NigeriaPlus » Business

Mobile Money: The opportunities and challenges in Nigeria (Part 2)

Franklin Chidi, PhD — Sat, 03 Dec 2011 18:50:36 +0000

A few weeks ago I published an article about the opportunities and challenges of Mobile Money (MM) in Nigeria and I received a lot of correspondence supporting many of my assertions and in some cases pointing to other challenges I did not include. The earlier article focused on four major issues, which I felt if addressed adequately would go a long way towards assuring the success of the MM initiative in Nigeria. In this current piece, some additional challenges are discussed and the role of the government is once again emphasized, since it has a direct influence on how successful mobile money services in Nigeria can be, especially given how it supports the cash management goals of the Central Bank of Nigeria (CBN).

One important issue concerns the branding of mobile money services and their use of exclusive independent agents. From an agency training or transaction processing perspective it makes sense to have exclusive MM agents who are only involved in relationships with single mobile money providers and their customers. However for the service to really take off and be used by a substantial mass of people it has to get beyond that to a type of shared services arrangement with non-exclusive agents who are free to serve multiple MM service providers. This will be similar to the role played by recharge card resellers, who typically sell cards for all major phone services.

Can you imagine a situation where a reseller only sold one Mobile Network Operator’s (MNO) recharge cards? Restricting agents to only one MM service provider increases the cost of agent acquisition to the providers, reduces the reach of the services to customers, lengthens the time for educating consumers on the services, and generally increases the costs of acquiring each new customer.

From a customer standpoint non-exclusivity helps to make the services more competitive thereby driving better service and encouraging innovation. Agencies can also be bigger, employ more people, have bigger float and better security as their location dictates. This is similar to the service offered by 7-eleven stores in the U.S. and U.K., where they provide money transfer services via multiple companies at their locations. The fact is that success in Nigeria will be better assured when stakeholders share key learnings and collaborate more on important initiatives that reduce their costs and promote mobile money services in general.

Another important issue is that of the technology application utilized by the mobile money service providers. This I found through my actual real world tests of most of the MM services currently running in Nigeria. To my surprise I found that one of the more aggressive and particularly alluring MM service providers did not currently use either an STK (Sim Application Toolkit) or USSD (Unstructured Service Supplementary Data) application which are more reliably used for MM services, but rather used SMS and automated voice.

On this particular service, a nomadic person with money in their mobile wallet unfortunately cannot use it to recharge a phone that has zero call credits since an SMS cannot be initiated from the phone. This issue highlights the importance of involving the CBN and the Nigerian Communication Commission (NCC) in negotiations to ensure that the MM service providers get equal access at reasonable rates to Mobile Network Operators (MNO) systems. At this technology junction, it is unreasonable to expect any service not using STK or USSD applications to make any sustainable impact in the marketplace since those are the two most widely applicable mobile technologies that work on most phones, particularly the low-end units popular with unbanked customers.

A third concern is that of network reliability and interoperability, particularly as it pertains to the speed of money transfers across networks. This concern is directly tied to the fact that although the CBN framework does not provide for the MNOs to have a lead role in the provision of MM service and is explicit in not providing MNOs mobile money licenses, the impression viewers get when they watch some of the mobile money television commercials of a leading mobile network operator in Nigeria might suggest otherwise.

This issue directly concerns the other players in the ecosystem, who fear that their transactions may be given lower priority on the networks of MNOs actively promoting their own services, whether or not the service is within the CBN’s operating framework. This issue has to be resolved to provide clarity since success in the open scheme practiced in Nigeria requires a reliable and consistent flow of transactions from one end to the other regardless of MM service provider.

The fourth issue is one of education about the safety and security of the mobile money service. It should be communicated very clearly to prospective users that strong controls are in place to prevent fraud and theft of money stored in mobile wallets. In addition, they should be clearly informed of the steps to take in the event their mobile handsets got lost or stolen. Recently published results of a survey conducted in Nigeria by Institute for Money, Technology and Financial Inclusion (IMTFI) indicated that respondents ranked concerns around fraud and theft much higher than fears of technology failure or ease of use.

This observation implies that MM providers should focus their education and promotion exercises on the security and safety of the service, rather than mainly on the conveniences MM services brings to consumers lives. The fact is it is easy to tell people what they can do with MM services, they can understand that rather quickly; the challenge is to prove to them that they can do all that safer and more securely than they are currently doing. Doing this well will make the difference between success and that, which is not.

Finally, the CBN needs to do a better job of promoting mobile money services. While it frequently talks about its cashless initiative, it appears to make little reference to the services that will help it achieve that end. Point-of-sale terminals are only useful to people using mobile money and card services for payments. It will serve them well if they made more frequent and explicit connections to the role MM and card services have to play for them to achieve their stated cash management goals.

Franklin Chidi, PhD is a telecommunications finance expert. He has been a senior management employee of AT&T Inc. in the USA for the last 12 years and prior to that was in commercial and investment banking organizations. Email at dr.fchidi@gmail.com

NSE Begs Investors Not To Dump Shares

The Punch — Thu, 11 Aug 2011 05:58:59 +0000

As stock values plummeted consecutively for three days, the Nigerian Stock Exchange on Wednesday appealed to shareholders to the halt further dumping of their stocks.

The Exchange had been characterised by the panic offloading of bank stocks since Monday following last week’s nationalisation of Spring Bank, Bank PHB and Afribank by the Federal Government.

The drop culminated in a N339bn drop in total market capitalisation. The banking stocks were the worst hit, losing 9.2 per cent of total value within three days.

For instance, the NSE Banking Index, which had dropped by 7.7 per cent or 25.45 basis points between Friday last week and Tuesday, fell further by 1.7 per cent or 298.75 points on Wednesday. The banking index had stood at 329.38 points on Friday.

The NSE, in a statement, appealed to investors not to be ‘disillusioned’ about the meltdown in the market, promising to continue to protect the interests of investors.

The statement quoted the Chief Executive Officer of the NSE, Mr. Oscar Onyema, as saying, “The Exchange believes that the actions taken by the Central Bank of Nigeria, Nigerian Deposit Insurance Corporation and the Asset Management Corporation of Nigeria should bring closure to the banking crisis and help stabilise the Nigerian Financial Markets in due course.”

It added that Onyema “strongly appealed to the investing community not to dump their shares as…the market fundamentals are still very strong and present a good opportunity for long term value investors.”

However, the Exchange appeared to have realised that the appeal, a tacit acknowledgment of the dumping of bank stocks, might send the wrong signals to investors. Hence, it quickly followed the initial press release with an updated one sent to our correspondent one hour later. The second press release did not contain Onyema’s appeal to investors not to dump shares.

However, our correspondent reports that the changes in the statement implied that the Exchange was concerned about the decline in the value of bank stocks and was working on ways to stabilise the market without scaring off investors.

Last Friday, the market capitalisation of the listed equities on the Exchange, which stood at N7.484tn before the announcement of the nationalisation of banks, fell by N339bn or 4.5 per cent to close at N7.145tn as at Wednesday.

Also, the NSE All-Share Index was down by 4.5 per cent or 1,061.69 basis points from 23,397.44 on Friday, down to 22,335.75 points. The NSE-30 Index, which measures the performance of the top 30 stocks, also fell by 5.2 per cent in the same period, from 1,044.69 to 990.12 points.

But Onyema explained in the statement that the management of the Exchange took the “proactive action of briefing the brokers’ community on the development with the banks before the commencement of trading on Monday.”

This, he said, had helped to stem the slide of the NSE All Share Index to 1.9 per cent despite the suspension placed on the trading of the shares of the three banks, which eroded N30bn of market capitalisation.

The three affected banks, according to authorities were nationalised for failing to recapitalise in line with the CBN’s directive.

In 2009, the banks, along with Union Bank Plc, Intercontinental Bank Plc, Finbank Plc and Oceanic Bank International Plc, were given up till September 30 to recapitalise or face liquidation. But the Federal Government, after reviewing the situation, concluded that it would be risky to allow the three to operate till September 30.

Managing Director of the NDIC, Alhaji Umaru Ibrahim, on Tuesday in Abuja said the banks nationalised were as good as dead.

“We got legal advice before we struck and we acted within our powers because there is a provision in our law that allows us to move in when a bank is failing, and all the signs of bank failure were apparent in the case of these banks,” he said.

He added that if the regulators had not intervened the way they did last Friday, the nationalised banks would have wound up operations before the September 30 deadline.

The NDIC boss explained that the three banks exhibited symptoms of failure despite being beneficiaries of the N620bn bail-out fund injected into the nine rescued by the CBN.

He said, “The CBN issued a statement in which it warned the banks to recapitalise before the end of September and that if they failed, they would be handed over to us (NDIC) to manage, sell or liquidate.

“But the bottom line is that there was a continuous deterioration in the financial conditions of these banks. They had totally lost their capital; the shareholders’ funds were negative and even below zero.

“These banks had been living on the life support system guaranteed by the CBN – that is largely, the inter-bank guarantee.”

The equities market had reacted negatively following the action, with the banking stocks being the worst hit.

The Rising Prices of Commodities (II)

Muhammad Ajah — Tue, 14 Jun 2011 17:55:37 +0000

The prices of commodities in Nigeria are unbearably skyrocketing. There is nothing sold in the markets which has remained in its prices in the last one year. It is even an understatement that the prices of everything in the country are on the increase on monthly basis. And the masses are surely at the receiving end. One wonders why Nigerians prefer to die in silence. Or is it accepted that figuratively, Nigerians are the happiest species of humanity on earth?

Last year, I wrote an article entitled, the rising prices of commodities. This would serve as part two of the said article because after watching events for the past one year, things have gotten worse in prices. I want those who do not go to markets to ask their wives or friends because if nothing is done to forestall this development, it would be quite difficult to curtail the rate of forced criminality, anti-social and inhuman activities by the Nigerian underlying. These are what the authorities at all levels of governance are empowered by the constitution to fight to a standstill.

Even in villages where things are supposed to be as cheap as life itself, a common sachet of pure water is N10, not N5 as before. I used to believe that there can be no hunger in the villages. But to my surprise, discoveries have shown me that many of the youths deserting their villages to the cities are fleeing from hardship including malnutrition, lack of medical services as well as other social amenities. Quite unfortunate for a country blessed with so much wealth and peace.

Kerosene has become so expensive that the citizens have returned to the olden age of cooking with charcoal and firewood. Apart from deforestation which is a trend campaigned against by government due to its consequences on the environment, their prices are also becoming unbearable. I know that the official price of kerosene is N50 per litre. I went into a filling station in Abuja one day to buy the commodity and I was told it was N170 per litre. I could not contain my anger but I had no option because where I lived, there was no provision for the use of charcoal or firewood. But many people definitely began to get used to the old ways of cooking, thus adding to the environmental hazards caused by smokes from generators and vehicles due to the circulation of condescend fuel in many parts of the country. God really loves Nigeria; if not, our air would have been polluted.

Fuel and kerosene should never be scarce in a country that has crude oil in abundance. In many parts of the country, despite the huge sums of money expended by the federal government on subsidy, these commodities have never sold at the official rates. In cities, the authorities try to enforce the official rates but what is happening in the villages where there is no money. The common man is continually in trouble in our blessed nation. Nigerians are fond of exploiting their compatriots when there are difficult situations. It is not only applicable to dealers on gasoline products, it is all over. Every Nigerian business men and women enjoy exploitation. It is quite difficult to recognize those who apply religious ethics in business by avoiding double standard or exploitation.

One of the greatest challenges to this exploitative tendency is lack of NNPC mega stations in many areas of high demand due to population density. One NNPC mega station in every State is just not enough to fight corruption in that circle. The only explanation that can be given whenever there is scarcity is that Nigeria imports refined crude oil products. This calls for laughter. Why should Nigeria be importing fuel and kerosene? Is it a pride or a shame that we export our crude oil to other countries and then pay heavily to import the refined product? It is unimaginable what the leadership of NNPC which is responsible to make our refineries functional is doing. Day after day, we are told stories that things will change. Yes, things do change but to the worse. This has lasted since the return of Nigeria to democratic governance. And the more we expect solutions, the more our expectations are dashed.

“We have barges loaded with kerosene at the wharf”, this is a statement from our oil chiefs. Somebody suggested once during a programme called Political Platform at the 100.5 FM that all the directors in the downstream sector including the Group Managing Director should be sacked for this singular long hardship Nigerians have suffered since January. Another person suggested that they should be probed because definitely monies meant for the development of the sector have not been utilized. Can Waziri’s EFCC beam its torch to this sector? Why is Nigeria importing kerosene?

Food stuff is no exception. Independent survey showed that prices of a bag of garri, rice, beans, onion, potato, flour, among others have added by over forty percent. The same thing is observed in the prices of sugar, tooth paste and other toiletries. A bag of garri is now N8,000 while that of rice is between N8,000 and N10,000 depending on the type, because most of them are imported. God forbid that one day Nigeria may begin to import garri and salt. Mr. President should do something about our refineries and also look into the management of NNPC.

Cement and other building materials have gone very high in prices. Many Nigerians who had been struggling to secure a shelter through their minimum wages had to halt their attempts. While the masses are crying over all these, the cities witness constructions of high rising buildings. Who should tell who to stop stealing? The rot is just too much that the nation needs cleansing.

Educational demands are on the rise too. Transportation is going up. Even religious leaders are also charging higher for their services. Whither the so-much contended minimum wage which state governors are still foot-dragging to accept. Maybe the President should review it upwards, at least to N30,000, if the worsening situation cannot be curtailed and the social security Nigerian masses dearly need remain elusive.

Government should consider operating welfare markets for civil servants. In such markets, commodities would be sold at cheaper rates to check the shylock-minds of independent markets. Civil servants would benefit from such markets as they can deposit part of their minimum wages to procure their monthly needs from the markets. But such markets must be situated within the Federal, State and local government secretariats and monitored very strictly to guard against misuse and mismanagement. Which way, Nigeria!

Things are getting better! Malaysia to flood Nigeria with palm oil from Ghana by Kayode Ogundamisi

Kayode Ogundamisi — Wed, 26 May 2010 04:16:58 +0000

Succor has come the way of users of palm oil in Nigeria . Malaysia , the country, which took the oil palm seeds away from Nigeria several years ago, is planning to flood the market from its silos in Ghana . Besides, some 5,000 metric tonnes of the commodity have arrived at the Apapa Bulk Terminal Limited in the Apapa Port Complex, Lagos .

It was learnt that the commodity was ferried to the terminal a few weeks ago. The arrival of the MV Cavally vessel came on the heels of reports that Malaysia , the world’s second largest producer of palm oil, had concluded plans to build silos on Tema Beach , Ghana . The move, it was learnt, was to further improve its export to the Nigerian market with barrels of palm oil, the shortage of which has hit the country.

Malaysia remains the world’s second-largest exporter of palm oil after Indonesia . The two countries account for 85 percent of global production of palm oil. Trailing China and India , Malaysia ranked as the world’s top producer and exporter of palm oil, generating fifty per cent of the global output, of which 85 per cent is exported.

Within the African continent, Nigeria has more extensive oil palm plantations of about 350,000 hectares, but they are not enough for local consumption. Both Nigeria and Malaysia are said to have reached an agreement that would allow the Asian country to invest in the former’s palm oil sector.

Malaysian palm oil, exported to more than 150 countries worldwide, with China as its biggest market, is used extensively across the globe for biofuel, processed food and toiletries, among other bi-products. It was revealed last week that investors looking for higher returns have jumped into the market, while countries, such as China have locked up African land, not just for food, but for biofuel production.

Altogether, close to 20 countries have leased tens of millions of acres of land in Nigeria , Sudan , Ethiopia and Democratic Republic of Congo (DCR), among other African countries, agricultural experts said. Last year alone, palm oil exports by Malaysia amounted to $15 billion. However, fishermen in Ghana have registered their protest against the move to help Nigeria , saying it would erase 25,000 jobs.

Inhabitants of the town said the silos would employ 1,000 unskilled youths. Currently, the bulk of the palm oil being consumed locally in Nigeria are imported from the Malaysian and Liberia . Major palm oil firms are also longing to come to Nigeria and other West African countries to establish plantations for the same purpose. The Equatorial Palm Oil was reported to have established a huge land bank for development in Liberia , and has raised funds to re-activate the existing plantations and begin expansion.

Liberia ’s Plantation Industries and Commodities Minister, Bernard Dompok, explained that the industry has forecast output to increase to 18.1 million tonnes this year, up from 17.5 million tonnes last year, due to a slight increase in palm oil acreage.

CBN, Savannah Bank conclude modalities for resumption

NigeriaPlus — Fri, 30 Apr 2010 21:41:09 +0000

The Central Bank of Nigeria (CBN) and the management of the Savannah bank are soon to finalise arrangement for the commercial bank to resume full banking activities. The bank has since concluded its due diligence with the Nigerian Deposit Insurance Corporation (NDIC), the apex insurer of depositor’s funds.

The apex bank would verify the funds of foreign investors, who are eyeing Savannah Bank Plc to ascertain whether they have what they claim, according to Mr. Ernie Onwumere, Savannah bank’s media consultant.

He said since Information Technology (IT) now plays a dominant role in modern banking, the apex bank would also verify the Savannah Bank IT vendors to certify their status. The verification is to enable the bank follow due process to ensure that the capital in the investors’ procession is not in doubt.

He said: “Because we also know that IT will have to play a major role and Central Bank has to verify the funds they are bringing in to confirm that the funds are available. That is why we are saying everybody in this era of due process we have to follow the due process so that all the capital in procession they are verified they are confirmed that they are in the group and certify issue for the capital importation.

“So that nobody will have doubts. The people that are rolling out the IT to activate the branches, we will be able to say these are the vendors who are bringing these things in for the Central Bank to confirm that they are satisfied with them.”

He assured that no depositor would lose his or her fund, although the payment will be made in piecemeal.

On management plans, he said the bank now has a new foreign investo, known as Richard Abraham, formerly of the bank of America and member of International Resource Associate (IRA), as its chairman. He added that the name Savannah bank will not change its brand because the new management believe in it.

According to him, Savannah Bank management has almost 90 per cent taken over the control of the bank but it is still going to work with the regulators for 18 months starting from February 2010.

“Savannah Bank has about 90% taken over the bank. We believe that working with our regulators we will begin to count 18months from February 2010. Right now we are doing verification. We are going to the branches to verify with the auditors, with NDIC. It is when we finish the verification we can now have a roll out plan,” he said.

Asked when and how the bank would re-open, he said until the verification is completed the bank will not have a roll out plan, although it would start operation from its regional offices such as Lagos, Port Harcourt, Enugu, Kano while the corporate head office will be located in Abuja.

His words: “We are beginning gradually, we will verify our depositors so that we ascertain our level of indebtedness. So the next stage we go is now to begin to regularize the accounts by opening the branches in Abuja, Lagos, Kano, Port-Harcourt, Enugu, from that regional role out we will now go over to the states.”

Savannah Bank is itching to enter the competitive market and it does not need to waste time so the investor Richard Abraham is leading the team to source for investors, said Onwumere, who added that the investors want to study the bank’s status before raising their fund.

“We are sure that before the year ends we would have gone too far. We also need to complete the market. The market is getting more and more competitive. So we do need to waste time. We have a chairman, Richard Abraham of the board he was there at the official handover by NDIC, CBN. He is leading part of the team that is trying to source for investors

“You know the foreign investors you are looking at they do due diligence. They want to look at all the documents; assets and liabilities and verify. And now they will come on board and bring in their funds. And when thing are concluded the funds will come in and we will now begin to talk about .They believe in the brand of Savannah Bank,” he said.

Awoyinfa Obafemi & Co, the Accounting Advisers to Savannah Bank Plc are carrying out a due diligence review exercise on the status of Savannah Bank Plc’s account from February 2002 to April 2010, when NDIC fully handled its affair .They have virtually concluded the due diligence review exercise which took place at NDIC premises in Lagos and are presently collecting and collating some required information from Central Bank OF Nigeria.

The joint external auditors of Messrs Ernst & Young and PKF were yet to finalise the banks‘s 2001 audited financial statement when NDIC took it over. The joint auditors are now presently finalizing same.

In the final analysis a statement of affairs as at febuary2002 and April 2010 being the bank’s take /hand over date s respectively would be prepared .This is a vital platform on which the bank’s stakeholders would consolidate their very eager and current recommencement position / efforts.

The handover of the remaining banks branches is presently going on with about 90% success.

From Ben-Bright Mkpuma, Abuja

UK to invest £30m in Nigerian public transport system

NigeriaPlus — Sat, 10 Apr 2010 19:28:04 +0000

Anyone who has experienced the “molues” and “danfoes” – the notorious buses and minibuses of Lagos – will understand the word anarchy. They carry huge numbers of people round the African mega-city but they respect no traffic lanes, bus-stops or policemen, many are falling apart and they belch some of the the dirtiest smoke in Africa.

But Britain is hoping to bring some order to the city of legendary traffic jams and road rage by trying to rationalise its public transport system. Over the next few years it will invest more than £30m increasing the number of bus routes, bringing in bigger buses and helping to build two new train lines to go through some of the most densely populated areas of Lagos.

Lagos has a population of 16 million but the Nigerian government expects this to grow to over 25m in the next 20 years, leaving the city authorities unable to provide clean water and electricity, or to keep pace with the growth of slums. Unless investments are urgently made in the infrastructure, says the UK’s Department for International Development, the situation will become critical. It now plans to invest in improving slum areas in other African cities.

The switch to investing in the urban environment rather than rural areas marks a significant shift in approach to combating poverty. Until very recently most aid has been directed at rural areas to try and stem the flow of people to cities and boost agriculture. But there is a new understanding that hunger in large cities and poverty is now as bad in cities as in rural areas.

“Investing in urban areas is a different set of challenges,” said international development minister Gareth Thomas. “We have watched the rise of the mega-city, especially in Africa. Places like Addis Ababa, Cairo and Johannesburg will all see massive expansion over the next 20-30 years. Unless we act now people will only live in slums.

“People find it difficult to access work outside their own impoverished areas due to lack of transport and potential industry around the slums is hampered by unreliable electricity sources,” he said.

UN predictions show that, by 2030, 700 million people will live in towns or cities in Africa and of them, 70% will live in slums.

via guardian.co.uk.

US seeks extradition of 72-year-old Briton | Business | guardian.co.uk

Uche Ofoma — Sat, 27 Feb 2010 14:54:36 +0000

A British businessman helped to channel bribes totalling more than $100m (£65m) to top Nigerian politicians to land lucrative gas contracts, an extradition hearing was told yesterday.

US prosecutors want to fly 72-year-old retired sales executive, Wojciech Chodan, to Texas to stand trial for his alleged involvement in a decade-long bribery scheme.

He faces up to 55 years in jail if convicted. His barrister said that it was “unjust and oppressive” to “haul him out of his domestic bliss” with his wife in a Somerset village and send him to the US where he could die in jail.

It is the latest in a series of controversial extradition cases involving the US. The British government has been criticised for being too willing to hand over suspects to the US at a time when it is said that securing extraditions from the US to the UK is difficult.

David Perry, QC for the US government, told Westminister magistrates court in London today that Chodan conspired to pay kickbacks of $132m to Nigerian politicians and officials to obtain contracts worth $6bn to build liquefied natural gas plants at Bonny Island off the Nigerian coast.

Perry said the bribes were paid covertly via bank accounts in Switzerland, Monaco and New York. Chodan worked as a sales executive for the London subsidiary of the construction company Halliburton.

According to US prosecutors, Chodan conspired to send a message to the “top man” in Nigeria saying that “we are ready to do business in a customary manner”.

Perry said that extradition was justified as Chodan's alleged crimes had “a substantial connection” to the US.

That argument was rejected by Chodan's QC, Ian Winter, who said that “almost none” of Chodan's alleged involvement was connected to the US.

He said the alleged corrupt conduct, such as meetings to arrange the kickbacks or the transfers of money, occurred outside the US, and mainly in the UK or Nigeria.

He added that it was unnecessary and disproportionate to extradite Chodan as the US had already “investigated, arrested, prosecuted and convicted the principal corporate beneficiary of the crime and the principal American national responsible for it”.

Halliburton and related companies agreed last year to pay a $579m fine, one of the largest in US corporate history, to settle the case after admitting making improper payments to Nigerian officials. Jack Stanley, an executive, has also pleaded guilty and faces jail.

Winter told the court that Chodan faced a “terrifying” jail sentence in the US when the British government had chosen not to prosecute him for crimes which allegedly happened in the UK.

The court heard that the US and UK governments had privately discussed which government should prosecute Chodan. The US department of justice had told the Serious Fraud Office in a private letter in February last year that “it was decided that the US should prosecute Mr Chodan”.

Yesterday, District Judge Caroline Tubbs adjourned the hearing until 20 April when she is expected to give her verdict on whether Chodan should be sent to the US.

The US is also seeking the extradition of London lawyer, Jeffrey Tesler, who is accused of playing a leading role in the bribery scandal. Tesler, 61, is alleged to have laundered the bribes to the Nigerians.

via US seeks extradition of 72-year-old Briton | Business | guardian.co.uk.

Banking reforms crash price of properties

NigeriaPlus — Tue, 09 Feb 2010 02:01:01 +0000

For the first time the history of the country, price of properties are on the down ward trend falling as much as ten percent.
Real sector experts attribute this unprecedented turn around in fortunes to the on going banking sector reforms.

Investigations reveal that price of some properties, mostly in the high end of Lagos property market, such as Ikoyi, Victoria Island and Lekki, have had their valuation reduced by about 10 percent, in some cases more, within the past three months.

An estate agent who spoke with Vanguard revealed that some three-bedroom bungalows along the Lagos end of the Lagos Ibadan expressway which was selling for about N15 million some months ago, now goes for about N13 million.

The banking reforms which commenced last year, led to the sacking of eight banks’ chief executives and the executive directors. This culminated into mass retrenchment with about 10,000 bank worker losing their job. The reform also occasioned credit freeze with banks cutting back on loans. This real estate developers said resulted into low patronage in the property market as well as decline in price.

Some developers who spoke to Vanguard admitted that the banking reforms forced property prices to decline in some areas. They said most of the price fall is due to banks’ debtors selling off their properties below valuation price to enable them settle their debts and thus avoid prosecution by the Economic and Financial Crimes Commission (EFCC).

A facility manager noted: “I think there is a rapid disposal under self_imposed forced sale conditions of property and real estate owned in Nigeria and abroad by the big debtors of many banks in Nigeria. The proceeds of which is being applied toward the prompt amortisation of their loans to avoid prosecution by the EFCC and possible conviction as well as disgrace.”

He said that with the desperation of some owners of properties who are bank debtors to dispose of their houses, they are forced to offload at lower prices to would-be buyers, who are also taking advantage of the situation, noting however that this is a temporary thing which is not expected to last for too long before the situation returns to normal. He added that in the medium to long term that most banks would be engaged in reviewing their real estate loan profiles.

Some property developers are however certain that the hiccups presently being suffered in the property market as a carry-over of the crisis in the banking sector in 2009 will be over before the end of the second quarter of 2010.

In all of these, it is however interesting to note that rent has continued to sky-rocket in may parts of Lagos, a development which observers have attributed to the simple economic principle of demand and supply, not forgetting the property agents who take advantage of the development to demand outrageous fees.

In some cases, landlords have taken 50 to 100 percent rental price increase on their houses despite complaints by tenants. Often many tenants quit when this happens. But as soon as they quit, new tenants take over the apartment at the new price. That has given some unscrupulous landlords the confidence to take unsubstantiated price increases.

But property experts insisted that the price movements are driven by market forces of demand and supply. “Demand is higher than supply in this market. Consequently, property owners take price increases confident that Lagosians will have no choice but to pay,” they claimed.