So it seems that the flurry of posts towards the end of last month were an aberration rather than the norm. No matter, I may still surprise. Anyway on to today's post.

It is pretty much standard economic theory that monopolies are great for the monopolist and bad for the economy as a whole. Look at it this way, a monopolist will generally set the highest price he can get away with. After all it is highly unlikely to believe that if one business has the power to set prices as high as they can, they would restrain from doing so out of the goodness of their hearts. There are very few pure monopolies in the world, but there are companies that exhibit monopoly power.

One of the more obvious near monopolies in Nigeria is diesel. There is one importer that controls around 90% of the market. Cos of our power situation, diesel is pretty much an essential product. The market isn't too bad. I mean internationally diesel is cheaper than petrol but here it is about 30% - 50% more expensive. We got proof of the magical staying power of the diesel price, when the import price of petrol dropped below N65 and the diesel price remained the same.

Still we have lived with this for a while, and are used to it. What does worry me is that the price of diesel increased by 30% over the last three weeks. In this time, the price of oil dropped from its highs of about $70 a barrel so there has been no primary reason for the increase. The only thing that seems to have changed is that there have been rumors in the press that the diesel importer is over-leveraged and is restructuring his debt.

Now there may be valid reasons why this is merely a coincidence, but they escape me. As a favor to me my loyal readers, please procure me with a reason that I can use to make myself feel better when I am making a trip down to the local filling station to get some diesel.

As the global financial crisis showed, confidence is the strong support on which the banking edifice is built. Once that support goes, chaos ensued. Banks are in the not very stable business of borrowing short term and lending long term. This means that if enough depositors wants their dough, things can get really bad really fast. Jimmy Stewart said it best "John's cash is in Jim's house" and it a'int that easy to sell Jim's house to get that cash.

Which now brings me to Intercontinental Bank. In today's Guardian, the legal counsel who clearly does not understand this cardinal rule took out a double paged ad in which he begged and pleaded with President Yar'Adua to save the bank. He was discombobulated by the fact that there exists a cabal of so-called affluent men who owe the bank billions and are parading around town refusing to pay even when they had the cash. Our learned friend even went as far as to give three examples of such august persons. The key point to note, according to the lawyer, is that it is not that Intercontinental Bank has bad loans, it is that people who took the loans are refusing to pay placing the bank in the predicament of having to take losses on the loans.

We also learnt that in its bid to serve the Nation, Intercontinental Bank proceeded to ignore most prudent lending standards and finance such strategic sectors as oil and gas especially in petroleum products side. It seems that Intercontinental was not like those other banks that chose to finance multinationals instead of Nigerian companies and was very patriotic in all its business dealings.

No one can predict the success of the ad in attracting Presidential aid. What we can predict however, is the effect on the other banks and the banking public... Let's just say that Intercontinental Bank won't be winning any awards for honesty and transparency.