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Nigeria. Economy/ Bank/Banker/ |
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Written by Samuel Akinyele Caulcrick
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Monday, 30 July 2007 |
Nigeria . Economy/ Bank/Banker/.
Samuel Akinyele Caulcrick
The desperate situation of millions of Nigerian youth roaming the streets unemployed could only be assuaged by creating jobs and more jobs. From the beginning of the Structural Adjustment Program (SAP), the oil sector has prospered especially now that there is boom in oil prices. Aside from that, only the banking industry is doing well, and that, however, is an anomaly. The money in the banks is still not cheap; therefore, it cannot fund developments in the other vital sectors. For that, the much talked about reforms in the banking industry has not created jobs. For an unexplained reason, we seem to believe that a banker would manage the economy better. But, that has yet to happen. From the mid 80s, when the economy of Nigeria was ceded to bankers and the banks, financial opportunities have dwindled to a trickle. During their watch at the helm in the finance ministry, industries have tottered, workers retrenched and unemployment figures soared. With due respect, the appointment of a banker yet again as the minister of finance evokes a feeling of despair.
Certainly, one cannot take anything away from the brilliancy and the vast experience of the new minister of finance. The scepticism, however, is borne out of our experiences in the past and the reversal on Friday of the release of the insurance deposits with the Central Bank. The culture of where the minister is coming from – the banks – is grounded on interest rates and collateral. Basically, banks are mainly depositors’ boxes and bankers do what they know how to do best. They keep our monies and manage them not too badly, but they are the most frugal. Unfortunately, developments sometimes could be about taking risks in the streets and bankers are the most likely not to. That is understandable; the money in their possession is not theirs and presently not cheap. My only hope is that this time this banker would break the pattern; he could shed the cloak of where he is coming from. I apologise if this turns out to be just noise; prematurely proclaiming the colour of the bird that is still in the pocket.
However, the world has moved on. In the competitive edge of global economy, it would be inimical to our economy to say the least if this very important subject is guided by the culture in our banking industry. More often than not, brilliant viable business ideas have been frustrated by banks for lack of collateral. Where do they expect a young man, for example, with a brilliant business idea or an upstart with the same, to have one? For that, the development of our communities has been stifled. Banks and bankers seem spineless when it comes to lending out money for viable projects. This phenomenon is global in banking practice. However, in the capitalistic economy, a solution that emboldens the banks to lend cheaply is often sought. If it is not the might of the state, it would be the insurance industry. Each of these gets its money through legislation that demands a premium to be paid. No legislation is yet devised to compel us to put money in the bank, if you get my drift.
For the state, the premium to be paid is the tax the individual is obliged to pay, while the premium paid to the insurance industry is according to the goods or services to be insured. With this perfectly in place, cheap money gets to the streets where it is needed to develop the community and create jobs. What good is the money in the banks that trickle to the street because it is not cheap? The insurance industry can create cheap money and thus afford to take greater risks in the street because of the nature of the source of its money. The collateral the banks ought to be asking for, therefore, should be the assurance given by the insurance industry in order for it to lend out money more easily. For the insurance industry to back lending, however, it too must command a sizeable amount of the wealth available. But the equilibrium in wealth acquisition as it were still favours the banks.
When our own Soludo was deployed to the apex bank from being an economic adviser to the immediate past president, I was one of those with dampened enthusiasm. I thought it was a “buried talent,” because of his limited scope. My fears have not been dispelled. The reforms in the banks did not impact on the unemployment situation – at least not yet positively on the economy. My feeling is, had Soludo remained then to influence the whole economy, probably the cart would not have been put before the horse. Consolidation and capitalization of the insurance industry should have taken place first. The consolidation in the banking industry (a brilliant idea) would have happened naturally afterwards. The whole exercise was to safeguard depositors’ money, which still falls squarely on the shoulders of the insurance industry. The National Deposit Insurance Corporation (NDIC) would have been in a position to withstand the collapse of any bad bank whilst its depositors’ money is guaranteed.
The money in the banks is not cheap, will not be cheap and cannot be cheap until the insurance sector becomes, yet again, a major depositor in the banks. A recapitalized insurance industry would support to the fullest the operations of the banks as it would emerge as their largest depositor. Thus, it would provide the cheapest money to fund major developments. Developments, such as mortgage, research, health, education, rail, agriculture, roads and so on, can only be successfully addressed by cheap money. These are the sectors where the poor are susceptible. The only other source would have been grants from donors, but Nigeria is not classified as a poor nation being the sixth largest exporter of petroleum. There has been shortage of sympathies from the rich nations. I hope the minister of finance will hasten the fortification of the insurance industry. I do not think any meaningful development will take place until that is done.
In January, a fellow I know took a short-term loan from one of the banks in Nigeria based on certain collateral. He has, however, finished repaying that loan. Recently, he went back for a similar loan, but the same bank is now asking for a life insurance on the new loan. Banks no doubt are now awash with so many funds. Have they at last realised the need for collateral in the form of insurance policy? If so, the banking industry has awoken up to the necessity of the insurance industry, but the country as a whole seems not to. It shows that the process is self correcting but it could be solidified further. It can be accelerated by government through executive policy or even legislation. Recently, government through legislation directed a forty-five percent local content for the insurance component of foreign contracts. Wealth must flow ceaselessly into the insurance industry in order to inject confidence to take greater risks in the country’s development.
During the last electioneering campaign, the idea of micro credit for the poor surfaced. Micro credit also demands guarantees, which could be beyond the capacity of the insurance industry. Such guarantee would then have to come from the greatest guarantor of all, the government. The government, however, needs to be paid premium by the people in order to guarantee credit for all. This premium as I stated earlier is tax. The argument for taxation is still not strong enough as it were. This is why the response is slow. Government ought to realise that nobody will readily pay tax in whatever form, unless convinced by a strong argument. That is one area we have not done well. Often, people see the rhetoric of politicians as mere rhetorical. We could employ the services of those who are sincere in the enlightenments and be able to delineate the gains to an individual for paying his tax.
Arguments could be advanced that could link the high unemployment figure, for instance, to the evasion of payment of tax. I remember Awo’s Action Group did that very well in the Western Region in the 50s. Thereby, they were able to free the receipts from cocoa, palm kernels and rubber for capital developments instead of the payment of salaries. The fear most people have is corruption. Tax reform, however, does not preclude the misappropriation of government money by government officials. Corruptions in government, I think, have not been confronted because of our passivity. This passivity could be explained by the seemingly reference of most of us as taxpayers among other things. Deep inside, those of us that do not pay tax know we are not taxpayers in the real sense and thus lack the moral right to challenge the embezzlement of government money. It could be that simple.
If and when government runs solely on tax money, money goes round in a circle like an unbroken chain and does not end up in a particular sector. The tax collected is injected back into the society through salaries of its staff and contracts for maintenance of collective properties. The return journey of this wealth back to the government treasury is then through tax to be sent back to the society as before. A process where recurrent expenditure, such as salaries of government staff and maintenance of its infrastructure, is solely on tax would allow the use of oil receipt, for instance, exclusively for capital projects. This in turn would be taxed in any case. That being the case, there would have been no need for the states to go to Abuja for revenue allocation every month to pay salaries. The size of the civil service should be dictated by the revenue generated through tax collection. Tax reform could then lead to what is being proposed below.
Revenue allocation from the centre in whatever formula should take the form of amenities, locally desired; conceived; designed; and executed by each state, but supervised by the centre. The reason for this is for tranquillity in the land. Our experience in the past immediate, speaks a volume. The Niger Delta crisis is familiar to all of us. Billions have gone missing with nothing to show for it. It could still happen - the current trials of immediate past governors, notwithstanding. The beauty of the proposed process is the checks and balances. Any lapses from any sector will be hollered by the other – the state or the centre and the situation nipped in the bud. EFCC is an aberration and cannot replace checks and balances. The country is still in a learning curve, but it would be foolish not to prevent a reoccurrence of massive misappropriations. The withholding of Lagos State ’s local government fund by the last regime at the centre, though that was illegal, is a platform to build on.
Samuel Akinyele Caulcrick, the author of The Devil Must Be Laughing.
ISBN: 1-4241-2196-5
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Last Updated (
Thursday, 24 April 2008 ) |
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Posted by Robot| 30.07.2007 12:04