Total Pageviews

Saturday, December 24, 2016


         After about nineteen months into the forty eight months tenure of President Buhari, the major challenge to his yet to be declared second tenure ambition is in economic front. Continuation of what happen in the economy in the past months into next year will prove costly for the government. What happen to agriculture is also important. For example, should Buhari take sectors like education, agriculture, infrastructures, etc., just like any other sector, NO. Agriculture shall be treated as a special area - a strategic sector. Without that what ever bad happen to the sector will spill over to the economy through higher inflation (high price of food) and lack of local raw materials. Up to now Buhari is yet to have concrete blueprint on how to turn the sector and if he has one at all he is keeping it to his chest. The earlier he and his team get a road map for the sector the better for every one. Now that Boko Haram crisis has been reduced to the lowest level possible (to use the President word 'crush'), Buhari focus shall turn to Economy! yes Economy!! Economy!!! because his 2019 electoral success depends on it. Despite these, rating agency Moody recently commended the government success in maintaining a strong balance sheet despite having turbulent economy, when compared with peers in the same condition. The banking sector need special attention in order to help make other government objectives achievable. The current lending level by the banking sector is below capacity, government must provide incentives to enable the sector to lend more. As we  enter 2017 CBN shall consider reducing interest rate during next MPC meeting.
         As many analysts have observed Buharinomics is old economic model that operated during the 1970s and 1980s central focus of which was nationalism and self reliance. Pursuing industrialisation and self reliance are not bad in them self, but where the problem lies is the method to be used in realising that objective in today complex world. A financial times article describe Buhari economic policies as replica of "Venezuela’s exchange rate policy and China’s failed equity market strategy
". Though, our foreign exchange problems will not just banish as we want them to do, Buhari needs to find an effective way of managing them in the short run so as to reduce the hardship caused by the scarcity of Forex in the wider economy. Thus, of priority shall be need to find solution to current rationing of Dollar. Our system as it is cannot be relied upon to distribute scarce dollar to those that need it, corruption, and bureaucracy will be in the way of achieving any desired objective. The unnecessary shocks that Nigerian economy has gone through in the last one and half years would have been avoided has Buhari plan well at the beginning of his tenure and did not take the economy for granted with appointments that can well be term as mediocre (learning on the job). Just like with any other human endeavor there is no alternative to recruiting the best hands, people who are experts in their fields to advice any government. Now that there is talk of cabinet reshuffle Buhari shall look for competent hands to manage the economic front, not any other person. Buhari's pre-inauguration state of mind that Nigeria of today can be put on rapid economic progress with 1970s and 1980s economic models, not minding that things have changed will not work. Economics as a discipline in itself is more dynamic than what Buhari thought it to be, models of 1970s/80s have been improved upon since. More advance successors who can handle today economic complexities better are available and President Buhari has no excuse for not looking for them.
        The link between economic growth and development of higher education sector has been emphasised by many past academic studies, recently a study by London school of economics noted that doubling the number of universities in a country resulted in increase in GDP of about 4.7%. Here it seems Buhari government's advisers are not aware of this connection, looking at their slow responds to the demands from the education sector. Just like Buhari saw the need to develop agricultural sector, he also must see the need to develop our education sector if we are to achieve economic growth and development. One of the immediate benefit of doing so is it will reduce pressure on foreign exchange as the number of Nigerians going abroad for higher education will come down. There is no alternative to having the right people to manage your affairs. Despite recent efforts by his government to respond to the growing cry on how the economy is being run, Buhari needs to get more experts on the economy on board to help advise him on the economy. Currently, there are insinuations in the media that the caliber of ministers Buhari recruited have failed him. It therefore, become necessary for him either to reshuffle his cabinet or appoint competent advisers to assists in handling the economy and other strategic sectors. The whole world must see Buhari fulfilling his promises to fight corruption no matter who is involve. Whether that person is in his government or outside of it, big or small.

Monday, December 12, 2016

Why this government must create more Dangote

          In a period nations states around the world are competing to create their national champions, Nigeria (an African giant) is left behind. According to Wikipedia "National champion is a governmental policy in which large organisations are expected not only to seek profit but also to 'advance the interests of the nation'; the government sets policies which favour these organisations.". Examples of national champions around the world are very easy to notice and they are as varied as the nations that produce them. For example, mention South Korea and Samsung, LG, Hyundai, KIA come to mind; Name Brazil and Embraer, Petrobras, come as the nation's champions; India? You have Tata, Infosys, Wipro; Japan? has Toyoto, Honda, Sony; China on it own has Alibaba, Baidu, Haier, and Lenovo. Over the last two decades, economic power has shifted gradually from the so-called developed countries to what is now refers to as 'emerging economies'. Today's world second largest economy China was not long ago referred to as a third world nation. China was forecast to overtake the United States as the world biggest economy in not distant future. According to some estimates, it is already the world largest economy measured in term of purchasing power parity (PPP). The so-called BRICS, an acronyms coined by a former Goldman sachs executive to refer to Brazil, Russia, India, China, later joined by South Africa, demonstrated that shift in economic power from Western World to Asia and other emerging nations. Another group of emerging global players the next eleven (N-11), identified by the same Goldman Sachs executive Jim O'Neill, included Nigeria as a potential global player. How Nigerian authorities work to remain in the list is any one guess?

  Dangote group of companies employ thousands of people across Nigeria, imagine having five more Dangote-like organisation in Nigeria? How the fortune of the country will change and our unemployment menace reduce to the lowest limit possible?  But, how Buhari create more of these big employers of labor? Shall Buhari just empower the rich by given them preferential treatments such as tax holidays, import quotas, subsidize foreign exchange, and government contracts, a big NO. Government shall create a level playing ground where potential entrepreneurs succeed. Favoring one business mogul at the expense of another only harms the larger economy, as previous experiences in this country and in others show. Favoritism poster corruption and inefficiency.  A lot of those favor by, for example, Babangida military government failed to develop into employers of labour instead become crony entrepreneurs who help in sabotaging government efforts to create a competitive environment. The same thing applied to Obasanjo efforts to create South Korea type Chaebol by means of selling government properties to friends and associates. The top global brands we have today started as national champions before graduating to global champions. Countries around the world have been supporting their own national companies to compete with those of other countries as far back as one can remember. The goal is the same whether in Europe, North America or Asia, the only difference is in methodology - the path followed in achieving the goal. 

      US internet giant Google total market capitalization is bigger than many economies around the world, but it is still a private not government organisation. Other US giant companies such as General electric, Apple, General motors, Boeing, HP, and Walmart employ hundred thousands of people more than many nation states do. US internet heavy weight like Facebook, Google, Microsoft, Amazon, Yahoo, still lead the world in research and innovations while at the same time generating billions of dollars for their owners (shareholders) and the US government in form of tax. By creating our own Steve Jobs, Mark Zuckerberg, Bill Gates, Sergey Brin, Jeff Bezos, etc., Nigeria will not only create jobs and wealth but help build enduring institutions. America's Stanford,Carnegie Mellon, and Cornell Universities, were founded by wealthy citizens so are Ford, Rockefeller and MacArthur foundations. Private enterprise including small scale business is the most enduring way to create successful economy. The earlier Buhari economic managers understand this and start to put policies in-place for it realisation the better. Government agencies like CBN, ministries of finance, agriculture, commerce, labour, and mining must put heads together with other private sector actors to make this dream a reality. Smaller countries such as Singapore, UAE, and Taiwan have succeeded in creating there own champions, Nigeria shall learn from them as it moves to have its champions.

Sunday, December 4, 2016


     Having the largest Muslim population in Africa, one would have expected Nigeria to be the leader in Islamic finance in Africa but that position goes to Sudan. Nigeria is late comer to Islamic banking and finance having gotten her first Islamic bank in 2012. Sudan is the first African country to accept the Islamic banking system and convert it whole financial system to level compatible with the Islamic system, it also issued Africa's first Sukuk bond through a Sudanese cement company{1}. It remains among the  few countries in the world to attempt total conversion of their monetary and banking system to Islamic. While the first modern Islamic bank in the world is believed to have being established in Egyptian town of Mit Ghamr in 1963, though it operation was short lived as it was closed. Sudan still remains the biggest market for Islamic finance followed by Egypt. South Africa a country where Muslims are in the minority is doing better in term of adaptation of the Islamic banking model than either of Nigeria, Algeria and Morocco. The first Islamic bank to open in South Africa was Albarka Bank in 1989.

      According to some estimates{2} Africa has only about 2% of the global Islamic banking assets and only 0.5% of outstanding Sukuk despite having over a quarter of the total global Muslim population. Muslims make up about half of the population of Africa. Another study{3} put the share of Islamic finance in Sub Saharan Africa, as part of the total global market, as 16.6 in 2012. There are currently Islamic banks in Algeria, Botswana, Chad, Djibouti, Kenya, Egypt, Tunisia, Gambia, Guinea, Liberia, Libya, Niger, Nigeria, South Africa, Mauritania, Mauritius, Morocco, Sudan, Senegal, and Tanzania. Kenya, despite having its Muslims not in position of being the majority, its first Islamic bank was established back in 2005 by Barclays bank. Since that period more Islamic banks have opened their doors in Kenya. In Nigeria, the first Islamic banking window was open by Habib bank Nigeria plc (a subsidiary of Habib bank Pakistan) in 1992, but Nigeria's first fully fledged Islamic Bank Jaiz Bank Nigeria plc only open its door in 2012 despite raising capital for that purpose way back in 2003. Other banks operating Islamic banking window in Nigeria include Stanbic IBTC plc and few micro finance banks. Senegal first Islamic bank Banque Islamique du Senegal (BIS) its biggest Islamic bank was established in 1983{4}

    Just last week, the governor of Bank of Uganda Prof Emmanuel Tumusiime-Mutebile was quoted saying: "We should not think that Islamic banking and finance is only for Muslims. It is for all of us. Therefore, you need to come out and stress the unique tenets that distinguish Islamic banking from the conventional banking and compare the similarities too," Ugandan central bank is putting things in place for the introduction of supervisory manuals and regulatory framework on Islamic banking in the East African nation. Among the major factors slowing the growth of Islamic banking in Africa are: Ignorance about the system, absence of initiative on the part of African leaders, lack of Shari’ah compliant investment vehicles, poor legal and regulatory frameworks, unnecessary oppositions (base on ignorance of the system) from non Muslims, absence of commitment from Africa based research institutes, and lack of trained manpower. In view of these, multinational financial institutions like African Development Bank shall lead the initiative just like the IMF and World Bank are doing at the global level. Considering the position of Nigeria in Africa, base on its economic and population strength, Nigeria shall also join in leading the initiative to make Africa a world leader in Islamic finance.


1- Global Islamic Finance Report (GIFR 2010)
3-Gelbard, E., Hussain, M., Maino, R., Mu, Y., and Yehoue, E.B. (2014), "Islamic Finance in Sub-Saharan Africa: Status and Prospects", IMF Working Paper WP/14/149
4- Abdullahi, S.I., "Islamic banking in West African Sub region: a survey", Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 2, No.7, Feb. 2013