Thursday, May 1, 2008

Why we are supporting Lagos in infrastructural devt – Obigwe, ED, Union Bank of Nigeria

Thursday, May 1 , 2008

•Austen Obigwe
Photo : Sun News Publishing

Union Bank’s Executive Director, Corporate and International Banking, Mr Austen Obigwe has commended the Central Bank’s consolidation exercise because of its positive impact on the economy generally. He said consolidation has made it possible for the country to attract bilateral loans.

“We are attracting a lot of bilateral loans into the economy which never happened in the past. Many banks are coming up now to say I will finance this project at 300 million dollars. It never happened in the past”, Obigwe said.

Citing another of what he considered a good example of such bilateral loans, the bank executive said that Union Bank Nigeria plc and a Chinese Group have concluded arrangements to raise one billion United States dollars, equivalent of N117billion for infrastructural development in Lagos State.

Obigwe who was one of the discussants at an interactive session with stakeholders and the media on Financing Infrastructure in Nigeria put together by the Bureau for Public Enterprises (BPE) and the Union Bank plc, told journalists that, “we are doing that because we have confidence in Lagos State”
Continuing, the bank executive affirmed that the micro economic policies of the apex bank has enabled Nigerian financial institutions to play their due role in the economy much more effectively.

Obigwe also said that in financing infrastructure that would attract toll in a Public/ Private Partnership arrangement, the government must give the public an alternative that would not attract toll. He also commented on some other issues.


According to our constitution, the life span of any administration is four years. In a situation where there is no continuity, when the new government comes in, then that creates a big problem. The repayment period of some of these projects may go as high as may be 15 years. The way I am looking at it, we don’t even have the physical money around and then the further risk of this project being stopped or running into difficulties when another government comes in becomes a very big problem. Maybe what the government needs to do now is to have an Act, a law that would stipulate that any contract that have been entered into-maybe the State House of Assembly or the National Assembly could pass such a law and make it compulsory that such contracts should not be reviewed.

If there are errors in them, people should learn from such errors. You don’t say because there is an error, if I put in 100 million dollars in a transaction and because you have cause to believe that the contractor did not do one or two things then you cancel it. But my money is at stake and it makes it difficult.

We talk about NITEL, actually the President did not approve the cancellation of NITEL. But you know that it was announced that it was a cancellation. Of course that affected our preparedness in getting more involved in further privatization.

Now, if you want the bank to provide the financing, which I have said the government only cannot provide the funds for, the local and foreign banks will provide the financing. We need to have more confidence that when this project has started even before they are completed that they will continue regardless of the government in power. We are aware of many projects that have been abandoned. There are so many of them all over the places. And this concept-Public/Private partnership (PPP) is an entirely new concept.

A lot of us have learnt about the power project, the probe of the project is coming up. Even though it is not affecting our client, but it is a source of worry for the banks because we don’t know where that will end. The issue for us is that in other countries like in the United States of America or even South Africa next door, a project is done for 15 years, nobody goes back on it once it has been approved and is on going. Nobody should go back to start reviewing it. If you want to review anything, the first thing is to find a fault. So, the best thing is to say look its being awarded, the banks are financing it, they should leave the contract to continue until the life of that project.

Financing and politics

When you talk of the banks, now the Central Bank took the best decision by bringing about consolidation and it has been consistent with its micro economic policies which is good for us. But then, we don’t have the power to influence political issues. We cannot influence the fiscal policies of the government. On our side, what we are doing is, we are ready to provide finance to support whatever government wants to do.

Again, we will continue to emphasize the issue of continuity. You have changes in the financial institutions. A new Managing Director does not come in and start cancelling what the other Managing Director had done. No, It’s never done that way. But because it is politics particularly when a state is transiting from one party to another, you have a lot of probe of what is not supposed to be probed. You see quite a lot of cancellations of policies. Actually, in banks, a year to an election we don’t support any state. Because we are afraid that if the sitting governor does not come back, the new governor will start changing the rules again.

For us in the banks, all we can do is to write our recommendation. The banks are supposed to be seen. We are not supposed to be heard. Once we recommend, the issue for us is micro economic policy. The CBN is doing a great job in that area. We are attracting a lot of bilateral loans into the economy which never happened in the past. A lot of banks are coming up now to say I will finance this project at 300 million dollars. It never happened in the past. So, in that area, the financial institutions are playing their part.

Alternative infrastructure

The alternative normally exist. When I was a student in the USA, we had a turnpike road where there is no traffic light at all. You can drive 300 miles, no traffic light. But you have the main road like you have the Eko bridge which is there for you not to pay. If you are going to use the turnpike, you must pay. So, there as an alternative.

What I am saying is that the government should not say we are privatizing roads and expect people to pay when you don’t have an alternative for them to use. For example the second Niger bridge will be a toll bridge. If you don’t want to pay toll, you have an alternative, you can use the old one. So, that that’s what I believe we should do in some of the roads. If people don’t want to pay toll, you must give them an alternative. And that is the way it is all over the world. Now, look at Lekki, you don’t have a choice if you must use that road. You must pay toll. If you don’t use Lekki road, which other road can you use? So, there must be alternative.

Why we are supporting Lagos

Lagos State has a history of continuity, of obeying and respecting whatever contractual obligations the preceding government has gone into. We see Lagos State as being highly credit worthy. What we are trying to do is our bank (Union) and a group in China we are launching a one billion dollar infrastructural development fund which will be used in Lagos State alone. We will use it to fund projects in Lagos State. We are doing that because we have confidence in Lagos State. We’ll look at other states too. We believe in Lagos State.

Even if another government comes to power, because of the economic importance of economic activities in the State, the chances that whatever contractual obligation the previous government has will be respected are usually very high.

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