An  Address On ETHICS AND ECONOMIC MELTDOWN By Chief Richard U. Uche, PhD, FCA-  President, The institute of chartered Accountants of Nigeria

At a seminar On a theme “BUILDING AND RETAINING PEOPLE’S CONFIDENCE THROUGH HIGH ETHICAL STANDARDS”

held at AGIP RECITAL HALL, MUSON CENTRE,  ONIKAN LAGOS On Wednesday, April 15, 2009

 PROTOCOLS

1.0       Preamble
It is indeed a great honor and pleasure to be invited to present a paper at this seminar on “Building and Retaining People’s Confidence through High Ethical Standards” organized by the Rotary International District 9110. I commend the chairman and members of Rotary International for putting together this important seminar which will go a long in finding solutions to the current global financial crisis. It is worthy to mention that since the formation of the first Rotary Club in Nigeria on April 28, 1961, the club has continued to contribute tremendously to the growth and development of the country through its humanitarian service, encouraging high ethical standards in all vocations as well as helping to build goodwill and peace around the world.

2.0       The topic which I have been requested to talk on at this seminar “Ethics and Economic Meltdown” holds a a lot of allure for this eminent gathering which include professionals from different fields, business executives, captains of industry and various stakeholders. You will no doubt agree with me that the world economy is going through turbulent time with things changing at a puzzling pace and with leaders all over the world putting heads together to proffer solutions to the lingering global financial crisis. This global financial crisis which started in the US and Europe in July 2007 has continued to generate different reactions and safety measures from government across the globe and the noticeable effects of the crisis are the collapse of reputable global financial institutions in the industrialized countries, slow economic growth, crash in commodity prices(crude oil in particular) meltdown or write down in value in all capital markets of the world, decreasing consumer spending, job losses, reduction in capital flows to developing countries, reduction in remittances from industrialized to developing countries, loss of confidence in the financial markets, etc.

The impact of the crisis in the Nigerian economy some of which have already manifested itself are:

• Commodity price collapse(especially oil price, which currently stands at about $52/barrel),
• Reduction in revenue as a result of declining oil price,
• Declining capital inflows into the economy,
• De-accumulation of foreign reserves and pressure on exchange rate,
• Limited foreign trade finances for banks,
• Capital market downturn and disinvestment by foreign investors.

The effect of the global crisis in Nigeria is more pronounced in the capital market with the drop in the second quarter equity market capitalization from N12.64 trillion in May to as low as N6.21 trillion in December 16, 2008 before finally closing to N9.56 trillion on 31st December, 2008. As a result of this financial meltdown, foreign investments in the Nigerian stock exchange fell by a record of N105.87, which has resulted in the liquidity squeeze in the market. The current lull in the market has been a source of concern to most investors most of who invested their life savings in the market.   

3.0       Causes of the Financial Meltdown
The has been linked to factors in both the credit and housing markets. These include among others the inability of home owners to make their mortgage products high personal and corporate debt levels, craftily packaged financial products that concealed default risks, central bank policies and government regulation and fraudulent market manipulations. It is however, sad that much of the wealth generated through these dubious means are being wiped out with the current financial meltdown.

Let me also note that aside from the aforementioned causes of the current financial meltdown, the relentless pursuit of profit, greed, poor corporate governance and poor ethical behavior on part of organizations and individuals also contributed largely to the crisis. This scenario has resulted in the lack of confidence and trust in the activities of most financial institutions, a development which has further worsened the crisis.

4.0       The Role of Ethics in Business
Let me reiterate that one of the major causes of the current financial crunch is poor ethical behavior. One would recall that the corporate failure involving the likes of Enron, Toyco, Worldcom were all attributed to the profound lack of ethics particular turnaround ethic, the story would have been different today.

The running of a business ethically is an antidote to the success of such a business. Business ethics deals, with issues regarding moral or ethical rights, duties and corporate governance in a company and its relationship with its shareholders, employees, customers, media and government.

The application of ethics in business associates to behave ethically as well. There is no doubt that employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates.

Let me affirm that when individuals operate with a sense of confidence regarding the ethical soundness of their position, their mind and energies are freed for maximum productivity and creativity. On the other hand, indulging in unethical behavior results in diminished effectiveness and reduced success.

4.0       Promoting Ethical Behaviour
There is no gain saying that the part of the root cause of the financial meltdown we are witnessing today is total disregard for good business ethics. This applies not only to the financial institutions but to all companies. The effect of this in the country today, is the lack of trust in our institutions and leaders. There is therefore need for us to do more with a view to re-assuring and restoring the confidence of all stakeholders, employees, customers and investors. We can only build and sustain great organization by imbibing good ethical behavior. To restore people’s confidence in our organizations therefore, requires that we do the following:

• Ensure ethics awareness and training in organizations by raising the consciousness of people so as to understand the right thing to do.,
• Managers should promote ethical behavior by leading by example. If ethics are poor at the top, that behavior is copied down through the organization, and
• Managers should share the burden of cost reductions and belt tightening during difficult times rather than resulting to lay off of employees.

It is by promoting this ethical behavior that we can build , restore people’s confidence in our organizations as well as build solid organizations.

5.0      The Way Forward for Nigeria
Although the government had ser up a presidential committee on the financial meltdown, it has become imperative for the government to diversify its productive base as well as review its revenue base. The reason is Nigeria’s continued reliance on revenue from crude oil portends danger for the country given the decreasing demand and price of oil across the world. As the country revenue base continues to dwindle, there is need to intensify war against the unethical issues of corruption and lack of accountability in the public sector of the economy. The regulatory agencies must ensure strict adherence to sound corporate governance in all organizations.

6.0      Conclusion

Ladies and Gentlemen, in the final analysis, we need to exhibit good leadership the right values and setting standards of good behavior and conduct. We have to exhibit these qualities in what we do and abstain from self interest and greed which had led us to the present financial meltdown.

Thank you for listening and God bless you all

Chief Richard .U. Uche, PhD, FCA

President, ICAN

April15, 2009

PAPER PRESENTED AT THE ETHICS SEMINAR OF ROTARY INTERNATIONAL DISTRICT 9110, AT AGIP RECITAL HALL, MUSON CENTRE, ONIKAN ON APRIL 15, 2009 BY ROTN RICHARD GIWA-OSAGIE (DISTRICT GOVERNOR, RI DISTRICT 9110)