The Nation Newspaper

Tag: Economy

  • Economy ‘not scary’, says China president

    The risks faced by China’s economy are not that scary and the government is confident it can head off the dangers, President Xi Jinping told global business leaders to dispel worries about the world’s second-largest economy.

    In a speech to chief executives at the Asia Pacific Economic Cooperation (APEC) CEO Summit, Xi said even if China’s economy were to grow seven per cent, that would still rank it at the forefront of the world’s economies.

    China’s economy, the world’s second-largest, has had a rocky year. Growth slid to a low not seen since the 2008/09 global financial crisis in the third quarter dragged by a housing slowdown, softening domestic demand and unsteady exports.

    Xi said: “Some people worry that China’s economic growth will fall further, can it climb over the ridge?  There are indeed risks, but it’s not so scary.

    “Even at growth of around seven per cent, regardless of speed or volume, (we) are among the best in the world,” he said, noting that China’s economy remained “stable”.

    The remarks from Xi came a day after data showed annual growth in Chinese exports and imports cooled in October, in another sign of fragility in the economy that could prompt policymakers to take further action to stoke growth.

    To shore up activity, policymakers have loosened monetary and fiscal policies since April to ensure that the economy can grow by around 7.5 per cent this year.

    Regional governments have accelerated spending on some infrastructure projects and abolished limits on the number of homes that Chinese can buy. The central bank has also injected short-term loans into banks to increase credit supply, and cut mortgage rates for some home buyers.

    Yet the results yielded have not been as good as some had hoped, fuelling speculation that China may have to cut interest rates or the reduce the amount of deposits that banks set aside as reserves – moves Beijing has denied are on the cards.

    Xi, who would sign off on any interest rate cut in China alongside the country’s elite decision-making Politburo, did not comment on the policy outlook, but stressed that his government was focused on reforms and that China was open for business.

    Underlining the country’s growing clout as an exporter of capital, he said China’s overseas direct investment was expected to hit $1.2 trillion in the next decade.

    After three decades of almost uninterrupted double-digit growth, China’s economy has lifted several hundred millions of Chinese from abject poverty, but also polluted the country’s air, land and waterways.

    The destruction of China’s environment and a yawning income gap has led Chinese authorities to promise to enact sweeping social, financial and economic reforms in the country that would be the most ambitious in three decades.

    “These reforms are gradually being put into effect project by project,” Xi said. “Once the bow is drawn, the arrow cannot be put back in the quiver; we will resolutely deepen reform.”

    Xi also sought to address concerns that China’s growing economic and diplomatic prowess could constitute a threat beyond its borders, saying that China is willing to have friendly relations with its neighbours.

    China has territorial disputes with many of its neighbours and has been much more aggressive in enforcing its claims in recent years.

    “China’s development brings enormous opportunities and benefits to the Asia Pacific and the world, and the business opportunities are lasting and limitless,” he said.

  • Big economy, broke nation

    SIR: That Nigeria’s economy, by virtue of its recent rebased Gross Domestic Product, is the biggest in Africa yet governments across all levels have been finding it extremely difficult to meet their fiscal obligations due to cash crunch, remains one of the internal contradictions that characterise the country’s 100 years’ existence. In Nigeria, it is the more you look, the less you see!

    Except the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo Iweala and her team, every Nigerian knows that Nigeria is broke. The argument by Okonjo Iweala that “Nigeria, as country, has quite enough assets…” is only meant to distort empirical facts. To be broke, in its simplest term, means to be lacking in money. The concept of liquidation as applicable to banks if juxtaposed with the minister’s argument will expose her double standard. For example, banks are liquidated on account of bankruptcy not necessarily because they do not have enough assets but simply because they do not have enough cash to continue carrying on in their businesses. As a matter of fact, a liquidated banker’s assets are usually mobilised to set off its debts. So, it is inconsequential that the country has “enough assets” as the minister would insist. Until those assets (assuming they exist) are “mobilised”, the bleeding truth is that Nigeria is currently bankrupt, simplicita!

    Indices of a broke nation have continue to stare us in the face. The most evident is the continuous dwindling of the revenue allocation accruing to states and non disbursement of same to states as when due. As a result, most states have resulted to other excruciating means in order to augment the dwindling allocation. Today, many states owe their workers running into months. And where they could not endure any longer, they resulted to borrowing in the money market through bond’s instrumentality. Of course, the implication of this is that States are mortgaging the future of their citizens. Yet we have a “fat” economy which effects are yet to translate to meaningful impacts on the lives of Nigerian masses.

    How does the Finance Minister explain the recent disturbing revelation by the Niger State government of its inability to pay the debt of N294 million it owed the National Examination Council (NECO) was responsible for the non release of the 2013/2014 examination results of candidates from the state? The state government was unmistaken in its statement that this worrisome scenario was caused by the inadequate cash flow from the Federation Account. Also, in recent times, state commissioners for finance have had to storm out of meetings with the federal government in anger as a result of the inability of Federation Accounts Allocation Committee (FAAC) to release their monthly allocations.

    Even the federal government, recently, have had to go borrowing from foreign countries and bodies in order to carry out her fiscal responsibility. The most recent was the $1 billion external loan approval sought and received by the federal government from the parliament to procure arms to fight the Boko Haram. It is abundantly clear from the foregoing that Nigerians do not need soothsayers or economists to tell them that the country is not only broke but may also not have the so-called “enough assets” to revive its much taunted N80.22tn economy contrary to the Finance Minister’s claim.

    Largely responsible for the doldrums is corruption and mismanagement of resources. And until these maladies are checked, the country will continue to witness cash crunch that may eventually drive it to the state of perpetual bankruptcy, notwithstanding the so-called big economy status, and the sooner the minister and her employers come to the realisation of this notorious fact, the better for the country!

     

    •Barrister Okoro Gabriel,

    Ebonyi State.

  • LCCI canvass emphasis on non-oil economy

    LCCI canvass emphasis on non-oil economy

    Lagos Chamber of Commerce and Industry ( LCCI), has called on government to lay more emphasis on non-oil economy as it is more inclusive, growth-oriented and characterised by high economic linkages and more sustainable.

    The Chamber also noted that the pressing and overriding challenge in our quest for economic diversification and transformation is to fix the impediments to productivity and competitiveness in the economy.

    Speaking at the opening ceremony of the 2014 Lagos International Trade Fair  with the theme “Promoting the Nigerian economy as a preferred investment destination” over the weekend, LCCI president, Alhaji Remi Bello said the impediments include the state of the infrastructure, especially public power supply, substandard and fake products and high cost of funds in addition to inconsistent policies.

    President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture ( NACCIMA ) Alhaji Mohammed Badaru in his remarks said the theme of the fair is timely at this time when the Federal Government  is implementing policies that will soon revolutionize the country’s investment climate and position it as one of the best places to for business globally.

    He said: “The theme cannot be more important than now when the value of indigenous and sectoral linkages, and benefits of inclusive growth are being transmitted and fast tracked to ensure adequate provision of the enabling environment, including infrastructure and incentives to support increased economic activities, to ensure macroeconomic and policy stability for business to flourish.

    Badaru stressed that no economy can experience sustainable level of real growth and national development without harnessing its trade potentials for successful transformation of the real sector.

  • ‘How falling oil prices’ll hurt economy’

    ‘How falling oil prices’ll hurt economy’

    The lead director, Centre for Social Justice, Eze Onyekpere, assesses the factors responsible for the crash in crude oil price, and how this will impact the global economy. His grim conclusion is that Nigeria and other countries that depend heavily on oil proceeds to power their economy may be in for hard times. He spoke with Assistant Editor ADEKUNLE YUSUF

    Who or what do you think is responsible for declining oil prices in the world market?

    The world is witnessing fragile and moderated economic growth and it is apparent some countries are yet to recover from the global financial crisis of 2008. Decreased economic growth engenders reduced economic activities which, in turn slows down the demand for oil and other sources of energy. The statistics show the details. Euro Zone is expected to grow by 1.1 per cent and 1.5 per cent in 2014 and 2015 while Japan is growing by 1.6 and 1.1 per cent respectively in 2014 and 2015 respectively. The United States of America grew by 1.9 per cent in 2013 and it is doing 1.7 per cent in 2014 while the projection for 2015 is 3 per cent. China has come down from the double digit and very impressive high horse growth and in 2013, 2014 and 2015, it is growing by 7.7 per cent, 7.4 per cent and 7.1 per cent respectively. India grew by 5 per cent in 2013, 5.4 per cent in 2014 and is projected to grow by 6.4 per cent in 2015. Sub-Saharan Africa has been stagnated at 5.4 per cent growth for 2013 and 2014 while the projection for 2015 is 5.8per cent growth.

    The entry of the United States as a strong oil producer through the shale oil boom and increased production in Canada and the return of production in crisis areas like Libya implied that there is excess supply of crude oil in the world market. The US has moved from being an importer to debates about the possibility of exporting oil. Also, oil has been discovered in many countries that hitherto imported it. These developments are further compounded by the discounted oil being sold by criminal gangs like ISIS. From these developments, no one should be blamed; the price of oil is following the global economic realities and the natural consequence of events. It is also imperative to understand that in the context of climate change, the future of the world is dependent on carbon free or reduced carbon energy sources.

    What impact can this have on the global economy if the prices continue to fall?

    A reduced oil and commodity price is a fall-out of the reduced economic activities and reduced economic growth. It will have no special impact on the world economy and the price will pick up as economic growth gets stronger. But in the long run, the price of crude oil is bound to decrease as new eco friendly technologies emerge.

    Who are the ultimate beneficiaries and losers of the declining oil prices and why?

    Countries that import oil will definitely like cheap prices to fuel their economy as cheap energy prices will reduce the cost of production while oil exporting countries will not be happy at the development considering the reduction in their national income.

    In term of specificity, in what ways will the oil price crash affect Nigeria?

    Nigeria derives about 80 per cent of its foreign exchange from the sale of crude oil and over 70% of the federal, state and local government budgets are funded from crude oil sales. The first challenge is that all tiers of government will have less revenue to run their affairs. In the short to medium term, workers salaries will become due but will be unpaid. Little resources will be dedicated to capital expenditure and the government will incur high deficits in a bid to fund the budget. Governments will borrow more and pile up debts. The fiscal buffers in the Excess Crude Account will be drawn down and the stabilisation account will record near zero. The second set of challenges will see a depreciating naira, diminished external reserves, increasing inflation; capital flight by portfolio investors exiting the stock market. The stock market may crash as prices will hit rock bottom.

    Are you satisfied with the response of the Nigerian government to this problem?

    I cannot see any response by the Nigerian government. They are still living in dreamland.

  • Ebonyi’s international market to boost economy

    Ebonyi’s international market to boost economy

    When Ebonyi State Governor Martin Elechi assumed office, he evolved several policies and pogrammes that will help in shaping the young state to be a home where investors will come.

    One of such programmes is the Abakaliki International Market which was initiated because of the governor’s desire to have a standard market for the state that will promote trans-Saharan trade with other African countries.

    The decision was laudable when one takes into cognizance the fact that Abakpa Main Market, which serves as the only standard market in the state, has become over-crowded following the influx of people from other states.

    According to the Commissioner for Land, Survey and Housing, Mr. Friday Nwaoha, the international market is a sight to admire. It measures about 49 hectares of land and is strategically located on the Abakaliki-Enugu Expressway which is part of the trans-Saharan African highway.

    “The highway runs through Ebonyi into Cross River State and onwards into Cameroun and from there to other African countries. The market is very strategic to boost commerce in the region.”

    According to him, the market, which will cost the state government N20.6 billion, including channelisation and road network is almost 95 per cent completed.

    Mr. Nwaoha said the international market is made up of 7,070 shops and other facilities and structures which include 15 warehouses, maintenance work building for fire service, police post; two observatory towers for security purposes and so on.

    “The market was divided into three lots because of its size and is being handled by three major contractors; namely GMK Nigeria Limited, Costain West Africa Limited and Edon Nigeria Limited.

    “However, because of the topography of the place, it has been increased from three lots to four lots which include the channelisation and drainage of the market. This is because years back; we discovered that flood used to be a problem in this area. Therefore, one is going to do the road network and channelisation of the market,” he said.

    The commissioner said the market, when completed, will boost the economy of the state, even as he enumerated other gains the people are expecting from the market.

    “The environment is going to be comfortable for trading within the country and so it’s going to boost the economy of the state and bring Ebonyi to the world in terms of trading.

    “Secondly, the market is one of the needs where people can buy and sell. It will also develop our tourism sector because the market will be the biggest market east of the Niger.

    “Thirdly, the choice of the market is good because of the road the Trans-Sahara Road that connects most countries in West Africa. If you are coming from Enugu, if you’re going to Ogoja, Cross River, Akwa Ibom and everywhere, you must pass through that road if you are passing through Ebonyi State.”

    On the completion of the project, he noted that the international market will be ready by next month.

    “Most of the shops have been painted, roofed and so it is very few structures that are still remaining and we urging the contractor to speed up the work in order to deliver on time.

    “Though we have some challenges that delayed the pace of work at the market, the government terminated the contract awarded to Costain West Africa Limited when we discovered that after series of warning, the company couldn’t improve, even when the state is paying them. So, we had to terminate the contract.

    “And to be sure that what happened with Costain didn’t repeat, we re-awarded it to many contractors. That was why for the little delay.”

  • How Vandals sabotage Nigeria’s economy, by IPMAN

    How Vandals sabotage Nigeria’s economy, by IPMAN

    The Independent Petroleum Marketers of Nigeria (IPMAN) has blamed non-availability of petroleum products at the Ilorin Depot in the last eight months on the activities of petroleum pipelines vandals, even as it said the country loses millions of Naira daily to the activities of vandals.

    The Chairman, Western Zone of IPMAN, Ogbonewo Adekoya said this in Ilorin, the Kwara State capital, shortly after the inauguration of members of his executive.

    Other members of the executive inaugurated included Mrs. Yemi Adeaga (Vice-Chairman), Otunba Odeyemi (Secretary) and Mr. Ogunbola Ayodeji (Assistant Secretary), among others.

    Adekoya also berated the deplorable state of most of the roads leading to Nigerian National Petroleum Corporation (NNPC)’s depots across the country.

    “Many of the roads leading to our depots are an eyesore and those are the places where the money is coming from. How much will it cost to make the roads linking these depots motorable? It is disgusting honestly.

    “Government has a lot to do to help our operations and the oil industry at large. Government needs to put in place adequate security measures to monitor the pipelines as vandals have taken over our rights of way.

    “In Ilorin Depot, the last time we had fuel supply was February this year, no thanks to the activities of vandals. It is worrisome. We are ready to collaborate with the Federal Government to find a lasting solution to the menace.

    “Pipelines vandalism has wreaked a lot of havoc to Nigerian economy and to even IPMAN members. I just said in the last eight months we have not loaded in Ilorin depot. It costs N180, 000 for a trailer to haul fuel from Lagos to Ilorin here. It is more viable and profitable for us to pick our products at the depot here and put it in our nearest stations than go to 300 kilometres. In essence, vandalism is causing us hardship. Government is losing millions of Naira from oil spill as a result of the activities of vandals,” he said.

    The IPMAN boss extended hands of fellowship to all IPMAN members so as to move the association forward.

    He said: “We need to wake up to our responsibilities in the Independent Petroleum Marketers of Nigeria (IPMAN) and move the association forward. A situation where some few people turn themselves into a cabal and corner what belongs to thousands of people is unacceptable. This can cause a lot of chaos and we don’t want that, as we are businessmen.

    “Members of my executive will carry everybody along. We are not in enmity with anybody. We want to make IPMAN one. We should be one. I believe in reconciliation, that is my aspiration.”

  • Economy’s biggest problem is overdependence on oil, says LCCI

    The Lagos Chamber of Commerce and Industry’s (LCCI) Director-General,  Mr. Muda Yusuf has said that the nation’s economy’s biggest shortcoming is its dependence on oil.  This, according to him, makes the economy weak and vulnerable to global shocks.

    Yusuf, who spoke in Lagos, observed that the  15 years of uninterrupted democratic rule in the country  has earned it enormous goodwill as one of the few stable democracies making it an investor’s delight.

    He, however, regretted that core democratic values are yet to take firm root in our democracy, especially in accountability and transparency in the management of public finance.

    He called for seperation of powers and the inherent checks and balances, quality and independence of democratic institutions, federalism and  citizen engagement in the democratic process.

    “The LCCI recognises that Nigerian democracy is still work in progress, but it is crucial to recognise the importance of these democratic ideals in the sustenance of our democracy,” he said.

    On economic growth performance in the last 54 years, Yusuf said the economic trend measured by the performance of the Gross Domestic Product (GDP), has been positive over the last two decades, averaging about six per cent.

    This development, according to him,  is good compared to growth conditions in most economies around the world. He, however, said it remained a major worry that the economy is still structurally defective because it’s too dependent on the oil and gas sector, creating serious vulnerability risks.

    He frowned at  the lack of political will to reform the oil and gas sector, which he argued, has remained a major shortcoming of governance over the past two decades.

    He commended the transformation in the telecommunications sector, which stands out as the most successful reform story in the economy.

    He said: “We note the progress being made in the agricultural sector. But it is important to note that the sector cannot be transformed in isolation of infrastructure development and industrialisation.

    “The financial services sector has also shown significant transformation since independence, especially with regards to leveraging technology to enhance service delivery.  The sophistication of the industry can compare with its counterparts even in the advanced economies.”

    On  the weak impact of the growth performance on private sector productivity and the welfare of the Nigerian people, he said the quality of the business environment remained a source of concern to investors, especially in the real sector.

    He further underscored the fact that  weak infrastructures and  institutions had adverse effects on efficiency, productivity and competiveness of enterprises in the economy. According to him,  these conditions pose a major risk to inclusiveness and job creation in the economy.

    Concerning challenges in the economy the LCCI boss said: “Following the GDP rebasing of the economy, the economy is now the 26th largest globally and the biggest in Africa with a GDP of $510 billion in 2013. It is also one of the largest consumer markets globally.

  • ‘Domestic economy determines interest rate’

    ‘Domestic economy determines interest rate’

    The Executive Director/Chief Financial Officer (CFO), FirstBank of Nigeria Limited, Adesola Adeduntan, says the bank’s Capital Adequacy Ratio is strong and that it has raised $450 million Tier-2 Capital. At an interactive session with select journalists in Lagos, he spoke on the state of the economy, high interest rate and the re-introduced Automated Teller Machine (ATM) charge. He said despite regulatory challenges, FirstBank has repositioned for growth. COLLINS NWEZE was there.

    Banks’ lending rates are mainly determined by the state of domestic economy, the Executive Director/Chief Financial Officer (CFO), FirstBank of Nigeria Limited, Adesola Adeduntan, has said.

    At an interactive session with the media in Lagos, he said part of the strategic objective of the Central Bank of Nigeria (CBN) is to ensure that interest rate goes down overtime, adding that commercial banks are in support of the policy direction.

    On the rising cost of banking operation, the bank director said the operational expenses of lenders are also reflective of the level of the infrastructure available in the domestic environment.

    “For example, if you have a branch at a location where electricity is not readily available or where the supply from the national grid is epileptic, then you need to be able to provide your own standby generator. Most branches of banks across the country tend to operate on generator because they do not want to be switching on and off on the national grid.

    Again, your customers expect 24/7 access to their banking data base because, as I mentioned to you earlier on, people can now transact banking businesses in  the comfort of their homes. So irrespective of the opening and closing time of branches, you could sit in the comfort of your home at 10pm and effect banking transactions,” he said.

    Continuing, he said: “As a bank, we have been focusing enough on our own expenditure. We do have a framework which we manage our expenses but the reality is that given where we operate, the cost are there. But we are working and managing them. We do have a strategy with which we are curtailing our cost. Like I said, fundamentally, the government is dealing with most of the issues that is responsible for the high operating cost environment. It is not just the banking sector; it is also applicable to the manufacturing sector and also to the telecom sector,” he said.

     

    Banking regulation

    Adeduntan explained that regulation is a key component of banking all over the world adding that the ability of financial institution to survive and survive very well depends significantly on its ability to manage regulatory issues and regulatory pronouncements.

    “It also depends of a bank’s ability wrap its business strategy around such regulatory pronouncement and challenges.  So, in our own case, it is true that there have been significant regulatory pronouncements over the past few months. We have responded by tinkering with our business model and repositioning our business in such a way and manner that enables us to continue to grow despite all those regulatory challenges,” he said.

     

    Lending/ risk management

    He said FirstBank is managed very prudently and enjoys sound risk management structure. “We do have a very strong governance structure, starting with our board of directors in which we have very strong people, very knowledgeable people; we also have a very strong executive management team under the leadership of our group managing director.

    What that does is we have the platform, the knowledge and technical base to be able to embark on those types of lending that we are into. We do have a very robust credit risk management system and framework where we upfront, have our credit strategy and pro-active risk management policy that limits our exposures by business sectors, by geography, by product and by customers,” he said.

    The CFO said these policies and framework essentially cap the bank’s exposure within sectors, subsectors and to certain categories.

    “Although we are the largest financial institution in Nigeria, those exposures that you are seeing have been prudently determined, evaluated and they all fall within our internal benchmarks for those sectors. Also, a bank cannot exist in a vacuum; the balance sheet of a bank will be a reflection of the opportunities available in the domestic economy. For example, we should be surprised if we suddenly see the FirstBank lending to a sector that is non-existing in Nigeria. If we have five per cent exposure to diamond and it is not something that is available. So, if you look at the sectors we mentioned, they are critical sectors for this economy,” he added.

    He reiterated that oil and gas is the backbone of Nigeria economy adding that telecoms in the last 12 years has become one of the most dominant sectors of the economy and one of the sectors that has demonstrated the potential growth of opportunity that is possible in this economy. The same thing with manufacturing; Nigeria’s success is the emergence or re-emergence of the middle class. For middle class, the most important thing is that they have the disposable income and because they have disposable income, they also need to have goods and services.

     

    Capital Adequacy Ratio

    Adeduntan said FirstBank’s Capital Adequacy Ratio remains strong, adding that the lender raised $450 million tier two capital last July and repositioned its business model in a manner that enables it continue to grow despite regulatory challenges.

    He explained that Basel II and Basel III Capital Adequacy Ratio are banking accords that have been implemented in other jurisdictions adding that FirstBank finds it exciting that the CBN has rolled out its programmes.

    “We believe it is the right thing to do. For us at FirstBank, we are doing all that is possible to ensure that the institution is Basel-compliant.  Capital Adequacy Ratio is one of the ways regulators monitor banks. What is also very important to highlight at this point is that first and foremost, internally, we do have a capital management framework.

    CBN also made it mandatory for all banks to implement internal capital adequacy assessment process and what that policy does is that it compels management and the board of directors of every bank to look at their capital position, to look at their business strategy and the growth forecast, carry out forward looking kind of analysis, say where will my business be and what level of capital do I require if this or that happens? The framework also forces you to also look at stress scenario, what if this happens, what happens to my capital?

    If you look forward where is my business going and what level of capital do I require and to support that business? The framework also forces you to also even look at the scenario to see what if something happens to my capital position,” he said.

    The executive director disclosed that FirstBank went into the international financial market in July 2014 during which it successfully raised $450 million of tier two capital. He explained that there is opportunity for banks to capitalise their retained earnings subject to audit, and that also helps lenders to beef up their capital adequacy ratio.

    “At the end of the day, we would take the most cost effective approach that helps the institution.

    Where we are today is that our capital adequacy ratio is fine and like I said, based on the $450 million additional tier two capitals we raised, our capital adequacy is fine,” he said.

     

    ATM charge

    The CFO explained that withdrawal by customers from the ATM owned by their own bank continues to be free adding that as a customer of FirstBank, one can come as many times as possible to its ATM to make free withdrawals.

    “Where the challenge sets in is where people go on to other peoples’ machines to make withdrawals. Even at that, you are allowed to withdraw at least three times for free in a month. It is only when you have withdrawn more than three times that the charges set in. The way it works is that the bank, your own bank, gets charged each time you make withdrawal from another bank’s ATM.

    Somebody needed to be compensated for that but the fundamental thing is that when you withdraw from the ATM belonging to your own bank it is free. When you withdraw up to a certain limit even from the ATM that belongs to other banks, it is also free,” he explained.

    He said that ATMs cost money, to maintain them also cost money. “The fundamental message is that if you use machine belonging to your bank, it is essentially free. Even when you are in the location where the nearest ATM is not the one from your bank, it is still free up to a certain number of times. So I think that is the most important thing,” he said.

    Continuing, he said FirstBank is  the leader as far as ATM is concerned. “We actually own about 25 per cent of the ATM in the entire network. Truly speaking, for our own customer, they are able to access our ATM at virtually all the critical locations and we are also very strategic when we position our ATM such that in most cases, we will expect our customers to have an ATM relatively close to wherever it is that they would like to withdraw cash,” he added.

  • OECD sees global economy held back by slow eurozone

    OECD sees global economy held back by slow eurozone

    Conflict in the Ukraine is among the factors holding back global growth,

    A slow recovery among nations using the euro is holding back the global economy, the Organisation for Economic Co-operation and Development (OECD) has said.

    The market economy group downgraded its growth forecast for most big economies.

    Conflicts in Ukraine and the Middle East and the referendum on an independent Scotland are areas of risk and uncertainty, it said.

    Its 2014 estimate is a 0.8per cent increase in the eurozone economy for 2014, compared with a forecast of 1.2 per cent made in May.

    The UK’s forecast was cut by 0.1 percentage points to 3.1 per cent.

    US economic expansion for the year was cut to 2.1per cent from 2.6per cent. Japan’s forecast was cut to 0.9per cent from 1.2per cent.

    The OECD did not provide an update to its forecast for global growth for 2014, which it forecast at 3.4per cent in May.

    “Continued slow growth in the euro area is the most worrying feature of the projections,” the OECD said.

    Among countries which are not OECD members, China’s forecast was unchanged at 7.4per cent. The OECD said China “has so far managed to achieve an orderly growth slowdown to more sustainable rates”.

    India was the only economy to be judged by the organisation as likely to grow quicker, with its forecast upgraded to 5.7per cent from 4.9per cent after voting in a new government that said it would pursue growth-oriented reforms and progress in containing inflation.

  • Lagos and the national economy

    With a population of 21million, Lagos, Nigeria’s economic nerve centre, is one of the world’s largest cities. The population is rising faster than many experts and government officials would seem to appreciate. Many people fleeing from the North-east part in the wake of the Boko Haram insurrection are headed for Lagos. When kidnappers overwhelmed Rivers and Bayelsa states some six years ago, many from these places, including oil firms, fled to Lagos. When the security situation in the South-east became unbearable about three years ago, many relocated to Lagos; among them was the chief executive of ABC Transport.

    Lagos remains Nigeria’s melting pot, long after the federal administration moved to Abuja, because of the traditional liberal disposition of the people and, more importantly, the outstanding achievements of Governor Babatunde Fashola who is easily the most important revelation of Nigeria’s current democracy. His security system is incomparable. Violent crime is at an all-time low, despite the awful employment situation in the country and the nation’s growing misery index. The favourable economic environment in Lagos has seen the state’s economic landscape change constantly. Alas, the state’s strength is also its weakness as all manners of people not only from all parts of Nigeria but also neighbouring countries troop to Lagos in their thousands daily in search of physical and economic security. How can the state government provide adequate employment, adequate housing, adequate transportation, adequate electricity, roads, adequate schools, adequate healthcare facilities, adequate food, etc, to 21million people and still counting?

    Lagos is blessed to have as its governor a person imbued with what researchers in contemporary management science call a double loop mindset, that is, someone with a concrete vision of how to change the situation drastically because the current palliative or adaptive way is grossly inadequate to grapple with the enormous challenges. A few days ago, Governor Fashola went on an inspection of some capital projects financed with facilities from the international capital markets. The capital intensive projects include the 70-kilometre Mile 2—Badagry Expressway, a federal highway which terminates at the border with Benin Republic. The road, which used to have four lanes, is being expanded to 10 lanes. Also being expanded is the Mile 12—Ikorodu Road. The state of the art light rail on a very long bridge which criss-crosses parts of the state with the greatest population density will be completed within 12 months. These and some other projects like the brand new jetties connecting Badore, Ikoyi and Ikorodu, complete with modern water taxis, have been delayed by numerous legal actions over the right of way and compensation payment. Lagos is full of social activists who at the drop of a hat would head for the courts.

    Facilities for these huge projects have been provided because of the impressive credit rating which the state enjoys around the world. It is currently BB- with a positive outlook.  Lagos is the only state, otherwise called sub national government, which enjoys such a reputation in Africa. The other two sub national governments are in India and Brazil, two federations which make the list of BRIC nations, that is, four emerging nations whose rapid rise will take the world by storm in the next few years.

    As a Nigerian, one is filled with pride over the judicious use to which the Lagos State government has put the money from international lenders. But as someone from the South-east, I must confess I am filled with envy. The old Anambra State government, with the assistance of Dr Chu Okongwu when he was the Finance Minister, negotiated a $110m loan from the African Development Bank for rural electrification, rural water supply and for the establishment of an industrial development centre in Awka. The mouth-watering contracts were awarded to Arthur Eze’s Triax and Kings Engineering firms, which abandoned the jobs no sooner than they were started. About the same time, Prince Eze became chairman of Premier Breweries in Onitsha, the nation’s third biggest brewery after Nigeria Breweries and Guinness Breweries in Lagos. On Eze’s watch, Premier Brewery was closed down. And about the same time, Eze became chairman of Orient Bank, and ran the bank in such a way that made the Central Bank of Nigeria during the time of Paul Ogwuma as governor issue a circular banning him from ever being on the board of any bank. Last year, Arthur Eze was rewarded with a high national honour by President Goodluck Jonathan.

    Back to the international credit facility to the Lagos State government for the reengineering of the state. True, Lagos does obtain considerable revenue from internal sources which are collectively higher than the monthly allocations from the federation account. But the revenues come in trickles from the payment of drivers’ licences, tenement rates, land use charges, etc. therefore, it makes sound economic and management sense to borrow substantial amounts for the huge projects and pay back the loans at an agreed interval of, say, every month from both the internally generated revenue and the monthly allocations from the federation account. What is important is the efficient management of the sources of the revenue and the end to which the resources are put at the end of the day. The Lagos State government has done pretty well in this area.

    It is a pity that Lagos State has taken over many economic challenges of the country. Most other economic centres in the country have since collapsed. Sully Abu, a founding member of The Guardian editorial board, once called national attention to the fact that up to the 1980s our northern brothers and sisters used to shun the suggestion to live or work in Lagos because they had alternatives in their own cities. But with the collapse of industries in Kano, Kaduna and elsewhere, they found themselves flocking to Lagos. The same thing can be said about other parts of Nigeria. I used to consider Lagos too rough. But with the collapse of Nigercem, Nigergas, Nigersteel, Premier Breweries, Aba Textile, Golden Guinea Brewery, Sunrise flour mill, AVOP oil, Anammco and others too numerous to mention, I just had to leave the South-east. As a professional, I didn’t want to be underemployed. Like most of those with whom I grew up in Enugu, Lagos is our new base because of the immense economic and business opportunities available in the nation’s commercial capital. The federal government has to realize that Lagos, Abuja and Port Harcourt should not be the only places with opportunities. It should, therefore, take measures to open up other parts.  We had thought that the nation’s six zones should be promoted as centres of socio-economic development, but unfortunately our prebendal politicians have turned the six zonal structure into a deadly instrument for sectional politics and private business gains. Nigeria’s political leaders should borrow a leaf from Governor Fashola on how to run a modern political entity in the 21st century. Lagos is driving the national economy effectively.

    • Dr Uchendu is CEO of a management consulting firm in Lekki, Lagos.