The Nation Newspaper

Tag: Sanya Oni

  • So much to talk about!

    I got a very interesting response to my Independence anniversary piece titled The giant totters at 53 from Uncle Layi Ashadele in what appears to be his discomfiture with my diagnosis of Nigeria’s crisis of governance and by extension, development.

    Here is what the distinguished thespian wrote: “your piece makes a lot of sense under normalcy and proactive leadership. Under an inept entrepreneur, nothing is achieved in production; no matter the effectiveness of other factors of production. Even in the days of our fathers, only a few of them were in real terms literate but there was a common desire by even the least educated to led his flock well enough to better their lot. As Olatunji Dare pointed out in “Still planning and polling without facts”, the true population of Nigeria was premised on fraud by Britain at 1914 amalgamation; to lure the North into Nigeria’s nationhood and the trend has been consistently maintained to date. The military came to truncate the economy with ruthless stealing…remember IBB’s Gulf War windfall saga? What we need to survive is true federalism we had before independence… growth within capacity per block Shikena!

    Now, the piece to which Mr Ashadele referred did not anticipate President Goodluck Jonathan’s October 1 Greek Gift of a National Conference. It didn’t even pretend to any grand theorem on the Nigerian situation in any structured sense although I hinted in passing on the need to tinker with Nigeria’s dysfunctional architecture if only to ensure that the locked-in energies from Nigeria’s federating entities are released for development. Needless to state that I considered it an inescapable step towards national integration. I did of course raise serious worries about the absence of abiding values across the board not just as an inhibiting factor in the current tepid efforts to crank the knocked-down Nigerian machine to life, but as the bedrock without which any notion of future orderly society stands only a dime of a chance! How could I have imagined that our outsourced presidency was actually preparing a full course menu to re-engineer itself into relevance in the midst of what is probably the most comprehensive meltdown in governance ever witnessed in the annals of the republic!

    Have I taken a position on the National Conference yet? Not at this time; we are not even there yet! I believe that Nigerians will inevitably get to talk. And to be sure, it is now past debate that this iniquitous arrangement as unsustainable as it has become, can only engender needless attrition among component units of the Nigerian federation. And then to imagine that the present course is the ultimate path to mutually assured atrophy (MAD).

    But then, should anyone be carried away by the antics, or the latter-day manoeuvres of those who have suddenly found the need to “review the foundational principles that drive our action” only because the challenges of governance have overwhelmed them?

    Here, one must give it to the hordes of the President’s speech writers. It seems finally that their lines, not the delivery of their principal, are getting better particularly the song about the Pauline conversion to the national conference idea and then, the subsequent treatise on leadership accountability to the electors under representative democracy: “we are in a democracy and in a democracy, elected leaders govern at the behest of the citizenry. As challenges emerge, season after season, leaders must respond with best available strategies to ensure that the ship of state remains undeterred in its voyage.”

    Really? Since when? The trouble is that the President is coming to this awareness several years late. Where in the PDP manifesto is the idea of a national conference? How many of the current parties are sold on the conference idea? Are there consultations going on that Nigerians are not aware? Now, I cannot even recall the President mention the word “conference” while campaigning for our votes. Worse is that the President has not – at least up till this time – bothered to give Nigerians the benefit of the outline of his thoughts on how his administration intends to marry the conference outcome with the existing constitutional order.

    Will the outcome be in the form of recommendations, hence a bill for consideration by the National Assembly? If so, why not simply continue with the current process of reworking the constitution and save everyone the trouble of a rancorous talk that would not achieve anything in the end? And why should anyone trust this administration to treat the outcome of the conference as sacrosanct? And why shouldn’t Nigerians be suspicious particularly coming in the second half of the President’s current term?

    Perhaps, only the fat cats in the Presidency live in the illusion that the President has earned our trust, or that Nigerians believe that the charade is anything but the race towards 2015. As it is, it is not yet a question of half loaf being better than nothing; after all, a poisoned loaf is worth less than nothing.

    Here are few tips that the President may wish to consider if he truly desires to address some of the more manifest distortions in the fiscal arrangement and to galvanise development across the board.

    Let’s start with the sharing of the national revenue. Today, for every N100 that flows into the federation account, his federal behemoth takes a whopping N54 under the iniquitous distributive arrangement. That way, the 36 states and the federal capital territory get to share a meagre N24 – which comes to less than one naira per state for every N100 earned. Let him initiate a bill to the National Assembly aimed at reducing the awesome fiscal powers of the federal behemoth. How about allowing the Revenue Mobilisation Allocation and Fiscal Commission to do its work for once? A good beginning is to move to slice the federal pie to 20 percent; apart from stripping the patronage-spinning Abuja machine of its awesome war-chest, it would surely be one step to reduce corruption and the fiscal brigandage at that level.

    I have not yet dealt with the mater of the incredibly opaque Nigerian National Oil Corporation which not only treats the nation’s daily oil receipts as unknown, but unknowable and the pervasive culture of corruption and indolence that the corporation has spawned in the nation’s life. How about dismantling the corporation block by block to stave the nation of its putrefaction?

    Such practical steps by the President would seem by far more immediate than the journey to the unknown that he seems set to lead us. That journey, if I may say, would still have to come later!

     

  • FG vs. AfDB

    The federal government’s indignation at the African Development Bank AfDBs unflattering scorecard was perhaps expected. Having sunk so much energy into convincing Nigerians of its deft handling of the economy, its touchiness over comments remotely deemed to negate its exaggerated claims of performance should be understandable. Even at that, it seems that the Jonathan coterie of self-scorers barely read, not to talk of digest, what could in fact pass as a generous assessment by the continental finance institution.

    The details of the AfDB report are of course already in the public domain. To start with, I do not think the so-called report contains anything new or different that Nigerians are not already familiar with on the economy and its vulnerabilities.

    Let me however, attempt a summary of the main elements of the report. The report starts by acknowledging that the economy has been on a steady cruise hovering between 6.5 to 7 percent. That despite government’s best intentions to turn the tide in agriculture, the sector remains largely hobbled by lack of modernisation on one hand and poor linkage with manufacturing on the other. That unemployment, despite the impressive growth rates actually increased from 21% in 2010 to 24% in 2011; it attributes this to the fact that the sectors driving the economic growth are not high job-creating sectors. It gave the federal government credit for fiscal consolidation which has helped to contain the fiscal deficit below 3.0% of gross domestic product (GDP). So also is the tight monetary policy of the Central Bank of Nigeria (CBN) which kept inflation at around 12.0% in 2012. Over all, it projects a flattering picture of positive growth in the future.

    Indeed, it seems to me that only the Federal Government considers the AfDB’s presentation on the “enclave” economy of crude oil, which powers an annual 8.0% growth, (the corresponding figure for non-oil sector is -0.35%) while leaving youth unemployment at a monstrous 37 percent as anything but objective. Or more still – its prescription of the need to broaden the base of the economy through diversification, harnessing its potentials in agriculture, manufacturing and services to broaden the growth and to create employment and reduce poverty.

    It was therefore not sufficient that the lynch mob at the Presidency found the presentation disagreeable – it had to be passed off by Jonathan’s information minister Labaran Maku as containing “bogus claims and disingenuous innuendos” only because it dared to draw attention to the vulnerabilities of the economy. Coincidentally, the Minister of Finance Ngozi Okonjo-Iweala had only a week before in an interview with Thisday admitted the vulnerability to be real!

    Of course, the federal government counter-argument to the AfDB could only be revealing. First, it argues that the growth rate of the Nigerian economy projected at 6.7 percent this year would be the fastest on the continent. That, courtesy of the Jonathan administration’s transformation agenda, Nigeria remains the destination of choice for Foreign Direct Investment in Africa, over and above South Africa and Egypt. It awards it awards itself high marks for the recovery of the capital market, celebrates its “successful” realignment of the Lugardian Lagos-Kano rail lines; sings the high praise for the still-in-the-womb standard gauge rail lines from Lagos-Ibadan; Abuja-Kaduna; Warri-Ajaokuta-Itakpe; Abuja City Light Rail; etc.

    It goes on to celebrate the creation of 12,000 YouWin jobs; looks forward to another 80,000 more jobs by 2015. As for the SURE-P funded Community Services Scheme, it claims that 178,000 youths are already employed out of the 370,000 expected while the Graduate Internship Scheme is expected to place about 50,000 graduates across the country. Now, all of the above merely represent a fraction of the achievement which the administration claims it has in its kitty.

    Of course, you would be mistaken to imagine that the minister was not talking about a nation that spends an annual $11 billion – representing 35 percent of its entire budget- to import staple food for its population; an economy powered by generators and where basic manufactures are still sourced abroad. We are talking of an economy where more than 40 million are out work; where factory closures are more than start-ups, and where the only ‘productive’ activity going on is politics!

    While it seems that the poor grasp of the fundamentals of the economy by the likes of Maku is troubling enough, the greater danger is when officials choose to live in denial of the reality. Contrary to the picture often painted, the arithmetic of the economy is neither nor too complex to grasp. Excess crude means nothing more than surplus of earnings over projected receipts. You do not need experts from the World Bank to understand that it does not require special intelligence! The same with foreign reserves; it is growing because the nation is earning more – not consuming less!

    That the economy enjoys a semblance of macro-stability is simply a function of oil receipts.

    By the way, no one needs to look far to understand why all manners of portfolio investors are swooning on Abuja: it is precisely because the nation has enough reserves to guarantee safe exit for the investors whenever the bubble burst. What the like of Maku is yet to appreciate is that our present capacity to pay for imports remains dependent on oil prices holding steady. Even then, there are increasing signs that the economy is heading for troubling times as oil receipts dwindle due to theft and tumbling oil prices.

    The second leg of the report is the aspect dealing with unemployment and poverty. The federal government, not surprisingly thinks it is doing enough on both counts. What have they done? It is unimaginable that the government thinks so much of the high-octane affairs in Abuja during which some 100 youths are presented with wheel barrows all in the name of job creation? Is that job creation?

    Let me end by praying that this revelry last; it seems to me that the nation is due for a shocker. Contrary to the AfDB’s prognosis, I do not even think that the prognosis is good. Soon enough, the reality would dawn on everyone.

  • All roads lead to Abuja?

    The latest circus of muscle-flexing over local government autonomy hardly comes as a surprise. If it seems an indication of how muddled our federalism has come to be in the hand of our slow-learning operators, it partly reflects the desperation in some quarters to perpetrate their retrogressive reign and anti-development agenda on the polity.

    I don’t want to go into the matter of how our federal lawmakers came to read their manual on federalism upside down. That is not important; at least not now. Rather, of great interest to me is that the two chambers of the National Assembly have taken their positions on the raging debate of local government autonomy: one for, the other against.

    The House of Representatives, persuaded that autonomy is the way to go, voted –according to the reports – overwhelmingly to give “full financial, administrative, executive and legislative autonomy to local government councils in Nigeria”.

    In the Senate, a determined group of minority senators – 34 in number – used the filibuster to deny the pro- autonomy senators the needed 73 votes! And that on an issue that have the potentials of altering the terrain of our federal practice!

    Should anyone therefore feign surprise that the division came that close? I don’t think anyone should. At least, not while everyone remains hung on the Niger Delta freebies and the rentier economy it promotes, and not when power is seen as an end an itself rather as an opportunity for service.

    I think I understand the Lower House’ love for the fancy word “autonomy” a phrase increasingly used exclusively for the councils. It starts from their opinion of the 36 governors as the bad boys who need to be stopped forthwith from dipping itchy fingers into the councils’ tills. Where the idea came from, I do not know but suffice to say that the attitudes of some of the governors, who, often times carry on like the Lords of the Manor have simply not helped matters.

    What could be wrong with councils insisting on taking control of their funds? I think there is a world of difference between being allowed to take charge of their affairs and the clamour to have council officials sit at table with their federal and states counterparts to share revenue from a common pool. How about blending the confounding three-tier federal arithmetic with the monthly conclave of 774+ 36+1 officials to share oil money in the name of autonomy? How does that square to the imperative to devolve more powers to the states?

    And to what effect? More funds for council officials to buy those fancy toys that make them objects of adoration in those far flung communities after leaving just enough left to pay the bills of their bored staff?

    What are the problems with our councils? I can number them in dozens. In the first place, I believe that the capabilities of our local councils are overstated. Majority are simply nowhere there yet, at least not as far as being agents of change and development is concerned. Take a trip to any of the rural local governments and you will be amazed at the number of absentee officials – officials on AWOL – men and women who only show up either when their wage is due or when there is something to share!

    No doubt, there are few exceptions in notably, urban local government areas which for obvious reasons, have very little choice than to perform even if minimally. The truth is that the records of our local councils overall, have been dismal. That explains why nothing of development is going on, and why basic social services are not provided at that level. Fact is; majority are no more than mere outposts for sharing the federal freebie.

    So how does the quest for “autonomy” cure what is fundamentally a structural problem? How does a monthly excursion to Abuja promote development or even lift the status of the local council? Will the craving to share in the wealth they did not help to create encourage responsible fiscal practice? Would it not produce alternate governors – officials who will consider themselves answerable to no one in the long run?

    This is where I believe that those pushing the autonomy miss the argument. It starts with their inability or unwillingness to isolate the problem. Left to me, we should rather be discussing whether indeed the current local government structure has not outlived its usefulness. Imagine the chairman of a local government whose internally generated revenue would not even suffice to purchase the diesel needed to run its generators making a case for autonomy. What he means is that he needs a licence to live off the wealth created by others. True autonomy means living off your sweat. Has anyone ever queried any chairman for spending their internal revenues the way they deem fit?

    I need to make one important point. I do not wish to suggest that the governors are entirely blameless in the mismanagement of our councils. Indeed, one of the problems is the absence of democracy at that level. The obverse side is that claims of meddlesomeness by the governors are often times exaggerated. The problems of the local governments are largely endogenous, hence my position that the prescription of autonomy is a wrong therapy to consider.

    While fiscal federalism is yet a long way yet in practice, let the local governments make do with what they have. Yes, we need democracy at the grass roots; we also need development. Autonomy in the circumstance cannot be the end. The councils surely have a long way to prove that they are worthy of our trust. They are a long way from there.

     

  • Bonds: Stiglitz vs Okonjo-Iweala

    Bonds: Stiglitz vs Okonjo-Iweala

    If you missed Wednesday’s announcement of the outcome of the country’s billion-dollar bond offer to international investors by Finance Minister Ngozi Okonjo-Iweala, you probably number among the uninitiated in the free-wheeling club of high finance.

    Just in case you missed it, let me attempt a simple summary of the outcome that has since kept Abuja on the orgy of wild celebration: Nigeria put one billion dollars bond on offer; the subscription, said to have drawn top investors from US, Europe and Asia, came in multiple of four! In layman’s language, it means Nigeria had sought to raise one billion dollars from the international capital market but got enough investors to stake $4 billion for a share in the Nigerian pie!

    That obviously meant a lot to Finance Minister Okonjo-Iweala; her excitement, so palpable, nearly went overboard. Hear her: “the fact that Nigeria could go to the bond market, after waiting a while and we got four times our subscription, shows confidence in the strength of the Nigerian economy… Over 200 investors could not get any share of the bonds because we were oversubscribed’’.

    She would also add: “The reason we are excited is because as you know, these are turbulent times, especially following expectations of tapering of Qualitative Easing by the U.S Federal Reserve Bank”. Lost perhaps was the irony that the feared quantitative easing actually drove interest rates down – not up; our officials are of course exultant about the prospects of borrowing at relatively high costs! That is what they call “confidence”!

    Let’s look at what the bond in two categories of $500 million each means for the ordinary Nigerian. Whereas the first tranche has five-year duration, it attracts a 5.125 per cent interest rate; the other, with 10-year duration at 6.375 per cent interest rate.

    What happened to the argument made only a short while ago that the loans being sought were cheap, concessionary loans of two percent with some 20-30 years repayment? Does that figure now in the current relapse into the old habits of debt peonage?

    Does anyone bother these days to raise questions about the bizarre financialism under which the nation would borrow at interest rates of six percent only to stash its Sovereign Wealth Fund in off-shore accounts to draw a measly below two percent interest?

    At this point, I should invite you, dear reader, to the seminal contribution Joseph Stiglitz and Hamid Rashid on the subject of Sub Saharan Africa’s increasingly insatiable appetite for sovereign bonds. A must read – if you ask me – for what I consider as its fresh perspective on the raging debate.

    Stiglitz and Rashid had posed the interesting question of why increasing numbers of developing countries have resorted to expensive sovereign-bond issues particularly when their existing foreign debt carried an average interest rate of 1.6% with average maturity of 28.7 years.

    The article, set in the background of the raging contagion of Eurobonds which first birthed in Ghana, but has since spread to Gabon, the Democratic Republic of the Congo, C’ote d’Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania, also contains dire warnings on the danger of the ultra-orthodox financialism which most sub Saharan governments have since fallen spell.

    In it, the duo did a good job of ripping through the official mantra of “surging confidence” bandied as feeding the obsession for the debts when they noted that: “the quantitative easing having driven interest rates to record lows, one explanation is that this is just another, more obscure manifestation of investors’ search for yield”.

    That shouldn’t be hard to understand; in Europe, United States and Asia, interest rate capped at two percent or below offers little or no attraction for “vulture” funds. So, where would the ‘gamblers’ have taken their money except to regions where they can enjoy six percent interest with sovereign guarantee to boot?

    Since when did “confidence” stop being denominated in hard cash – the cash haul described as return on investment? Shouldn’t that knowledge have tempered the claim of achievement? Picture the gambler and the profligate in a game of feints and deception; isn’t it supposed to be game in the muddled world of high finance?

    The article under reference also identified “the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing”.

    I love the way the duo framed the rhetorical question: “What politician wouldn’t prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them”!

    Now, that is an elegant way to frame a problem that we know only too well – corruption.

    We know the attraction for bonds; they are cheap. The ‘cheapness’ is however not always the whole story. The rents – arbitrage – to be earned by thieving officials have more often than not constituted the major attraction. Even at that, it seems the best way to kick the problems down the road for the coming generation to solve. That is the way things have been. Apparently, they will remain so for a long time to come.

    So, what would the Jonathan administration do next? Go for more bond issues as proof of “investor confidence”? Leave the nation’s financials in utter mystery while living in denial that the nation is fast sinking into debt peonage?

    Have we parted with the so-called “odious” debts in 2005/6 only to re-learn the habits that we once assumed had been shed? How does one explain the mystery behind the mounting debts during a period of sustained oil earnings?

    Permit me, dear reader, to suggest that the so-called “investor confidence” is completely misconceived. The world knows better than celebrate the “fundamentals” of an economy where no meaningful economic activities are going on. Didn’t our officials announce way back in 2008 that our capital market has arrived on the world stage with return on investments said to be highest on the universe?

    How come the market took the hit at the onset of the global credit crisis with the exit of the vultures – the foreign portfolio investors?

    What is the difference between the SAPped 80s and the present? In the 80s, the nation ran into balance of payment crisis because oil prices took a dive. Unable to meet its import bills, and with a huge portfolio of debts to service, it had to endure all manners of economic prescriptions to keep afloat. Three decades after, the only difference is that oil price has not only kept steady, but has managed to surpass expectations. With $50 billion dollars in the kitty, as foreign reserves, even a blind vulture can afford to gamble. You call that achievement; well, I call it common sense.