Author Topic: INVESTORS SHOULD GET MONEY READY FOR SHARES ? AKINGBOLA  (Read 658 times)

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INVESTORS SHOULD GET MONEY READY FOR SHARES ? AKINGBOLA
« on: November 10, 2008, 11:49:29 AM »
Investors should get money ready for shares ? Akingbola
By Our Correspondent


The big topic now is the global financial crisis. In what ways will it affect Nigeria. Or is the country immune like some have said?

To say that the financial crisis in the world will not affect Nigeria is to oversimplify it. Its effect will be felt here because even if the products that have caused them problems abroad are never sold here, because they are in trouble now, all the lines of credit they used to make available to Africa, they are reducing it. The crisis in the oil market has also trickled down here. There was a time when oil was as much as $147. Now, it has gone down to $60, and those who bought the product at that time, still have it in their tanks now, thinking of what to do with it, and I am sure some of them borrowed from banks.

The crisis has swept big banks in the United States under. Are the Nigerian banks well-positioned to forestall such?

I think we are lucky, we have a Central Bank Governor who understands his duty. He had come out proactively ahead of time to say, I know what is happening in the stock market, I know what is happening in the oil market. I am ready to buy over some loans from banks, so that they can roll them over. In fact, he issued a circular, saying that banks could roll over stock loans for up to a year. In addition, he has said that any bank that has liquidity problem can bring its loans and get some money so that life can go on afresh.

That reassurance affects the inter-bank market because banks now know that there is an alternative.

How does this reassure the banking public?

The banking public now know that the CBN is standing behind their banks, so there will be no panic unlike what happened in the United Kingdom. As a result of simple comments on Northern Rock and Co, everybody lined up the next morning to collect their money. And let me tell you, if the people decide that they are worried about a bank and they all line up at the same time to withdraw their money, that bank will surely come down. So, I think the CBN has done well in this regard.

When should investors hope to see the end of the current crisis in the Nigerian capital market?

Concerning the stock market, what is happening is very strange to Nigerians because we have always believed that once anything goes up, it never comes down in Nigeria, especially prices. Nigerians never believed that the stock market prices would ever come down. For a very long time, everybody was playing the stock market and it was like picking money on the road. Drivers, security guards, and other players were making 100 per cent profit.

They could not believe it was happening in Nigeria only for them to wake up to the rude shock that what was being priced at N40 had suddenly come down to N15. They could not believe it and they were very bitter. But the way the capital market works is that when prices go up, you sell and take your profit, because there will be a rush for a lot of people to take profit.

Once supply is more than demand, price will come down, but when it gets to the point we are approaching now, people will go out to buy again and when they start buying, the price goes up again and you should expect again that people will take profit. That is how markets are all over the world. Nigeria is just joining the world community, we are just playing the stock market, so eventually we will get used to it.

Is it safe to buy shares now?

A lot of people have been calling to ask me when they can start buying. I want to say people should be getting their money ready because all the stocks have started gaining now. Probably, in the next two weeks, all the stocks will return to active trading again. In the last one week, I have been telling everyone that I am looking for money to pick shares, to buy them cheap. This is the time to buy and buy cheap. One must watch how the market moves, but I believe eventually we will get used to it and nobody will complain again. A lot of people have made money and lost money, and they are waiting for the next round of money making, so nobody is committing suicide.

What role is the Chartered Institute of Bankers of Nigeria playing to ensure best practices in the banking industry?

Talking about the CIBN, the CIBN Act was passed last year by the National Assembly. The Act empowers the institute to register every practising banker in Nigeria and we have sent circulars to banks, we have sensitised bank CEOs that it is important to make sure all their members are registered with us. The whole purpose of that Act is to be sure that the industry can self-regulate. Once you know that your name is in the register and that your name can be struck off for malpractices, it will make you behave better. We are looking forward to registering everybody. Let me say that since May, when I became president, our membership has doubled. And we have a lot of students who want to become bankers as well. They are registering everyday and we want this to continue. We are trying to beef up training in the industry because with the huge explosion of branches and banks, there is dearth of knowledge. So, we are encouraging our members to set up training institutes across the nation. We are giving them subvention to do this and we are involving all the retired bankers. We are also developing a functional curriculum on risk management because what is important in banking is how to manage your risk, and once that is taken care of, it will take a long time before the banks collapse. The IT platform of the institute has been revamped and our members can contact the institute from anywhere in the world either to register for membership, examination or whatever. They don?t need to get out of their house. We are committed to making sure that the business of banking is accorded its place of respect.

In spite of strong growth in the banking sector, the real sector has been performing below expectation...

Our profit would have been more if the real sector had been performing. But some of the funds that should have gone to the real sector are used for trading and speculative activities of the stock exchange. The question of why money is not going to the real sector has been asked several times even on the floor of the House of Representatives. The major reason is that the challenges before the manufacturing sector are numerous. Even if banks decide to charge different interest rates, will manufacturing survive in Nigeria? The answer is no, because you have to provide your own generator, you have to provide your own water, you have to provide your own road and you have to provide your own security. Like I told them at the House of Representatives, we need a stakeholders? forum in this country. Let us sit and decide how to rescue the nation from import dependency and what the role of everyone is. Government must be serious about encouraging manufacturing. It is not that we have not been lending to manufacturing, but most of the money don?t come back. We usually had to write them off. That is why today, if somebody says he is going into manufacturing, privately, we ask him, are you sure you know what you are doing. Don?t forget the banks are trading with depositors? money. If the money is put in a venture where it will never come back, then the bank will be distressed and people will lose their funds. That is why bankers are very careful.

It appears that banks are beginning to undermine the essence of the banking sector consolidation by engaging in unhealthy rivalry, as evidenced by malicious texts messages circulated recently.

The CIBN played an active role when those text messages were flying around. We wrote to CEOs for a meeting. Actually, I got two of the text messages. In one of them, my bank was mentioned, while three banks were mentioned in another. But when we got to that meeting, somebody showed us a more serious one, saying that three other banks would collapse the following Monday.

But today, the banks are still running. We, therefore, decided that when we got back home, we should write circulars to all our staff to warn them that if any staff was caught de-marketing another bank, he would be dismissed. In addition, if another staff of the same bank is caught, then the bank will pay a fine of N10m, and we signed that resolution. And when we got to the Bankers? Committee meeting in Abuja, we mentioned it and the Governor sanctioned it, then it became a rule in the industry.

I want to believe that the genesis of those messages are from stockbrokers themselves, but I am only guessing because Intercontinental is one of the five banks mentioned. I want to believe that stockbrokers want to stampede the banks into this bail-out so that every bank will want to be a member. We attended a meeting with the stock exchange and all banks were there and everybody was saying yes, we are ready.

We agreed that on Thursday we would come back to sign the agreement but on Thursday, only two banks showed up -Intercontinental Bank and Union Bank. So the question is, where were the other banks that were showing muscles that day? It is not realistic to use depositors? money to quarantine. It is unfair. The reality is that cash is not an option. What the market needs is confidence and not cash.

The fundamentals of a number of companies, especially the banks are alright. Look at the banks, they a still paying dividend, still making profits.

There were reports, based on the Nigerian Deposit Insurance Corporation?s 2007 annual report, that out of the 24 banks currently operating in the country, only four were sound. Even though the CBN and NDIC have debunked this, it still casts some doubt on the health of the banks. What do you think?

The CBN and NDIC disowned that report. Today, in the industry, an analyst has grouped the banks into three. We have the first seven, another 10, then the rest.

And what they have done is to analyse their assets, their shareholders? funds and their profits and I think today, if there are 24 banks, about 18 of them are very solid and even the remaining, compared with what banks used to be, are super banks. They are stronger than what even First Bank used to be before consolidation.

Some bank workers have complained that in spite of profits being made by banks, post-consolidation, their salaries are being reviewed downwards and they are being paid according to what they generate. How true is this?

When such claims are made, it is better to ask for a document to show where that salary has been reduced. One should also demand to see the person?s last package. In Intercontinental, I just paid N1bn to staff as mid-year bonus, and I believe other banks are paying such because there is competition for good staff. If your staff are earning less than what obtains in other institutions, you will lose them. So, most of these things you hear are from disgruntled people, who might have been dismissed.

For deposit, it is true we give people deposit target. A life without a goal is a useless life. At Intercontinental Bank, we have always let people know that you must set goals for yourself. For example, at the beginning of the year, I asked myself what was my deposit this year and what do I set for myself next year? By the time we set that, we ask ourselves, how do we get this?

As the CEO, I use my influence to bring in something. If we want to be paying everybody the way rain falls on us then we will be playing god. We want to make sure that those who are making efforts are rewarded better than those who refuse to make effort.

If you are happy with your basic pay, that is the one in your letter of appointment, then all well and good. But if you want this extra thing we pay every month, then work for it.

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INVESTORS SHOULD GET MONEY READY FOR SHARES ? AKINGBOLA
« on: November 10, 2008, 11:49:29 AM »

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