A Rotten Financial System - Part One

A ROTTEN FINANCIAL SYSTEM: THE IMAGE OF THE NIGERIAN NATION – PART ONE
By Tony Okonmah
In the prelude to this topic last week, I did reveal that the Nigerian financial system is rotten and in a mess. The article indicated that financial repression very much exists in the Nigerian financial system and is one of the major causes of the volatility of the economy which makes Nigeria a high risk economy unsuitable to attract development investments. Today, I am going to discus one of the agents of financial repression in the Nigerian financial system and the scale and scope of their activities.
For ease of understanding for the financial layman, a definition of financial repression is hereby necessary. Financial repression is simply, the means or measures created by government to divert money or channel funds meant for development and provision of infrastructure or for other purposes to themselves. Is AMCON one of these channels? Who are AMCON and what are their terms of reference?
It is not surprising to most of us that the 2008 global financial crisis impacted on our banks in manner and scale that Nigeria economy almost experienced a total collapse. There were then no doubts that the CBN's intervention to bail the eight most important banks to the Nigerian economy was the right steps in the right direction. However, the result is what we have today – the birth of an organisation known as Asset Management Corporation of Nigerian (AMCON).
In constituting AMCON, there were a lot of things Nigerians needed to know but they were not told. There were lots of information that both CBN and the Nigerian government did not avail the Nigerian public. Put straight, CBN and the Nigerian government were economical with the truth over the constitution of AMCON. What CBN and the government told the public is that AMCON was constituted to manage the toxic assets of the eight failed banks that were bailed with tax payers' money. These toxic assets were to be disposed by public share subscriptions. A number of issues has arisen over what CBN and the Nigerian government did not tell the public over the appointment of AMCON.
Firstly, neither the CBN nor the government told Nigerians the full details of the terms and mandate of AMCON over the issue of the assets of the eight failed banks. Nigerians to date do not know who are the people behind AMCON, their experience of such task and therefore, are unable to assess their performance and competence. Two years since the constitution of AMCON, neither the organisation nor the CBN has given the Nigerian public a performance record and account of AMCON. The Public do not know what percentage portion of the toxic assets of the failed banks has been effectively salvaged by AMCON.
Secondly, a highly disturbing issue is the fact that the CBN pumped in tax payers money to bail eight failed banks but did not tell Nigerians the criteria for the bail-out and how ,much did each of the eight banks receive respectively. Does each receipt reflect the measure of the value of each failed bank's toxic assets? The CBN failed to tell Nigerians the value of each of the failed bank's toxic assets. Inadvertently, Nigerians do not have the opportunity of assessing whether the amount received by each failed bank was justified and whether such amount was sufficient to stir them out of the muddled waters.
Finally, the CBN and the government did not tell Nigerians who conducted the valuation of the toxic assets, how much were they valued? when were they valued?, and where were they valued?. There is a whole lot of lack of transparency to the whole exercise and the constitution of the organisation called AMCON. Is AMCON an agent of financial repression?
Next week, I shall be writing on another government agency of financial repression. You have been poked.
Tony Okonmah, an independent financial adviser is based in the UK. This article was first published in October 2011 in The Guardian News, Nigeria.