Putting some names to some of the figures Ojediran pointed out that big names have in fact lost significant market value. Among them: First Bank - 38 per cent, Union Bank - 62 per cent; Nestle - 31 per cent and Dangote Sugar - 51 per cent. And brokers are not left out. According to Ojediran “many brokers have also had their figures burnt through the offer of margin facilities. Big Trouble! Yes, brokers too are in trouble... Even without counting the billions of naira that went into underwriting and private placements, the sum of N899 billion has been confirmed as the total stockbrokers’ exposure to the banks. Put differently, the banks are owed that amount, which represents a large part of the total shareholder funds of the banks.”
Of course, you have heard the announcement. President Umar Musa Yar’Adua has asked the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) to review the remuneration of political, public and judicial office holders downwards. According to media reports quoting from a letter to the Commission dated February 10, President Yar’Adua acknowledged that our country “like other nations is going through difficult times because of the global financial meltdown and unprecedented economic crises”.
Noting that a “critical evaluation of the impact of the crises on our domestic economy shows that declining oil sales and shrinking foreign direct investment flows are twin threats to our ambitious development programmes,” the President was quoted as proffering that the situation “can only be mitigated through a responsive review of current costs to maintain the momentum of our development”. In the thinking of the President, the place to start that cost review is with the provisions of the so-called “Certain Political, Public and Judicial Office Holders (Salaries and Allowances, etc) (Amendment) Act, 2008.” His words: “Accordingly, in my opinion, it would be practically impossible and unrealistic for us to continue to implement the current provisions of the said Act. Indeed, it would amount to insensitivity on our part to continue to implement the Act under the circumstances.”
Making the new thinking public, Presidential spokesman, Segun Adeniyi had quoted his principal as calling a meeting of ministers, special advisers, senior special assistants and special assistants to intimate them of the need for them to be ready to make some personal sacrifices. He also reported that the President emphasized the need for all his appointees to embrace “honesty, dedication and commitment to selfless national service in the discharge of their official responsibilities”.
It is of course tempting to dismiss gestures like this as cosmetic and unlikely to contribute much. But, if I know anything about anything, I know that the President’s move is a departure from the norm around here where belt tightening is reserved only for the poor. And when it is realized that a whopping N1.3 trillion is the estimated annual expenditure on salaries, allowances and fringe benefits of Nigeria’s political office holders at all tiers of government, even a 5% cut could save the nation N65 billion.
But possibly the most important aspect of the rhetoric from the seat of power is the linkage the President sees between crisis and opportunity. According to Adeniyi, his principal emphasized that “despite the fresh challenges to national development which it had thrown up, the current global economic crisis would also provide fresh opportunities which insightful and perceptive leaders at all levels could utilise to ensure that Nigeria’s 20-20-20 vision is not derailed.” He also expressed his “confidence in the capacity of Nigerians to seize the moment by using current challenges to reposition the country for peace and prosperity.”
What makes this particularly important is the fact that functionaries of this administration do not seem to agree on the nature or extent of the challenges facing us. That is not surprising because economics is such an imprecise science and in any case, economies with some of the world acclaimed specialists are also largely feeling their way through the current crisis. So we need perception, we need insight. But most of all we need not just the facts, but more crucially, the truth.
Now what are the facts? I do not claim to know, but facts and figures contained in a February 3 piece written by Bisi Ojediran in his ThisDay column, Tolling Bells under the headline “Big Trouble” should throw some light.
Bisi, an erstwhile Shell executive, pointed out the “it doesn’t rain, it pours” scenario that seems to be playing out in the national economy. According to him, just as the government was coming to terms with “the effects of the recession-induced fall in oil prices on the foreign exchange earning of the country,” “micro-economic indicators that had stabilized over the last few years are now hopping in wrong directions.”
He noted Central Bank of Nigeria’s courageous move to stabilize the external value of the Naira which resulted in “a brief rally” in the last few days of January only to be followed by a fall to N148.60 to the dollar from its N148.10 level the day before. This of course fuelled fears of a further decline. He pointed out that “for an import-dependent country, the depreciation of the naira means high prices of goods and services”.
His take: “Prices are also rising because there is cash crunch. Afraid of the future, and cautioned by increased default in loan repayment, banks are holding on to their funds or doing selective lending. Debt levels are too high and fiscal capacity is hard pressed by contingent liabilities in the banking system. Consequently, interest rates are climbing for the roof. Big trouble! Around the world, governments are desperately trying to restore the confidence of banks to lend to boost consumer consumption and also jump-start production.”
Turning to the stock market, Ojediran wrote: “Perhaps the greatest pain is felt in the stock market. Hopes that the Nigerian stock market will rebound are crashing. Since March last year when share prices began a downward slide, they have refused to look back. Between then and now, the market which was enjoying a boom has lost over N7 trillion in capitalization. In 2008, market capitalization fell by 45.8 per cent, a sharp inverse growth from 2007, when the market grew by 74.7 per cent. The slide has continued in the new year. The market has lost some 30 per cent capitalization in the first four weeks of 2009 and there are no hopes of a rebound anytime soon..”
For those who might see this as mere number crunching, he said, ”These may look like mere numbers, but the price of shares is an important part of the dynamics of economic activity. It can influence or be an indicator of social mood. The stock market, an important tool for capital formation, is often considered the primary indicator of a country’s economic strength and development, and share prices also affect the wealth of households and their consumption. Behind the numbers, I know about five people who borrowed money to invest in stocks during the 2007 boom. With the share prices tumbling, their investment is now worth far less than the principal. They can only hope for the prices to rise to sell, but they have to service their debts. The situation of one of them, a friend who borrowed about N1 million, is so critical that his wife has detailed his brother to keep him under watch so he doesn’t take his life. These people’s loss is part of the N7 trillion.”
Putting some names to some of the figures Ojediran pointed out that big names have in fact lost significant market value. Among them: First Bank - 38 per cent, Union Bank - 62 per cent; Nestle - 31 per cent and Dangote Sugar - 51 per cent. And brokers are not left out. According to Ojediran “many brokers have also had their figures burnt through the offer of margin facilities. Big Trouble! Yes, brokers too are in trouble... Even without counting the billions of naira that went into underwriting and private placements, the sum of N899 billion has been confirmed as the total stockbrokers’ exposure to the banks. Put differently, the banks are owed that amount, which represents a large part of the total shareholder funds of the banks.”
Now you can see why we need leaders with insight and perception. You can see why Yar’Adua correctly admitted to not being the sole custodian of these virtues by setting up a national economic management team which cuts across political divides including Edo State’s Comrade Adams Oshiomhole and Lagos State’s Babatunde Fashola, to explore and exploit such opportunities.
The President, to my mind, is spot on in this respect. But permit me to state that all of these would simply be palliatives unless we are willing to deal with the fundamentals. In the area of political structure, Nigeria’s best days were in the days of true federalism. There was healthy competition that led to rapid development. Similarly, her best days were in the days of the so-called mixed economy, when government had its role and played it; and the private sector went about its profit making role. Barack Obama seems to understand this and he’s going back to basics. The ax-head principle applies here too. Let’s return to where we lost it. That is the direction our insight and perception should lead us.
No comments:
Post a Comment