A slippery opportunity
Rose Umoren
Published: 08-JUN-04

Continuing economic parlousness heightened the restiveness surrounding last month's fifth anniversary of democracy. Nevertheless Nigeria is now in the best position to end its 22-year-old depression. Discouraging statistics notwithstanding - such as worsening interest, inflation and exchange rates, and inflow of foreign investments - structural developments in the private sector in particular suggest that if the Olusegun Obasanjo government could bridge its credibility gap with an inclusive economic and political strategy, economic turnaround could be attainable in the next 2-3 years.

The private sector is at its most robust, and is using democratic freedoms with their attendant access to foreign trade, particularly in telecoms. The legendary under-declaration of taxes cannot fully hide the versatile activities that are spanning both traditional sectors and those which barely existed pre-democracy, in virtually all information and communications technology (ICT) areas. The ICT industry itself has so expanded that there is hardly an urban street without multiple operators, while telecoms density has risen steeply, with competition forcing operators to adopt the latest technologies.

Perhaps the most dramatic developments are in the banking industry, where traditional rulers are struggling to maintain their relevance as newcomers use service excellence and aggressively traded offshore credits to undercut age-old critical success factors, notably, stable small-savers' deposits. These newcomers include Guarantee Trust (GTB), Diamond, Zenith, Oceanic and Standard Trust (STB) and are successfully challenging the regulatory framework which traditionally favoured the entrenched. They scored a coup last quarter by getting the central bank (CBN ) to expand its list of pioneer settlement banks from the traditional big four ( First, Union, United Bank for Africa and Afribank) to include Zenith, GTB and STB. Since April, these banks daily settle cheques and other clearing instruments on behalf of themselves and 69 others called 'agent banks'.

The newcomers wore the CBN down by meeting all the pre-qualification criteria, including N15 billion ($107 million) collateral, establishing branches nationwide, and 2.5 percent of the value and volume of total clearing instruments. Then they noisily paraded this fact. Even more instructive, however, is the agent banksline-up. Although the big four had months of marketing headstart, the list now reflects the market's new dynamics.

Zenith, which consistently topped all excellence ratings in 14 years, has a constellation of the industry's stars: Standard Chartered Nigeria, Stanbic Nigeria (Standard of South Africa's subsidiary), and Nigeria International Bank (Citibank). These show that the industry is poised for competitive financing.

At the same time, developments in the Economic Community of West African States (ECOWAS) are also turning fortunate. As Sierra Leone, Liberia and Cote d'Ivoire recover from war, trade formalisation, including harmonising tariffs , is advancing, preparatory to the planned monetary union later this decade. This favours Nigeria whose huge trade with its neighbours has been mostly informal, while West Europeans dominate formal trade.

Why can't Nigerians see these encouraging signs? Rather, they are so angry that confrontations between pro-democracy demonstrators and the police, that characterised military rule - have resurfaced, amidst widespread religious and other mayhem. Because they are swamped by corruption, poll-rigging elected officials being self-serving and unwilling to share power with the electorate, and a lack of credible economic strategy. Corruption has seen some $50 billion oil earnings frittered away over the past five years, with the government too weak to hold the private sector accountable.

Government officials complain that banks keep interest rates high despite N128 billion of low-priced public sector deposits, but ignore the fact that some in their own ranks, and some bankers, personally profit by upwards of five percent undeclared 'brokerage'. Similarly, legislators passed the N1.3 trillion 2004 budget with relative ease in April, partly because of their huge welfare allocations which again dwarfed capital appropriations. Even so, they soon asked the executive to write off their outstanding car loans as 'gifts'. Executives shun political engagement, and Obasanjo continues to dismiss trenchant demands for a sovereign national conference (SNC) to address such federalism challenges as the rehabilitation of the oil-destroyed Niger-Delta and its 20 million impoverished people.

After their long isolationist military rule, Nigerians are now able to compare themselves with other democracies; as a result, they, have become radicalised by political disenfranchisement and economic alienation.

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