the dangers of
counterfeit products to the perceived cheaper cost of such products.

“The
difficulty of detection by mere physical examination of end users, the
reluctance of brand owners to notify the public of the existence of
counterfeit of its original products so as not to negatively affects
sales, among other factors contribute to the counterfeiting business,”
she said.

Consequences

Apart
from consumers not getting the safe and effective products they pay
for, legitimate manufacturers and intellectual property owners suffer
from the trade mark patent and copyright infringement and loss of
goodwill.

Marc
Schreuder, chairman of the Anti Counterfeit Collaboration, Nigeria and
Chief Executive of KFC Nigeria, an international fast food chain, which
recently started operation in Nigeria, said the challenge of fake
products is not restricted to fast moving consumer goods lone.

“The fast food industry is rife with copyrights infringements which mean consumers do not get value for money,” he said.

Mrs
Nwokocha added that counterfeit products also discourages firms from
embarking on research and development leading to loss of employment
opportunity.

“It
also discourages foreign investment as they would be suspicious that
investment will be negated by competing counterfeiting activity,” she
said.

Urgent solution needed

The
volume of counterfeit goods in Nigeria is about 60%-80% based on a
survey recently conducted in pharmaceuticals, luxury goods, software
and computer hardware, audio and visual sector, motor vehicle spare
parts and food and beverages, Mrs. Nwokocha said.

The
battle against counterfeit products, she added, is the responsibility
of the Nigerian government, the brand owners and even the end users.

“The
Nigerian government should tighten its laws and measures against such
practices. They should also improve communication with consumers and
(make) policies for better surveillance, control and prevention of
public health risks associated with counterfeit goods,” she said.

“It will be more effective if these goods are stopped at the ports
and borders, for those that are imported, than to tell users what to do
to identify the genuine product.”

Some operators at
the Nigerian capital market have described the removal of Aliko Dangote
as the Nigerian Stock Exchange’s (NSE’s) president, a welcome
development that will further boost investors’ confidence.

Ope Banwo, an
analyst and legal practitioner at The Market Ombudsman, said that the
development is a positive one for the Exchange and the financial market
generally.

“I have been on
record for saying that it is morally and equitably wrong for Mr.
Dangote to have been appointed as President of the NSE in the first
place, even while recognising that the Exchange is a privately owned
organisation,” he said.

Mr. Banwo said
fairness must not only be done but must be manifestly seen to have been
done. “Since the operations of the stock exchange directly and
indirectly affect everybody in Nigeria, it should not be allowed to run
under the normal rules of a privately held company. So, putting Mr.
Dangote as President of an Exchange where stocks from companies he runs
and owns are quoted, is a manifest conflict of interest that should not
be allowed,” the lawyer said.

Furthermore, he
explained that it was wrong for the business mogul to have been
appointed president of the stock exchange when there were pending
allegations of share manipulation levelled against him in the law
courts and other forums.

“This is the
equivalent of appointing somebody who is on trial on accusation for
armed robbery of a bank, as the CEO of that same bank while the trial
and accusation is still pending. Just the whiff or accusation alone
should have disqualified him from being considered in the first place,
in any self respecting society. Yet, the powers-that-be appointed him
anyway and now they reap the fruits of their actions,” Mr. Banwo added.

Market improvement

The national
chairman of the Progressive Shareholders Association of Nigeria,
Boniface Okezie, said the Federal High Court ruling which nullified the
election of Mr. Dangote last Friday, will bring improvement to the
market.

Mr. Okezie said
that Mr. Dangote was not actually elected in the first place because it
was a unanimous decision that brought him into power. “Now that the
court has asked him to step aside, I think he has to comply, even if he
decides to appeal the judgement. The NSE also has to obey the court
ruling,” he said.

“We (shareholders)
said it from Day One that having been there as the vice president of
the NSE, while the issue of AP and Nova Finance came to play, Mr.
Dangote, as an actor in the middle of the crisis, should have resigned
honourably,” he added.

The council of the NSE, had on August 6, 2009, named Mr. Dangote as its 17th president in a unanimous endorsement election.

Proud of Judiciary

Mr. Banwo said the
development is very positive because it signals to all market operators
that Nigerian courts are up to the task. “I am extremely proud of the
judge and the judicial system these days. They are showing some class
and courage that has almost been eroded in the past 15 years. I say
kudos to the judiciary for the boldness of the judge; rising up against
the lawlessness and disdain to court orders exhibited by big boys, who
believed they were above the law,” he said.

“The judgment will
also send a signal that it is the dawn of a new era where the judiciary
will indeed be the last refuge for the oppressed and the wronged in
society. The development sends signals to the Ndidi Okerekes and Udo
Udomas of this world that their time is running out when it comes to
taking conflicting positions in a market yearning to be transparent,”
Mr. Banwo said.

Ganiyu Solomon,
chairman Senate Committee on Capital Market, in a telephone interview,
said, to avoid a situation of conflict of interests in the general
market regulations, Udoma Udoma, Chairman, the Securities and Exchange
Commission (SEC), and Chairman, UAC Nigeria Plc, a quoted company,
should also resign.

“We should not wait
till we are presented with a situation of conflict of interests. It is
very important that a regulator is not encumbered in any way in
carrying out his duty. If you go through other jurisdictions, you will
discover that they make sure that people holding such offices are not
in any way tied to any quoted company. It is just to safeguard the
interest of the market,” Mr. Solomon said.

“If we say that
anybody can go ahead to hold any particular office, can you envisage a
situation where a stockbroker who is highly connected becomes SEC’s
chairman. Are you going to say he can continue to operate on the floor
and still hold that position?”