The Price for Financial Impunity

ijeoma.nwogwugwu@thisdaylive.com

Ever since the Central Bank of Nigeria blacklisted 113 companies and their directors, whose loans – primarily non-performing – are in excess of N5 billion and had been taken over by the Asset Management Corporation of Nigeria, the affected debtors have been lobbying quietly to get the central bank to reverse the decision. The ignominy of being blacklisted aside, they are worried that by barring them from accessing further bank credit, the CBN has sounded the death knell on them and their businesses. Some have even argued that they need to keep borrowing to refinance their loans, raise money for working capital to save their businesses from going under and prevent job losses.

On the last point, they might be right. But the fact of the matter is if the loans were not being serviced, they were already bankrupt. As such, they have no one else to blame for their sorry state but themselves. Since the crisis in the banking system in 2009, a number of measures have been taken by the authorities to reverse the culture of financial impunity arising from financial recklessness, mismanagement of the banks and a raft of debtors unwilling to repay their loans. From bank managing directors who were summarily dismissed and dragged to the courts for insider lender and mismanaging the institutions that they ran, the name and shame tactics employed by the central bank between August and October of that same year to get debtors repay the loans, to the establishment of AMCON as a resolution vehicle for bad bank debts.

The measures notwithstanding, the bulk of the debtors who were listed three years ago still dominated the new list compiled by the central bank last month. Although the loans have since been taken over by AMCON, a cursory glance shows that like 2009, the new list was dominated by local oil and gas companies and stock broking firms. In 2009, banking system exposure to oil and gas companies and the capital market accounted for more than 70 per cent of loans that had gone bad. In effect, nothing much had changed between 2009 and 2012. The only distinguishing factor was that the same bad loans had been moved from the banks to AMCON.

The irony is that when AMCON was established in 2010, quite a few of these debtors consciously courted the banks to transfer their loans to the corporation. They felt that with AMCON, they would be under less pressure to repay their loans, could restructure them under less stringent terms and could maintain their luxury lifestyles without a care in the world. But what they did not bargain for was that the central bank would come down hard on them again until they repaid what they owe.

In defence of the CBN’s directive to banks on the bad debtors, its deputy governor, Financial System Stability, Dr. Kingsley Moghalu, told this writer that if the central bank had not blacklisted the chronic bad debtors, it would be reversing the financial system stability, which had been achieved through the establishment of AMCON. Also, the reluctance or refusal by debtors to repay their loans taken over by AMCON presents a moral hazard and could encourage others to act in the same irresponsible manner, he explained. More important, the culture of financial indiscipline, especially by borrowers who believe they are above the law and can borrow without paying back, must be stopped.

What these debtors do not realise is that by allowing AMCON to assume their loans, their businesses and assets have effectively been taken over by the Federal Government of Nigeria and they have no hope of recovering them until they repay their loans. Is it any wonder that Mr. Femi Otedola, whose company, Zenon Oil and Gas Limited, had the highest exposure to the banking system, wisely gave up most of his assets to wipe his slate clean? 

The lesson to be learnt from Otedola’s experience is that others still indebted to AMCON would have to pay up or lose the shirts on their backs. Those opting for the courts to challenge the interest charges and penalties imposed by the banks, quite frankly, are wasting precious time, because they have a negligible chance of winning their cases and would still have to pay what they owe after the law suits have run their course.

A better option for them is have the loans restructured and ensure that the loans are performing for a reasonable length of time, which could encourage AMCON to ask for a review from the central bank on a case-by-case basis. On this, Moghalu said AMCON would be required to advise the CBN on the new status of the debt. Such reviews, he added, will be periodic, may be every six or 12 months, after which the debtor may be delisted.

Another option is for a debtor, who honestly wants to pay, to apply to AMCON for working capital under a restructuring plan as provided under Section 6(1)(c) of the Act establishing the corporation. That section provides that the corporation shall have the powers to provide equity capital on such terms and conditions as it may deem fit. But on this, its managing director and CEO, Mr. Mustapha Chike-Obi places a caveat. According to him, even though there is a window to give some working capital to companies under the Act, as a regulated entity, AMCON would have to inform the CBN which must be satisfied that the debtor has the capacity to pay and will not fritter it away. Expectedly, companies that qualify for such consideration includes the airlines – Arik, Aero Contractors and Air Nigeria – as well a few others in critical sectors of the economy.

But it is not just debtors that owe AMCON more than N5 billion that the CBN intends to target. Based on information made available to this column, the central banks plans to periodically review the list and lower the threshold of bad bank debtors to N1 billion. The thinking in the central bank is that debtors with the habit of going from one bank to the other accumulating loans without repaying should also be blacklisted in order to safeguard the banking system.

In more advanced jurisdictions, debtors with a poor credit rating are not only barred from borrowing; if and where they get new loans, these loans are granted under the worst possible terms. That way, the propensity for financial indiscipline by the banks and borrowers is largely kept at bay.

Economic Stimulus vs. Savings
Under the 2013 -2015 Medium Term Expenditure Frame and Fiscal Strategy Paper presented by President Goodluck Jonathan to the National Assembly, the government is proposing a crude oil benchmark of $75 a barrel for the 2013 budget. One reason is that by establishing a conservative benchmark price, excess revenues accruing from oil sales could be saved for the rainy day.

The House of Representatives, on the other hand is proposing to increase the oil benchmark in next year’s budget to $82 a barrel. The House is arguing that by increasing the benchmark, more revenue will accrue to the government for capital spending and would reduce the budget deficit and government borrowing. 

Although the legislators may be acting out a script on behalf of their state governors and may appear imprudent, their position should not be dismissed with a wave of the hand. Almost two years ago, I wrote an article on finding a balance between stimulating the economy and saving for the future. That article still remains relevant today and has been replicated in part:

“Savings beyond planned investment is not what Nigerian needs at this juncture. What excessive saving does is to create the false impression that all is well on the surface as long as base macroeconomic indicators state so, but unemployment, poverty and income inequalities will continue to persist. What this means is that certain wrong macroeconomic actions are leading to inefficient aggregate macroeconomic outcomes, such that the Nigerian economy is operating below its potential output and growth rate.

Realistically, the best way to diversify the economy is for government to de-emphasise, not completely jettison savings, and invest more in capital infrastructure projects capable of creating new jobs and opportunities for the unemployed. The impact of investment by government is that it has a cascading effect on the economy. When it injects funds into capital projects, this results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so on.

Economists term this the circular flow of income, and is inevitable because the initial stimulus starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.”

ThisDay

Benin prince counsels youths against violence

Written by Uchechukwu Olisah

Crown Prince of Benin kingdom, Edaiken N’Uselu Eheneden Erediauwa, has advised youths that constitute Community Development Associations (CDAs) in various parts of the kingdom to desist from violent acts that could endanger the peace of the state.

Prince Erediauwa gave the advice when members of the National Union of Benin Students from the University of Benin (UNIBEN) paid him a courtesy visit.

The Edaiken N'Uselu, who called on the students to work towards the eradication of cult activities which, according to him, has spread from schools to communities in the state, denounced cult activities which he said had become an instrument used against opponents on the streets in various communities.

Prince  Erediauwa also cautioned communities against selling large parcels of land to non-indigenes who would take possession of such land forever.

According to him, the communities should cultivate the habit of leasing land to those who might be interested, with a reminder to them that their children would definitely need the land in the future.

He urged the Students Union leaders and other members to be good ambassadors of the Binis wherever they were, just as he called on them to be united and work hard to bring other Benin students  within the country together.

Earlier, the leader of the Benin Students Union, Mr. Isaac Erhunmwunse Ukponahiusi, said they were at the residence of the prince to welcome him home from his diplomatic service.
Nigerian Tribune

Nigeria close to the precipice – Ex-minister

 by Olusola Fabiyi

Dr. Oby Ezekwesili
| credits: File copy

A former Minister of Education, Mrs. Oby Ezekwesili, has said the country is on the edge of a precipice.

Ezekwesili, a former Vice-President of the World Bank, spoke with journalists in Abuja on Sunday on the Mubi massacre and the killing of four students of University of Port Harcourt by a mob.

The UNIPORT students were alleged to have stolen laptops and telephones.

Ezekwesili said she was devastated that the students were burnt and videotaped in Port Harcourt, the state capital, by the killers.

The former minister said, “I am shaken; I am outraged, I am devastated, I feel mortally wounded.

“The situations in Mubi and Port Harcourt were terrible. Did you see the video-recording of how students were killed in Port Harcourt?

“Is this not the same country where it is emotionally difficult when you see a corpse on the street?

“I am sorry; I am totally outraged like any decent citizen of a nation that we love. The killings were barbaric, mere savagery and very devastating.

“We are getting to the precipice and we need to pull ourselves back. The government has to take full responsibility; it has to be in charge to prevent anarchy.

“The only way out is for the government to prove that it is really in charge.”

She said it was obvious that some people were acting or behaving as if there were no people in charge of the government.

“Something is fundamentally wrong with our society: To see the dastardly mob’s killing of four misguided youths (in Port Harcourt) who stole, sank my optimism. No! Even in death, these four must get justice. My voice shall be heard on this. What have we become?” almost sobbing.

Meanwhile, the National Chairman of Peoples Democratic Party, Dr. Bamanga Tukur, has said Nigeria needs prayers in order to combat the security challenge facing it.

Tukur, after reviewing the recent killings in Mubi, added that the security problems confronting the country needed to be tackled with all seriousness.

To secure Adamawa State from cultists or terrorist groups, he said there should be concerted efforts by all to complement efforts by the security agencies.

The PDP chairman spoke with journalists in Abuja on Sunday at his residence.

He called on security agents not to relent on their efforts until they fish out the perpetrators.

Punch

Corruption: An Invitation To Revolution

  FATIMA AKILU

An abridged version of an article published in The Politico magazine in August 2012.
By Furera Isma Jumare
Recently Ban Ki-moon, the United Nations Secretary-General, lamented that globally, 30 per cent of aid meant for development was lost to corruption in 2011, hampering the ability of countries to prosper and grow, by preventing peace, development and human rights from flourishing.
This brings to mind Nigeria, a country awash in oil wealth,  but which ranks 143rd in Transparency International’s Corruption Perception Index (or the 33rd most corrupt country in the world). In his 2007 book “The Bottom Billion”, Paul Collier, former World Bank Director of Research Development had also called Nigeria a development failure.
In Nigeria, government agencies which have the responsibility of providing public goods and services are cesspools of corruption. It is the same thing from the federal government, to the states, and the local government councils where it is an open secret that in some cases, their statutory monthly allocations are simply shared among officers.
Sadly, no one seems to care anymore that public officers, many of whom earn less than a N100,000 a month, drive around in brand new expensive cars (paid for in full), send their children to expensive private schools, own expensive homes, and flaunt their ill-gotten wealth.
Obviously, the civil servants are aided and abetted by legislators that have oversight function over their agencies, as well as the private sector itself. For example, around 2008 the power sector probe by the Ndudi Elumelu led House of Representatives Committee on Power was steeped in allegations that members had collected a bribe of N100 million from a contractor. Elumelu and his team were charged to court, but have we heard anything anymore about the case?
Then there is  the Farouk Lawan (Mr. Integrity)/ Femi Otedola bribery scandal during the fuel subsidy probe. Here, evidence emerged that Mr. Integrity had taken a bribe of at least $500,000 to exonerate a company owned by Femi Otedola, a big player in the oil sector.
It is also clear that members of the legislature cannot help soliciting bribe regardless of the importance of whatever project, sector or ministry they “oversee”, knowing this is to the detriment of growth and development of the country, its citizens, or even the constituencies they claim to represent. In Nigeria the corruption disease has hit on such an audacious scale and now reached frightening proportions.
To add salt to injury, Nigeria ranked 156th in World Bank’s Human Development Index in 2011, falling into the Low Human Development group, and only better than 23 countries. For many years the country has fallen into that group, and now it is not likely to meet most of the Millennium Development Goals (MDGs) by the target date of 2015 according to reports.
This is because to achieve each of the goals requires an infusion of funds by government. And there lies the problem for Nigeria. Wherever funds are needed for a project, corruption is lurking around the corner. How on earth then did we think the country would achieve rapid development and meet the goals by 2015? Marrying the two issues of corruption and achieving the MDGs together, understanding why it would be a difficult task anyway becomes easier.
Already, looking at the overarching of the eight goals - eradicating extreme poverty and hunger, the United Nations Development Programme (UNDP), in assessing the current progress of the MDGs in Nigeria reports that this goal is not likely to be met by 2015. As it is already, by 2010, 61.2 per cent of Nigerians were living under a dollar a day, according to Nigeria’s National Bureau of Statistics (NBS).
But then again, for the same reason, can Nigeria meet the goal of achieving universal primary education? While World Bank statistics showed increased primary school enrolment in this case, there is a missing link. If the MDGs are supposed to be a means to achieving development, that goal should have addressed the issue of quality of education, and not just volume.
The educational system in the country has totally collapsed in terms of quality. There is dilapidated physical infrastructure, limited educational equipment and other materials, and poor quality of teaching. Of course this feeds into Nigeria’s secondary school system where for example only 10 per cent of the 110,724 candidates passed the 2011 November/December Senior School Certificate Examinations of the National Examination Council (the NECO SSCE).
For the health sector, the case of Professor Adenike Grange, the former Minister of Health who was fired for graft in 2008 is an example of corruption in high places. But also recently in July, a scathing report appeared in the equally sensational on line news media, Saharareporters.com, regarding the activities of the Federal Ministry of Health. Staff members together with those of the National Primary Health Care Development Agency (NPHCDA), were accused of stealing much of the N320 billion allocated to the ministry specifically for the achievement of the MDGs and others.
But the Office of the Senior Special Advisor to the President on MDGs is not left out of the corruption scandals; it was recently reported that the Independent Corrupt Practices and other Related Offences Commission (ICPC) had arrested the Benue state coordinator of the MDGs, Mr. Timothy Aikyor, and some of his subordinates, for misappropriation of between N300 million and N1 billion.
In view of all this therefore, are the MDGs attainable in Nigeria? We know that corruption in Nigeria, very much like religion, has been accepted as a way of life. Law enforcement and other constituted authority that should abhor and prevent it actually condone and fuel it. Many corruption cases have “disappeared” because of the connivance of constituted authority, but even where cases still exist, they are often tied up in bureaucracy at the courts anyway. So what to do?
Countries have been urged to ratify the United Nations Convention against Corruption (UNCAC). Adopted in 2003 by the General Assembly, the instrument is the first global legally binding one meant to help countries fight corruption and recover stolen assets. Nigeria has ratified it, but if the Nigerian government is sincere in its fight against corruption, then for a start it must incorporate the convention’s provisions into our laws.
When this happens it might serve as a deterrent for those who believe they can steal public funds and hide the loot abroad.
Leadership

ANPP BoT to Ratify Merger Plans

National Chairman, ANPP,   Dr. Ogbonnaya Onu

Onyebuchi Ezigbo in Abuja

The Board of Trustees of the All Nigeria Peoples Party (ANPP) will tomorrow meet in Abuja to consider issues relating to the party’s participation in the ongoing merger talks with other opposition political parties in the country.

THISDAY gathered that the BoT members were to meet in Calabar,  Cross River State, but that their meeting was later rescheduled for this week in Abuja due to cost implications.

Top on the agenda of the BoT headed by the former Governor of Borno State, Senator Ali Modu Sheriff, is said to be on strategies and condition that would be applied in the negotiations.

A top member of the party told THISDAY Sunday  that the board is also expected to consider members nominated to serve on the merger committee of the party.

The national leadership had earlier constituted a six-man committee headed by a member of the BoT, Admiral Lanre Amosu (rtd) but later expanded it to 20, with the inclusion of all the serving and former governors.
It was learnt that at the meeting of the party’s National Working Committee  (NWC)  held last Thursday, the national officers had a heated session when the national chairman, Dr. Ogbonnaya Onu, brief them on the talks with leaders of other opposition parties.

Most of the officers were agitated over the seeming back-seat ANPP appeared to be taking on the merger talks.

They worried over the delay in inaugurating the committee on merger which had to wait following the chairman’s trip abroad.

Majority of the NWC were  however calmed down after Onu had tried to allay their fears that the party was indeed holding out it own as far as the engagement with other opposition parties is concerned.

Onu had said the reason for the expansion of membership of the contact committee on merger was to ensure that people with  experiences would be made to impact on the search for a viable mechanism for opposition alliance.

Onu who said the leadership of the party has been exploring ways of restoring the party to a position of eminence, also informed members of NEC that discussions are already underway with  chairmen of leading opposition parties on how to achieve common political interest.

“We have also set up an  inter-party contact committee that will hold talks with other opposition parties with the aim of strengthening platform that will help us win elections at all levels of government.  The membership of the committee will be enlarged to include as many as twenty leaders so as to fully tap the vast experience within the party for the good of all,” he said.

ThisDay

ONDO GOV ELECTION Mimiko ’ll win by landslide - Tunde Bakare

by Soji Ajibola

Mimiko

THE Senior Pastor of the Latter Rain Assembly and vice-presidential candidate of the Congress for Progressive Change (CPC) in the 2011 general election, Pastor Tunde Bakare, said on Sunday in Lagos that Dr Olusegun Mimiko would win by a landslide victory in the October 20 governorship election in Ondo State.The victory of Governor Mimiko, according to Pastor Bakare, will usher in a new wave of leadership in the South-West, adding that leadership is not by birthright but by living right.
Briefing newsmen on the forthcoming election in Ondo State, Pastor Bakare said, "Mimiko will win hands down in Ondo State and nothing would happen. Thereafter, he will muster strength and there will be an alternative party as people would begin to see leadership by living right and not by material acquisition of flying jets over the people that you want to vote for you, without letting us know how you come about the jets when you have little or no money in your pocket when you became the governor.
"The people of Ondo State should be vigilant and be alert and make sure that they defend their vote. They should vote for the candidate of their own choice.
"I want to remind those who said they will win at all costs what Samuel Akintola said in the election that led to 'Operation we ti e', that if people did not vote for them, angel will vote for them and we know the consequences of that. If anybody thinks they can perpetrate any violence in Ondo State, violence will consume the perpetrator of violence,” he said.
“I speak for no political party because none of them is big enough to buy me. In 2007, the South-West was visited by a powerful hurricane called PDP. The party, under President Olusegun Obasanjo swept almost all the entire South-West because people believed him that he was just trying to be limited to the presidential election. But to their chagrin, their states were swept off and we had PDP in Oyo, Ogun, Osun, Ondo and Ekiti states. They received some through court proceedings, verdict and judgments.
"But God preserved Lagos State in the midst of that hurricane. Through Lagos that was preserved, Ahmed Tinubu, who became the leader of ACN, alongside the leadership of the party, began to muster strength that they were able to secure the South-West from the PDP. It was a breath of fresh air. But the same group opened the door to PDP to sweep the polls during the presidential election in 2011. In the midst of all that, God, also, to teach lessons, preserved a state to be neither ACN nor PDP just as He preserved ACN in Lagos.”
On the proposed integration of the region by the ACN, Pastor Bakare noted that, “no destructive means can bring about constructive ends. If indeed as claimed by them that they want to have economic integration in the integration, it should be preceded by enabling legislation that the house of assemblies of states in the region should pass into law and that will empower their governors to do such.”

Nigerian Tribune

24 hours to deadline, FG yet to file Bakassi review

 by John Ameh, John Alechenu, Olalekan Adetayo and Ihuoma Chidozie

Attorney-General of the Federation and Minister of Justice, Mohammed Bello Adoke (SAN)
| credits:

Barely 24 hours to the expiration of  the  deadline for Nigeria to appeal for a review of the International Court of Justice judgment on  the Bakassi Peninsula, there is no indication that the Federal Government has done so.

The 2002 judgment  had ceded the oil-rich peninsula to the Republic of Cameroon. And Nigeria, in compliance with the judgment,  signed the Green Tree agreement  with Cameroon in 2006, thereby formally handing over the area.

But the Bakassi people alleged unfair and inhuman treatment in the hands of the Cameroonian authorities and  mounted  pressure on the Federal Government to file  a suit for a review of the judgment.

Under Article 61 of the ICJ Statute, a party to a suit can file for a review within 10 years if new facts not known at the time a judgment was delivered surface.

Nigeria  has till Tuesday(tomorrow} to  file a suit for the review .

President Goodluck Jonathan had set up a committee last week to advise him on how Nigeria would approach the case; but as at Sunday, it could not be established if a report had been laid before  him.

It was gathered that part of the committee’s assignments covered  suggesting a formidable legal team that would  draft and file the case.

The committee is under the watch of the Attorney-General of the Federation and Minister of Justice, Mr. Mohammed Adoke (SAN).

The Ministry of Foreign Affairs claimed that the matter had left its table and was now under the control of the presidential committee.

The spokesperson of the ministry, Mr. Ogbole Ahmedu-Ode, told one of our correspondents that until the committee’s  report was submitted, there was nothing much the ministry could do.

He said, “As you are aware, the President has set up a committee to look at the issue and advise him appropriately.

“I suggest we all wait for the outcome of the committee’s work and we will take it from there. The committee  still has a day or so to complete its work, let us wait.”

Efforts by one of our correspondents to get Adoke to comment on whether Nigeria would file the appeal failed on Sunday.

The minister did not answer calls to his mobile telephone. He also  did not reply an SMS sent to him.

Also, the Chief Press Secretary to the AGF, Mr. Ambrose Momoh, did not say whether the government would seek a review or not.

When contacted, Presidential spokesman, Dr. Reuben Abati, told one of our correspondents that Adoke would address a press conference on Monday (today) to give Federal Government’s stand on the ICJ verdict.

Abati said contrary to media reports, the Federal Government was not appealing the verdict.

He said the ICJ does not give room for appeal but only a review or the interpretation of the verdict.

He said, “What the Federal Government has been asking for over the years is the interpretation of the verdict which has not been forthcoming.

“But by tomorrow (today), the AGF will speak comprehensively on the issue and give Federal Government’s position in a press conference.”

The PUNCH had in its earlier report said government would seek a review and not appeal the judgment.

The House of Representatives, which last week passed a resolution asking the government to file for a review, was at a loss on the direction of Nigeria on Sunday.

The Chairman House Committee on Foreign Affairs, Ms Nnena Ukeje, whose committee investigated the issue and recommended a review of the case based “fresh facts”, advised.  “Nigerians should cross their fingers.”

Ukeje stated that since there was no categorical statement from government as at Sunday, the “best bet is to wait till Monday (today).”

She added, “The National Assembly passed a resolution backing a review of the judgment.

“I am aware that Mr. President set up a committee to advise him; the committee met a couple of times up to Friday.

“For now, we don’t know what the committee will come up with. This is a weekend, so we wait till Monday.

“Whatever we say now will be mere conjecture; all I can add is that as a legislature, we took a position. Our position is that Nigeria should enter for a review of the judgment on the strength of new facts on the ground.”

The Senate had also passed a similar resolution.

 Punch