Category: Nigeria

Adedeji Olowe shies from politics but has tons of opinions about Nigeria. He’s passionate and stakes his future here.

What makes a smart organization

Of recent, I have been thinking deeply about what makes an organization to be smart. Or deeper still, what defines a smart organization. I am thinking about real life attributes not some fancy buzz words from smart pants consultants.

If someone should ask me, I would say a smart organization is one that reacts quickly to market changes, whose components (resources, employees) are used in the most cost effective manner delivering above average return on investment. So a lot must be expected from each organizational unit. Assets must be deployed in the most cost effective manner and results must be squeezed out. These are just rambling thoughts but one day, I will come around to codify it.

Why should we have smart organizations? My own answer is so simply stupid: It makes employees happy! From my little life experiences, the workers are the first to get stressed up when things don’t go smoothly. Like some people I know will say, they willl “Fi eje se!” (use blood to run it!). If things can run faster, better, more efficiently with less input and more time to either party away (Friday night is sacrosanct) and do better things, I should be less stressed up.

December 31 FYE: Implications for the Nigerian banks

 With the drive of the current administration of the Central Bank of Nigeria, CBN, to take the Nigerian financial sector to be at par with international standards, the recent pronouncement for all banks to have the same financial-year-end comes as no surprise. In more sophisticated economies, the financial institutions usually close their books at the end of the fiscal year. With this, regulators, analysts, investors and other gamut of interested parties in between have a clear cut idea of what their economy is doing.

The last 3 years since the CBN handed down the shore-up-your capital declaration, the financial sector, especially the banking industry, has witness a rapid growth. But that hasnt come without its own baggage of issues. With banks closing their FYE at different times, each was clamming one flag-post position or the other while the average Joe sits there bewildered; not knowing who is where.

The new FYE directive will solve that problem once and for all. 

For one, competition would be keen and cut-throat. Now that the end has come for year-end-deposits balances would be adjusted by markets which would now force bankers to look for deposits more aggressively. Competition is not really a bad thing as customers could now call the shots. Since deposits would be in short supply, any bank that wants to close the year on a positive note must find a way to delight its customers. 2009 would probably be a good year to be a banks customer. This could induce an increase in deposit rates; forces of demand and supply, with demand outweighing supply.

Also, this would definitely sieve the big players from the fringe players. The top ten positions would be keenly contested and there would probably be severe punishments for any bank caught in the bottom 5.

Since every bank would be closing its book by December 31st, industry pundits, and the rest of us mere mortals, can at last know the real size of the Nigerian economy. Massive account to account from one bank to another for year end is about to come to an end, the winner truly takes it all. Since the CBN depends on the figures provided by banks for year end to determine the size of banked funds in the economy, this would give us an accurate snap shot of where we truly are.

Another winner here is the NDIC. The NDIC takes an insurance premium from every bank based on the size of their deposits by December 31st. Legends have it that December 31st usually has banks recording the lowest deposit in the year which miraculously increases few months after. This is the time for NDIC to take its own pound of flesh.

The biggest question of all is how will the few heavy weight auditing firms be able to handle the 23 banks within 2  3 months when their books are due to be submitted to CBN for vetting? How will the CBN audit all these banks at once? Does that mean that there would be a scramble to employ more auditors?

This is really an interesting time.

Global Africa: Presence or Profitability?

Following the ultimatum that Nigerian banks shore up their capital base if they are to remain in business, several banks have indeed gone over board with each one raising capital in excess of $1billion. Their aim in the long run, having been rescued from the shackles of being a bank in a developing nation, is to become a mega bank with global presence.

With large purses and an increased appetite for international trade and global financing, banks started to look for routes to invest these funds. Routes that will guarantee maximum returns on investment and create a true global presence. It became inadequate to have a good branch network within Nigeria, to remain a Mega bank with enough clout; the bank had to have presence in other countries asides Nigeria.

Early entrants within the banking industry controlled about 60% of the market share and had well established network within Nigeria and most importantly the United Kingdom. This branch network was necessary to help facilitate their international trade. The focus was never on the African axis as these banks were barely able to meet up with customer and service demands in their own home country.

With the consolidation exercise and the creation of bigger bank who have energetic, young and adventurous CEO’s at the helm of affairs, the banking industry was about to witness a phenomenal change. Emphasis was removed from merely being a Nigerian bank offering financial services; it became the case of meeting up with international best practice. Ideas started to flow. It became easy enough since these ideas were backed with the required purchasing power. The banking industry witnessed a significant evolution that changed the face of banking in Nigeria. Top of the range technology was deployed, service standards improve and international trade began to boom. Foreign investors realizing that the return on investment in Nigeria was high began to invest huge sums of money into the banking industry. Hedge funds, public offers, private placements offered excellent investment opportunities for these FDI’s.

Being armed with enough capital and having fully conquered the Nigerian markets, it was time to conquer the African markets. Global Africa was next on the agenda. Which bank was going to be the first to have adequate branch network in Africa. It was time to contest with the likes of Standard chartered Bank in the fight for the African business. After all, there was human capital, technology and the cash to be deployed to the rest of Africa.

The first country to witness the advent of Nigerian Banks become global was Ghana. With loose demands from their Central bank in setting up a financial institution, it was easy to open up branches in Ghana. Now, the whole of West Africa is having a taste of Nigerian banks. The issue is no longer which country to go to; the issue now is “we hope we won’t be the last bank to open up a branch there”

Now the frenzy is on. This brings me to my question. Global Africa is it all about creating a global presence or is it about creating investments that has a higher rate of return? With loose laws and minimum requirements to establish financial institutions in most African countries, creating a chain of banks in Africa has become an easy feat to achieve. Knowing how aggressive bankers are in Nigeria, they are not about to let this opportunity go without thoroughly maximizing it.

Having gone through the rudiments of starting up a new bank in other African countries, the acquisition of banking license, the acquirement of physical and human capital, It becomes obvious that Nigerian banks have more in sight than the mere returns on their investment. The question really is, if all these resources were to be deployed in the setting up a new branch in a viable area in Nigeria, would it achieve a higher rate or return on investment than that of a new deployment in Nigerian’s neighboring countries?

The Greatest Disappointment

A Yoruba adage made popular by the legendary singer, King Sunny Ade, says “Akinkaju t’o mo’ja ti’o mo’sa iru won ma’n b’ogun ibo mi lo ni”. Meaning a good warrior knows when to advance and when to retreat. And a better warrior even knows whether to go to war or not.

Now I’m talking about Donald Duke. I am so pissed off with him that if he was Dara (my baby) I would have whipped his bum silly. Can you imagine this guy raising up everyone’s hope then throwing in the towel so cheaply without a fight? I know politics is about strategy and it is about give and take.

Well, we all remember that when the issue of presidency came up, Duke was playing hide and seek and he wouldn’t come out on time. But when he decided to, everyone was happy. There wasn’t any doubt that I was going to march every member of my family (at gun point!) to go and vote for him. His credentials are impeccable. He’s up to the task. At last, we all felt Nigeria was set to graduate from the remedial classes.

How wrong we were. Baba just called him last Thursday night (two days to the December 16 PDD Presidential primaries) to shakara the guy and he just collapsed like that. What a shame! Didn’t he know all these before? Didn’t he know there would be an anointed from the north? We all thought he had all it takes to fight it to the end.

No wahala. We must move on, but Duke better not bother come and disturb me again because I only stake my votes with people who know what they want to do. And em, with Yar’ Adua, I don’t know what to say because I don’t know him. I didn’t ‘en know there was a governor called a Yar’ Adua before this presidential primaries. However, the few I have heard people say about him are pretty ok. Not fireworks in terms of, em, say reforms and ideas, but at least, I heard he’s honest and not corrupt and no matter what, we need a massive dosage of that in Nigeria, especially after the last 8 years of garrison politics.

NOSPETCO: A Classic Ponzi Scheme

I have always wanted to write about a classic Ponzi scheme that is making raves in Nigeria of recent but never got around to it until this afternoon when I read about what a like minded person wrote about it.

This is the short take: There is a company in Nigeria, Nospetco, who takes a minimum deposit of N450,000 (about $3,516) for a minimum of 6 months and gives you a flat interest of roughly 8.8% every month. Isn’t that interesting?

Yeah, it is interesting if you are a blind fool. What kind of investment will give that kind of return? At that rate, the investment yields to you 106% per annum. Well, there are investments like that but for the company to give you that kind of interest, they are getting something much more. And if that line of business is that good (heard they are into oil and gas or something weird like that) why wouldn’t they take a loan from a bank for say 22% pa?

There is an old adage that says nothing is new under the sun. Ponzi scheme, also called pyramid scheme are as old as my great grandfather’s grandfather (assuming that Darwin is wrong and I ain’t descendant of some black monkey. Duh!).

According to Wikipedia,

“A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns (“profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.”

Now, I can bet my a**e that 106% is way beyond what any business can legitimately pay investors in Nigeria. This is different for stock where the appreciation in value is dependent on demand and supply and the general believe of inherent value. Even when a stock goes too high then you know a burst is just a mile around the corner.

I also remember an old CBN (Central Bank of Nigeria) advert that use to say “when it is too good to be true, then it is not true”. I have seen people tell me (even some of my learned colleagues) that Nospetco has been around for 2 years plus. But some of the most notorious schemes even operated for over 5 years before the authorities came around to shut them down.

The truth is I might be wrong about this. But I would rather discover that I should have put my money there than discover that I shouldn’t have gone around their end.

For more about Ponzi schemes and the man it was named after, head on to Wikipedia.