Monthly Archives: June 2013

FITCH AND KWARA

My youth leader used to tell me only my opinion of myself should matter. Up until I got my first real job as a pharmacy intern I used to believe this mantra was universal; but I was a paid employee with immediate superiors, and making the assumption that my personal assessment of myself using my own biased standards was the most valid report card was self-admittedly fallacious. Reading the news coming from Kwara state one hopes its government, accountable to the good people of Kwara, would be just as honest.

There are three most revered international financial ratings firms in the world: Moody’s, Fitch and Standard and Poor’s (S&P). They have their limitations but still their seasonal assessment of financial institutions, government bodies and so on across the world have been a pointer to their clients’ fiscal healthiness or otherwise. In 2008/2009 bowing to pressure from opposition parties to declare its financial status in light of a N17 billion bond programme it wanted to secure at the capital market the incumbent Kwara state government called on Fitch to render its objective services in the state. Even if it was borne out of political pressure I felt this was a very laudable step by their government considering this is Nigeria where administrations hardly like objectiveness in reporting, whether journalistic or financial. This explains why our politicians hardly grant access to news outlets, local or foreign, except when the purpose is to blow their trumpet as loud as they can. President Jonathan’s interview with Christine Amanpour of Cable News Network (CNN) is the most recent example of that trait. Tax payers’ money was paid to get the 15 minute slot; Nigerians were furious at the half-truths the president told; the backlash was inevitable in social media. But I digress.

For three consecutive years Fitch produced unparalleled bond rating of Kwara state government’s financial status. They were given a long-term foreign and local currency B+ ratings and long-term national rating of AA- with stable outlooks. I could begin to tell you what these ratings mean but all you probably need to know is that Kwara state government is not financially mediocre but there is room for improvement. While that room may be the largest in the world, the lesson learned transcends their performance. Besides the fact that no other state (until Lagos state did much later) had got a similar rating and it would have been hard to conduct comparisons nationally. Kwara had demonstrated to the world that it had the temerity to open its cupboard for inspection without any fear of the discovery of skeletons.

You would expect continuity of this praise-worthy initiative but, as with many other mind-boggling scenarios we witness in Nigeria they have decided to terminate the trend. In his monthly address fittingly dubbed The Governor Explains, the current Kwara state governor, Abdulfatah Ahmed, who at the time of courting Fitch’s services was Commissioner of Finance and Economic Development, claimed they had initially subscribed to the idea of financial rating because at that time they needed to secure loans from the capital market. Now they don’t. If this is the sole reason why his administration is now revoking its contract with Fitch then it is very short-sighted and you wouldn’t blame me if I begin to develop conspiracy theories. But the governor did give me another reason to have a raised eye brow. He said the purpose of the original Fitch rating was to get the bond from the capital market and “also showcasing ourselves to the world as benchmarking against best practices.” So, again, why then stop it?

In a country where corruption is said to be the bane of national development it would only smack of tomfoolery for a government dedicated to positive change to chuck out the sole indicator of its financial prudence. Don’t get me wrong. Fitch’s report does not directly measure the presence or absence of corrupt practices in Kwara state. But in auto-mechanic-speak it is like a “check engine” light one should take seriously. Also, considering how foreign governments take this ratings seriously Kwara state deserves whatever flak it is now receiving for its action. In 2011, Standard and Poor’s cut the USA credit rating by a notch from AAA+ to AA+. S&P cited the government’s failure to cut spending or raise revenue enough to reduce budget deficits. The world did not end then but the American government knew they were certainly not heading in the right direction. It served as a timely reminder that they had to get back to the drawing board and get things right.

Now that Kwara state says it no longer needs the bond ratings of Fitch, against which template do we then rate its financial buoyancy? Last time I visited Ilorin, the state capital of Kwara, I was impressed at the capital projects being undertaken by the government. The presence of outside investment, notably the South African mall, Shoprite was also conspicuous. These however do not indicate anything regarding the health of Kwara’s economy or the standard of living of its citizens. In fact, it took me several minutes to locate Shoprite because many ordinary people who I asked on the roadside for direction had not even heard of it, let alone visited it. This may mean nothing. What’s incontrovertible is that new malls were still opening in Greece just before the financial crisis rocked and threatened the country’s existence. One may be tempted to counter by saying Greece did have the benefit of Fitch rating but, being a medical professional,  I always insist that a prognosis is better than none.

Also, you may wonder why I have picked on Kwara state; after all, most other states in Nigeria have not even shown the will to get credit ratings in the first instance. I am aware of this and have already given credit where it’s due. It’s just that when you see a state government pioneer something so beautiful then relapse to mediocrity tongues should start wagging, fingers should start pointing, praise should be withdrawn. The “check engine” light should indeed be checked.  

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