pleep:
Maybe Nigeria is not as free as you think. Atleast not in the sectors vital to development; namely Petrolum, Minerals and Energy.

1. If you own land and want to mine that land for minerals that is called "illegal mining"

2. If you get get raw petroleum and want to refine it in an artisanal factory, like they do in the delta, that is illegal
also

Yet those two sectors are absolutely vital

In addition to this, the areas where the market is free, foreign companies prevent indigenous companies from gathering the capital neccessary to compete with an economy of scale.

How is petroleum, minerals and energy vital to development. Some of the most industrialised nations don't have raw power or minerals - Japan, Germany, Switzerland. China has rare Earths but Chinese growth in the last 20 years is based on manufacturing. Having natural minerals is good but what good has it done for Africa?

Katsumoto:

Banks don't have a small pool of funds; Nigerian banks are heavy with funds. For funding to work efficiently, there must be

No Sir, they dont. Ask Babalakin, ask Dangote, as Shell and get data from the CBN. Nigerian banks are highly handicapped and even the PFA's are yet to attain a level of comfort where they can comfortably finance 10year investments let alone banks. All it took to throw the entire banking sector into a spiral was the default of a few petroleum importers in 2008, no Sir our banks lack funds.

pleep: Then why isn't the private sector building railroads?!

Because the private sector requires reasonable finance rates and a stable government. Who is going to build railroads when no one is sure Nigeria will survive the next two years? Uncertainty is the enemy of development and commerce; especially when financing rates are in double digits.

wesley80:

No Sir, they dont. Ask Babalakin, ask Dangote, as Shell and get data from the CBN. Nigerian banks are highly handicapped and even the PFA's are yet to attain a level of comfort where they can comfortably finance 10year investments let alone banks. All it took to throw the entire banking sector into a spiral was the default of a few petroleum importers in 2008, no Sir our banks lack funds.

You mean GTB, Zenith, First Bank, Access, UBA, Ecobank, etc. are cash strapped? Yet Nigeria has 11 banks in the top 50 banks in Africa.

http://www.vanguardngr.com/2012/01/11-nigerian-banks-make-top-50-african-banks/

Katsumoto:

Because the private sector requires reasonable finance rates and a stable government. Who is going to build railroads when no one is sure Nigeria will survive the next two years? Uncertainty is the enemy of development and commerce; especially when financing rates are in double digits.

But we have foreign banks including SA's banks financing 5-year investments with decade long ROI's in the petroleum sector! How's that so? Do foreigners have more faith in Ngr than Nigerians do? Perhaps it's just that the funds aren't there and "faith" has become a convenient excuse!

Katsumoto:

You mean GTB, Zenith, First Bank, Access, UBA, Ecobank, etc. are cash strapped? Yet Nigeria has 11 banks in the top 50 banks in Africa.

http://www.vanguardngr.com/2012/01/11-nigerian-banks-make-top-50-african-banks/

Compress those banks and they aren't even worth One South African bank take ABSA for instance. I'm talking Nigeria's top 5 banks here campared to a single SA bank!

wesley80:
But we have foreign banks including SA's banks financing 5-year investments with decade long ROI's in the petroleum sector! How's that so? Do foreigners have more faith in Ngr than Nigerians do? Perhaps it's just that the funds aren't there and "faith" has become a convenient excuse!

The bolded is your answer. Returns from petroleum are almost guaranteed.

Katsumoto:

How is petroleum, minerals and energy vital to development. Some of the most industrialised nations don't have raw power or minerals - Japan, Germany, Switzerland. China has rare Earths but Chinese growth in the last 20 years is based on manufacturing. Having natural minerals is good but what good has it done for Africa?

We have to look at our comparative advantage. And that is definately minerals and energy, besides do you really think Nigeria can progress without its energy industry?

we would be another somalia

In my opinion the over-regluation of these industries is the main thing the Nigerian government is doing wrong. the rest is politics

wesley80:

Compress those banks and they aren't even worth One South African bank take ABSA for instance. I'm talking Nigeria's top 5 banks here campared to a single SA bank!

Don't make new rules; you implied/stated that Nigerian banks are cash-strapped. Relative to their environment (Africa), Nigerian banks come tops. Germany has the biggest bank in the world by assets (Deutsche) - does that mean Germany has the bigger banks than the UK, China, the US?

Katsumo you still have not answered my question... how are Nigerian Banks making money without giving loans?

Katsumoto:

The bolded is your answer. Returns from petroleum are almost guaranteed.

Suddenly political stability takes a back seat and Returns becomes the only determinants of investment just that Nigeria banks do not care much about "Returns" right? Come on now, this banks are cash strapped and can only finance low capital - short term projects.
Meanwhile here's a 2011 article that says Nigeria's top 9 banks aren't worth a single SA bank! Say what?
www.vanguardngr.com/2011/08/one-south-africa-bank-bigger-than-nine-top-nigeria-banks-banker/

pleep: Katsumo you still have not answered my question... how are Nigerian Banks making money without giving loans?

Forex, high fees and hidden charges to customers, low deposits (federal and state governments) and high interests, financing high value petroleum industry deals (short term financing). I am no expert on Nigerian banks. Maybe some one else can add to that list.

Katsumoto:

Don't make new rules; you implied/stated that Nigerian banks are cash-strapped. Relative to their environment (Africa), Nigerian banks come tops. Germany has the biggest bank in the world by assets (Deutsche) - does that mean Germany has the bigger banks than the UK, China, the US?

Tier one capital remains the top determinant of a banks strength and that's what determines a banks adequacy. Nigeria banks fall far short in this regard. That was my point.

^ So you think the high interest rates are a result of inadequate supply in the financial market?

Katsumoto:

Forex, high fees and hidden charges to customers, low deposits (federal and state governments) and high interests, financing high value petroleum industry deals (short term financing). I am no expert on Nigerian banks. Maybe some one else can add to that list.

Banks also get involved in direct investments. Fidelity bank has been particularly impressive in this regard financing a number of projects including NB's can making plant in Ogun state and a number of Agricultural projects. The botched Lagos 'Ibadan expressway was to be financed by a local bank with shared profits but a lac of funds stalled the project till Babalakin got some external finance in SA, unfortunately it never took off.

wesley80:

Tier one capital remains the top determinant of a banks strength and that's what determines a banks adequacy. Nigeria banks fall far short in this regard. That was my point.

So only Tier one banks can lend money?

Katsumoto:

So only Tier one banks can lend money?

No Sir, it is just an indicator of the strength of a bank. A bank with low T1 capital as are Nigeria banks would only be disposed to short-term-low-capital financing as against those with relatively higher T1 capital.

pleep: Then why isn't the private sector building railroads?!

Private sector does not build roads even in China. US is the free economy capital of the world and the govt is solely responsible for public infrastructure. Govt is not a PLC, but private sector is!

Katsumoto:

But free market doesn't imply the exclusion of government from the market. Free market is simply price being subject to the forces of supply and demand. Government, as a player in the market, can buy distressed companies at a low price, and sell at a profit. For instance, the US tax payer made profits from shares acquired by the government in the the US Auto industry, AIG, and the Banks. And Government can also make a loss from acquisition i.e UK government bailing Royal Bank of Scotland.

Government spending in infrastructure can also be likened to an investment. When governments build infrastructure, it enables commerce which in turn generates receipts (taxes) for the government. Government pays its workers who are also consumers, and hence contribute to price action, growth, etc.

in theory thats how it works, the reality does not exist.
if its the interaction b/w demand and supply,govt need not bail banks out, subsidize some companies to remain in biz aand keep work force.
do you know some farmers gets paid for not ploughing their field so as to control supply of goods.
the bail should not be considered a loss if there was a deliberate intention.
the fact is nothing actually happened in the banking industry, its a scam to transfer public wealth to the private sector. if its a bailout pple cried for a refund to the public sector when the banks started making profits and sharing it.

Dont trust that magic capitalist wand.

CAMEROONPRIDE: Go check Atlanta 96 and come back at me.

No help me check and bring the link here, yours is right before you, you disgraced Africa, even the leader of your delegation confirmed Nigerian athletes will never do that.
http://www.edition.cnn.com/2012/08/10/world/africa/olympics-cameroon-missing-athletes
http://www.dailymail.co.uk/news/article-2184943/Cameroon-athletes-missing-Olympic-Village-London.html

muyi says


Theory or practice whatever, you guys must understand that these economic theories are traditional western economic policies and should be applied with careful skepticism. what we need is an economics for the third world but because of the heterogenity of Africa especially relative to Europe we have to take alot of normative economic decisions. Gone are the days when d problem was unemployment, depression ....we now have inflation along side unemployment which is terrible. Therefore these theories should be appiled carefully to suit the Nigerian economy not destroy it.

adconline:
Private sector does not build roads even in China. US is the free economy capital of the world and the govt is solely responsible for public infrastructure. Govt is not a PLC, but private sector is!

In the 1800's, before the united states government invested heavily into infrastructure, the sector was taken care of by private companies via the railroad system, toll roads and toll bridges.

Why cant Nigeria do the same? In Africa the private sector has not even provided the government any good companies to contract with, forcing them to rely on over-priced foriegn firms.

The federal government is just a skape-goat, the real problem with Africa is the people (private sector) especially those of us abroad.

The cost of building a kiliometer of road in Nigeria is almost the highest in the world, whos fault is that? the government or the private sector?

pleep: In the 1800's, before the united states government invested heavily into infrastructure, the sector was taken care of by private companies via the railroad system, toll roads and toll bridges.

Why cant Nigeria do the same? In Africa the private sector has not even provided the government any good companies to contract with, forcing them to rely on over-priced foriegn firms.

The federal government is just a skape-goat, the real problem with Africa is the people (private sector) especially those of us abroad.

where did you get the info from??

What do you mean? I've studied history as a hobby for years....

If you want an example, look at the first transcontinental railroad; It streched from San Fransico to Iowa and was made by a partnership of three private companies.

When there was a glut in the supply for transportation, the American Private sector fufilled that need.

wesley80:

No Sir, they dont. Ask Babalakin, ask Dangote, as Shell and get data from the CBN. Nigerian banks are highly handicapped and even the PFA's are yet to attain a level of comfort where they can comfortably finance 10year investments let alone banks. All it took to throw the entire banking sector into a spiral was the default of a few petroleum importers in 2008, no Sir our banks lack funds.

you got it right, Nigerian banks have very limited fund, how many Nigerian banks can fund like say 1 billion dollar deal comfortably, I dont think even 1 bank can do it. But many banks in Europe, US and Asia can comfortably do that, any body conversant with money markets will know that over 4 trillion US dollars is moved around across the globe daily, hw much of that money passes through Nigeria? Infact some banks like HSBC, Goldman sachs, Citibank have balance sheets that is more than the economy of the whole sub saharan Africa.

djon78:

you got it right, Nigerian banks have very limited fund, how many Nigerian banks can fund like say 1 billion dollar deal comfortably, I dont think even 1 bank can do it. But many banks in Europe, US and Asia can comfortably do that, any body conversant with money markets will know that over 4 trillion US dollars is moved around across the globe daily, hw much of that money passes through Nigeria? Infact some banks like HSBC, Goldman sachs, Citibank have balance sheets that is more than the economy of the whole sub saharan Africa.

Should Nigerian banks not crawl before flying? Shouldn't the banking industry loan to small and medium businesses before lending to big businesses? How large is the Grameen bank? Isn't it changing lives in Bangladesh and Malaysia? The cornerstone of most stable economies are small and medium sized firms. This obsession with billion dollar deals is misplaced.

kunlekunle:


in theory thats how it works, the reality does not exist.
if its the interaction b/w demand and supply,govt need not bail banks out, subsidize some companies to remain in biz aand keep work force.
do you know some farmers gets paid for not ploughing their field so as to control supply of goods.
the bail should not be considered a loss if there was a deliberate intention.
the fact is nothing actually happened in the banking industry, its a scam to transfer public wealth to the private sector. if its a bailout pple cried for a refund to the public sector when the banks started making profits and sharing it.

Dont trust that magic capitalist wand.

Bail out is market action because government is acquiring shares. Subsidies, I agree, distort markets. Are you aware that subsidies to farmers in the US is tied food stamps. Senators in states with huge farms support it as well as senators in states with huge urban centers. Subsidies keep food cheap and makes it easy for the US government to feed poor families (income distribution and reduction of inequality).

As for your comment about nothing happening in the banking industry, perhaps you can tell us why European banks are sinking, what happened to Leyman Brothers, Merill Lynch, why Ireland received bailout to support its banks, why Barclays was re-inforced by arab investors and why Buffett invested in Goldman Sachs? The problems with banks were real. Under the terms of the bailout, governments acquired the shares of those banks. US banks returned to profitability while European banks haven't.

If Capitalism doesn't work, can you explain why China reduced its poverty levels (according to the 1990 UN definition) from 84% in 1980 (when it embraced state capitalism) to 10% in 2010? Make no mistake, capitalism encourages inequality but it also enriches millions.

Katsumoto:

Should Nigerian banks not crawl before flying? Shouldn't the banking industry loan to small and medium businesses before lending to big businesses? How large is the Grameen bank? Isn't it changing lives in Bangladesh and Malaysia? The cornerstone of most stable economies are small and medium sized firms. This obsession with billion dollar deals is misplaced.

And how many Nigerian banks are giving funds to SMEs, when the interest they charge cannot even allow the SME to break even talkless of being profitable. Let me state it again, for our economy to grow, there must be easy access of funds for entreprenures, if not then we have got a long way to go.

djon78:

And how many Nigerian banks are giving funds to SMEs, when the interest they charge cannot even allow the SME to break even talkless of being profitable. Let me state it again, for our economy to grow, there must be easy access of funds for entreprenures, if not then we have got a long way to go.

You stated that 'how many Nigerian banks can fund like say 1 billion dollar deal comfortably'. Do SMEs require $1 billion funding? If not, of what relevance is the point about $1 billion loans or the size of a bank's assets? I hope you can see that they are two separate topics, unless you are arguing that Nigerian SMEs require a billion dollars each.

Katsumoto:

You stated that 'how many Nigerian banks can fund like say 1 billion dollar deal comfortably'. Do SMEs require $1 billion funding? If not, of what relevance is the point about $1 billion loans or the size of a bank's assets? I hope you can see that they are two separate topics, unless you are arguing that Nigerian SMEs require a billion dollars each.

why i stated the billion dollar issue was to disprove the statement by someone that Nigerian banks have plenty funds and I now stated that they dont have such plenty funds when not even one bank can comfortably fund a billion dollar deal.

Then u talked about SMEs and I told u that even the interest they charge will suffocate the SMEs, so I dont understand what u are on about?

My personal verdict is that Nigerian banks have a lot of improvement to do cos they cannot comfortably fund even a simple long term deals on one hand and on the other hand cannot support growth of SMEs due to high interest on loan.

And both funding of billion dollar deals and small funds for our Smes are needed hand in hand for our economy to develop. For example to invest in power infrastructure, high speed trains, new world class cities will require billions of dollars to do but how many of our banks can fund these types of deals? These things can be done now majorly via FDI inflows from foreign investors, like those wall street fat cats, soverign wealth funds, private global investors etc not Nigerian banks my friend.

The fact of the matter is, the amount of cash available to the banks determines what interest rates they will be able to charge.

If American banks are charging 6% with several billion on their balance sheets we should not be surprised that Nigerian banks are charging 15% when they only have several million.