Business Interview- Eben Joels: The board of bad banks should be held accountable for depositor funds that they lose.


To get Nigeria’s economy back, FG needs to make the political office less attractive.

FG should empower unemployed youths through the aggressive development of IT knowledge acquisition platforms.

Eben Joels is the Managing Partner, Stransact Partners, a Lagos-based independent audit, tax, and advisory firm. He Speaks with Adedayo Adejobi on his firms new, Correspondent status, the effect of forex ban to bureau de change operators on micro and macroeconomic policies, non-performing loans and implications for business,  current tax regime, Nigeria’s rising debt profile, the role of the National Collateral Registry in debt recovery, reviving the nations economy post-Covid, IMF’s proposed band on Cryptocurrency, and how AMCON can resolve the debt burden….

What’s your take on the recent ban of forex to bureau de change operators? To what extent do you think this policy initiative can affect the micro and macroeconomic policies going forward?

In previous times when the CBN banned BDCs, the CBN alluded to the preponderance of rent-seeking among the BDCs, the same reasons it has again cited.  Unfortunately, the same CBN unbanned these BDCs and BDC licenses again became an instrument of dispensing political favours in Nigeria.  I am hoping that this time around, the CBN is genuinely going to use its policy-making powers to fight all forms of rent-seeking in Nigeria, and not just among BDC operators.  Many genuine business people know that where there are avenues for making free and easy profit such as you get from round-tripping between official and black market foreign exchange rates, there is diminished incentive for honest enterprises. That is the issue in Nigeria.  We need to find a way to promote genuine enterprises that employ people and generate real profit.  It is these kinds of enterprises that create economic growth.

What’s your assessment of the current tax regime? Do you think it’s progressive or regressive in nature?

Our tax regime is not mature enough to be so classified.  You can only classify a tax system that is stable and uniformly enforced.  You cannot be talking of a progressive or regressive tax system in a scenario where most taxpayers continue to be those that are employed in the formal sector.  Some of the richest people in Nigeria do not pay taxes. I remember sometime in 2012, a judge placed a bail condition requiring a property owner in Maitama to submit his certificate of occupancy and tax clearance certificate as a surety.  The defendant returned to court to seek a variation because according to him, those that pay tax do not live in Maitama and those who live in Maitama do not pay tax.  Nothing has changed since then. It probably got worse. The people who bear the brunt of taxation in Nigeria are those who dare to be organised.  Employees and employers in the organised private sector.  Many political contractors and job men who control the economy do not pay their fair share of taxes. Imagine how much government revenue will swell if all the entities used to launder diverted funds are made to pay taxes on those transactions?

Do you think the nation’s rising debts are a cause for concern, especially the ones from China?

The only cause of concern in Nigeria is the failure of governance and institutions across the country.  If we get our governance and structures right, we can grow in such a quantum manner as to make our current debt portfolio insignificant in the long term.  However, a situation where you borrow money to fund contracts from which returns are required to fund political parties and the ostentatious lifestyle of many jobless bosses, means that we continue to move round in circles or even reverse course. The most important aspect of any sovereign is its ability to raise funds by issuing debt instruments. That tells you that debt in itself is not so bad.  But our collective productivity should be able to support repayment and the government should channel these debts into tackling basic issues such as safety and policing, health, morals, and general welfare of the people.

What’s your view on the Economic and Recovery Growth Plan of the federal government? Do you think it has made any impact thus far?

I am not sure many people know what this plan was about or if those tasked with its implementation were themselves sufficiently committed to the ideals of the plan.  For example, the policy document released by the statehouse on this plan used the word “National cohesion” at least once.  But today, Nigeria is more divided on primordial issues such as ethnicity, religion etc.  The easiest way to court popularity today is to become an ethnic champion calling for a federation of people who are from your ethnic group.  Most people forget that corruption and abuse of power pervade our society.  These issues are not unique to any one ethnic group.  In my opinion, Government should do more using the instrumentality of the National Orientation Agency to preach National cohesion.  Similarly, the government should be seen to be above board in appointing political office holders so that everyone has a sense of belonging.  Government should also know that in today’s world, you do not empower people by appointing one of their “sons” or “daughters” as they say into public office.  People are empowered by granting them access to knowledge.  The disintegration of national cohesion is enough evidence of the failure of the growth plan.

What do you think the government can do to get the economy back on track post-Covid-19?

Right now, the biggest jobs in Nigeria involve running for political office. We need to do something to make the political office less attractive.  It should be redesigned to foster a sense of service.  For example, I was shocked to find out that legislators in the U.S state of New Hampshire earn $100 per annum. Even at today’s exchange rate, that is only fifty thousand Naira per annum. I am sure that the small state is richer than most states in Nigeria. The political office should be refocused as a service platform. This is of course only a hope. It will take us several generations to get to this level. Our government can do a lot to create an ecosystem for the development of technology skills. Technology today is no longer made up of iron tools but codes.  I believe an aggressive development of information technology knowledge acquisition platforms is one way of empowering the army of unemployed youths we have in Nigeria right now.

Your firm recently got into a strategic alliance with RSM, the seventh-largest global network of independent audit, tax, and advisory firms in the world. What is the unique essence of your RSM correspondence status, and what does it portend for Africa?

One of the things we teach small business owners is that they should learn to think long-term.  It does not matter if the dreams you have for your company do not get fulfilled in your lifetime.  What is important is that you planted a tree of business that will bear fruits for several generations if well-tended.  This has always been our outlook.  We teach our small business leaders to emulate Japan where some companies are almost a thousand years old.  Our long-term view is shaped in science and statistics, not wishful thinking. Africa will be the leading source of growth for the global economy over the next century. It is the continent with the highest population of young people.  Nigeria alone is projected by the economist to have 400 million people by 2050, at which time Africa is projected to have a population of over a 2.5billion, mostly young people. This means that a small business with a long-term vision can grow along with the population as long as its products or services are relevant, and the entity is appropriately governed.  Yes, this presupposes a stable political environment. Now, the RSM network is the network of choice for businesses that operate in the middle market. The middle market includes most businesses apart from behemoths such as Apple, Facebook, Google, Amazon Microsoft etc.  Now imagine that RSM actually has the capacity and skills to service the behemoths but has chosen to make that skill and resources exclusively available to the middle market.  That tells you that RSM helps small and middle-market companies become the behemoths of tomorrow.  Our correspondence status is the first step in our quest to be properly integrated as a full member of RSM so that we can help middle-market businesses in Nigeria enjoy the competitive advantage that RSM offers.

What is your view on the suggested ban on cryptocurrency by the International Monetary Fund? The bank raised a red flag against the plan by countries to introduce their own cryptocurrenciesincluding Nigeria. Do you think IMF’s cautious optimism is the way to go?

I am not aware that IMF has suggested a ban on crypto.  No doubt, virtual currencies which provide their own unit of account and payment systems threaten traditional banking as we know it since these systems allow for peer-to-peer transactions without central clearinghouses or central banks.  However, I think that blockchain and decentralized finance are here to stay and the world will find more use for them outside of cryptocurrency.  I think we should be promoting knowledge of decentralized finance as it has the potential to create jobs in Nigeria.  Crypto miners earn foreign exchange for their activities.  It is not wise to adopt a blanket ban on cryptocurrency and thereby shut off Nigerians from earning revenue in the decentralized finance space.

There are worries over the growing level of non-performing loans with huge implications for business. What do you think could be responsible for this?

Most definitely the same factors that led to the crash of big banks and the creation of AMCON in 2009 by Sanusi Lamido Sanusi when he was appointed the Governor of CBN. At that time, we learned that several individuals feigning big boys and girls as bank owners were no different from the ordinary petty thief but were rather worse. They simply feasted on depositor funds, savings of hard-working civil servants and salary earners, by granting massive loans to themselves and their families with no plan to repay it. It is over 12 years now.  AMCON was expected to be a short-term vehicle to help the government recover what it could from these loans after the government bailed out the banks. Rather AMCON is itself a player in the sleaze that is still going on. We were all witnesses to the recent situation in First Bank.  Nigeria’s oldest and traditionally most stable bank is now enmeshed in massive shareholder loans that necessitated some form of CBN intervention. As long as banks continue to loan money to only “traditional” big men, rather than businesses that need them, the traditional problems of non-performing loans will not go away.  There are honest young men doing business, but our banks will not fund them, banks prefer to fund a big man with a reputation for being a “big man” rather than a reputation for creating and managing enterprises successfully. That is the issue.

One of the bodies set up to help the government recover debts is AMCON in 2010. 11years after do you think the agency has performed above the board?

From an objective perspective, AMCON has greatly improved its collections in the last two years. In June, it reported that it has collected N1.48 trillion out of the N4.15 trillion owed to the bank by debtors.  They also told us that some 350 chronic debtors owe N2.05trillion. Unfortunately, these chronic debtors are right now being loaned more money by the same banks – of course with no plan to pay them back. It appears that today some big men can collect bank loans to fund elections. In which other country is this done? If he or she loses the election for whatever reason, do you think the bank will get their money back? And if he or she wins do you think he or she will repay from any other source other than from diverting government funds? As I said earlier, if the agency has performed excellently, we would probably be winding it down by now.  But they have done better lately.

How would you access its role against the huge debt stock of N5trillion still being owed by individuals to date?

To be honest, I believe the figure of bad loans in the system is way more than the amounts held by AMCON.  There are still many non-performing loans masked as legitimate loans that will one day be again, sold for a penny to AMCON. So, the issue is not AMCON.  It is the system that is powered by corruption such that a borrower will deliberately inflate the amount of principal he needs so that he can split the loan with bank insiders as their share for facilitating the loan. If someone needs 200 Naira for a business, and he approaches a bank and the manager asks him to take N250 so that the manager will get the N50 on top, do you think the man who needed the N200 will ever pay back? We need a radical overhaul of our system.  As long as the reward for corruption is a higher office, nothing will change.  AMCON is only a scapegoat in the situation.  The options for recovery are limited.

Do you think the failure of compliance has anything to do with the poor level of debt recovery?

The failure of compliance, whether it is with risk management procedures, or money laundering laws or corporate governance rules, etc., actually created the problem.  These are the factors that lead to banks advancing money to individuals who have no plan to repay and most times with the active connivance of the banks. AMCON has said that they have so many cases in court that they want special courts set up to help them in their recovery. You can imagine. We know how tough it is to get justice in our system. We know how politicians deliberately weaken the judiciary for the sake of maintaining a stranglehold on political power and this is the result. We have a weak system of law enforcement.  We can see the results everywhere we look. The weak law enforcement system has given birth to bandits, kidnappers, and many herdsmen are now “heads” men, literal headhunters instead of animal husbandmen.

Will credit rating agencies improve the system?

Most certainly there will be some improvement. Some. Credit rating agencies are efficient only in a system where credits exist in the first place. In a country where we do not have proper long-term mortgages or financing for business, what are the consequences of bad credit history? Hopefully, this country will rise again, and consumer loans will start filtering down, and at that time everyone will know that good credit is itself insurance against poverty.

How would you access the role of the National Collateral Registry in terms of debt recovery?

Every system that works does so because everyone knows the rules and information is freely available.  Registration of encumbered assets with the relevant government office should be a routine issue that does not require another “National” agency that will sooner than later turn to a civil service position to be filled on the basis of quota. In most countries, liens and other encumbrances are registered with the equivalent of our CAC or some other state government secretarial office and the information is accessible to everyone with internet access. The idea is good but creating a bureaucracy to solve a problem sometimes only makes matters worse.

Do you think AMCON can resolve the debt burden?

Unfortunately, the government bails out these banks with public funds otherwise, these debts should be the private headaches of the banks and the individuals who took the loans. Really, there should be a limit to the kind of debts AMCON can buy. The board of bad banks should be held accountable for depositor funds that they lose. People tend to repeat bad behaviour if there are no consequences.

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