At that time I was trying to cash out my Lead investments because I had invested in a small finance venture that I had helped through the metamorphosis into Platinum Bank which I served as Chairman.
As the merger game played out, Lead Merchant Bank was left stranded and more than N200 million became nothing overnight. That money would probably be valued at a billion naira or more today. Nobody cared what happened to investors who did nothing wrong. The world including foreign investors watched all that, and we want them to invest here.
Then Platinum Bank merged with Habib Bank and continued as Bank PHB. In 2008, the US banks in overreaching themselves created the subprime crisis.
But the US system was deliberate to avoid a systemic crisis with Main Street bailing out Wall Street. The case of AIG is more telling. But we, who were shielded from the speed of contagion by limited integration into the global economy and the Obasanjo savings which buffeted what ripples may have been felt. Then step in the regulators with imitation stress tests. By the time they were done playing like policemen on the country roads of “occupied” Eastern Nigeria or South-East states, and going after those they did not like, they had halved the value of the Nigerian banking system. As one PWC USA consultant speaking at the Wharton Business Club in Philadephia put it, they had done more damage to the Nigerian economy than he had ever experienced in unforced ‘self-inflicted harm’ anywhere. In the case of Bank PHB, it was a brazen effort to “snatch” or steal a bank. This bank robbery happened before a cheering media and community of bankers. Those spared the bullying said nothing and whispered in their bedrooms that ok banks were taken over and some terrible ones let go. But the world saw the damage to Nigeria.
Need I add my venture into food produce retailing. Working with a South Africa food lovers retail franchiser, Fruit and Veg City, we began to develop a model outlet in Lagos with space leased from OPIC Plaza just by Sheraton Hotel. It was a BOT scheme. With much work and more than 180 million naira deployed on construction and market development from 10 years ago, uncertainty bared its fangs. Ibikunle Amosun arrived on the scene as new governor. For no reason ever offered and at reputation damage in excess of a billion naira, he stopped the project along most approved during the tenure of Gbenga Daniel.
When people educated as accountants can violate property rights so brazenly, no one should be surprised at the Forbes classification of Nigeria as a money losing machine.
Imagine all the foregoing as only part of the experience of one entrepreneur. Aggregate the damage to the economy of this phenomenon I referred to in my 1998 book, Managing Uncertainty, as the predatory acts of public officials.
I had borrowed several hundred million of naira to increase my stake in the bank and ended up with zero value in my portfolio within a few months. In many countries, those kinds of outcomes result in mass suicides. Not many return to such an investment destination.
All these at a time when it is clear that Nigeria must produce or go into economic meltdown; and when capital flows into the economy are critical for that. Nigeria needs capital to produce but even if oil was on top performance, our budgets could not drive needed investments.
In 1996, at the heart of Afropessimism, I participated in the Europe-Africa Summit hosted by Aspen Institute, France, in Annency. The theme was ‘Africa must Produce or Die.’ In much of my writings, I have tried to make the point that cash flows, such as from oil revenues, never really make a people affluent. My typical explanation was the lottery effect as seen in how a poor man who wins the lottery returns to poverty after a season of splurging, tells the story.
I believe that Thomas Sowell in ‘Wealth, Poverty and Politics’ does a better job of articulating that phenomenon than I have done. Nigeria must produce or die. But how does Nigeria produce?
Our institutions are anti-production in their mode, our financial system is designed for trading and economic rent extraction and not production and our infrastructure makes producing a nightmare, whether it be power, road or rail transport. As the French economist, Thomas Piketty, shows, the world has never had so huge a stock of capital due to globalisation. But he laments that they are in few hands. For me, that could actually be an opportunity rather than a threat. It means that if we dress well before those few we will receive the capital needed for a growth surge. The way Nigeria dresses up turns its possibilities to the other end. To produce and grow, Nigeria has to rebuild its institutions and rebuild collapsed culture.
To begin to seriously produce, you need value chain champions organised as a college of obsessively focused change drivers, on the policy side, and true wealth creators rather than celebrity-wannabe bankers more interested in siren-escorts than in customers who create wealth.
A cultural revolution that celebrates output that bridges dissatisfaction gaps and not one that puts more cash in the pockets of economic actors like profiteers from structural distortions in the economy, will power this change of direction towards sustainable development.
The bottom-line is our current order can more deepen internally generated poverty than internally generated revenue from production output. With investments aimed at the social sectors to boost input into production, like with education and healthcare, The Great Escape from misery that the Nobel Prize-winning economist, Angus Deaton, celebrates, can more quickly be our lot. Concluded
Credit: Pat Utomi, Punch
If you missed part 1 of this essay, read it here: http://Internally generated poverty (1), By Pat Utomi