 Opening up Nigeria
Privatization, though, became an official policy as far back as 1988, has never witnessed the kind of support being presently shown by a wide range of stakeholders.
The banking industry in Nigeria has however been the standard bearer of the privatization. The sector has undergone a sweeping reform, both structural and operational. A decree (Failed Bank Decree) instituted in 1995 on the recommendation of the country's Central Bank and the Nigeria Deposit Insurance Corporation (NDIC) was aimed at sanitizing the industry and re-instating the confidence of local and foreign users of the banking facilities.
To reach this stage, the system has passed through an era where it was believed that
"no bank should be allowed to fail". Ismail, former finance minister captures the dereliction that followed this policy which led to a switch from that era to the era of allowing "banks that cannot swim sink": "Banking has experienced such level of distress over the last couple of years... We had the cause to cancel a number of banking licenses of distressed banks. We had to restructure the pay due capital for banks. We improved the capital base and we had to encourage them to adopt the international guideline with international sector and manufacturing institution, in reaching capital requirement to improve, we had also to compel the bank management capability so it has been a real transformation", he asserts.
It is obvious that the reform in the banking sector has contributed to the restoration of macro-economic stability, the road to its present state hasn't been so smooth though. The NDIC, established in 1988 following deregulation in the country to protect depositors from banks that might sink, had designed and carried out various failure resolution and containment measures which succeeded in, to some extent, stemming the tide of distress.
However, the biggest effort has been the restructuring that came with shareholder's initiative in response to the ultimatum given by the Central Bank to both commercial and merchant banks to recapitalize to the minimum tune of US $5illion. Some of the banks whose shareholders capacity could not meet the expected level of recapitalization were packaged by the regulatory authorities for competitive bidding by both local and foreign investors.
United Bank for Africa initially had lost its way under state control, says Bello-Osagie "until 5 to 6 years ago when the government sold its shares to Nigerian shareholders. The capital and one other American bank came in last year after the exit of BNP (Banque National de Paris).
The bank today milks from the experience of some of the members of its board in the oil industry. Bello-Osagie leads the pack, being a former Special Assistant to the Presidential Adviser on Petroleum, before setting up an oil consultancy company. A former Managing Director of the Petroleum Corporation and a former Head of Public Relations are some of those who have made oil sector the primary areas of operations for the bank. UBA's profile reveals names of big oil companies like Shell, Mobil, ELF, Agip and Chevron, but the banks fishing net isn't exhausted yet, but meanwhile, says Bello-Osagie, "on the profit side, UBA has hooked on to the oil companies than any other bank in the country".
The bank today is a testimony to the advantage of competition in a free economy."... if we didn't have Citibank, Diamond bank and all other such banks competing with us. And if there were just in the market, First Bank, Union Bank, UBA, three government banks dominating the economy and simply privatized, would all these other competitive banks have been there today? No, we would have sat down complacently and just settled rates among ourselves and this would have continued well for the banks and be disastrous for the rest of the customers of the banks," says Bello-Osagie.
Bello-Osagie is very right. But for the deregulation of the economy, Citibank wouldn't have any business being in Nigeria. "We have been around in the country for sometime. Actually, 1994 was a second re-incarnation of the Citibank, because of the changes in deregulation, we have been in and out of this country. We would probably have come earlier if we had been allowed by the regulations, but it was only around 1995 that the regulations were changed , allowing foreign banks to have a majority ownership of Nigerian banks," reveals Mr. Michael Accad, MD\CEO of the Citibank. And now, with the level playing field in the banking sector, Citibank has diversified from the energy sector, its primary area of operation worldwide to more of the local market and it is not doing badly. "Right now the facts are very fuzzy, we are between number four or five in terms of asset size, balance-sheet size, revenue size and we are in the top two or three in terms of network coverage," says Accad.
Investment Banking and Trust Company, IBTC, is a product of the reforms in the financial sector. With a lean staff strength of 70, Investment Banking and Trust Company, IBTC, CEO, Mr. Atedo Peterside led bank has risen to number one or two position among wholesale and investment banks around. And now IBTC has got the big one. The largest public issue ever in Nigeria. "Right now," says Peterside, "we are doing a rights issue for Coca-Cola, Fanta, Sprite, the largest soft drink company in the country. That rights issue is ... for US $40 million. That gives an indication of the size of our market."
The Merchant Bank for Commerce, (MBCOM.) is also moving ahead with the country's privatization dream, " we are playing a role as financial advisors. We are one of those that were selected for interviews, about three months ago( January). We did quite well at the interview and we are hopeful that some of the mandate will be given to us, shortly." Nwabuoku expresses confidence in the banking sector, saying it is now capable of coping in a free market system. "One, Nigeria is ready for foreign direct investment, secondly, the banking sector is much more developed than you can ever imagine from outside the country ... so, investors coming in and dealing with the banks , you have very little to worry about as long as they (sic) go about it through the right channels," he warns.
IBTC came into the banking business 10 years ago focusing mainly on mergers, acquisitions, divestitures and also corporate finance, trade finance and FOREX trading. Today, it boasts of being a high yielding bank in terms of networth, net income and other indices which have made it first or second best investment bank in Nigeria.
For MBCOM the core business areas have been oil and gas sector and financing projects funded by multi-lateral financial institutions. Mr. Ike Nwabuoku says it is a strategic focusing necessary to ensure that the eight year old bank remains a top contender in the increasingly competitive banking sector. Even here at MBCOM, "One of the things we are trying to do as a bank is to be open to outside investment in the bank itself. We do not hope to remain a purely indigenous institution for too long. It’s one of the items we have in our program."
The restructuring for competitive bidding has become a bug and no bank is being left out. Nigeria's oldest bank, the First Bank, however relies on the experience that comes with age to remain ahead of others in the industry. Mr. Chris Adimorah, MD/CEO calls it pro-active strategy: 'I think we've always been very, very pro-active. We don't have a docile board or management. We have a department that is focused on looking out for new measures or new means of doing business, so that at any point in time we are ahead of competition".
|
It is part of being ahead, that the bank, in anticipation of Nigeria's entry into the global economy village through privatization, created a project tagged: First Bank Century
11.The project is aimed at re-engineering and restructuring the way First Bank does business well ahead of the year 2000 so that First Bank wouldn't be found wanting when foreign banks arrive.
But such preparation is not limited to the First Bank, Alhaji Muhammed Yahaya of the Union Bank sees banks as the gateway to the Nigerian economy. So, Union Bank is ready. "We are getting ourselves ready to provide the most efficient and up-to-date modern service to our would be foreign investors. To this end, we have put in place a very comprehensive program of computerization, so that we can improve on our IT system... and I can tell you quite a fortune is being spent on that. We hope that in the next couple of months about 71 branches will be connected by radio link. Secondly we are renewing our banking package with a view to ensuring that our branches are modernized in network, I mean layout, and giving sufficient empowerment so that they can deliver service quickly to would-be customers. We intend to also strengthen our London operations, together with the proposed New York branch, we think we will be able to provide all that we need to, in ensuring that interested foreign investors coming to Nigeria are able to get the best out of the services we provide, " reveals Yahaya.
The nation is caught in the feverish preparations for the era of free market economy, notwithstanding that it took the country 10 years of stock taking to get to this stage, forward march it has been. Good enough the out-gone regime has provided enough legal framework with the promulgation of privatization decree. So, legislative debates would not bug it down. The divestiture policy still remains the same. Government intends to sell at least 40 per cent of its stake in all the enterprises to core and strategic investors, 20 percent to the general public at floor of the Nigerian Stock Exchange Market and the remaining 40 percent is to be held by the government.
In preparation for the influx of foreign investors, a new stock exchange market has been opened in the Federal capital, Abuja. This will compliment the existing Lagos Stock Exchange which is more strategically positioned to gain from the privatization program of the government.
The Lagos Stock Exchange had opened an automated Trading System, as against the former call-over system, thus internationalizing its operations. The automated system is in addition to the existing Electronic Depository and Clearing System (EDCS).
The nation now waits anxiously for the deluge of investors and the foreign exchange to be earned from the transactions. But much more than that is the services. Most of the companies aside constituting drain pipes on the nation's purse are less than efficient in services.
The great expectations for Nigerians however lies in the oil and gas industry. And like a good business man, the government is carrying out rehabilitation and modernization of the oil installations before taking them to the market. Towards improving on the market value of the country's four refineries the government is spending a sum of US$214 million on the Kaduna refinery, US$189 million on the Portharcourt refinery and US$150 million on the Warri refinery, with about US$120 million on a number of pipelines and depots all over the country.
Hyson is one of the subsidiaries of Nigeria National Petroleum Corporation, (NNPC). It handles the oil export transaction for NNPC and it is into a joint venture with Vitol oil, partly a Dutch company. Alhaji Barkindo, the MD of Hyson Nigeria Limited says United States is the Nigeria's main market for oil. About 40 percent of the oil is supplied to America daily.
Hyson's joint venture with Vitol oil ( a world wide highly trading and marketing company) is in the ratio of 40 : 60. "60 percent to NNPC, 40 percent to Vitol oil, yes. In order to operate internationally as outlined in our Memorandum of Understanding and Joint Venture agreement, we decided to establish an offshore company, called Calson Bermuda, a company that is operating now from London. This is to give us vehicle to operate outside Nigeria, because we are the international arm of the NNPC, we are the opposite of PPMC ( Pipelines and Products Marketing Company), which provides the domestic market with products, we trade and market surplus products internationally, we also assist our sister company PPMC by providing them with deficit products, whenever there is need to do so, "explains Barkindo.
Aret Adams , Former Petroleum Adviser to the government, says the on-going modernization and privatization of the oil and gas industry is to make it more investor friendly and in line with the deregulation policy outlined in the vision 2010 program. He is of the opinion that Nigeria stands better chance in the oil and gas industry. "At the moment, we're still a major, low-cost, oil-producing area and that's a major advantage, government after government has demonstrated that we abide by the contracts, by the agreement with foreign entrepreneurs, the major oil companies, their service companies and so on. I think geographically, we are very well-positioned to trade with Europe and the US as far as oil is concerned ... I think the fact that we are also English-speaking ... in many instances it is a big help", he says.
Joint venture operation has given the NNPC the best in oil industry in terms of personnel and the efficiency of the modern day technology. NNPC partners are Shell which holds about 30 percent share in its joint venture with NNPC. It produces about 1 million of the nation's 2 million barrels per day. Mobil oil producing ranks second, producing in Nigeria alone, 14 percent of its total oil and gas production world wide.
For now, NNPC is showing a lot of interest in gas exploration. "We will embark on laying pipelines, distributing gas within the country, as at now for instance TEXACO , NNPC and other interested investors from Germany are to lay six thousand kilometers pipeline and that will bring industries to different parts of the country ... we are building independent power plants and it is one of the biggest pipeline projects to supply other West African countries like Ghana, Ivory Coast. Then we have another plan, which could go southward to Cameroon, Zaire, Namibia even to south Africa," explains Alhaji Dalhatu Bayero, MD, NNPC.
The plan for gas production is impressive. Nigeria intends to make maximum use of its vast gas deposit by launching the country into the community of gas exporting nations adds Bayero. "We hope to see another LNG plant of the same capacity as we have now. We have to intensify our effort in building more NGL plants. Right now we have about three or four and of course we have to see industries utilization of gas at the domestic level, so within that period may be you will see a lot of fertilizer plants, more petrochemical plants with gas as base-material. That is what we want to see in the next ten years." |
NIGERIA
