A Critique Of Mills Harm Principle Philosophy Essay

A Critique Of Mills Harm Principle Philosophy Essay In this essay, I will be writing a critique on Mills harm principle. Evaluate its criticisms and explain why its positive influence far outweighs the negative ones in a society which its citizens are free to dictate their notions. In his Autobiography of 1873, John Stuart Mill described On Liberty as a kind of philosophic textbook of a single truth (Mill (1989 edn), p.189) and rather than speak in terms of rights, some may claim a right not to be harmed, Mill said only Harm (or the threat of Harm) is a sufficient justification for exercising power over another. Mill further qualified his Principle by adding that it wouldnt be a sufficient condition to exercise power over someone simply for their own good and he does permit some exemptions to the Harm Principle. So he allows coercion in an economic context, like when a more efficient and presumably more profitable company Harms a competitor by seizing an increase in market share. Another exemptions are of the incompetent, the retarded, the ignorant, children, all those below the age of consent. They may all be coerced; in short all those not competent are exempt and Mill allows for coercion by the judiciary. So for example the type of legal coercion which punishes murder by imprisonment is exempt. However probably the most controversial exemption in, On Liberty is Mills reference to backward states of society, Mill refers to barbarians and says We may leave out of consideration those backward states of society in which the race itself may be considered as in its nonage. (Mill, John Stuart. Stefan Collini (ed.), On Liberty and Other Writings, (2000 edn), p.13.) Mill is referring here to societies so backward theyd hardly be capable of understanding the Harm Principle let alone responsibly applying it. The implication here is that society needs to recognize concepts like free discussion before it can achieve that level of education and understanding which enables it to benefit from The Harm Principle. Yet when considered in its totality his Principle is anything but simple, because On Liberty is concerned with, Isaiah Berlins later defined concept of Negative Liberty that is, freedom from interference. To quote Berlin, the freedom of which I speak is opportunity for action, rather than action itself. If, although I enjoy the right to walk through open doors, I prefer not to do so, but sit still and vegetate, I am not thereby rendered less free. Freedom is the opportunity to act, not action itself. (Berlin (1969), p.xlii). Some significant criticisms of, Mills Harm Principle have been expressed over the years. I intend to consider the three leading arguments, 1. VAGUENESS. In other words what exactly does Mill mean when he uses the word Harm? Its notable that no definition of Harm is to be found in, On Liberty, granted Mill gives us some exemptions, but no more than that and accordingly Mills use of the word Harm is often considered imprecise. Its this very lack preciseness (vagueness) that prompts us to wonder if there could be a point at which acts of offence become acts of Harm. Without an adequate definition of Harm it becomes difficult to derive to a meaningful definition of Offence and without that judgments of rightness or wrongness are in danger of becoming blurred. In a book by the philosopher Joel Feinberg entitled, Offence to Others, he discusses a thought experiment whereby the reader is assumed to be a passenger on a crowded bus. Its possible to leave the bus of course, but that would be inconvenient and theres not another seat to move to and theres also no prospect of leaving ones seat to stand. Feinberg relates a set of examples, each more offensive than its predecessor, which take place in full view of the passengers. He starts innocently enough with comparatively mild examples like horrible smells, migraine inducing lights, intolerable noises and so on. In the next section which is headed, Disgust and Revulsion, he outlines even more revolting examples; people eating live insects, each others vomit and so on. Further on Feinberg talks of sex acts on the bus, both heterosexual and homosexual. He goes on to suggest increasingly more offensive examples, cataloguing in all 31 distinct illustrations. It emerges that some actions, although of fensive, can be tolerated in public whilst others may be so intolerable as to be better conducted in private. During our earliest years we learn to be conscious of concepts such as yours and mine (that is your sandwich but this is my sandwich) and its from these formative years that our notions of property as well ideas like property rights and obligations derive. Mine has a deeply personal value ascribed to it, encompassing not only physical things (like sandwiches) but also more abstract things, like personal space. An invasion of mine can invariably bring with it an almost instinctual reaction and Suppose someone, in an effort to signal friendliness, stands that bit too close or the person in the next seat plays their walkman that little bit too loud. We can feel aggrieved perhaps even angry? We often describe the other person as, invading our space. A proportion of the public space has become deeply personal. In other words, something about that public space has become mine. In this respect then we often hear somebody say that what someone is doing is, so unnecessary. By that she means i ts unnecessary for an activity to be conducted in public, because it could just as well be carried on in private. It may well be then that offensive public displays should be prohibited by law but still be allowed in private. When one tries to draw a line between Offensive Acts and Harmful ones its not unusual to be faced with a dilemma. Suppose someone is running, naked, along a street that could be interpreted by some onlookers as an Offensive Act, it might even be considered a Harmful Act towards children. In a similarly vein it may be that someone could find the idea of a homosexual relationship, even if behind closed doors, more offensive than an intimate heterosexual liaison which takes place in public. So, just as before, it seems that some things are judged offensive if conducted in public but may well be condoned in private. On Liberty makes it clear that in order to tolerate what Mill calls experiments in living, the toleration of some things, in private, is necessary. For example, some things which are objectionable to this generation may well be acceptable to the next. To him experimentation is a necessary attribute to drive society forward. Mill makes it clear that its by experiments in living that society progresses, an open-minded society would tolerate geniuses because, as Mill maintains, to prohibit everything but the norm would have the effect of stifling innovation and experiments in living'. Thus, a follower of Mills Harm Principle allows offensiveness but modifies the distinction to say that, if offensiveness is conducted in private with each participant having full knowledge of consequences and outcome and each being fully and freely aware of what theyre doing, then the Harm Principle would be complied with. Others however take a different view. Lord Devlin however admits no distinction between public and private actions. He maintains, see Dworkin Ronald (ed.) (1977) The Philosophy of Law, Oxford University Press, pp76-77, that private morality if widely adopted can become public morality. He considers that just as treasonable acts, plotted in private, can eventually adversely affect society so immoral acts, conducted in private, can become similarly antisocial. For Devlin the test of rightness is not linked to Utilitarian Theory at all. He famously refers to The Man on the Clapham Omnibus, his test being the feelings of intolerance, indignation and disgust of a reasonable man. But there are difficulties with relying on what an ordinary person would find morally acceptable. Presumably, in the heyday of the Taliban, if we had asked the reasonable man on a Kabul omnibus whether or not there should be a law barring female children from attending school, his feelings of intolerance, indignation and disgust would be a sufficient justification to allow the introduction of such a law. H. L. A. Hart, Professor of Jurisprudence at Oxford University, differs from Devlins reasonable man view holding it better to adopt a rational person test. (Ibid, pp83-88). A reasonable person is neither required to have reasons for, nor to justify, moral beliefs. Instead they depend upon convictions of what is and isnt morally acceptable. Its apparent then that, despite an intuitive appeal, Devlins approach fails to fully refute Mills Harm Principle. 2. NO MAN IS AN ISLAND. Mills implicit assumption that its possible to undertake an action in such a way that it wont affect anyone else is called into question here. Of course, its quite possible to do something which only appears wholly self regarding. Suppose I enjoy rock climbing. I may believe that my climbing, if solitary, could harm no one but myself, even if I should suffer a fatal accident. In such circumstances I wouldnt, on the face of it, be causing Harm to another but should I have a climbing partner she may well be Harmed by my demise, even though not in any way responsible for my misfortune. And even if I made certain that I and only I climbed, in the event of a fatal accident, grieving relations could be harmed. There could well be a similar Harmful effect suffered by members of a mountain rescue team that recovers my body and so forth. Therefore some might say I should be stopped from participating in dangerous hobbies because of a risk of possible Harmful effects an accident to myself may have upon others. If, being aware of the dangers of passive smoking, I smoke cigarettes heavily but only in my own home, taking care not to impose the effects of my smoking upon others, it could be said that I stand to harm no one but myself and so Mills Principle would then apply because I could be persuaded of the danger to my health but coercion shouldnt be used. But if my risk of a serious smoking related disease puts an unfair burden upon an already overstretched asset, perhaps even reducing the resources available to other people with serious illness. For this reason Mills implied assumption that some actions regard the perpetrator alone has been questioned. Fitzjames Stephen held that, by far the most important part of our conduct regards both us and others (Fitzjames Stephen (1967 edn), p66). This view is held by many of Mills critics. Nonetheless its implausible to assert that every self-regarding act has a Harmful effect upon others. 3. LIBERTY AND UTILITARIANISM. A foundation of On Liberty is Mills professed Utilitarianism, where each persons individuality and happiness is the objective of a civilised society. But because Mills Utilitarianism has its emphasis on consequences of action, some have questioned whether its correct to assume the Harm Principle is truly Utilitarian and so Mills Utilitarianism is often termed a consequentialist theory. Happiness, according to Mill, is not as simple as Jeremy Benthams idea, where he thought of happiness as, a blissful state of mind. Mill believed happiness to be something more complicated; he thought the sum of human happiness was better served by the preservation of as wide a range of negative liberties as possible. Its been argued though that many of the negative freedoms put forward by Mill were ultimately incompatible with his Utilitarianism because the Utilitarian aim of maximum happiness gives way to other considerations. But this view misses the fact that far from abandoning Utilitarianism, Mill argues that The Harm Principle and Utilitarianism can go hand in hand, so to speak. He certainly holds that there should be complete freedom of thought and discussion. Almost a third of, On Liberty is devoted to these vital freedoms yet, as a consequence of his thoughts about experiments in living he also makes the case for individuality and individual freedoms. Mill holds that the very concept of Negative Freedom allows for a choice between good and evil, for the freedom to choose between overall happiness and the gratification of individual desire. In other words people are free to accept or refuse an opportunity. As Mill said, The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs or impede their efforts to obtain it. (Mill, John Stuart. Stefan Collini (ed.), On Liberty and Other Writings, (2000 edn), p.16.) In the section of On Liberty entitled, On Liberty, as one of the elements of well-being. (ibid, p68) Mill maintains that the fact of human diversity is itself an argument for liberty. He argues that imposing one way of life upon every member of a society would be as disastrous as treating a cactus and an orchid in the same fashion. Mill says (putting aside some exceptional circumstance, such as monastic institutions) that human beings differ so much from each other that it would make no sense at all to expect each one to conform to a single model of a good life. Mill differentiates private interests, where no intervention is permitted, and public interests where, to maximize general happiness, intervention is allowed. For example, there are certain things like murder and fraud which a civilized society could not tolerate and against which it would have to protect itself but that same society should still encompass within it private interests of freedom and liberty. Its clear then tha t Mill adopts a utilitarian philosophy when addressing matters of public interest, but its a subtler form of utilitarianism which weve come to know as Indirect Utilitarian. While a direct utilitarian believes that any action which promotes general happiness is good, an indirect utilitarian would follow a more understated interpretation, holding that individuals should not simply be left to maximize happiness for themselves and its this indirect utilitarianism which Mill assumes throughout, On Liberty. He says, I regard utility as the ultimate appeal to all ethical questions; but it must be utility in the largest sense, grounded on the permanent interests of a man as a progressive being (Ibid, p.14) CONCLUSION In, Thinking from A to Z, Nigel Warburton reminds us that a Socratic Fallacy is: The mistaken belief that if you cant define a general term precisely you wont be in any position to identify particular instances of it. Warburton. Nigel. Thinking from A to Z. Routledge (2nd edn. 2000), p.120 The vagueness objection is a Socratic Fallacy, because whilst a concise definition of the word Harm isnt to be found in, On Liberty the following argument is sound: Premise 1. Minor objections should be set aside if an idea withstands the test of time. Premise 2. On Liberty has withstood the test of time. Conclusion. On Liberty should have minor objections set aside. To insist that Mills Harm Principle is specific at every eventuality is tantamount to asking for the impossible simply because the very concept of freedom (or liberty) carries within it an element of vagueness. The most a person reading, On Liberty with charity could reasonably expect is a Harm Principle with illustrative examples, and where fitting, appropriate definitions. This essay has reviewed the major criticisms leveled at Mills deliberations. The question of Mills alleged vagueness has been addressed as well as the problems associated with deciding what is Harmful as against Offensive and its been argued that consenting adults, acting in private, are unlikely to harm anyone but themselves. With regard to the claim that Mill has neglected his utilitarian principles it has been argued that, On Liberty has remained true to Mills utilitarian ideals, accommodating the negative freedoms necessary for an individuals freedoms. Mills arguments favor through Utilitarian means a concept of negative liberty, making the point that its only when were given sufficient freedom to freely choose how to live our lives (follow the good, if you will) that were most likely to maximize happiness. He says that a diversity of lifestyles is necessary because it allows differing individuals to find their own fulfilling ways of living. Its useful to remind ourselves that, On Liberty was published in 1859 and that it was intended primarily for the general public, it certainly wasnt presented as a dissertation solely for the academic world. Reading, On Liberty one is struck by Mills feeling for humanity and by his concern for his fellow man. He goes to some lengths to point out that his Principle is intended to protect those less able or, as he said, those not in the maturity of their faculties. All in all, On Liberty gives a structure within which to discuss the question of how free a person should be to live life as they please. For us in the 21st century, On Liberty embodies truths of tolerance, liberty and accountability to which the best of our societies aspire to today. From Mills writings its clear that the Harm Principle is essentially sound and that Mill is still relevant after nearly one hundred and fifty years. For example the rise of religious fundamentalism often brings with it an intolerance of alternative views that runs counter to Mills ideals. By the same token, its not too difficult to find totalitarian regimes (be they left or right wing) whose subjects are required to repress their individuality in service of the common good. Its right that the last word be left to J. S. Mill. The mischief begins when, instead of calling for the activity and powers of individuals and bodies, it (The State) substitutes its own activity for theirs; when instead of informing, advising, and, upon occasion, denouncing, it makes them work in fetters, or bids them stand aside and does their work instead of them. (Mill, J. S. On Liberty and Other Writings, (2000 edn), p.115.) THE END

Annotating (Glass Castle)

Annotating (Glass Castle) Glass Castle Did you notice anything unusual about Jeannette Walls portrayal of poverty, or homelessness? Even though they had bad times with food and other necessities, they still were happy as a family * When she was young, she viewed life as an adventure and when she got older and in West Virginia she started to see reality of her life and she didn’t want to be seen as the girl who lives in the beat up house and the family that didn’t always have food * She doesn’t let her situation of poverty be an excuse or a burden for not being successful and she knew she was going to push past it * It shows that the Walls’ lifestyle was a choice, when her she figures out her mom has had land worth a million dollars and she just wanted to live the way she was living When did Jeannette figure out that her life was not normal? * When film makers came to Welch and were making a documentary and she saw films about life in New York, she saw ther e was life outside the way they were living * When her dad was prostituting her out, her view of her father was changed * When she went over to a friend’s house they had a thermostat and she had never experience one before and this she realized there was much more like that and the way she was living wasn’t normal Do you think her parents were mentally ill?Her mom would stay in bed for days at a time and she would not even take care of her own kids and do nothing, she was probably in depression The dad was an alcoholic (when he tried to quit in Arizona he had withdrawal) and this was a mental illness He might have been molested by his mother, Erma-When Erma was molesting Brian and the children told their father he denied it and became very angry, probably trying to cover up what happened to him He also never wanted to go to West Virginia, he said it was because of pride but he was probably scared of going back to Erma Being molested by his would explain his alcoholism, his anger Annotating How do you know what is important enough to take notes on when you are reading? 1. Reveals some important detail about plot a. Exposition i. Time and Place of Setting, Setting Changes 1. Setting changes frequently in Glass Castle 2. Sometimes time is very difficult to figure out, in Glass Castle they were watching Water Gate which was in 70s, they lived in Lyndon B Johnson apartment building and he was president in late 60s ii. Introduces us to Main Characters iii. Hints at, or Suggests, the Conflict 3.When Jeannette went to hospital and her dad does the Skedaddle we know the problem is going to involve her dad or parents iv. Gives us necessary background info, Anything we need to Know what is Happening 4. We need to know these things for the story to make sense b. High-Point v. Every high point is like a mini climax in a story vi. The climax is the high point at the end c. Climax vii. The point where the Main Character, or Protagonist, Can win or lose, live or die, succeed or fail. d. Denouement (Resolution) viii. Happens the second we know which way the climax is going to go-win or lose, live or die, etc. ix.The Climax and Denouement happen in almost the exact same moment e. Conflict x. Conflict is most important element of plot xi. Internal 5. Glass Castle had a lot of internal conflict going on in Jeannette’s head xii. External – Most Movies or stories 6. Ex: Batman and Bane 2. When you come across special literary devices f. Foreshadowing xiii. Something earlier in the story that gives a hint to something that happens later in the story g. Symbol xiv. In Glass Castle the Glass Castle is a symbol of hope in the beginning but later it becomes disappointment and failure because they realize their dad was never going to build h. Irony xv.When something happens that is the exact opposite of what you expect i. Flashback xvi. The whole Glass Castle is a flashback because she is telling the story of her childhood 7. A memoir is one long series of flashbacks j. Juxtaposition xvii. Where you put two opposite scenes next to each other 8. Happens a lot in books 9. Ex: When Jeannette is living in a very high end apartment and her parents are living the streets and dumpster diving 3. When it reveals the importance of the title k. Sometimes it is obvious but others it is not xviii. Ex: In Glass Castle the first half of the book it was literally the house Rex was going to build and it represented hope and the future.Towards the end it represents disappointment in her father 4. Unfamiliar vocab words l. Circle and Look up and write definition by it xix. Ex: Hirsute-means harry or shaggy 5. When it reveals something important about a character m. New Character-Character List, Do every character and just put a little description on them with something specific what they said or did xx. Ex: Brian coming up with the idea of the catapult instead of saying Jeannette’s brother n. Mark when a character does or says something that is out-of-character, or not typical of them xxi. Ex: When Jeannette steals a watch from Mr. Becker (Eventually she brings it back) 6.Theme o. One of the main ideas or lessons that the writer is trying to teach us in a book xxii. Usually more than one them, even in short stories p. Made up of two parts xxiii. Subject matter xxiv. Author’s opinion 10. Ex: Glass Castle is about poverty and homelessness and Jeannette is trying to show us that poverty can be a choice 7. Highlight any phrases or sentences that you just like q. For whatever reason, funny, cool, just something you really like 8. Take note of anything that reflects your own personal experience, or some idea you’ve had or something you strongly believe Things Mr. Danforth Tests On Level 1 QuestionsLiteral questions that you can find in the text; concrete details you should be able to point to in the book. They are basic facts from the story (Where she worked for her first job in New York. Level 2 Questions Questions that require us to â€Å"read between the lines†-us making deductions on details or facts that are in the story and we are deducing a fact that is not written in the story. Means we come up with a fact, that is not written in the story, based up on one of two other facts in the story. Never printed in the book. Ex. : Why doesn’t Cinderella’s stepmother love her? Ex: Rex is sexually abused by his mother. He would never go back to West Virginia and also his mother, Erma molested her grandson as well.Ex: Rex is mentally ill based upon that he was molested by his mother and all the times he refused going back to West Virginia. She makes her clean all the time and gets all the really disgusting jobs and the other sisters don’t do any chores. She treats her differently because she is not her real daughter, she is her step daughter. She is jealous of Cinderella and her beauty and her daughters are ugly and fat, or maybe she’s jealous just for herself because she is old and not as pretty as Cinderella. Level 3 Reasoning Ideas that connect the story to real life in the present. Deep thinking themes. Ex: Mental illness and homelessness in the Glass Castle

Banking Industry in Nigeria

Against the backdrop of the role of banks as financial intermediaries and their function as the engine of growth of the economy, this paper examines the extent to which the banking industry has helped to stimulate economic activities in Nigeria and what the prognosis looks like in the post-consolidation era.The paper notes that the banking industry in Nigeria witnessed a remarkable growth in terms of deposit base, number of branches, total asset and volume of loans and advances, especially since the de-regulation of the financial services sector in the last quarter of 1986. However, given the potentials of the market, banks need to do more, particularly in financing the real sector of the economy.It is argued that the consolidation programme is expected to have a positive effect on employment in the long-run, and that has drastically altered and redefined the nature of competition in the banking industry. Furthermore, it argues that mere size would no longer be a critical factor in t he customers’ choice of which bank to patronize. Rather, emphasis would shift to the ability to deliver superior value to customers. THE BANKING INDUSTRY AND THE NIGERIAN ECONOMY POST-CONSOLIDATION By DR. B.B. EBONG GROUP MANAGING DIRECTOR/CHIEF EXECUTIVE UNION BANK OF NIGERIA PLC 1. 0 INTRODUCTION Banks facilitate economic growth in a variety of ways. In the first instance, they act as financial intermediaries between the surplus generating units and the deficit spending ones. This is a two-fold function involving the mobilisation of savings from the former group which are then channelled to the latter to support productive economic activities. This intermediary role is important in two respects.First, by pooling together savings that would have otherwise been fragmented, banks are able to achieve economies of scale with potential benefits for the users of such funds. Secondly, in the absence of banks, each person or business seeking credit facility would have had to individ ually look for those with such funds and negotiate with them directly. This is a cumbersome and timeconsuming process of double coincidence of wants. By matching the preferences of savers with those of borrowers therefore, banks help in overcoming such difficulties.It is pertinent to note that it is from this intermediation function that banks normally not only earn the bulk of their income by way of interest margin but also pay out returns to savers, compensating them for the opportunity cost of their money. It is important to bear this point in mind because, as we shall see later, if any bank is unable to recover the funds it lends out, its own existence as a going concern would be undermined rapidly and ultimately. This is to the extent that its ability to meet the withdrawal needs of depositors would be impaired.It is for this reason that the officials of any bank cannot afford to toy with the management of its risk assets. Towards ensuring that the funds they lend out are recov ered, banks have found it expedient to provide business advisory services to their customers. The essence of availing their clients these services is to assure themselves that the beneficiaries adopt modern management policies and practices in running the affairs of their respective companies which benefit from borrowed funds. The ultimate goal is to guarantee that these customers are in a position o service their loan obligations as and when due. This, in turn, would enable banks meet their obligations to depositors while also earning a narrow margin to ensure business continuity and corporate growth. Banks also play a pivotal role in an economy by providing a mechanism for producers/buyers and consumers/sellers to settle transactions between themselves. They do this not only within a country but also across national boundaries through a highly efficient and technologically enabled payments systems.In the process, banks encourage specialisation and division of labour, a major advan tage of which is the enhanced production and economic growth of the country. Furthermore, banks act as a conduit for the transmission of monetary policy. They provide a veritable platform when it comes to the implementation of monetary, credit, foreign exchange, and other financial sector policies of the government. Among other things, monetary policy is designed to influence the cost and availability of loanable funds with a view to promoting non-inflationary growth.The instruments available to the Central Bank to achieve this include open market operations (OMO), the cash reserve ratio (CRR), liquidity ratio (LR) and of course, moral suasion. The capacity of the banking industry to perform these functions effectively is, to a large extent, determined by the financial health of the individual institutions themselves and soundness and viability of the industry as a whole. For instance, where the majority of banks are adjudged to be weak and unhealthy, that will impair the ability of the industry to lubricate economic growth and vice versa.Against this background, the objective of this presentation is to examine the extent to which the banking industry has helped to stimulate economic activities in Nigeria and what the prognosis looks like in the post-consolidation era, come January 2006. To achieve its objective, this paper is organised into five parts. Following this introduction, we review the performance of the Nigerian banking industry between 2000 and 2004 in section II. The challenges facing the banking industry, which the current reform programme was designed to address, are highlighted in section III.In section IV, we present the prognosis and outlook during the post-consolidation era while section V contains the concluding remarks. 2. 0 THE PERFORMANCE OF THE NIGERIAN BANKING INDUSTRY IN 1990 – 2004 PERIOD. The banking industry in Nigeria has witnessed a remarkable growth, especially since the de-regulation of the financial services sector in t he last quarter of 1986. In terms of headcount for instance, the number of banks increased by about 154. 8% from 42 in 1986 to 107 in 1990. It further increased by about 12% to120 in 1992.By 2004, however, the number had reduced to 89. This was because, some banks had to be liquidated on account of their dwindling fortunes. The number of bank branches also rose from 1,394 in 1986 to 2,013 in 1990, 2,391 in1992 and by 2004 in spite of the reduction in number of banks, it had reached 3,100. This translates to an inter-temporal increases of 44%, 18. 8% and 29. 7%, respectively. Given this scenario, the pertinent question agitating the critical mind is the extent to which the expansion in the number of banks and their branch network had impacted on the economy.Another way to evaluate the performance of banks is to carefully examine the credits they granted, both in terms of volume, distribution by sectors, and the maturity profile. The data on banks’ credit to the economy are sho wn in table 2 below. Table 2: Banks’ Credits to the Economy, 1990 – 2004 Year Aggregate banks’ credit (Net) (N billion) 42. 58 49. 41 59. 25 125. 75 162. 83 194. 05 266. 44 Growth rate (%) Net Domestic Credit Target (%) 13. 5 10. 6 13. 2 17. 5 9. 4 11. 3 12. 0 Actual (%) 17. 1 45. 3 69. 1 91. 4 29. 2 7. -23. 4 1990 1991 1992 1993 1994 1995 1996 16 19. 9 112. 2 29. 5 19. 2 37. 3 1997 1998 1999 2000 2001 2002 2003 2004 302. 31 378. 08 608. 44 807. 01 1,033. 64 1,302. 2 1,591. 2 2,078. 1 13. 5 25. 1 60. 1 32. 6 28. 1 26. 0 22. 2 30. 6 24. 8 24. 5 18. 3 27. 8 15. 8 57. 9 25. 7 24. 5 -2. 8 46. 8 30. 0 -25. 3 79. 9 64. 6 29. 1 12. 0 Source: Central Bank of Nigeria, Annual Report and Statement of Accounts, (various years) As the figures show, the rate of growth of aggregate bank credit (net) to the domestic economy ranged from 13. % in 1997 to 112. 2% in 1993. However, according to the Central Bank of Nigeria, in its 2004 Annual Report and Statement of Accounts, an ana lysis of the sectoral allocation of these credits revealed that the less productive sectors of the economy continued to be favoured. For instance, in 2003, those sectors comprising agriculture, solid minerals and manufacturing got only 40. 2% of the credits. The situation worsened in 2004 as this figure further declined to 37. 0%.The corollary of this is that, on average, it was more attractive for banks to lend to such sectors as distributive trade, especially import financing, because the risks associated with such lending were relatively lower. The turn around time was equally shorter. Furthermore, as shown in the last column of table 2, actual domestic credit (net) consistently deviated from target for most of the years for which data was shown. If we take the targets to be representative of societal preference, what this means is that the flow of credit for each of those years was far from what was socially desirable.The quality of these risk assets has worsened progressively s ince 2002 as the statistics in table 3 demonstrate graphically. Table 3: Asset Quality of Nigerian Banks, 1990 – 2004 Year Ratio of non-Performing Credit to total Credit (%) Ratio of non-Performing Credit to Shareholders’ Funds (%) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 44. 10 39. 00 45. 00 41. 00 43. 00 32. 90 33. 90 25. 81 19. 35 21. 5 16. 9 21. 3 21. 6 23. 08 344. 00 222. 00 299. 00 380. 86 567. 70 496. 00 419. 80 253. 09 89. 20 92. 2 77. 1 85. 9 89. 105. 3 Source: Nigeria Deposit Insurance Corporation, Annual Report & Statement of Accounts, Various Issues The data in table 3 reveal that the ratio of non-performing credit to total credit declined from 45% in 1992 to 23. 08% in 2004. This means that of every N100. 00 lent out during these years, banks lost an average of N30. 60. These losses contributed in no small way to the erosion of shareholders’ funds as shown in the table. These bad accounts represented 567. 7%, 419. 8 % and 105. 3% of shareholders’ funds in 1994, 1996 and 2004, respectively.In deed, in the years 1990 to 1997, the shareholders’ funds had been impaired by non-performing risk assets in several multiples. The factors responsible for the poor quality of risk assets range from inadequate appraisal of credit proposals, unfavourable environmental factors that adversely affected the cash flow of the clients’ businesses to sheer unwillingness to repay credit facilities on the part of borrowers and the corresponding ineffectiveness of the rule of law to catch up with pathological loan defaulted some of whom moved round and ravaged one bank after the other.The deterioration in the quality of banks’ risk assets took its toll on the health of the industry as the outcome of the rating of all licensed banks by the Central Bank of Nigeria using the CAMEL parameters has shown. The result of that exercise, which is reproduced in table 4 below, has shown glaringly that th e performance of banks in the country has deteriorated since 2001. Table 4: Rating of Banks Using the CAMEL Parameters, 2001 – 2004 2001 No. of % of Banks Total Sound 10 11. 1 Satisfactory 63 70. Marginal 8 8. 9 Unsound 9 10. 0 Total 90 100. 0 Category 2002 No. of Banks 13 54 13 10 90 2003 No. of Banks 11 53 14 9 87 2004 No. of % of Banks Total 10 11. 5 51 58. 6 16 18. 4 10 11. 5 87 100. 0 % of Total 14. 4 60. 1 14. 4 11. 1 100. 0 % of Total 12. 6 60. 9 16. 1 10. 4 100. 0 Source: Central Bank of Nigeria, Annual Report and Statement of Accounts, 2004 From the table above, it can be seen that the banks adjudged to be sound was consistently less than 15% of the total number for the four-year period.In addition, those whose performance was considered satisfactory represented as high as 70% of the total in 2001. By 2004, however, this group represented only 58. 6% of the total number of banks covered by the exercise. Apart from poor quality assets, other factors responsible for th is state of affairs include under-capitalisation, weak corporate governance practices, and the challenges of ethics and professionalism. It is these factors that the on-going reform agenda seeks to address with a view to totally overhauling the system.These issues are examined in more details in the next section. 3. 0 CHALLENGES FACING THE BANKING INDUSTRY IN NIGERIA The current banking sector reform in Nigeria was designed to promote the viability, soundness and stability of the system to enable it adequately meet the aspirations of the economy in terms of accelerated economic growth and development. The reform agenda was motivated by the need to proactively put the Nigerian banking industry on the path of global competitiveness to enable it effectively respond to the challenges of globalisation.The overall objective is to guarantee that the economy and Nigerians do not remain fringe players in the context of a globalizing world. The major challenges that the reform was targeted at include inter alia, the following: Weak capital base. Most banks in Nigeria had a capital base that was less than US$10 million while the largest bank in the country had a capital base of about US$240 million. This compared unfavourably with the situation in Malaysia where the smallest bank had a capital base of US$526 million.The small size of most local banks, coupled with their high overheads and operating expenses, has negative implications for the cost of intermediation. It also meant that they could not effectively participate in big-ticket deals, especially within framework of the single obligor limit. The challenge of ethics and professionalism. In a bid to survive the stiff competition in the market, a number of operators had resorted to unethical and unprofessional practices. Strictly speaking, some even went into some businesses that could not be classified as banking.In appreciation of the enormity of the problems caused by the failure to adhere to professional and ethi cal standards, the Bankers’ Committee set up a sub-committee on â€Å"ethics and professionalism† to handle complaints and disputes arising from unwholesome and sharp practices. Poor corporate governance practices. There were several instances where Board members and management staff failed to uphold and promote the basic pillars of sound corporate governance because they were preoccupied with the attainment of narrowly defined interests. The symptoms of this included high turn over in the Board and management staff, inaccurate reporting and on-compliance with regulatory requirements. Gross insider abuses. One area where this was pronounced was the credit function. As a result, there were several cases of huge non-performing insider-related credits. Insolvency. The magnitude of non-performing risk assets was such that it had eroded the shareholders’ funds of a number of banks. For instance, according to the 2004 NDIC Annual Report, the ratio of non-performing cr edit to shareholders’ funds deteriorated from 90% in 2003 to 105% in 2004. This meant that the shareholders’ funds had been completely wiped out industry-wide by the non-performing credit portfolio.Over-reliance on public sector deposits. These deposits accounted for over 20% of total deposits in the system. In some institutions, such public sector funds represented more than 50% of total deposits. This was not a healthy situation from the viewpoint of effective planning and plan implementation, given the volatile nature of these deposits. On account of the huge reliance on public sector funds, a number of players did not pay adequate attention to small savers who normally constitute a major source of stable funds which should be channelled to finance the real sectors.Instead, they concentrated on a few high networth individuals, government parastatals and blue chip companies. It was in response to this situation coupled with the need to accord the small and medium ent erprises sub-sector the priority it deserves that the Bankers’ Committee came up with the Small and Medium Enterprises Equity Investment Scheme (SMEEIS) with a view to redirecting credit flows to the sub-sector Distinguished Ladies and Gentlemen, the foregoing captures the situation in the banking industry at the time the reform agenda for the sector was conceptualised and introduced.One has taken time to highlight the challenges that the industry was grappling with to enable us better appreciate the rationale for the reform in terms of what it is intended to achieve. Even though the consolidation programme has thirteen basic elements, it is those relating to the minimum capital base for banks and mergers and acquisitions that have received the most attention in the ensuing public discourse on the subject. In the light of this, it might be useful to enumerate these elements, more so that they are at the centre of this discussion.These planks of the reform programme are: Incre ase in the minimum capital base of banks from N2 billion to N25 billion with December 31, 2005 as deadline for compliance; Consolidation of banks through mergers and acquisitions; Phased withdrawal of public sector funds from banks, beginning from July, 2004; Adoption of a risk-focused and rule-based regulatory framework for the industry; Adoption of zero tolerance in the regulatory framework particularly in the area of information rendition/reporting. All returns by any bank must now be signed by the Managing Director;The automation of the process for rendition of returns by banks and other financial institutions through the electronic Financial Analysis and Surveillance System (e-FASS); Establishment of a hotline and confidential internet address to enable Nigerians wishing to share confidential information with the Governor of the Central Bank of Nigeria to do so; Strict enforcement of the contingency planning framework for systemic banking distress; The establishment of an Asset s Management Company as an important element of distress resolution;Promotion of the enforcement of dormant laws, especially those relating to the issuance of dud cheques and the law relating to the vicarious liabilities of the Board members of banks in cases of bank failure; Revision and updating of relevant laws, and drafting of new ones relating to the effective operations of the banking system; Closer collaboration with the Economic and Financial Crimes Commission in the establishment of the Financial Intelligence Unit and the enforcement of the antimoney laundering and other economic crimes measures; andRehabilitation and effective management of the Mint to meet the security printing needs of Nigeria, including the banking system which constitutes over 90% of the Mint’s business. The likely impact of these measures on the banking industry and the economy are examined in the next section. 4. 0 ANTICIPATED IMPACT OF THE CONSOLIDATION PROGRAMME ON THE BANKING INDUSTRY AND T HE NIGERIAN ECONOMY In this section, we will attempt to paint a scenario regarding the probable impact of the consolidation programme on the banking industry and, hence, the economy.In doing so, it is important to reiterate that even though the reform agenda is targeted at the banking industry, its ultimate focus is the Nigerian economy. In view of this, and in order to put the discussion in proper perspective, we would like to begin this section with a brief review of the performance of the economy between 2000 and 2004 which data are presented in table 5 hereunder: Table 5: Nigeria, Selected Macroeconomic Indicators, 2000 – 2004 Indicator Real GDP Growth Rate (%) Oil Sector Non-Oil Sector Manufacturing Capacity Utilisation (%) Gross National Savings (% of GDP) Gross Fixed CapitalFormation (% of GDP) Inflation Rate (%) External Reserves (US $ million) 2000 5. 4 2001 4. 6 2002 3. 5 2003 10. 2 2004 6. 1 11. 3 2. 9 5. 2 4. 3 -5. 7 7. 9 23. 9 4. 5 3. 3 7. 5 36. 1 39. 6 44. 3 45. 6 45. 0 NA 11. 3 15. 6 13. 6 15. 3 7. 3 7. 2 9. 1 12. 0 16. 2 6. 9 9,910. 4 18. 9 10,415. 6 12. 9 7,681. 1 14. 0 7,467. 8 15. 0 16,955. 0 Source: Central Bank of Nigeria, Annual Report and Statement of Accounts, 2004 The data in table 5 reveal that, in real terms, the rate of growth of domestic output ranged from 3. 5% to 10. 2% between year 2000 and 2004. The average annual growth rate for the period was 5. 6%, which falls far short of the 10% minimum that is required for the country to meet the targets set in the Millennium Development Goals (MDG). Furthermore, the service sector and wholesale & retail trade still account for a disproportionate share of total output, considering our stage of economic development. On the other hand, the real productive sectors like agriculture and manufacturing are yet to assume their pride of place in the economy. As can be seen from the statistics, capacity utilisation in the manufacturing sector was consistently below 50% throughout the five ye ars.Among other things, this is a reflection of the undue competition that local manufacturers have had to face from their relatively more mature and efficient overseas counterparts. These are not healthy developments from the viewpoint of a developing country that is desirous of achieving sustained economic growth. Given the low level of domestic output, coupled with the rising demand, it is not surprising that the authorities were not able to keep the inflation rate below double digit as intended.It is this parlous state of the economy that the banking sector reform was designed to address at the end of the day. The expectation is that the reform programme will impact positively on the banking industry and thus put the economy on the path of sustainable growth. While most analysts have expressed serious concerns regarding the adverse impact of the consolidation programme on the level of employment, the authorities at the Central Bank of Nigeria have allayed such fears.While acknow ledging that employment opportunities in the industry would shrink, at least in the short run, the management of the Bank is optimistic that the long-term positive effects of the reform programme on the labour market will be more far- reaching. The thrust of the argument is that at the end of the day, the consolidation programme will lead to a stronger and more robust banking industry that will adequately support the expansion of economic activities, especially in the real sectors of the economy. In this process of rejuvenating the economy, more job opportunities will be created.The consolidation programme will drastically alter and redefine the nature of competition in the banking industry. By significantly increasing the minimum capital base for banks, the policy has not only raised the barriers for new entrants, it has also reduced the number of banks in the system through the mergers and acquisitions. It will be recalled that hitherto, competition in the industry was essentially between those players that one may safely refer to as the â€Å"industry giants† on the one hand, and those popularly referred to as the new generation banks, on the other.Going forward, however, what we will witness is a battle for survival among the ensuing mega banks, all with extensive branch network. In the new dispensation, stability of individual institutions and, hence, safety of depositors’ funds is not likely to remain a major consideration in customers’ choice of which bank to patronise. Rather, emphasis will shift to the ability to deliver superior value to clients and stakeholders generally as well as the prices for bank products and services. As pointed out earlier, many banks in Nigeria had relied heavily on the public sector as a source of funds.Consequently, they did not aggressively explore available potentials in other market segments. This situation will, however, change with the withdrawal of public sector funds from the vaults of banks as part of the policy shift. We therefore expect that banks will focus more on those sectors that were hitherto underserved like the real, informal sectors, including the consumer market. They need to devise creative ways of effectively tapping into the opportunities in these market segments, both in terms of deposit mobilisation and the provision of credit facilities.Going forward therefore, banks are more likely to provide better support for sustained economic growth in Nigeria. The pressure to aggressively explore those market segments that were hitherto underserved will be reinforced by the desire on the part of the management of each bank to continue to generate attractive returns to shareholders. Currently, the average return on invested capital (ROIC) in the Nigerian banking industry is estimated at 38%. With the substantial increase in shareholders’ funds, however, each bank will need to generate a minimum of N9. billion in profit before tax in order to maintain the same rate of return. This is a daunting challenge that calls for creativity. To meet the challenge, banks will need to radically redefine their business models and strategies. The status of corporate governance in the banking industry is expected to improve remarkably following the change in ownership structure. This is because, even though poor governance practices cut across the industry, they were more pronounced in the privately owned institutions.Given the dilution of ownership in the new dispensation, the situation where individuals and their cronies had overbearing influence in the running and management of banks will become a thing of the past. Moreover, as public companies, each bank will now be subjected to a higher standard of governance in terms of information disclosure. 5. 0 SUMMARY AND CONCLUSION In this paper, we have examined the probable impact of the on-going banking sector reform on the Nigerian economy.In the process, we drew attention to the challenges facing opera tors in the banking industry that need to be addressed for the industry to make desired contributions to the orderly growth of the economy. These challenges encompass those of unethical and unprofessional behaviour, poor corporate governance practices, weak capital base, and over-dependence on public sector deposits. From the analysis, it is clear that the consolidation programme will impact positively on the economy for a number of reasons.First, the development is expected to have long-term beneficial effects on the level of employment considering that it will facilitate enhanced production in diverse sectors of the economy. The reform programme will also redefine the nature of competition in the banking industry such that each institution will have no choice but to assign priority to its capacity to deliver superior value to its clients, since this is what will ultimately make the difference between losers and winners. By denying anks access to public sector deposits, the reform will make it imperative for them to shift focus to those market segments that were largely unbanked and untapped hitherto. Furthermore, it is envisaged that the consolidation programme will have salutary effects on corporate governance practices in the industry. In concluding this discussion, it is important to reiterate that the realisation of these outcomes would depend on the effective implementation of the programme. In particular, it would depend on how the banks that have embraced mergers and acquisition handle the post integration challenges that will face them.Where these issues are nor properly handled, the anticipated synergy may become elusive.BIBLIOGRAPHY Central Bank of Nigeria, Annual Report and Statement of Accounts, (various issues. ) Nigeria Deposit Insurance Corporation, Annual Report and Accounts, (various issued) Statement of Mckinnon, R. I. (1973), Money and Capital in Economic Development Washington, D. C. : The Brookings Institution. Oboh, G. A. T. (2005), Sel ected Essays On Contemporary Issues In The Nigerian Banking System. Ibadan: University Press Plc.

Essay on Biography of John Clare - 581 Words

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