If we have learned anything from the ongoing economic crisis, it is that we ought to be suspect of government actions and regulations. More so sweeping proclamation emanating from government quarters have to be thoroughly vetted for the public charade and/or the hidden intentions. Our government officials (not only in Nigeria) have perfected the delicate art of double speak. So when Mr Soludo (our own Henry Paulson) stated that No big bank in West Africa will be allowed to fail. I scuttled over to the PDF , eager to check out the stops that have been put in place to ensure that this proclamation would hold in the coming months. This is all I found in t he document, “Keep vigilance on early warning signals through rigorous examinations. If chronic liquidity problems— provide term loans; target examination, and seek restructuring of balance sheet and management. If solvency problem: Could change Management, and strategic plan to recapitalize bank, including possibility of merger with/acquisition by stronger bank.” Copied off of any off the shelf text. This prompts me to ask Mr. Soludo once again, where is the beef?
I may be overly pessimistic but having lived through 2008 working in this sector, I find this combination of making huge promises, stating a lot of broad based possibility yet refraining from making specific statement isn’t working. Not until Mr Paulson and Mr. Geithner gave us some hard facts and hard solutions did the volatility in the finance sector take on an uneasy calm.
According to Mr Soludo, in Nigeria the financial system is dominated by the banking sector (about 90% of the assets) and about 65% of market capitalization of the Nigerian Stock Exchange. The banking sector is the key driver of the economy— supplier of oxygen– with new credit to private sector expected to exceed the combined spending by three tiers of government (this was the case in 2008 and never happened in Nigeria before). In 2009, FGN and State Governments expect to borrow approx. N1.6 trillion. Which is a fancy way of saying that a sizable chunk of the recent growth in Nigeria’s economy can be attributed to the growth in the banking sector. Wouldn’t it be top priority to keep the sector open and avoid a repeat of the American experience. I am not the only one clamoring for more openness.
Finally I know Mr. Soludo must have some detailed answers in his briefcase somewhere, otherwise he would not have made such an audacious statement. A PDF document peppered with historic tables of the stellar performance of the Nigerian banking sector will not do, this time around. It will be nice to put the alternatives plans on the table so that the public can further scrutinize the choices available. Paraphrasing an African proverb, the horses in the back of need not fall in the same pits as those in the front of the caravan. This situation is becoming eerily similar to the crisis in the American finance sector, only with a one year lag.
Tags: Finance, Henry Paulson, Nigerian Stock Exchange, West Africa
Nigeria’s economy faces serious challenges given the economic squeeze. This is a reality faced by every country. Unfortunately, the Nigerian government has adopted the same old policy of “say no evil…”
However, that was the game played by the America, where people where encouraged to shop and buy things they truly couldn’t afford. American could bail itself out. Can Nigeria? I know that the country has a significant amount of reserves (which itself dropped by a considerable amount in the last few weeks), and yes, the World bank is throwing money at the country. Nevertheless, Nigeria cannot afford to adopt the Western model of lying through your teeth because if and when things fall apart, I am not sure that we have the cushion larger/richer countries have and we shouldn’t deceive the people whose lives will depend on the truth.