By Stanley Oronsaye, 234Next
Nominee Managing Director, Asset Management Company of Nigeria, ( AMCON) Mustafa Chike Obi, speaks exclusively to 234Next. Excerpts:
How would you compare Wall Street and the Nigerian capital market?
The Nigerian capital market is a developing capital market. It is not as fully developed as the United States capital market. But it has some of the essential ingredients that would make it successful. There are a lot of intelligent people, a lot of active interested parties and I think that the regulators have spent some time taking what is best from a lot of capital market in the world. It is not yet complete but it is young and I think it is moving in the right direction.
How does it feel leaving your practice to come back to Nigeria?
I did not come back here to make money. My kids are grown. I have a consulting firm. In fact, just before I came, I had a contract that would have paid me $4 million by the end of the year. I started it but I gave it up. So this is all about doing something to make a difference in the country. It sounds grandiose people don't believe that but that is the truth. There is a sense of guilt that we have over there that other people are building this country and we are not. It's there. We may find ways to subdue t but it's there. And so when somebody gives you opportunity to serve, you are happy. My wife asked me if I am sure I want to do this. I told her I have no choice.
What should Nigerians expect from AMCON which many believe will salvage the situation at this point?
Let me first make it clear that I don't have a job as managing director of AMCON. I am a nominee at this point. The process needs to go through the Senate for confirmation and nobody especially me is taking the Senate confirmation for granted. The Senate has a role to play and it must play it fully. Having said that, my thought as a nominee for AMCON is that AMCON was necessary. It was necessary because some of the things that happened all over the word also happened here. The Nigerian banking system was no worse than anywhere else. The mistakes that were made were made everywhere else including the United States of America. So I think that we should not spend too much energy beating ourselves up because of what happened. It happened everywhere else. So AMCON is necessary because it is useful to put al the non performing loans in one place and manage them. It creates economies of scale. AMCON is going to be able to have long term financing which will enable it hold on to these non performing loans for longer period of time and dispose of them gradually. So what should Nigerians expect from AMCON. Nigerians should expect that AMCON will relieve the banks of some of the burdens that they currently carry. It would encourage them to do what they are supposed to do to give loans to the real economy and hopefully, through good management, AMCON would be able to dispose of the assets it acquired at the right time. From my part, I expect that AMCON would be a world-class institutions that Nigerians can be proud of.
In line with your brief, how do you intend to drive this process considering that you are almost going to build an institution from scratch?
I don't know how to answer your question about briefing, but I will tell you that it is not an institution from scratch. A lot of people have been working very very hard to make AMCON a reality. Those people are the Central Bank, the National Assembly, they have spent a lot of time on this Bill. In my opinion this is a very well crafted Bill. The ministry of finance has worked hard. The Presidency has been involved, the ministry of justice ensured that the bill conformed to all the legal requirement of the constitution. So I think that a lot of work has been done. Nigerians will be very pleasantly surprised that when AMCON starts to operate, it will move very quickly to relieve the banks of non performing loans and recapitalise them to the point when they are fully functioning again.
Some people think AMCON is taking too long. It is still at the stage of confirmation of nominees after several months and the economy is haemorrhaging. How fast should Nigerians begin to expect action?
You asked one question but you have made a statement before the question. You said AMCON has taken a long time. It depends on your point of view. This Nigerian AMCON Bill, and I have studied a lot of AMCON; including America, is in my opinion, the model that takes in all the best features of what all the other asset management companies that have operated in the past. It necessarily required study and deliberation. It is taking sometime but I think that the product is the best product we could have got. It is necessary in a democracy for every body who is involved to have their say. The banks, the representatives of the people and the enabling institutions like Central Bank and ministry of finance. These are busy people. They have other things to do. So it has taken time to get them all together at the same place. But I will repeat; once this process is complete, Nigerians will be pleasantly surprised at how fast AMCON will move. I can't give any timetable because I cannot preempt the Senate confirmation process. But once that is done, I think that within 30 days, we will see definite action.
The central bank has directed banks to reduce their capital market exposure to 10 per cent. The question then is what will be left for AMCON to do if the banks have reduced a huge chunk of the bad loans which is exposure to the stock market
There are several things to this. Central Bank is the regulatory body for banks. I am not privileged to go through the deliberation that led to the Central Bank coming up with the 10 per cent. But from my point of view, it makes sense that banks are primarily focused on lending to the real economy. That is what banks are supposed to be doing. So if the central bank in its wisdom decides that 10 per cent is a good number, I will not second guess that. Your assumption that most of the non performing loans are based on capital market lending, I can tell you that is not correct. There is significant amount of non performing loans, more than the majority, that is not capital market related. So there is still a lot of work for AMCON and the banks.
One issue of contention is how these assets are going to be priced. Have you contemplated the issue of pricing?
Yes. A lot of work has been done on pricing of these assets. There is a methodology of pricing assets. If you have all the correct information and all other input, you can price a lot of these assets. One thing I have heard is people talking about toxic assets. There are no toxic assets in Nigeria. There are a lot of non performing loans. Toxic assets refer to highly structured derivative securities that require tremendous pricing sophistication. We don't have those here. We have non performing loans with more or less complete to incomplete documentation.
These loans can be priced and there are various ways of pricing these loans. I am not going to tell you all the work that has been done on these loans but I can tell you this; It is going to be a negotiation between AMCON and the banks. AMCON is there to resolve problems not to create them. AMCON will give the methodology it wants to use. It will be very transparent, it will be published. Everybody will understand what AMCON is trying to do. We will negotiate with the banks and we will come to such agreement. But the pricing valuation method will be public and be published very quickly after AMCON starts work.
So what should the financial market expect about price?
Once AMCON publishes its valuation method, one can have valid discussion as to which method would be best. Until then, the concept of AMCON is one of helping, resolving a crisis. There should be no objection to the AMCON concept. Now we can all discuss various things about its operations when it starts operating and by law it must publish how it is going to operate. But until then, I would advise people not to be anxious because the concept is to provide solution, not to create problems.
Stockbrokers feel that their interest was not adequately covered by AMCON. How do you address this?
The Central Bank by law determines eligible institutions and determines eligible assets. That is the duty of the central bank. AMCON doesn't decide who it has to deal with or what assets it has to buy. Central Bank decides that. So if there is an issue about that, it should be directed at somewhere else but AMCON, because AMCON is very well defined. AMCON in consultation with the central bank and the institutions comes up with the price and everybody is happy. If stockbrokers have a concern, I suggest that they should wait and see what central bank directs us.
You seem enthusiastic to serve the country. What can you say about Nigeria at 50?
I have the privilege of looking at Nigeria from oversea and I focus a lot on what has happened. There is a long way to go but we have come a long way as well. Some years ago we couldn't attract people like the minister of finance, to name one, the director general of the SEC (Securities and Exchange Commission) to name another. We couldn't attract a lot other people that are back. This country has come a long way and I think that if we focus on what we have accomplished as a country, we can make the steps necessary to get to where we want to. I am very optimistic about Nigeria. I am very happy to be given a chance to serve and I think that this is the place where people of talent and good intentions can make a big difference and my hope is that I can make a big difference to Nigeria. I feel sad at being away for so long and other people have brought it to this point. But better late than never. I hope I can be able to add my effort.
Tell us about your work experience in the financial market in Nigeria?
I will give you some background first. My father, Professor Chike Obi was an academician and my older brother followed in his footsteps. He had a PhD in physics and was professor in University of Ilorin. I was supposed to follow in their footsteps but I realised very quickly that my love was for the finance industry. So I abandoned that path and I came and I worked for Chase Merchant Bank, one of the three initial merchant banks in this country at a time when the merchant banking industry was being formed. I worked for two years in the treasury department.
I rose to become the head of the treasury department. And I am proud to say that we were the ones who made treasury department become an important profit centre in banks because at the time it was a vibrant function. So I spent two years first as an analyst in the treasury department, we were selling bankers acceptances and commercial papers to pension funds and insurance companies. Later on the function grew to managing the bank's liabilities, making sure the bank's excess funds are well invested and managed in such a way that the bank functioned adequately. So it became a profit centre. I did that for two years and I left to go to business school at Stanford. So I did spend two years in Nigeria. Many of my colleagues are now senior members in that industry and I am still in touch with them. I have been aware of all the development over the years through my colleagues.
So you think that sufficiently positions you for this new role?
I think that the AMCON job needs more than experience. I think it needs thorough understanding of the financial market. It needs an international exposure. It needs a thorough knowledge of international financial theory. It needs knowledge of the Nigerian people and Nigerian market and situation. I think that if it was a one man job, nobody will be qualified to do it. But luckily, there are other people that are going to be involved that would bring in other aspects of leadership and skills so that when you have a team you have a team that can cover all the various aspect. We need somebody the international market can respect. We need somebody the domestic market can respect. So we are trying to create a team at AMCON. I wish there was just one person with all the qualities but it's difficult to have it. That's the idea.
There is renewed interest by Nigerians in the Diaspora to come back home to contribute their quota. How do they fit into a system which is different from what you are used to in the developed economies?
I think that the most important thing in anything you do in life is passion. It is not skill. I know people who are skillful at things and they have no passion and don't get anywhere with it. If you have passion and love for anything, everything else will come to pass. You will follow it to the end. What I would tell people who are coming from anywhere, Diaspora or not, who are given important responsibilities in Nigeria, I will tell them that if they don't have the passion and love for what they are about to do, they should not do it. Because once you have the love and passion for what you are doing, it doesn't matter if you don't have electricity for four hours, it doesn't matter if you in traffic jam for four hours. You are consumed with what you want to do and how you can contribute. For me, I am like a little boy now. I am excited. I want to do something. I want to make a difference. And do I notice that it is warmer here than it is in New Jersey. Do I notice that generators are humming in the background and they don't in New Jersey? I notice that but they are background noise. I'll rather be here than anywhere else in the world.