Our Grouse with SWF, by Fashola

Governor Babatunde Fashola of Lagos State

Governor Babatunde Fashola of Lagos State Wednesday spoke extensively on the delay in the take-off of the Sovereign Wealth Fund (SWF), maintaining that the governors are not opposed to the idea of saving for the rainy day as popularly believed.

He was speaking at Third Annual Pan-African Investors’ Conference organised by the international investment and research firm, Renaissance Capital (RenCap), in Lagos.
Chief Executive Officer, West Africa, RenCap, Mrs. Yvonne Ike, has, meanwhile, suggested that in order to be able to manage the growth potentials and opportunities for banks in the country, another consolidation exercise for commercial banks is necessary by 2014.

Fashola said: “Within a democratic environment, the process is as important as the result, and as I say, you cannot break the law to enforce the law. Now, even in our domestic economics that we do in our respective homes, it is known that you cannot consume everything that you produce. There must be some sense of savings and investments. But whose funds are you saving? Are they yours?

“Before you save on my behalf, there are also issues of trust.

“How efficient have you managed the one that the federation has put in your trust and what makes you the better saver and the better investor? And is this a saving that is to be made within the acceptable framework of the constitution? Those are the issues around the SWF.”

The governor also queried the validity of the excess crude account (ECA), insisting that its current structure could discourage investment in the country.

“Therefore, if the ECA is sometime that is managed at the whims of a certain leader, then there is no predictability and that is not a good climate to do business. So, these really are the issues and not that the governors are up in arms against the idea of the SWF,” he argued.

Ike, while speaking with journalists on the sideline of the conference, made a case for a new round of banking consolidation.

The Central Bank of Nigeria (CBN), under its 2005 consolidation programme, had directed that commercial banks’ capital base be increased to a minimum of  N25 billion, as against the N2 billion then.

The exercise led to a reduction in the number of commercial banks in the country from 89 to 25. However, the number of banks further reduced to 20 last year, after another reform in the industry.

But Ike stated that the exercise is necessary to support Nigeria’s anticipated growth.      

She said: “If you think about the incredible work that the CBN has done to clean up the financial sector, to really prepare it (the financial sector) for growth, we anticipate more consolidation. We anticipate banks having to be bigger and better to cope with the growth potentials and opportunities that present themselves.

“We see the banking sector consolidating over the next 24 months. We think it is healthy for it to happen. The biggest driver of this is growth. So, to meet the growth demands in the banking sector, banks need to be more efficient and they need to be run better. So, it is not necessarily about being bigger, it is about being able to access things such as customer base, as well as in some cases, growing in size.

“So the growth will be the underlying thing for further consolidation and capital raising that we envisage in the sector. Who benefits? We believe that the depositors would be beneficial and the growth will be much more orderly. Also lending to the real sector would benefit and the investors would also benefit.”

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