Reflections on Nigerian banks and global financial crisis

 By Casmir Igbokwe

 Published: Sunday, 19 Oct 2008

I have an account with HSBC, one of the leading banks in the United Kingdom. For some time now, I have been thinking of transferring the money I have there to my account in Nigeria. The urge to transfer this money intensified with the current global financial crisis. My thinking was that the global credit crunch was mainly the headache of Western industrialised countries; and that if I didn‘t really retrieve my money soonest, I might start hearing unpalatable stories about it.

In my reflections, I remembered the crisis that rocked Northern Rock, hitherto one of UK‘s solid banks, last year. Information had filtered out that the bank was having some problems. Being in the UK then, I was alarmed at the rate depositors rushed to the bank to withdraw their deposits. Government‘s intervention and assurances did not assuage the mad rush. People had lost their confidence in the bank.

I’m not an economist. Neither am I an expert in stock/financial analysis. But from what I have read so far about the current financial crisis in the world, nay Nigeria, something tells me that all is not well. This has nothing to do with the frequent allegation that banks turn their female staff to near prostitutes in the name of soliciting funds from rich clients. It has nothing to do with the suspicion that some bank staff aid and abet armed robbery incidents or other financial crimes in their banks.

My concern stems mainly from the conflicting comments emanating from some of our financial experts. For instance, the Chairman of Stanbic IBTC Bank, Mr. Atedo Peterside, in a front-page report in THE GUARDIAN of October 12, 2008, said Nigeria was not an island but susceptible to the volatility of the worsening credit difficulties. He compared margin lending by Nigerian banks to the sub-prime crises in the global market.

He was quoted to have said, “If you substitute margin lending to finance the purchase of stocks on the Nigerian Stock Exchange by people who do not have enough income to service the loans for ‘dodgy’ US and UK mortgage lending, then the similarities are striking. If you also substitute falling NSE stock prices for falling US house prices, then the similarities are even more striking and that is why we cannot afford to be complacent.”

However, the Federal Government has repeatedly assured Nigerians that there is no cause for alarm. The Nigerian economy, the Minister of Information and Communication, Mr. John Odeh, reportedly said, was insulated from the global financial crises. The Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, had equally assured that the global crises would not affect the nation‘s financial system. Even the former Minister of Finance and Managing Director of the World Bank, Dr. Ngozi Okonjo-Iweala, also believes the nation could withstand the global financial meltdown.

Amid these confusing signals, I sought the opinion of some friends in the banking industry. They allayed my fears, saying there was no correlation between the sub-prime crises in the global market and margin lending in Nigerian banks. Sub-prime mortgage lending involves giving loans to individuals at interest rates below prime lending rates. This is to attract such individuals with the hope that the property will appreciate and generate much profit and engender repayment. Margin lending by Nigerian banks, on the other hand, is said to be fully commercialised and collateralised.

Whatever, there is need to restore confidence in the financial sector. Some Nigerians are yet to recover from the loss of their hard-earned money trapped in some collapsed banks prior to the banking consolidation of 2004.

But the dog-eat-dog syndrome in the banking sector appears to be resurfacing. Or how does one explain the so-called text messages suggesting that five banks selected as market makers to arrest the downturn in the stock market, have liquidity crisis.

Our penchant to either make mischief or reap fortunes from crisis situations is further exemplified by the laughable alibi provided by the Minister of Transportation, Mrs. Diezani Alison-Madueke. The minister was quoted to have said last Thursday that the global financial crisis might affect her ministry‘s road rehabilitation efforts. According to her, allocations to ministries and agencies will drop because of the planned review of the oil price benchmark for the 2009 budget, which was brought about by global financial problems.

She said, “We must keep on asking that Nigerians keep bearing with us. We are looking for creative ways to get additional funding and the more we can get, the more we will do. If there are major roads that we have not been able to address, it is not because of lack of time, it is because of funding. It is as simple as that.”

I don’t think Nigerians want this rain-is-still-falling type of excuses now. Alison-Madueke should lift the spirit of her compatriots by aggressively embarking on the rehabilitation of the dilapidated federal roads.

Likewise, our banks should stop giving us conflicting signals. What Nigerians want now is assurance that their investments are intact in spite of the global financial turmoil. Perhaps, we should take a cue from the renowned American investor, Warren Buffett, who reportedly said he was buying up stocks in the US.

As he reportedly put it, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” My understanding of Buffett’s statement is that the market will bounce back, the current global financial mess notwithstanding.

I am tempted to follow Buffett and start buying now that some people are divesting from the capital market. I’m also tempted to close my HSBC account and plough the money back to my account in Nigeria. After all, to be a billionaire like Buffett, one must take some risks. But then, we need genuine guidance from our financial experts.

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