•The new team has the duty of restoring Skye Bank’s soundness
Last monday, the Central Bank of Nigeria (CBN) wielded the hammer on some key members of the board and management team of Skye Bank. At a news conference in Lagos, CBN Governor Godwin Emefiele named Alhaji Muhammad Ahmad as new chairman and Adetokunbo Abiru as new managing director of the bank. To join the duo on the board are Bayo Sanni, Idris Yakubu, Markie Idowu and Abimbola Izu – all of whom had also served the bank as executive directors, to ensure continuity and a smooth transition.
The bank’s erstwhile chairman, Olatunde Ayeni, managing director, Timothy Oguntayo, deputy managing director, Amaka Onwughalu, and two executive directors, Dotun Adeniyi and Mrs. Ibiye Ekongwere were all said to have resigned voluntarily before the regulatory action. Also affected in the sweep were Victor Odozi, Babajide Agbabiaka, Jason Fadeyi, Kunle Aluko, Victor Adenigbagbe, Abdul Bello and Hajiya Amunna Lawan Ali – all of them non-executive directors.
According to Emefiele, the “proactive moves have become unavoidable in view of the persistent failure of Skye Bank to meet minimum thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN lending window.” Providing further justification for the action, the CBN governor stated that “although the existing board had done its best to steer the ship, it had come to a realisation that it would be unable to bring the bank out of its present precarious situation.”
As would be expected, the measure came with CBN’s assurance that the bank was not distressed and that it was not at a point where depositors’ funds were threatened. Of course, if the assurance amounted to anything, it is perhaps because the regulatory action comes nowhere near the gale of sanitisation that swept the banking industry in 2009, either in terms of scale or depth and which the financial sector mercifully survived. Even at that, Nigerians must be in wonder as to what went wrong with a bank which only in November 2014 acquired the Mainstreet Bank for a whopping N120 billion, in a deal said to have leapfrogged the bank to the rank of the biggest and largest bank in terms of branch network.
We commend the proactive steps taken by the CBN, both to save the bank and to ensure that depositors’ funds are safe. What it suggests is that the nation has at least learnt something from the 2009 episode when a coterie of delinquent bankers, through wide-ranging but insidious credit abuses, not only plunged their financial institutions into ruin but nearly took down the financial services industry as well. While that mess would cost an initial N620 billion to clear, the repercussions are still being felt in the industry till today.
Next is to deal with the pervasive culture of impunity in the financial services sector. Now, couldn’t the apex bank have done more than simply allow those alleged to have abused their privileged positions to take a walk? Would it suffice to ask those among the pack said to have garnered humongous loans while shunning the duty of paying back, not excluding those whose bad credit decisions put their financial institutions in the state that warranted the intervention of the apex bank – to go and sin no more? We do not think so.
Nonetheless, the new board has its job well cut out: to ensure a swift return of the bank to soundness and to restore confidence to the institution as an entity. A good way to start is to pore over the books to see the extent of the bank’s exposure to the former chiefs and to get those among them found to have abused the credit guidelines to either make good on their loans or risk severe sanctions.
That obviously would be a good signal to stakeholders that the bank is ready to break from the ignoble past.
•There must be synergy among the workers, employers and security agencies to stem the tide
The report by the Nigeria Deposit Insurance Corporation (NDIC) that the banking sector recorded 12,279 fraud cases, worth N18 billion in the 2015 financial year should worry the security agencies. According to the report, there was an increase in the number of cases by 15 per cent, compared to 10,612 cases recorded in 2014; even though a higher sum of N25.6 billion was involved in the previous year. The report also put the actual loss suffered at N3.02 billion, as against N6.19 billion loss suffered in 2014.
With the reinvigoration of the Economic and Financial Crimes Commission (EFCC) under Ibrahim Magu, it is time to beam the searchlight on the financial sector. Under Nuhu Ribadu, the EFCC was a potent fear for those engaged in financial crimes, and some measure of success was achieved. While the ongoing efforts to recover our stolen common wealth from corrupt political actors should be sustained, the EFCC and the police fraud unit should also show similar vigour in fighting financial crimes.
Indeed, there is the need for transparency in the financial sector, to stem the debilitating corruption in the country. Most of the frauds involving huge sums of money go through the banks and other financial institutions. Even with some clever officials engaging in tricky measures to hide their loot, most of them still use the banks to either wire the sums stolen out of the country, or make one traceable investment or another.
We also think it is the cheap money easily made from the hot deposits by the banks and its senior officials that has discouraged them from their traditional intermediary roles towards the growth of the economy. The recent tales by one sitting governor under investigation by EFCC, against a bank, if true, shows how desperate some of the bank officials can be, to gains access to the loot that come from those occupying public offices in the country. Unless the loopholes are blocked, it will be difficult to convince banks to lend to the real sector, instead of the dubious capital transfers for imaginary imports, mostly by the looters.
Perhaps the NDIC should send its report to the EFCC and the police, so that some of the cases can be further investigated. After all, most banks will have full proof evidence of the fraudulent transactions, including videos, pictures and handwritten documents, which can be used to prosecute the cases in court. While the banks may not have the time or wish to expend resources to individually prosecute the cases, the state represented by the prosecutor agencies, should not allow crimes to be committed, and the faith of those involved left to the financial institutions.
As shown by the NDIC’s report, about 38.59 per cent of the frauds and forgeries were committed by temporary staff. The import of this is that the bank’s duplicitous labour practices of engaging casual workers and banning unionisation may actually be fuelling unwholesome work attitudes among the staff without job security. While we are not making excuses for fraud and criminality, it is dubious for banks to declare humongous profits, even when they engage in bad labour practices against hapless Nigerians.
To stem criminality in the financial sector, particularly the banks, there has to be a synergy among the employers, employees and the security agencies. This is critical to the national wellbeing, as the economy is more like the blood, and the banks the veins upon which a country’s economy is dependent.
Gunmen Thursday killed a bank customer, Kingsley Chukwudi in the Apapa area of Lagos State.
The incident occurred in the morning while the young man was leaving the bank.
It was gathered that the gunmen who rode on power bike, allegedly trailed the victim to the bank and shot him.
The Nation gathered that they also carted away his bag containing laptop, money and other valuables.
It was learnt that a combined tram of Rapid Response Squad (RRS) operatives and policemen attached to the Apapa Division have been on the lookout for the suspects who fled immediately they shot the victim.
A source who hinted on the incident said the robbers probably thought that the victim was carrying huge money in the bag.
“He has entered the bank and was leaving when he was shot. He was a security guard. He was carrying his laptop bag and the robbers thought he was going to deposit money into the bank but the young man was just carrying his laptop bag.
“His body was taken to Area B Police Command in Apapa, which attracted crowd because he was a very good person,” the source said.
Efforts to get the state command’s spokesperson, Dolapo Badmos, a Superintendent of Police (SP) to comment on the issue failed as at the time of filing this report.
Labour and Employment Minister Chris Ngige has described as “thoughtless and irresponsible”, the directive issued by the Director-General of Nigeria Employers’ Consultative Association (NECA) Dr. Segun Osinowo, to management of banks to disregard the directive of the federal government that they should shelve on-going retrenchment of workers.
Oshinowo reportedly said at the weekend that the labour law did not empower the minister to issue such a directive, which he considered uninformed and populist adding that the minister seems not to have shown understanding of the fundamentals of industrial relations and labour laws and thus, has “acted ultra vires,”
He also said the labour laws envisaged redundancy situation and, therefore, made provisions in Section 20 of the Labour Act to guide the actions of the parties in the event of retrenchment or redundancy.
But in a statement yesterday, the minister insisted that government directives to the banks are premised on set rules of engagement.
“Section 20 of the labour act is abundantly clear on redundancy and steps expected of institutions to safeguard not just their interests and that of their employees but also that of government who is the chief guarantor of industrial harmony”, he stressed.
The statement signed by Ministry spokesman Samuel Olowookere said the reaction of Dr. Oshinowo to government directives pending the outcome of a conciliatory meeting and stakeholder’s summit billed for the first week of July “is not only irresponsible and thoughtless but a bland knee jerk reaction borne out of self service and unpatriotism”.
The statement said any reaction that tends to hamstrung the intervention by government in any sector of the economy in the overall interest of all Nigerians, by invoking a sudden rigid stricture to free market rules, is an overarching absurdity
He said: ” If government has been intervening, and shall continue to intervene to save banks and allied institutions, even the aviation industry, in times of distress without allowing the free market rules to solely reign, therefore forcing some of them to go under, the same government can equally make minimum demands from this private sector in the overall interests of the nation. Our authority in this instance is not only statutory but also moral .
” Therefore, we wish to state clearly once more, that the intention of government rather than being punitive on these financial institutions is to safeguard national interest by staving off unnecessary job losses and hence avert its real and potential threat to the already fragile security situation and stability of the nation.
” Government intention is guided by the fact that there are clear alternatives to the abrasive lay off of thousands of workers especially in the background of non-compliance with laid down rules on redundancy as clearly enunciated in our labour laws. The labour unions in the financial has brought forward, very strong evidence that thousands of workers laid off last year in a similar excercise are yet to receive their negotiated benefits”, the minister stated.
Bank directors have urged the Central Bank of Nigeria (CBN) to explore dialogue in addressing key policy issues that affect the industry.
The new President of Bank Directors Association of Nigeria (BDAN), Sir Steve Omojafor, who disclosed this at the 19th Annual General Meeting (AGM) of the association in Lagos advocated for increased exchange of ideas between both parties on the introduction and implementation of policies to guarantee success of the industry.
One of the CBN policies that have shaken the banking sector include plan to introduce flexible exchange rate with the intention to curb the rising volatility affecting the naira and foreign exchange reserves.
Omojafor said BDAN, as the primary all-inclusive platform for all bank directors for both non-executive and executive directors, has a key role to play in getting banks to meet and review matters affecting the industry.
Sir Omojafor, who is also a director of Zenith Bank Plc, used his address at the occasion to present the achievements of the Association during the 2015 financial year. According to him, the year was characterised by challenges and turbulence in the macro-economic and political environment: including the general elections, issues in the global economic environment, and the attendant CBN’s policies.
These, he said, had varying impacts on the Nigerian banking industry, but BDAN was nevertheless able to record some remarkable successes in its operations.
He said the CBN has also included BDAN on the list of ‘Competency Framework for Nigerian Banking Industry’ as a minimum qualification for non-executive directors.
Another achievement highlighted by Sir Omojafor was the launching of the newly designed BDAN website, which is expected to serve in updating and providing useful information about the association and the banking industry to its members.
FBN Merchant Bank Limited, the merchant banking subsidiary of FBN Holdings Plc, has assured that it would consolidate and sustain impressive performance in the years ahead as the wholesale banker doubled pre-tax profit to N3.85 billion in 2015.
At the first annual general meeting of the company in Lagos, directors of the merchant bank said it has been positioned to improve on its performance and make better returns to shareholders. Audited report and accounts of the FBN Merchant Bank for the year ended December 31, 2015 showed that pre-tax profit rose by 113.1 per cent from N1.81 billion to N3.85 billion in 2015.
FBN Merchant Bank, formerly known as Kakawa Discount House Limited, started operations in November 2015 following Central Bank of Nigeria (CBN)’s approval of its merchant banking licence and completion of operational prerequisites.
Managing director, FBN Merchant Bank Limited, Mr. Kayode Akinkugbe, assured the shareholders that the merchant bank is appropriately positioned to ensure commendable dividends in the current financial year.
He said the wholesale bank will remain committed to building its franchise as the leading merchant bank in Africa by creating opportunities for its clients.
“This will be the first full year of operation and we are excited to launch the merchant bank on the strong platform of the FBN Holdings Group. We are confident that the management team, with the support of the board, will be able to face the challenges of 2016 and we will work tirelessly to make the belief placed in us deserved,” Akinkugbe said.
He said the merchant bank intends to approach the market with necessary prudence and hunger, being very mindful of all the risks involved, with the aim to improve the quality of its income and increase its balance sheet while ensuring that it has better results this year.
In his address, chairman, FBN Merchant Bank, Mallam Bello Maccido noted that the immediate past year was a challenging period for the Nigerian economy due to the election year and the transitional period for the company.
According to him, while the volatility experienced in 2014 continued into year 2015 and led to spikes in rates and general uncertainty in the market, the purposeful leadership of the FBN Merchant Bank took advantage of the volatilities and rode the economic headwinds profitably within the financial year thereby returning commendable returns to shareholders.
Group managing director, FBN Holdings Plc, Mr. UK Eke expressed confidence in the merchant bank, noting that it has all the necessary advantages to continue to grow.
According to him, with the strength of the FBN Holdings Group, more than adequate capitalisation of the merchant bank at over 25 per cent capital adequacy ratio which signifies capacity to prudently sweat the balance sheet, a strong visionary board, and a highly professional and experienced management team, FBN Merchant Bank has been primed to soon dominate the wholesale banking subsector.
The Nigeria Export-Import Bank (NEXIM) has pledged its support for the Central Bank of Nigeria (CBN’s) financing schemes for the development of the non-oil export sector.
Acting Managing Director Alhaji Bashir Wali, gave the assurance at a one day forum organised for stakeholders in Kano.
The forum was organised to expose the guidelines to all exporters, prospective exporters, products associations, bankers and other stakeholders for effective implementation of the schemes.
Wali said: “Given the negative impact of the current low oil prices and scarcity of foreign exchange on the macro-economic indices and external balance, the need to urgently commence the implementation of the intervention schemes cannot be over- emphasised.”
He recalled that a Non-Oil Export Stimulation Conference was held on Jan. 29, where strategic inputs were received from stakeholders to facilitate the review of policies and strategies towards additional financing and policy support programmes.
According to Wali, the conference is aimed at encouraging and stimulating additional investments in the non-oil export sector.
He said the CBN and NEXIM were committed to the effective implementation of the schemes for the development of the country
The Controller, CBN Kano, Hajiya Amina Abubakar, said the bank had introduced the financing schemes for the sole aim of lending credence to the non-oil export sector.
She called for effective implementation of the schemes in line with the indices of the speedy growth of a promising developing economy.
“NEXIM Bank has a spectacular role to play in complementing the effort of the CBN on granting the N500 billion Export Stimulation Facility and the N50 billion Export Rediscounting and Refinancing Facility,” she added.
Guaranty Trust Bank plc, has extended its yearly One-on-One consultation for children with autism and other developmental difficulties to Ogun State.
The five-day free programme, with the theme: “Managing autism: The next generation, consideration and resources”, began on Monday April 25 at the June 12 Cultural Centre, Kuto, in Abeokuta, the state capital.
The exercise features specialists from Nigeria and the United States (US) offering consulting services ranging from the assessment of children for autism and other developmental challenges to the counselling of their parents.
Other specialised consultation services include speech therapy, physical therapy, behaviour analysis, audiology, clinical psychology, developmental psychiatry, physiotherapy, and occupational therapy.
The First Lady of Ogun State, Mrs Olufunso Amosun through the Uplift Foundation, the state Ministries of Health and Education, Science and Technology, Blazing Trails International, Texas, United States, College of Medicine, University of Lagos, Idi-Araba, Patricks Speech and Language Centre and the Neuropsychiatric Hospital, Aro Ogun State, all graced the occasion.
The yearly consultation started in 2009 as part of the GTBank Orange Ribbon Initiative, an advocacy programme designed to support children with developmental disabilities in Nigeria, especially Autism Spectrum Disorders (ASD).
Over the years, the programme has attended to 100s of children with varying degrees of developmental disabilities and provided crucial support to their parents.
Its commencement in Ogun State has been well-received by the public and gained the support of governmental institutions and non-governmental organisations.
Managing Director and Chief Executive Officer of the bank Mr Segun Agbaje said: “We are succeeding in our goal of raising awareness of Autism Spectrum Disorder and increasing the expert assistance available to people living with this condition.
He continued: “As a bank that is committed to driving community development, our goal is to help achieve a society where children achieve the fullness of their potential irrespective of developmental challenges.”
A Lagos High Court sitting in Igbosere has ordered Skye Bank Plc to pay a writer, Odafe Atogun, N10 million as damages for the six thousand Euros (€6,000) Western Union Money Transfer it wrongfully paid to an impostor.
Justice Mobolanle Okikiolu-Ighile in her judgment held that the bank was negligent when it paid the 6,000 Euros Western Union Money Transfer to an impostor.
The claimant had in his statement of claim dated July 31, 2009 filed by his lawyer; Pascal Ememonu, accused the bank of negligence in its handling of 6,000 Euros sent to him by one Hudson Killeen from Ireland to establish a printing press in Nigeria.
But, the bank in its counter affidavit, contended that the High Court of Lagos State lacks the jurisdiction and competence to adjudicate on the suit being a claim arising from money transfer agreement between one Kevin Fuller and Western Union in the Republic of Ireland.
But Justice Okikiolu-Ighile held that Skye Bank admitted under cross-examination that the Central Bank of Nigeria (CBN) investigated the matter and found that it was negligent in the course of the transaction.
The court held that the defendant’s witness was not in the banking hall on the November 3, 2008 when the Benin City branch of the defendant wrongfully paid out the 6,000 Euros meant for the claimant to an impostor.
Besides, the court observed that the bank neither produced the Close Circuit Television (CCTV) recording of the banking hall of its Benin City branch on that day nor did it produce the alleged report of its own investigation.
Justice Okikiolu-Ighile stated that she found the claimant as a truthful witness after watching his demeanour.
Consequently, the court awarded the sum of N10 million as general damages and addition N250,000 in favour of the claimant.
As the world adjusts to the so-called ‘new normal’ for daily crude prices, the Organization of the Petroleum Exporting Countries (OPEC) has the challenge of balancing the geopolitics of oil with the global economics of oil. For petrodollar economies with looming recessions and systemic vulnerabilities, this is one of the biggest tests of leadership and vision. In relative terms, some petrodollar countries like the United Arab Emirates (UAE), Qatar, and Russia have long diversified their economies despite the importance of crude revenues — the UAE’s Dubai is more known for tourist attractions, world’s tallest buildings, and daring investments than her important oil industry. For Africa’s largest oil producer, Nigeria, deep systemic vulnerabilities to crude prices implies diversification is no longer an option, but an imperative course. More importantly, the bedrock of all transformative and impactful diversification strategy as seen in Dubai, United States, China and others is infrastructure. The challenge for Nigeria is not her well-documented infrastructure deficit but how to develop in the ‘new normal’!
On April 25th, Saudi Arabia’s 30-year-old Deputy Crown Prince Mohammed bin Salman, unveiled a bold 15-year plan to restructure Saudi’s economy. The bold ambition includes the creation of a US$ 2Trillion Sovereign Wealth Fund, partial public offering of Aramco, and large privatization of state-assets. These ambitious plans by the world’s top oil producer underscore the urgency of diversification and global shift in ‘petrodollar economics’. Perhaps, the Saudi government was motivated by a new precedence: the world’s largest and much diversified economy, the United States, was the largest oil producer and consumer in 2014[1]—an unprecedented influence by an already powerful nation. Across the ocean in vibrant cities of Accra, Lagos, Kampala, and Nairobi, countless 20-something Africans carry iPhones to connect with friends and family on Facebook. Yet, the combined market capitalization of Apple and Facebook is approximately US$ 825Billion (as of April 28, 2016) – an astounding 47% of Sub-Saharan Africa’s total Gross Domestic Product (GDP). The world has changed!
For Nigeria, what do these fast-evolving and global events mean?
Firstly, it means being Africa’s largest economy in GDP terms only is merely symbolic without strong diversification, economic sophistication, and widely-accessible infrastructure; deeper reflections and systemic changes are required for inclusive and sustainable economic growth—emphasis on inclusiveness and sustainable growth. For example, Nigeria still trails South Africa in key infrastructure, GNI per capita, and quality investments —few indicators that make South Africa an upper-middle-income economy. Nigeria must embrace ‘new-thinking’ for the benchmarks of economic success by solving complex socioeconomic issues like affordable housing, modern public transportation system, high-quality healthcare, and an equitable justice system etc. For a start, Nigeria must support and deepen the Buhari Administration’s ongoing and commendable multilayered restructuring: hard and simultaneous efforts to redefine Nigeria’s image on the international stage and economic restructuring. The biggest lift will come from bold policies and ideas that foster local innovations and Nigerian-led investments of large infrastructure.
The Buhari administration has undoubtedly shown tremendous fortitude to navigate the multifaceted socioeconomic and sociopolitical challenges that fiercely vie for dwindling oil revenues. The unbundling efforts of the Nigerian National Petroleum Corporation (NNPC), systemic realignments of the power sector (e.g., power mix, gas master plan, and infrastructure), and recently signed US$ 6B Chinese loan agreements are important milestones. These achievements reinforce the mindset of an administration that is solution-driven and eager to apply bold ideas to unprecedented problems. Yet, there is no bolder idea than to tackle Nigeria’s infrastructure deficit head-on. And for this bold action, Nigeria is unlikely to deliver impactful and broad infrastructure solely from public spending; private infrastructure investments (i.e., infrastructure investments by the private sector) co-led by an infrastructure bank is essential to coordinate global capital inflows and technical expertise.
Why an infrastructure bank?
Today, there are few and fragmented institutions that facilitate private infrastructure investments, but Nigeria is in dire need of an integrated, impactful, and well-capitalized infrastructure bank with semblance to a Development Financial Institution (DFI). The country needs a world-class infrastructure bank to: (1) Lead early-stage investments and development in private infrastructure (e.g., expedite project development cycles), (2) Lead, co-lead or structure infrastructure finance and credit enhancements, (3) Pioneer new ‘exit platforms’ and post-development frameworks. These three (3) starting goals should enormously streamline the systemic challenges of private infrastructure investments and complement government spending.
Infrastructure—soft and hard—in macroeconomic terms represents the physical structures and institutions that form a nation and shape the economy. But in the 21st century, infrastructure is more than an economic indicator on fancy DFI reports or eloquent talking points at London or Washington summits—in this century, modern infrastructure is imperative for global competitiveness, economic growth and power, and public safety. Hard infrastructure should still be about Nigeria’s plan on modern rail networks that link Lagos to the heart of the country; Lagos’ impressive infrastructure plans;12-lane interstate highways from Ogun to the East and North; affordable and clean tap-water in small-towns of the Middle-Belt; modern and safe aviation; and a vast pipeline network for gas-to-power and LPG, to name a few. Soft infrastructure is about access to modern and efficient institutions like nationwide healthcare systems, an equitable justice system for civil and criminal litigations, a transparent and sophisticated financial system, an educational system that nurtures bright minds; and broad efficient deliveries of government services.
On funding the aforementioned infrastructure, public spending and Public-Private Partnership (P3) models have proven susceptible to politics in the past than common-sense economics. Direct loans or Aid by foreign governments are inherently driven by national interests, and the plethora of global Funds with keen interests in African infrastructure are not interested in development finance.
In what seems like a paradox, the long and rigid development cycles for private infrastructure investments are often due to lack of infrastructure and reliable data. For example, Nigeria’s power opportunities are massive but project-sponsors have to spend considerable time, planning, and capital on systemic challenges. For new power-generation developers, a key systemic issue is contending with the availability of gas infrastructure (e.g., gas availability and processing, supply agreements, pipelines) to the power plants. For private investments in rail networks, there is no precedence in Nigeria for eminent domain, interstate concessions, and financial returns. Therefore, in raising capital, additional thresholds to the project plan may include local currency guarantees, strict credit guarantees or the participation of the Multilateral Investment Guarantee Agency (MIGA) to name a few – although, systemic problems for ‘power investments’ are being vigorously tackled by the Ministry of Power—the old perceptions linger. All these milestones are incredibly expensive and time-consuming for project developers; as everyday Nigerians hope for breakthroughs. Other infrastructure such as transportation, water, healthcare, and social infrastructure have similar systemic hurdles—including the high cost of capital from local commercial banks skewed to short-term funds—a mismatch funding model for infrastructure development.
Subsequently, a bold initiative like a well-established, managed, and funded “Infrastructure Bank” potentially has the capacity to bridge the gap: State-interests, DFI interests, and private capital requirements. The bank’s strategic participation should also bridge gaps through local liaisons with stakeholders, development finance, and local knowledge expertise.
Bankable Chart
Only Nigerian-led efforts, not foreign interests, will lead sustainable developments
There is broad consensus by politicians, academia, business class, and mainstream Nigerians that infrastructure development is the key to unlocking the nation’s potentials; however, the rancor has always been the ‘how-question’? Depending on the countless reports you may have read on infrastructure or by whom, Africa’s annual infrastructure gap is estimated to be approximately US$ 93B; the decades-old playbook of how to attract “foreign direct investments” from Europe and North America through lavish dinners, summits, and incentive-speeches are so foreign in a fast-changing environment—private investors are driven by returns and not social developments. The Dangote Group, Heirs Holdings, BUA Group, and Mike Adenuga’s companies among others have probably led more Nigerian investments than any single foreign investor in recent years. New serious and local consortia with proven capacity should be engaged and encouraged, as they are likely to exemplify longer term commitments than foreign interests.
Housing alone is potentially bigger than oil
According to industry reports, there are at least 16million housing deficits in Nigeria. At a conservative average cost of N 5M per unit with 10% yearly target, Nigeria needs an annual investment of N 8Trillion (US$40B[2]) – a figure that is larger than Nigeria’s projected average oil revenues of US$ 19.4B[3] in 2016. Yet, if two of America’s leading Global Asset Managers with combined assets under management (AUM) of US$ 517B were to invest in housing this year, there would be systemic challenges in this fragmented industry. For example, if an investment group chooses to invest US$ 2B in affordable housing, it will still be difficult without a secondary mortgage market for average Nigerians to purchase homes in big cities; however, mortgage securitization, investments from institutional investors, and market consolidation can foster continuous liquidity through an infrastructure bank.
There are several other viable and impactful ideas with proven capacity to create millions of good-paying jobs for middle-class Nigerians; however, these projects are stuck in local bureaucracy (e.g., States) or in very rigid investment processes of American and European investors: a bloc that is still the largest source of private infrastructure investments in Africa. Several of these ‘Western investors’ with valid justifications, implicitly operate with longer development cycles for large infrastructure funding in Africa—cycles that conflict with most investment exit-cycles. That simply means: without the resources of Aliko Dangote or his ilk with access to DFIs, qualified and competent project developers of power or 20km rail projects should expect to reach financial close in 2021 or 2023. In 5years, the fundamentals of any project can drastically change.
Development Cycle
Figure 1: High overview of development milestones
Cenpower, Ghana’s first Greenfield Independent Power Plant (IPP) received wide acclaim for an unprecedented US$ 900M financial close; yet, the journey to the celebratory headlines was long and must have required sheer fortitude to endure the painstaking process to financial close. Supposedly, an early-stage and independent investor officially began the development phase for Cenpower in 2005; the Africa Finance Corporation (AFC) took over in 2010 and the project closed in 2014. For some context, London’s impressive £14.8B 42km Crossrail project will commence operations on an 11-year development cycle—a 9-year project development cycle to financial close for much-needed power-generation deals is an unsustainable path for Africa’s development future!
As Nigeria embarks on the largest infrastructure development in over a decade, the private-sector’s deep expertise and networks should be fully engaged for maximum results. The Nigerian government should earmark public funds to ‘de-risk’ and facilitate large private deals through a new ‘infrastructure bank’.
With the creation of an infrastructure bank that partners with key global stakeholders (e.g., IFC, ICBC, OPIC, PIDG, and Wall Street); the new infrastructure bank can use its balance sheet, credibility, and scale to lead early-stage investments to significantly cut project development cycles. The bank could co-invest equity and structure guarantees for Greenfields with no African precedence. The bank can pay for broad and expensive studies on rail infrastructure, water, housing; and partner with large debt providers to reduce inherent project risk for investors.
Notably, Asian emerging economies, mainly China, built large infrastructure by looking inward and betting big with less reliance on rigid foreign investment frameworks. The formation of strategic entities such as the China Development Bank, Industrial and Commercial Bank of China (ICBC), and engineering counterparts have fostered China’s rise. Nigeria can do the same.
In Conclusion
Africa’s future is very bright, and no country is best positioned to lead that great future than Nigeria. During America’s Great Depression of the 1930s, President Franklin D. Roosevelt took a bold and ambitious step to rebuild through the Work Progress Administration (WPA) initiative. “The WPA built, improved or renovated 39,370 schools; 2,550 hospitals; 1,074 libraries; 2,700 firehouses; 15,100 auditoriums, gymnasiums and recreational buildings; 1,050 airports, 500 water treatment plants, 12,800 playgrounds, 900 swimming pools; 1,200 skating rinks, plus many other structures. It also dug more than 1,000 tunnels; surfaced 639,000 miles of roads and installed nearly 1 million miles of sidewalks, curbs and street lighting, in addition to tens of thousands of viaducts, culverts and roadside drainage ditches” (Stone, 2014).
This is the defining moment for our country and our people – our time to rebuild. Our people with sheer creativity and not oil rigs, built Nollywood that shines brightly into millions of homes in Europe, America, and Africa. Our people, whose determination puts a Nigerian in every part of the world with remittances that rival foreign aid; our industrious people, whose resilience and hope amidst seemingly hopeless life events have raised world-class Lawyers, Doctors, Nobel Laureates, and business moguls. Our incredible people have built over one million homes in Lagos without mortgages. Our people, whose hustle and street-smarts have built historic Balogun market, Alaba, Onitsha, and Kaduna commodities centers without oil. For it is one of our people, Aliko Dangote, who first became Africa’s richest man without a producing oil block.
The tremendous achievements of Nigerians in the diaspora: in business, civic society, politics, and healthcare, reinforce the notion of Nigerian resilience and hard work. With access to developed infrastructure, Nigerians can achieve any ambition with collective efforts and common purpose. For our common purpose and shared values are far greater than our subtle differences.
Let this time and defining moment be our time – the time we finally solved the complex socioeconomic problems that have long beleaguered a generation. Let this be the time that Nigerians of all walks of life went to work with shared responsibility to build our own chains of organized retail; our own world-class medical centers and theme parks; our own modern rail networks and skyscrapers that line the skies of Port Harcourt through Calabar to Lagos; and let this be the time, we finally solve the problems of systemic corruption, government that works for all, and create uninterrupted power!
Let this be the moment we end the strife of ethnic and religious divides – and the moment we will finally rise to become Africa’s giant through bold and giant strides! Before oil, Nigeria led Africa with prestige and dignity; let us lead again with lasting foundations of infrastructure to maximize our highest potential.
Dare J. is a Principal of an infrastructure finance and development Co. contact info: Djoincorp@gmail.com
References
U.S. Energy Information Administration. (2014). Total Petroleum and Other Liquids Production – 2014. Retrieved from http://www.eia.gov/beta/international/
Stone, Andrea. (2014). When America Invested in Infrastructure, These Beautiful Landmarks Were the Result. The Smithsonian. Retrieved from http://www.smithsonianmag.com/history/when-america-invested-infrastructure-these-beautiful-landmarks-were-result-180953570/?no-ist
[1] According to 2014 U.S. Energy Information Administration
