The Nigerian Accountant 2012 October/December Edition

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Technicalinterest but that spreading the spirit of enterprise by findingand supporting young entrepreneurial talent would advancethe cause a more affluent and just society. I have since spenta good part of the last two decades teaching entrepreneurship,mentoring young entrepreneurs and playing Business Angel. Abook from a few years ago ‘Business Angel as a Missionary’documents my role in startups from companies like Linkserveand Business Day to encouraging old school mate engineersto run road maintenance outfits. A second volume focusesmore on the ones that were spectacular failures and lessonsfrom them.A distinguished former member of this body, the late ObaOlashore encouraged me years ago to ensure my mission didnot become too risky for those dependent on me by investingin something that would provide assured income every year. Ashe was about to found a bank, I decided it was the right anchor.I became pioneer shareholder of Lead Merchant Bank. A fewyears later, mergers were decreed. In the politics of the rushto merge, Lead Merchant Bank failed to make the wedding.All I had invested to assure school fees for life just vanished.Complaining to one Deputy Governor of CBN, I was told whyworry, you are also in one group that made the marriageceremony. Another couple of years later it was nationalisedand again everything was supposed to be over even whereyou question the decisions. Meanwhile in a venture supportinganother entrepreneur, I had borrowed from friends at homeand abroad for most of the nearly one hundred million thatwas going into constructing an outlet for the venture. Herecomes a new Governor whose stateagency is lessor of the land. He haltsall activity, even with nothing wronglegally. After many calls, he assuresme all would be sorted in two weeks.Nearly one year later all is still stalled.The point of all of this is I have seenagain and again how the citizen isvictim and how altogether the obtusepower asymmetry between citizenand state kills the spirit of enterpriseand keeps the economy recursive andunderperforming potential. Who willbell the cat?I have noted earlier the point aboutRajan Zingales that the US strengthwas largely the product of rulings byJustice Charles Brandeis. How can wefind activist judges responding to civilsociety pressures so that institutionsmay emerge that will make tomorrowbetter? As a persistent litigant ChiefGani Fawehinmi contributed muchto institution building. I believe thatbodies like ICAN and the Nigerian BarAssociation should both litigate issuesuntil institutions that protect citizensand open the space for healthy growthin society emerge.As we search for the Justice‘We lost our best in acrucial building era inbrain drain becauseof weak institutionsthat allow the state todespoil the citizen. Wecannot go on like this.Those who fear to fightback must realise thathistory will hold them toaccount. To fail to buildinstitutions that supportgrowth and stability isto betray the mission ofthis generation.‘Brandeis of the Nigerian Judiciary who will build hope forfuture generations to thrive in venturing because of stronginstitutions it is pertinent to make the point about howinstitutional weaknesses in the finance sector has kept Nigeriain the recursive mode and can be directly linked to the currentstate of high unemployment in the country.Just to make the point about how long I have been makingthis point and how it is neither about me nor any particularstrong man in authority today, visiting the system with whimsthat assures we will lose one decade of progress, let me point toan Oped piece I wrote in The Guardian in 1984 titled “ChasingShadows at Chase”. It was about Government and ChaseMerchant Bank. With time my views were fully vindicated, it wasfound to be a wild goose chase but lives had been damaged,careers broken and foreign investors shaken enough to say asRichard Branson is said to have said recently: Never again inNigeria. It is the duty I feel about seeing it happen again andagain that has made me prepared to take the current disruptionof the financial system into a state of a war of attrition. Thisreally is what you as professional bodies should be up to if weare to build institutions to raise the quality of life of Nigerians.I still recall not so long ago when the ideas of formerBritish Chancellor of the Exchequer Norman Lamont ledthe Confederation of British Industry (CBI) calling for hisresignation. The cry was Norman Lamont must go. By June1991 British PM John Major fired Lamont. But here we hearNBA call for people in Central Bank to go. But nothing happensand the next generation prepares for a future in which peopleare afraid to lend or borrow or to investbecause without moral hazard theyare criminalised and their investmentsarbitrarily usurped.I have and will repeat a call forinternational consulting firms to behired to review decisions of our recentbank reforms for logic of the choicesmade. Even though National Assemblyprobes have already showed they werepervasion of justice.To illustrate the point further,staying with financial services sectoras example. In the mid 1970’s, lackof rigor in decision making resulted inmisunderstanding of a piece of policyadvice offered the then cabinet ministeron bank board structure and resulted inthe nationalisation of the banking sector.Even though no one can argue againstthe fact that one of its consequenceswas the growth of Nigerian humancapital in banking, it no doubt resultedin much deterioration of values in thesystem that privatisation would berequired later to rescue the system.Since government, which means noone, owned the banks the games playedto be appointed to executive positionsand the instability so created were soTHE NIGERIAN ACCOUNTANT 20October/December, 2012
Technicaldebiletive of development goals, a case of the tragedy of thecommons writ large, that you would believe no one would everdo that again. Strong institutions, with institutional memory,what the Germans call Weltaschanung, would not. Strong menhave strong whims and whims generate uncertainty and hightransaction costs.Henro Boyo in a well presented discussion of the CBN andinflation in The Guardian of October 4, 2012 makes this pointof the long term damage introduced by a CBN run on whims.What is even more bothersome Is that those who have come tomanage banks as caretakers with no long term commitment ofownership and whose agency function are not superintendedby owners, use the positions to abuse and to abuse on behalfof those who sent them. As they service their friends and thosewho sent them and fight the perceived enemies of those forwhom they serve as surrogates they further fracture the systemand set up the environment for the next systemic crisis.Ironically, they themselves are often the victims on thenext round. But theirs is a mindset of momentary advantagewhich dulls effort at building institutions to make the playingfield level and removed from what I called the ‘predatory actsof public officials’ in my 1998 book “Managing Uncertainty”.I was therefore not surprised when about this time last yearat the Wharton Africa conference a leading Goldman SachsExecutive noted that a strange outcome of banking reforms inNigeria was that the banks were at about half what their valueshould be using known methods of analysis.If we are to save ourselves these rounds of despair theninterested parties, as Douglas North argues in that seminalbook, Institutions, Institutional Change and EconomicPerformance, should engage in contestations that will ultimatelyresult in institutions that set boundaries to the conduct of all.It is as such I had suggested during the systemic failings ofthe banking industry in the 1990s when I was not associatedwith the industry that bankers should get together and take aclear strong position. But that those not in detention then, sawit as not their problem. A few of them would later be victimsin the last four years. It is as such that I have urged people inbanks forcibly seized in this round to establish locus standi byrefusing to accept claims from usurping managers and contesteverything, no matter the inconvenience, in a state whichFather Adewale points out so well, intimidates and oppressesthe one that should have power over it, the citizen. If wecontinue to roll over and play dead, the authority figures willcontinue to act in ways that heighten uncertainty and sabotageeconomic progress.In my view, if we are to build institutions, businessassociations, and citizens should become freedom fighterswithout guns for issues that will produce better context forhuman engagement. In some ways, my views on a pattern ofresistance is reinforced by what I hear every time I meet thegreat statesman, First Republic Minister, Maitama Sule, DamMasani Kano. He usually says “Pat whenever I think of you, Ithink of Ghandi and of Mou. You must never give up. Nigerianeeds you.” I will then joke that I would rather Ghandis’ painfulself sacrifice and resistance than Mou’s “I have blood to waste”.I wish to reiterate that these things matter because theconsequence linkages are self evident. Where people feel theyare victims of injustice, it is hard to find peace. Where there isno peace, progress is improbable. A just society is desirableand made likely by institutions that mete out consequences ina manner blind to who is involved. Where this injustice involvesproperty rights, they make the likelihood of investments andeconomic intercourse, in general, low. If it is so obvious whydo enough of us not care enough to sacrifice to change currentconditions. One clear way to go is to create conditions to giveyou as individuals or associations the locus standi to causereview of rules which frame new boundaries. This is particularlyimportant as the Nigerian Judiciary has often hidden behindthe locus standi doctrine.To conclude, let me make the point that poor institutionshave hampered progress in much more than the financialsector. An example or two from the very important infrastructurearea will suffice.I was in Kualar Lumpur, Malaysia, the day the city’s metrolineof a similar design as that which Gov. Lateef Jakande hadcontracted for Lagos was commissioned. That of Lagos wasaborted by the Buhari administration at enormous costs bothin actual payments of penalties and the opportunity cost of nothaving that facility in place. But more painful for me was thatthe Kualar Lumpur one was built by Taylor Woodrow a companythat nearly went bankrupt because of failure to pay bills as duein Nigeria. The problem of notoriety in meeting our obligationsin this sector is such that one of the biggest infrastructure firmsin the world PB is reluctant to touch Nigeria because of unpaidbills from work with NEPA of old. In another big firm in the US,a Nigerian rising star lost his job because a top executive bitterfrom experience in Nigeria from decades earlier found he hadinterested colleagues in looking at opportunities in Nigeria. Howcan we make progress with such a track record?If China stagnated after much progress under the MingDynasty 300 or so years ago, and Argentina dropped frombeing at par with the United states in the 1990s becauseof failure of its institutions to continue to evolve, the kind offailings that have given us this recursive economy after wisepolicy changes, weak institutions, must be combated for thelove of the next generation. One outcome formed already isthe factor of a generation that left town. We lost our best in acrucial building era in brain drain because of weak institutionsthat allow the state to despoil the citizen. We cannot go onlike this. Those who fear to fight back must realise that historywill hold them to account and that in the sense of the FranzFanon rebuke, every generation must discover its mission andeither fulfill it or betray. To fail to build institutions that supportgrowth and stability is to betray the mission of this generation.Mr. chairman, ladies and gentlemen, if institutions are toevolve to aid nation building business Associations, actingstrongly are imperatives of now.Among the critical areas for institutions to be built orinvigorated are in Education, Law and Order, Financial Markets,Communication and Land Reform. I do hope that this will berallying call that can save our country and thank you for yourkind attention.* Professor Patrick Utomi, senior faculty of the LagosBusiness School presented this Paper at the 42 nd AnnualAccountants’ Conference held in Abuja.THE NIGERIAN ACCOUNTANT 21October/December, 2012
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