It is abnormal that banks flourish when industries die –Ijewere
By OBIDIKE JERRY
Saturday, July 5, 2008

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When you talk about corruption in Nigeria all eyes tend to move to the public sector -government and its bureaucracy. This tendency ignores the festering corruption in the private sector such that companies manipulate their internal records to position themselves as the darling of potential corporate investors.

Against this background, Saturday Sun took on Dr. Emmanuel Ijewere, former Presidents of Institute of Chartered Accounts of Nigeria (ICAN) and Institute of Directors (IOD) and now a tax consultant on what many watchers of the economy believe is a sign of corporate leadership failure.

Ijewere admitted just like Dr. Erastus Akingbola, President of the Chartered Institute of Bankers of Nigeria (CIBN) that there are some dubious elements in the system who would not go unpunished if got. But that small number is not enough to condemn the entire private sector, the engine house of our economy.

“The history of Nigeria had been that until very recently the government – both federal and state were the commanding heights of the economy. They controlled virtually every thing. It is only now that government adopted in recent times from 1999 quite seriously the privatization policy. But even that has not really taken full root. So, to talk about corruption in the private sector is not something that is very common. This is so because the private sector has its model, the model of profitability and they put things together to be able to do that; corruption will not make that happen. Of course there are a few who are misfits but that happens everywhere”, he said.

Another negative trend in the system is the increasing profitability of the banking sector in an economy the real sector is in serious need of life. To this anomaly, Ijewere has this to say: “I would not say the banks have failed. I would say the banks have not addressed it the way they should. If industry is going down and the banks are doing well, it must be that banks are doing some other businesses.”

Corporate corruption
To make a generalized statement that there is so much corruption going on is not enough. What kind of corruption? Where is taking place? The history of Nigerian economy had been that of government control of economic factors until very recently when the governments – both federal and state started pulling out of management of companies and other business firms. They controlled virtually everything. It is since 1999 that government took seriously the issue of privatization.

But even that has not really taken full root. So, to talk about corruption in the private sector is not something that is very common. This is so because the private sector has its model, the model of profitability and they put things together to be able to do that; corruption will not make that happen. Yet it’s true. I mean we all live in Nigeria and we know that the system itself provides for a lot of corruption. When you drive from here (Lagos) to Benin you know a number of checkpoints you go through. The checkpoints are not for security but what will fill the pockets of those people that create them. And even the local governments have become very corrupt. They stop every vehicle that has a label and collect money. So, all these try to distort the real situation. So, corruption itself is perpetuated not by the private sector but by some unscrupulous officials from the public sector. The private sector itself is a victim of corruption in our society. So I would rather shortly defend the private sector.

SEC, Cadbury etc.
The Cadbury situation was surprising and in fact created an unhappy situation in the private sector. But again the full story has not yet been told because from what I heard, the Directors of Cadbury were never interviewed by Security and Exchange Commission. But I understand also that SEC gave them an opportunity to be interviewed. I am not holding brief for anybody but they believe (I understand that’s what I heard or read in pages of newspaper) that the matter was subjudice. So, they didn’t appear. Again the SEC had a job to do so they went ahead and did their job. But one cannot say their job is now fully completed because it is always better to hear more than one side of a case and I believe that the sides have not been fully heard.

I think until we have heard the side of Cadbury we cannot really determine what really happened. And in the case of Akintola Williams one has not really looked at exactly what transpired. The same way, may be, they too did not or were not represented because they perceived the matter was subjudice. So, I really cannot conclude yet. It is premature at this stage. Again, auditors have limitations, and those limitations were imposed by the law. An Auditor is not a person who goes in there like an investigator. The law provides parameters. All he has to do is not to say that these accounts are correct. Auditors can never say that. The auditor can only say they show a true and fair view.

That is the internationally accepted mode.
The auditor comes in after the end of the year to see what transpired about 15 months and he has two or three weeks to do it. He really cannot go through every transaction. And you know a thief is always one step ahead of the owner of the property. And he tries very hard to out smart him. If there is, I am not thing saying there is, an intention to defraud, it is very difficult for the auditor to find out that fraud because (an) auditor is not set up for the purpose of a fraud. But when he has reasons to believe that there is something fishy he can now alert either the shareholders or the directors who will authorize a full investigation. But the statutory responsibility of an auditor is to show or report whether the account shows a true and fair view which is not the same thing as perfect.

Something left hanging
The normal process is that where a company says to an auditor we have part of the assets of our company somewhere it is the duty of the auditor to find out and confirm independently that those assets are there in terms of quantum and quality because it is possible that the assets are there but have deteriorated. He must report ‘yes, it is true they invested money in there but the money no longer exists or they invested money, the money has appreciated or what they said they invested, they did not invest’. I agree with you that it is the duty of the auditor, but again I cannot speak specifically on this case because I am not sure of exactly what Akintola William’s position is on the matter. In general terms, when you say the asset of a company is somewhere it is the duty of the auditor to go and investigate that.

Borrowing to pay shareholders
My answer will be better understood if it is taken in the light of the fact that there is a difference between a company making profit and a company having liquidity. There are companies that are making profits but may be their money is tied down in stock, their money is tied down in a number of things but that does not mean that they are not making profit. And dividend is a function of profit because if there is no profit, no dividend. So, to say that is it right for a company to borrow money to pay dividend or not depends on the situation. I will say that in some cases it is right, in some cases not. But for prudence, a company would rather prefer a situation where it doesn’t borrow. But there is nothing in law, provided it is properly stated in the accounts that the company had made a profit and in its own cash flow statements or it will now have to show where its money is tied in. In that case it can borrow against it to pay but that is a very rare situation and it is never encouraged.

Reason for corporate corruption
From what I have seen in the private sector for the past ten years, Nigeria has a crop of some of the best managers in the world. Those who are surviving, if they are able to survive with all the difficulties in Nigeria you can imagine what they would have been if they were in the developed economy because it is not easy doing business in this country. Like I said, however small you are, you are sitting here now and we have the generator on, and it is not going to be on for one or two hours. It’s going to run all day, and that happens everyday. That costs money. That is what our counterparts outside don’t have to contend with. Because there is no regular public power supply the water situation has gone very bad.

So, you end up sinking your own borehole. And in some cases some of the roads and drainages are in some terrible situations. You have to spend money doing that. So, you end up being a local government- power generating company, water supply agency. All those things are things you don’t have in developed countries. Our managers in this country are damn good because they have been trained and schooled under extremely difficult conditions. They would have done a lot better if they were in other countries. Of course there are a few who are misfits, but that happens everywhere. But within Nigeria, looking at the most prominent of our sectors - the banking sector, yes, it is true a number of banks opposed the idea of the N25 billion recapitalization, but today they have gone beyond that and Nigeria banks are no longer within Nigeria and they are holding theirs.

Look at the telecom, look at what Glo is doing, MTN, Celtel, all of them. All these are fantastic. This guy, Dangote, is a manager too. He is one of the top people in the world today (a member of the club of 500 richest people in the world). Those are things we should be looking at, the good part of Nigeria and stop highlighting those minority people, those few people that are creating the wrong impression. Let us blow our trumpet because nobody will blow it for us.. All those young men - the Otedolas, Jim Ovias, Elumelus fantastic, I doff my hat for them. They are risk takers and they are doing well.

Management inability
There are a number of social pressures we cannot run away from. Because a company is successful, it is recruiting more and more people very quickly and its business is expanding. Because we have shortage of skilled manpower, in some cases they have to recruit people who are not really skilled in that area. We also have other additional social responsibilities. The level of poverty is very high. I don’t know about your family but I can assure that we have a lot of poor people in my own family. Now, these people are putting pressure on you and me. Even if you now bring them – a person who has a wife and four children you pay him N25,000 by the time he takes out money for transportation, he feeds his family, there’s no money for rent, or he pays the rent there is no money for food, the salary level is so low. So you have those social pressures that some people in company are looking for those survival instincts, which they use and these are corruption.

But again there are two types of corruption in our country. You have the corruption of need. I am not justifying it by any means. Those who want to survive find a way of trying to survive. Yet, the corruption of need is bad and unacceptable. But there is one that is even worse, the corruption of greed, which is the primitive amassing of wealth. The big men in our society, in the political spectrum and the private sector etc are guilty of this. But most of the looting does not take place in the private sector because there is not much to loot in the private sector. The place where big money comes from is government, either state, local government or federal. So, those are the areas we should be looking at when you talk about corruption.

Banks and the real sector
I would not say the banks have failed. I would say the banks have not addressed the problem of the real sector the way they should have addressed it. But the banks too, you have to recall that all those who invested money in the banks did so to make profit, so they can have dividends etc. However, there are some things that are really wrong. Industry is going down and the banks are doing well. It must be that banks are doing some other businesses.

The banks are not attracted to the industry. How will they? If you set up an industry, you have to create your own power (electricity supply), sometimes your own road, you own water and government – local, state and federal are buffeting industries from all sides with taxes and the rest. It is not attractive to be an industrialist and it will be very crazy for the banks to deliberately put shareholders money in a place that has no hope, which the government is not even supporting or helping. I would say the banks need to do more. But I would not blame them as having failed. Certainly, they have not. They are trying to do what a businessman does, survive and then flourish and create wealth.

No salvation
Well, I believe the development banks for very many years were government institutions and there is this disconnect between the government and the governed. The development banks are now being re-organized. I am glad that Bank of Industry is now adopting a private sector model to move forward. The Agric Bank in Kaduna is doing that as well. But the question is, are they adequately funded? And I think that we need to move them to a position where if they are properly funded, appointment should not based on political consideration. It should be based on ability to manage. It must be based on those same private sector yardsticks and benchmarks in determining who runs those places. There is still a problem there that has to be solved. But to a large extent I think they have been revamped at least in recent times to a position where they can improve on their performance.

ICAN, IOD and corruption
I think they are helping the system. But the system is heavy. The most corrupt people are those who are engaged in primitive wealth acquisition. I explained primitive wealth acquisition earlier. The basic necessity of life is not very many- roof over your head, food for your family, clothes to wear, water and maybe car. When you start going for the second, the third the fourth and the fifth house you are within the primitive wealth acquisition. And those people are the same people who control the Senate, the Federal House. Either they got voted in directly or they sponsored people to be voted in looking after their interest. How many poor people’s children have you seen as Assistant Inspector General of Police or Deputy Inspector General of police? How many poor people children have you seen as judges? So this whole thing is institutionalized and so powerful.

So what can IOD and ICAN do? What is so special about ICAN or IOD. They are part of the system, they are part of the country. There is not much they can do. IOD has a population not more than maybe 8000 members. ICAN has 25,000 members. What can these two do to the population of 140 million?