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Events of 2009: Business Featured

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Nigerian Community
Written by Emmanuel Uffot

Not much to cheer in the business world

   The global economic meltdown that trickled into Nigeria during the third quarter of 2008 gained root in 2009 with serious effects on the formal and informal sectors of the Nigerian economy. The effect in the capital market defied all measures put in place by regulators to boost the market during the year.

   There were significant occurrences in the banking sector in 2009. For instance, Charles Soludo’s tenure as governor of the Central Bank of Nigeria, CBN, ended on May 29, 2009. He was replaced by Sanusi Lamido Sanusi, former managing director of First Bank of Nigeria Plc.

   But the most striking occurrence in that sector during the year was the drastic reformation of the banking sector carried out by Sanusi, which resulted in the sacking of the managing directors of eight banks. In the first exercise, five chief executives were sacked. They were Cecilia Ibru of Oceanic Bank, Bartholomew Ebong, Union Bank Erastus Akingbola, Intercontinental Bank; Sebastine Adigwe, Afribank and Okey Nwosu, Finbank. The second sack swept away Francis Atuche of BankPHB; Charles Ojo of Spring Bank and Ike Oraekwuotu of Equitorial Trust Bank.

   Sanusi’s action resulted from reports of audits carried out on the banks by the apex bank. According to the CBN, the affected banks were in grave financial situation because of unsecured loans given out to people that were not repaid. A greater percentage of the loans turned out to be margin loans given to even people who did not apply for it. As a bail out measure the CBN injected N420 billion into the first five banks and N200 billion into the second set of three banks.

   However, heads of Unity Bank and Wema Banks that also had some infractions were spared because the CBN said the infractions committed by the banks were not such that  threatened their solvency or affected the economy. They were given six months to recapitalise.

   Expectedly, Sanusi’s action generated mixed reactions. While critics argued that he was hasty to take such a sensitive action that could boomerang on the economy, his admirers said it was overdue. Indeed the action led to unintended consequences, most especially as the banks were no more favourably disposed to advancing loans. The attendant cash crunch hit the oil, aviation and the manufacturing sectors, and Nigerians generally.

   Apart from releasing the names of the big debtors of the banks, the managing directors of the affected banks and some directors were arrested by the Economic and Financial Crimes Commission, EFCC. Apart from Akingbola, who is outside the country, others are currently facing prosecution in court on corruption charges.

   Other key events in the banking sector included the appointment of Kingsley Moghalu, former general counsel of Newswatch, as CBN deputy governor in August. It was also during the year that the CBN celebrated its 50 years of existence. That was shortly before Soludo left office. The event took place on May 4.

   It was actually a good year for stakeholders of Savannah Bank which regained its operational licence revoked by the CBN since 2004. The return of the bank’s licence was in obedience to a ruling by the Court of Appeal in Abuja on February 5, nullifying its proscription. The head office of the bank on Broad Street was unsealed on June 9, when its operational licence was returned to Jim Nwobodo by officials of  CBN and Nigeria Deposit Insurance Corporation, NDIC. However, the bank was unable to start operation because it had to recapitalise.

   The Nigerian capital market, which is yet to recover from the pangs of the global meltdown, had a new president at the helms of affairs of the Nigeria Stock Exchange, NSE, in the person of Aliko Dangote. The new NSE president, who is also president Dangote Group of Companies, was elected  on August 6, during the 48th annual general meeting of the NSE. He succeeded Oba Otudeko, who served in that capacity for three years.

   Another issue that made headlines in the economic sector was the federal government’s decision that the downstream oil sector was going to be deregulated. The pronouncement created tension in the country as many Nigerians, led by the organised labour and civil society groups, opposed the planned deregulation, arguing that it would lead to an increase in the price of petroleum products. But the government has insisted that deregulation was irreversible since it would lead to availability of products when many players have the opportunity to participate. Government had also reasoned that it was removing subsidy on oil because it could no longer bear the huge sums paid to subsidise importation of petroleum products.

   The take-off date of the deregulation fixed for December 1, 2009 was put on hold apparently because of the absence of President Umaru Musa Yar’Adua, who had been on admission at the King Faisal Hospital, Saudi Arabia, to endorse the policy formally. But to Nigerians, deregulation had surreptitiously taken off.

   Since early December, there had been scarcity of petrol. For the better part of December, fuel was sold in Lagos for between N100 and N120 per litre at petrol stations. It sold for N150 in Abuja. It was a harrowing experience for commuters as operators of buses, taxis and motorcycles called okada hiked their fares by over 50 percent.

   Beyond deregulation, there were other key occurrences that made news in the oil sector. There was a change in the leadership of the Nigeria National Petroleum Corporation, NNPC, with the appointment of Mohammed Barkindo in January to replace Abubakar Yar’Adua as group managing director of the corporation. After the appointment of Barkindo, a major overhaul took place in the NNPC which led to the removal of six group executive directors, GED.

   It was also during the year that the federal government sent the Petroleum Industry Bill to the National Assembly for consideration. The bill was the outcome of the report of the Oil and Gas Reform Implementation Committee reconstituted in 2007 by President Yar’Adua. The bill, which seeks to empower indigenous operators to participate actively in the sector, is yet to be passed even though a public hearing was conducted for it at the instance of the National Assembly. Still in the oil sector, the federal government introduced a new guideline for the renewal of oil licence by oil producing companies. Under the new condition, those seeking licence renewal or concession should show commitment to invest in new refinery projects or take equity in the existing government-owned refineries. Earlier in the year, government had waived the one million dollar mandatory non-refundable deposit required for investors willing to build a 10,000 barrel capacity refinery.

   Last year, the Nigeria Customs Service, NCS, got a new comptroller-general. On August 14, Abdullahi Dikko was appointed comptroller-general of Customs by President Yar’Adua after the retirement of Bernard Shaw Nwadialor. Until his appointment, the Katsina-born Customs boss was assistant comptroller-general at the NCS headquarters, Abuja.

   Similarly, the National Agency for Foods and Drug Administration and Control, NAFDAC, got a new director-general. Paul Orhii was appointed in January 2009 to replace Dora Akunyili, who became minister of information and communications.

   During the year under review, the six states of the South-South geopolitical zone organised the first economic summit to chart a new course for the development of the area. The summit took place from April 22-24 at the Tinapa Resort in Calabar, Cross River State.

   There was no dull moment for the aviation sector during the year. The most prominent occurrence in the sector was the February 18, shake-up within the aviation parastatals that consumed Ado Sanusi, managing director Nigeria Airspace Management Agency, NAMA, and nine directors of NAMA, Nigeria Civil Aviation Authority, NCAA and the Federal Airport Authority of Nigeria, FAAN. Sanusi was sacked for inability to explain what happened to N6.5 billion counterpart fund for the Total Radar Coverage of Nigeria, TRACON. He was replaced by Ibrahim Auyo who incidentally was the pioneer managing director of NAMA in 1999.

   The Accident Investigation Bureau, AIB, on March 14, 2009, released the report of its investigation into the ill-fated Beechcraft 1900D aircraft belonging to Wings Aviation that crashed in Obudu, Cross River State, in March 2008, killing the crew on board. The report indicted air traffic controllers at the Enugu airport. It revealed that lapses in communication by the air traffic controllers were one of the causes of the crash. The NCAA and NAMA, however, disputed the report. 

   It was not a good year for domestic airlines in the country as some of them experienced cash crunch. The reform in the banking sector worsened matters for them. Some of the airlines hard hit by the meltdown were Afrijet, Virgin Nigeria, Bellview, Capital Air, Associated Air and IRS. Some of the airlines dropped some routes while others sacked some of their staff. For instance, Virgin Nigeria suspended its London and Johannesburg routes while Afrijet could not pay over six months’ salaries as at December.

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Godwin Ibe

Medical Doctor (GP), IT professional, Web Designer, CELTA Certified Teacher of English, Economist and International Trade Marketer.

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