By Ifeanyi Ugwuadu
The absence of appropriate risk management models to protect Nigeriaâ€™s mono product economy and the dependence of the local stock market on foreign resources combined to deepen the nationâ€™s economic crisis at the onset of global financial meltdown.
This was the view of risk management expert, Engineer Jacob Adeosun, the chief operating officer of Industrial Risks Protection Consultants and an executive director at Insurance Brokers of Nigeria. He echoed the opinion of several others that a blatant breach of risk management procedures was largely responsible for the meltdown in the financial system.
For Adeosun, the serious impact on Nigeriaâ€™s economy was due to lack of adherence to risk management procedures tailored towards protecting the mono product economy and dependence on foreign equities.Â â€œCapital flight, withdrawal of private equity funds and foreign direct investments from Nigeria were the first impact of the meltdown. The sudden divestment hit the banks and the capital market and the impact was not anticipated,â€ he stated in an interview to draw attention to imperatives of risk management culture in the country.
The financial crisis was â€œa true measure of the strength of our capital market which was dependent on foreign resourcesâ€ he stated, proposing, â€œmanagers of our resources need to be fully aware of the risk profile in order to deploy appropriate risk mitigation measures.â€
Adeosun proposed that â€œregulatory agencies in Nigeria like CBN, SEC, NAICOM, and PENCOM should adopt appropriate risk protection strategies to safeguard the wealth and assets of Nigeria and investors against the risk exposures.â€
In addition, he explained that â€œthe crash of the price of crude oil in the international market in the wake of the meltdown brought to the fore the weakness of a mono-product economyâ€ observing that â€œdue to inconsistent policies and lack of continuity of government projects implementation, little or no progress have been achieved in diversifying the economy.â€
He believed that effective risk control mechanisms should have been used to â€œunderpin and rationalize government policy decisions and implementation which can outlive political actors and regimes.â€
According to him, â€œfrom risk management considerations, the current global financial meltdown could be attributed to a number of factors including breach of credit risk management, failure of oversight and control, regulatory functions, lack of or ineffective impact analysis including risk assessment of new business models and financial products like derivatives.
Adeoson who is a council member of Risk & Insurance Managers Society of Nigeria disclosed that the institute is collaborating with Institute of Risk Management, London to organise a seminar in the country to draw attention to the importance risk management in national life.