APC’s FIVE THOUSAND NAIRA PROMISE FOR THE UNEMPLOYED AND VULNERABLE: LET’S NOT BEAT OURSELVES UP OVER AN IMPROBABLE PROMISE:
For me, I think the government was courageous in telling the truth, to Nigerians, on the impracticability of the proposition. Just like School feeding, just like State Creation and other bogus promises which only appeal to the undiscerning, there is no basis for those lavish schemes which are not sustainable and only speaks of spending without a carefully thought out spin-off and possible benefit for the economy. I am not saying that investment in human capacity development does not pay dividend. What I am saying is, there are more strategic schemes which can help the bottom of the pyramid, bridge inequality and create a sustainable basis for the development of the economy.
LET’S REVIEW A COUPLE OF THINGS THAT THE GOVERNMENT CAN DO AS REPLACEMENT FOR THE BOGUS FIVE THOUSAND NAIRA PROMISE
1. EDUCATION - Tied to poverty is illiteracy. How do we avail the right kind of education that can feed our development needs and de-emphasize education that prioritizes white-collar jobs over blue-collar? How do we create an education system that can accelerate development; and one that targets the bottom of the pyramid - giving them requisite vocational skills that can feed into a chain of small businesses and guarantee a supply of support skills that can help quicken our infrastructure and industrial development? That should be our priority. School feeding is of secondary importance here, and may be introduced if the economy is buoyant and is able to support the investment long-term, otherwise, why not seek other platforms in which the parents of school-children can be supported, while the right infrastructure and instructional environment is created?
2. ENERGY - Growth and Development are actually not synonyms. In Nigeria's case, growth averaged 6.2% for 10 years from 2004 – 2014, without commensurate development. How can a nation fast-track development with electricity supplies to the national grid averaging 2,500 Megawatts in a nation of 178 million people? It is often said that small businesses are the engine room of development in any economy, and China remains a classic example. There is correlation between access to energy and cost of doing business as well as the development of small businesses. Rather than invest 3 Trillion in hand-outs to constituents that are not properly delineated, given the absence of a credible National Identity Scheme, why not invest it as part of Development Financing for Energy and other Infrastructure? If this is done, not only will we be able to create over 200, 000 (two hundred thousand) direct jobs in the energy and infrastructure sector, we’ll also be able to liberate over 2,000,000 (two million) indirect jobs from Agribusiness, manufacturing and allied industries, as a result of acquired energy and infrastructure efficiencies. This does not include the tax income and foreign direct investments that will flow therefrom.
3. EMPOWERMENT - Agriculture contributes about 21% of Nigeria's GDP but it is largely done at subsistence level with no empowerment for rural and small-holder farmer, whose manual efforts are greeted with very low yield-per-hectare, hence the high-level of rural-urban drift; and tied to this is the high level of destitution and crime in our urban centres. So rather than worry about giving a five thousand naira monthly stipend to the vulnerable, the focus should be on how we can empower small-holder farmers, implement a value chain approach to the development of our Agriculture while moving the dynamics of the Agriculture sector from Farm-gate to factory-gate, leveraging access to credit, fertilizers, all year round irrigation, extension services and the building of Agro-Allied Industries in identified Agric-Belts. Furthermore, beyond Agriculture, there are over 12 Million registered SME’s in Nigeria, with less than half of these operational due to a lack of access to credit and other economic infrastructure such as electricity. So rather than invest 3 trillion naira on a preventive giving scheme, why not set-up a Development Finance framework to empower over a million MSME’s? If one million MSME’s are empowered and are able to create at least 2 new jobs each, that is another 2 million jobs added to the economy with productivity gains added, representing a boost to our Gross Domestic Products.
SO WHY INSIST ON THE 5 THOUSAND NAIRA STIPEND?
It’s a promise, if implemented, may derail this government from achieving anything worthwhile, rather than hyper-inflation, which may, in fact render the naira totally useless. We have seen the result of bogus schemes such as this. Remember the the Robert Mugabe's programme which returned land to poor uneducated black farmers who did not have the capacity to maximise the potentials of the land. This populist policy threw the Zimbabwean Economy into the deep recession, which the Country is battling till date. Let's not start a wild scheme in Nigeria. #LetsFaceFacts
Let's talk business and nation-building
Tuesday 1 March 2016
Monday 22 February 2016
Nigeria: Crude Oil Futures and Lessons from History
AS OIL DROPS BELOW $27, SPEEDILY NEARING THE PSYCHOLOGICAL $25 MARK - HISTORY MAY BE ABOUT TO REPEAT ITSELF.
Oil futures today fell below $27, as it traded at $26.30 as at 12 noon Eastern time on January 20, 2016 - the lowest it has seen since 2003. In the last two weeks alone, we have witnessed the free-fall of Crude Oil prices with the announcement that Iran is set to pump over 500,000 barrels into the market following the lifting of sanctions - adding another venomous bite to the inability of OPEC members to agree on the need to slash production quotas. Given the over-supply situation currently prevailing in the market, it does not appear that the price level has bottomed-out yet. So prices may be yet on a roller-coaster ride southwards.
BITTER SWEET BEGINNINGS - RENT-TAKING IS SET TO GIVE WAY TO HARD RIGOR AND SMART IDEAS
Now our Governors will act more as Managers than Monarchs.
Now our National Assembly will assemble to discuss serious policies and not assemble to share money. Now the Public Service will truly be about service and not kickbacks. Now Presidency will have to move beyond Anti-Corruption rhetoric, to strategy on revamping the economy and social re-engineering.
ORDINARILY, WHAT DOES NOT KILL YOU, SHOULD MAKE YOU STRONGER - NIGERIA APPEARS TO BE DIFFERENT.
Given that we have a penchant for not learning from history, history is repeating itself in a very mischievous way. In 1984, when General Buhari took over government, Oil futures averaged $28.75. It continued its free fall in 1985 and bottomed-out in 1986 at $14.44. This forced the Babangida administration, the successor to the Military government of General Buhari, to implement structural reforms - starting with the Second-tier Foreign Exchange Policy and the Structural Adjustment Programme. Had the Babangida administration not frustrated its own reforms through unbridled corruption and enthronement of a culture of rent-taking, ending in its refusal to hand-over government to the winner of the election it conducted, things may probably have been different today. I pray we look back to history in solving this current problem. #LearningFromHistory
Oil futures today fell below $27, as it traded at $26.30 as at 12 noon Eastern time on January 20, 2016 - the lowest it has seen since 2003. In the last two weeks alone, we have witnessed the free-fall of Crude Oil prices with the announcement that Iran is set to pump over 500,000 barrels into the market following the lifting of sanctions - adding another venomous bite to the inability of OPEC members to agree on the need to slash production quotas. Given the over-supply situation currently prevailing in the market, it does not appear that the price level has bottomed-out yet. So prices may be yet on a roller-coaster ride southwards.
BITTER SWEET BEGINNINGS - RENT-TAKING IS SET TO GIVE WAY TO HARD RIGOR AND SMART IDEAS
Now our Governors will act more as Managers than Monarchs.
Now our National Assembly will assemble to discuss serious policies and not assemble to share money. Now the Public Service will truly be about service and not kickbacks. Now Presidency will have to move beyond Anti-Corruption rhetoric, to strategy on revamping the economy and social re-engineering.
ORDINARILY, WHAT DOES NOT KILL YOU, SHOULD MAKE YOU STRONGER - NIGERIA APPEARS TO BE DIFFERENT.
Given that we have a penchant for not learning from history, history is repeating itself in a very mischievous way. In 1984, when General Buhari took over government, Oil futures averaged $28.75. It continued its free fall in 1985 and bottomed-out in 1986 at $14.44. This forced the Babangida administration, the successor to the Military government of General Buhari, to implement structural reforms - starting with the Second-tier Foreign Exchange Policy and the Structural Adjustment Programme. Had the Babangida administration not frustrated its own reforms through unbridled corruption and enthronement of a culture of rent-taking, ending in its refusal to hand-over government to the winner of the election it conducted, things may probably have been different today. I pray we look back to history in solving this current problem. #LearningFromHistory
Nigeria: The Search for the Right Economic Paradigm
MY CURRENT THOUGHTS ON NIGERIA – WE BADLY NEED TO CHANGE PARADIGM.
Nigeria is drifting and there seems to be a scarcity of wisdom, not just in the corridors of power, but everywhere. We seem to be great at recycling our leaders in an attempt to leverage experience in resolving a current challenge. It happened in 1999 and it repeated itself in 2015. But, the missing link has really not been “experience”, it has all along been “vision”. I reckon that for us to go into the future, “vision” must replace “experience”. In trying to find answers to the current challenge, we must look beyond the immediate. We really need to ask ourselves: “what really do we want Nigeria to be like in 30 – 50 years from now?”
MY CONVERSATION ON ZERO-BASED BUDGETING, THE 2016 BUDGET ERRORS AND THE CURRENT STATE OUR ECONOMY...
At the start of the debate on “Budget Padding” and all the phony figures that were emanating from the proposed 2016 budget, a foreign friend asked me some curious questions: “I thought your new government initially spoke about zero-based budgeting as done in China, I do not think that what was delivered was zero-based budgeting as there would have been no room for these levels of error if only the government had stuck with what it initially pronounced”. I tried to defend the government but my defence was feeble as my friend immediately countered by saying: what zero-based budgeting means is budgeting in which all expenses must be justified for each new period. Zero-based budgeting, therefore, starts from a "zero base" and every proposed expenditure – be it OP-EX or CAPEX - is analyzed for its needs and costs. So where did all the errors come from?” I was dazed. Before I could recover, my friend again asked another interesting question: ‘Did the current government weigh the challenge of falling Oil prices and the huge level rot in the system before aspiring for power?” That question was immediately followed by another one: “Beyond the quest to fight corruption, does the current government have a broad plan for the revival of the economy and the entrenchment of a system that works?” Both sounded like rhetorical questions to me because I could not proffer a clear answer.
SO, WHERE DID WE GO WRONG?
At the start of the current foreign exchange imbroglio, the government allowed the CBN governor a free reign as he experimented with currency controls – banning and unbanning items fit for access to the dollar at the official rate, yet no fiscal policy direction was unveiled to address imbalance within the economy. So, rather than put together a crack team to look at the issues more robustly, government played the ostrich.
WE PLAYED THE OSTRICH - USING MONETARY INTERVENTION TO ADDRESS AN ISSUE WHICH NEEDED A COMBINATION OF FISCAL AND MONETARY MEASURES
The government allowed the CBN Governor a free reign as it experimented with currency controls at a very delicate time, rather than put together a crack team to look at the issues more robustly. We got a downgrade on the JP Morgan Bond Index, it was fine. Foreign Investors started to flee our Bourse – it was fine. We started to lose foreign direct investment flows – it was fine. Government persisted in its ways and now, there is a huge gap between the official rate of the dollar and the black-market rate, with speculators having a field day in the middle – I hope we still do not perceive this as fine? Because, at this rate, if we do not start to do the right things, we might be heading for a recession.
NO DOUBT, PRESIDENT BUHARI MEANS WELL – BUT BEYOND GOOD INTENTIONS, WE NEED A LEADERSHIP THAT CAN LEAD THE WAY OUT OF OBSOLETE PARADIGMS
The problem is not good intentions. The real problem is that we are so used to doing nothing but corruptly courting the income coming from Crude Oil, with no push for a change in paradigm. We have designed all manner of Development / Rolling Plans – from Vision 2010 to NEEDS, to Vision 2020 – but, we have NOT action-ed any.
TRUTH IS, RIGHT ACTIONS ARE BETTER THAN GOOD INTENTIONS.
I still believe in good intentions, but I am longing more for right actions, right now, because Nigeria badly requires a leader that is an innovator and a change-maker, who is endowed, skilled and emotionally engaged. While right actions usually flow from good intentions – good intentions remain the starting point; we must take it further, because, in solving the current challenge, there is a need for revolutionary change and not incremental change.
POST-SCRIPT: MY SUGGESTION
While I accept that there really are no quick fixes for the position we found ourselves following the fall of Crude Oil prices in the global market, but our government did not help matters at all. Truth is, we have no one to blame but ourselves. Our love for everything foreign and our reliance on a wasting asset has led us on this path. Now what is desirable are innovative solutions rather than a hard-line position. Nigeria cannot be an island unto itself. We need the world, just as the world needs us. Devaluing by 20% when our dominant export had lost over 80% of it's value,and meandering on the corridor of a hard-line exchange control, seem to me like playing the Ostrich. What we should have done was to begin to address key fundamentals like interest rates, a possible quantitative easing with rate hikes on letters of credits for imports and subsidies for target sectors like Agriculture and Manufacturing, while reaching out for foreign investment.
Nigeria is drifting and there seems to be a scarcity of wisdom, not just in the corridors of power, but everywhere. We seem to be great at recycling our leaders in an attempt to leverage experience in resolving a current challenge. It happened in 1999 and it repeated itself in 2015. But, the missing link has really not been “experience”, it has all along been “vision”. I reckon that for us to go into the future, “vision” must replace “experience”. In trying to find answers to the current challenge, we must look beyond the immediate. We really need to ask ourselves: “what really do we want Nigeria to be like in 30 – 50 years from now?”
MY CONVERSATION ON ZERO-BASED BUDGETING, THE 2016 BUDGET ERRORS AND THE CURRENT STATE OUR ECONOMY...
At the start of the debate on “Budget Padding” and all the phony figures that were emanating from the proposed 2016 budget, a foreign friend asked me some curious questions: “I thought your new government initially spoke about zero-based budgeting as done in China, I do not think that what was delivered was zero-based budgeting as there would have been no room for these levels of error if only the government had stuck with what it initially pronounced”. I tried to defend the government but my defence was feeble as my friend immediately countered by saying: what zero-based budgeting means is budgeting in which all expenses must be justified for each new period. Zero-based budgeting, therefore, starts from a "zero base" and every proposed expenditure – be it OP-EX or CAPEX - is analyzed for its needs and costs. So where did all the errors come from?” I was dazed. Before I could recover, my friend again asked another interesting question: ‘Did the current government weigh the challenge of falling Oil prices and the huge level rot in the system before aspiring for power?” That question was immediately followed by another one: “Beyond the quest to fight corruption, does the current government have a broad plan for the revival of the economy and the entrenchment of a system that works?” Both sounded like rhetorical questions to me because I could not proffer a clear answer.
SO, WHERE DID WE GO WRONG?
At the start of the current foreign exchange imbroglio, the government allowed the CBN governor a free reign as he experimented with currency controls – banning and unbanning items fit for access to the dollar at the official rate, yet no fiscal policy direction was unveiled to address imbalance within the economy. So, rather than put together a crack team to look at the issues more robustly, government played the ostrich.
WE PLAYED THE OSTRICH - USING MONETARY INTERVENTION TO ADDRESS AN ISSUE WHICH NEEDED A COMBINATION OF FISCAL AND MONETARY MEASURES
The government allowed the CBN Governor a free reign as it experimented with currency controls at a very delicate time, rather than put together a crack team to look at the issues more robustly. We got a downgrade on the JP Morgan Bond Index, it was fine. Foreign Investors started to flee our Bourse – it was fine. We started to lose foreign direct investment flows – it was fine. Government persisted in its ways and now, there is a huge gap between the official rate of the dollar and the black-market rate, with speculators having a field day in the middle – I hope we still do not perceive this as fine? Because, at this rate, if we do not start to do the right things, we might be heading for a recession.
NO DOUBT, PRESIDENT BUHARI MEANS WELL – BUT BEYOND GOOD INTENTIONS, WE NEED A LEADERSHIP THAT CAN LEAD THE WAY OUT OF OBSOLETE PARADIGMS
The problem is not good intentions. The real problem is that we are so used to doing nothing but corruptly courting the income coming from Crude Oil, with no push for a change in paradigm. We have designed all manner of Development / Rolling Plans – from Vision 2010 to NEEDS, to Vision 2020 – but, we have NOT action-ed any.
TRUTH IS, RIGHT ACTIONS ARE BETTER THAN GOOD INTENTIONS.
I still believe in good intentions, but I am longing more for right actions, right now, because Nigeria badly requires a leader that is an innovator and a change-maker, who is endowed, skilled and emotionally engaged. While right actions usually flow from good intentions – good intentions remain the starting point; we must take it further, because, in solving the current challenge, there is a need for revolutionary change and not incremental change.
POST-SCRIPT: MY SUGGESTION
While I accept that there really are no quick fixes for the position we found ourselves following the fall of Crude Oil prices in the global market, but our government did not help matters at all. Truth is, we have no one to blame but ourselves. Our love for everything foreign and our reliance on a wasting asset has led us on this path. Now what is desirable are innovative solutions rather than a hard-line position. Nigeria cannot be an island unto itself. We need the world, just as the world needs us. Devaluing by 20% when our dominant export had lost over 80% of it's value,and meandering on the corridor of a hard-line exchange control, seem to me like playing the Ostrich. What we should have done was to begin to address key fundamentals like interest rates, a possible quantitative easing with rate hikes on letters of credits for imports and subsidies for target sectors like Agriculture and Manufacturing, while reaching out for foreign investment.
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