* Wave of capital market reforms in past 18 months
* Independent regulators cut through vested interests
* A new administration after elections could hinder reforms
* But change probably has too much momentum to be reversed
By Nick Tattersall
LAGOS, March 28 Walk into some government
buildings in Nigeria and it isn't hard to understand why the
pace of economic reform is slow.
Bored-looking bureaucrats sit on chairs that look many
decades old. Calendars on the walls are years out of date and
some officials can't remember the last time their phones worked.
Nobody blinks when the power fails.
But step onto the executive floors of the Central Bank, the
Securities and Exchange Commission or the state-owned "bad
bank", the Asset Management Corporation of Nigeria, and the
atmosphere changes dramatically.
Sharp-suited bankers and lawyers bark into mobile phones.
Documents are whisked from office to office. A sense of urgency
A triumvirate of reformers -- Central Bank Governor Lamido
Sanusi, AMCON Chief Executive Mustapha Chike-Obi and SEC
Director General Arunma Oteh -- has turned Nigeria's financial
markets inside out over the past 18 months.
A $4 billion commercial bank bailout in 2009 and the sacking
of eight bank chiefs for reckless lending, engineered by Sanusi,
was the first strike, shocking a corporate elite that was unused
to close oversight.
Oteh, who took office in January 2010, pursued stockbrokers
with equal vigour, taking 260 individuals and entities to a
special tribunal over alleged price fixing and insider trading.
AMCON, established last year to soak up non-performing loans
in exchange for government bonds, is hoping to rebuild
commercial banks' balance sheets after the bailout and deepen
the fledgling debt market as it does so. [ID:nLDE7201QZ]
The reform drive has pleased foreign investors. Nigeria's
main stock index .NGSEINDEX fell more than 60 percent over
2008 and 2009 as ramped-up prices collapsed, but confidence is
returning. Foreign investment in the market almost doubled to
$2.5 billion last year. [ID:nLDE7091N8]
But by demonstrating the importance of a few individuals to
financial reforms, the triumvirate's success indicates the
reforms' vulnerability. Next month's national elections could
cut the political support that the reformers enjoy, particularly
if a new cabinet is less willing to give them free rein.
"Administrative bottlenecks can be put in their way to
ensure the reforms are ineffective. A big risk is the selection
of the cabinet," said Bismarck Rewane, chief executive of
Lagos-based consultancy Financial Derivatives.
"These three people are very strong personalities. If for
any reason they feel frustrated, they will quit. They won't hang
around, and that would be a disaster."
As examples of such bottlenecks, he pointed to delays by the
tax office last year in recognising a tax break for corporate
bond issuance announced by regulators, and the refusal of the
customs service to recognise the lifting of certain import bans.
For profiles of the triumvirate, click [ID:nLDE72O1TZ]
The approach of Nigeria's presidential, parliamentary and
state governorship elections in April is already affecting some
areas of economic policy, causing government spending to rise
and helping to stall reforms in the oil and gas industry.
Incumbent President Goodluck Jonathan is the front runner
but faces a concerted challenge from former military ruler
Muhammadu Buhari. Past Nigerian leaders have curried support
with the promise of government posts and some analysts fear
history will repeat itself, leaving Jonathan with a less
cohesive and reform-minded team. [ID:nLDE72L0R2]
Nigeria has seen reformers come and go before, such as
former finance minister Ngozi Okonjo-Iweala, who led
negotiations for an $18 billion partial write-off of the
country's sovereign debt in 2005 only to be sidelined by
then-President Olusegun Obasanjo a year later.
There are reasons to be optimistic about the current
triumvirate of reformers, however. One is that they will not
need to be confirmed in their posts any time soon; Sanusi and
Oteh have fixed tenures which are not due to end until 2014 and
2015, while AMCON was established with a 10-year lifespan.
Another reason is that in different ways, members of the
triumvirate seem unusually immune to political pressures.
Sanusi's independence stems partly from his status as the
grandson of a former Emir of Kano, one of Nigeria's most
respected Muslim leaders, and his lineage appears to help him
cut through the turbulence of Nigerian politics.
"You don't get intimidated," he told Reuters.
"The important thing is that I come from a background that
is a public service background. The Emirate system is public
service. My grandfather was an Emir but my father was a career
civil servant, a class committed to public service.
"Maybe it bothers some people. I don't consciously act with
the knowledge of where I come from...but I think as long as I do
the right thing, I have support."
Sanusi has been a vocal critic of Nigeria's high government
spending, putting up a tough defence when he was hauled before
parliament last December to explain comments that government
overheads were too high. [ID:nLDE6B011X]
The other two members of the triumvirate come from outside
Nigeria's Byzantine and self-serving world of politics. They had
successful private sector careers abroad and could easily return
to them if necessary, a knowledge which boosts their ability to
resist political pressure. Oteh was a top official at the
African Development Bank, and Chike-Obi worked at Goldman Sachs.
"I just come here and do my job the best way I can. If it's
good enough, wonderful, but if it's not good enough, I tried,"
He acknowledged that AMCON faced pressure from other parts
of the government, but described it as a natural and manageable
part of his job.
"I think there's always a temptation in government to
bureaucratise quasi-government institutions. We have a big
balance sheet, we have a big footprint and so the government
bureaucrats like to reduce the autonomy.
"So it's always going to be a bit of a struggle, and it's
not an unhealthy one."
In fact, enough has been accomplished before the elections
to make the reforms difficult to roll back. New investors are
signing agreements to recapitalise the bailed out banks. The
capital markets are starting to see liquidity deepen and
corporate governance improve, creating a growing constituency
that benefits from reform.
Still, many further reforms remain to be undertaken if
Nigeria is to make the step up from frontier to emerging market.
The banking sector's lending to private firms remains weak, the
stock market is still heavily dominated by banking shares and
needs to diversify, and the bond market is primitive and opaque.
"There are risks," said Financial Derivatives' Rewane.
"These reforms can still be obstructed and significantly
closed down, and that would frustrate the efforts and the
enthusiasm of the reformers."
(For more Reuters Africa coverage and to have your say on the
top issues, visit: af.reuters.com/ )
(Additional reporting by Chijioke Ohuocha; Editing by Andrew