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Friday, December 22, 2017


       Though, i am not depending Gwarzo here, but history always repeat itself. In the recent past Ndidi Okereke as the then head of Nigerian stock exchange (NSE) manipulated the then SEC DG Alfaki, while another woman Ngozi Okonjo-Iweala tried the same trick with former SEC DG Ms Aruma Ote. Today another woman Kemi Adeosun, who is current finance minister, is on course to manipulate SEC, so the argument goes. Is SEC really independent? All the three women mentioned have one thing in common, powerful men behind them. This is the case of Politics meeting corruption! Since the return to democracy in 1999, SEC has never been out of controversy despite its importance as the regulator of our capital market. In a period when the Nigerian stock exchange has achieved its highest recovery since 2014, this is what investors least expect; not for an economy that is trying to make it way out of recession. Nigerian stock exchange, considering its importance as the gateway through which foreign investors invest their money in Nigerian economy, received the news of this debacle negatively. Thus, the quick resolving of this mess is of utmost importance for Buhari administration considering the looming election coming in 2019 and the need to fulfill campaign promises that goes with it. Some commentators have linked the sacking of Mallam Munir Gwarzo to nepotism, the need for South West region of Nigeria to protect one of it own: Oando Nigeria Plc. The godfather of South west politics Bola Tinubu’s connection to Oando's MD, being an uncle to Wale Tinubu, complicated the matter. But whether Tinubu has hand in this debacle or not we are all in this, as it matters very well to the health of Nigerian economy. This administration must do all it can to avoid sending negative signals of absence of transparency in managing Nigerian capital market. 

          Gwarzo has presided over a period with some level of reforms aim at returning the institution back to its core mandate. He has also tried to link the institution with the academia by mean of inviting academic researches and other inputs in this area. In line with this, SEC established it own academic journal just like CBN has academic journals to help its operations. But, the corruption charges against Gwarzo if proven will damage his argument of him being targeted by the minister for not doing her bidding. But, the fear in some cycle that Gwarzo's corruption charges will scarce away foreign investors is overblown. The charges label against Oando will have far greater impact on foreign investors decision to invest in Nigeria than that of Malam Munir Gwarzo. Though, both of them if proven to be correct are entirely wrong and damaging to  the reputation of Nigerian capital market. Thank God, authorities in South Africa are also proving the same company concerning allegation of market manipulation. We wait to see the outcome of both investigations. If Gwarzo is merely using the Oando issue to hide his own corrupt involvement, an impartial investigation will prove that at the end and he shall be punished according to the law. While if Oando is also found to be guilty of the allegations against it, it shall also be punished without fear of any political repercussions. Doing this is the only thing that will give both local and international investors confidence of this government promise to secure their investments in Nigerian capital market. Without this the promised war against corruption by Buhari government will turn out to be a mere joke. If the minister of finance is found to have taken side in this matter as alleged in some quarters, Buhari shall also punish her or else the general public will see it as if Buhari is protecting his appointees, just like he was accused of in the case of former secretary to the government of the federation, Mr Babachir Lawan.

Monday, November 13, 2017

How Nigeria can benefit from Global Halal Industry and diversify its Economy away from Oil

        Halal industry can simply be described as businesses that conduct their operation in accordance with laid down ethical procedures. It is about credibility and quality control first before any other thing else. The Halal products and services comprise broad number of sectors that cut across most of the areas of modern economy. Such businesses include banking and finance, food and beverages, hotel and tourism, education, marketing and advertising, as well as manufacturing. Thus, unlike what most people think about Halal as meaning Shariah or simply things made for Muslims only, Halal is universal for all people across all religions, culture and geography. In modern marketing terminology you can described Halal products as a brand group, just like when you categories some consumer products as for Western, Asian, or Latin consumers, but still being consumed by people in Africa, Middle East and Eastern Europe. Hence, the label Halal does not mean only for Muslims in Nigeria but also for Christians, Jews, and adherent of other religions living in Nigeria and Africa. Already there is vast market for these product categories. For example, most of the meat been consumed in Nigeria is Halal meat. An average Southern Christian buys his meat from a Hausa Muslim meat seller who follow Halal procedure of killing and preparing an animal for consumption. Halal means ethical, sustainable, environmentally- and socially-responsible goods and services. According to CNN's

       In Malaysia the government created what they called Halal Industry Development  Corporation charged with the responsibility of ensuring the integration and comprehensive development of their national Halal industry. It functions included focusing on the development of "halal standards, branding and promotion, and commercial development of halal products and services". It is the first of it kind in the world, established in 2006. Today many countries are following in it footsteps in order to tap the growing Halal market that was put at $2.3 Trillions. The annual grow of the Halal market around the world was estimated by World Islamic Economic Forum as 8%. In particular Dubai in UAE has gone far in this direction as it aspires to become global hub of Halal economy. Thus for those who are making noise about Islamic banking in Nigeria, but cannot restraint themselves from going to Dubai to enjoy the luxury of modern world this is a challenge for them. Because Halal does not mean for Muslims only, but humanity at large. Just like New York, London, Paris, Tokyo and Hong Kong welcome everyone, Dubai, Istanbul and Kuala Lumpur do the same thing despite their aspirations to become centers of the global Islamic economy. Countries such as China, UK, Thailand and South Africa are doing everything possible to become global exporters of Halal products and services such as beverages, cosmetics, pharmaceuticals, travel and tourism as well as financial services. In Europe alone it is estimated that the market is growing at the rate of 10-20%. Brunei has achieved some level of success in exporting its Halal certified products into Europe and gradually the products are getting acceptance in other parts of the world. As Nigerian government is eager to attract foreign investors into the country federal government shall include Halal industry in it strategy. It can start by creating Halal tourism industry and invite tourist from everywhere to Nigeria. There is also exportation of Halal meat as Nigeria is a big producer and consumer of animal products in Africa. We can become the 'Holland' of Halal diary and meat in the world looking at our potentials in this sector. Australia, despite not being a Muslim country, is one of the top exporters of Halal products mainly meat. Nigeria can as well export Halal meat to Middle East, especially Saudi Arabia and UAE. Brazil is another important exporter of Halal products. Singapore is one of the top destinations for Halal tourism and travels. China is important in production of Halal fashion products, while UK, France and Germany in Halal media and recreation.

Friday, November 10, 2017


    According to President Buhari himself an expanded cabinet is in the offing, in order to take care of many reservations and interests that included need for fresh faces and ideas, take care of interest groups, bring about flexibility and speed of execution of projects and deliver on the promises he made before election of 2015. Already there were cases of disloyalty and double standards on the part of ministers, the recent rise in the number of media leaking of letters confidentially written to the President office has been seen as embarrassing to the office of Mr. President. The entire cabinet is also accused of being out of reality with the happenings in Nigeria and the need to do things fast enough to meet expectations ahead of 2019 election where President Buhari is rumored to be interested in second running. This piece as usual is only concerned with Buhari appointments into his economic team. Shall Buhari sack his entire economic team or reshuffle it by adding new faces with fresh ideas? This is the question on people mind when it come to the team. Some people already saw need for changing the entire team, while others suggested otherwise. Looking at Buhari entire cabinet there is scarcity of business people, not only in role related to business and economy but any role at all. This is normally compared with past cabinets of Obasanjo, Yar'adua and Jonathan. Some analysts are associating the composition of Buhari cabinet with President lack of business experience and past career history. Hence, the President romance with retired security officers, journalists and bureaucrats. Unlike Buhari, Obasanjo has been involved in large scale agro-business venture. His Otta farm has been described as one of the largest commercial agriculture farms in Nigeria. In President Buhari economic management team, its head the Vice president Yemi Osinbajo is a lawyer by profession, likewise Minster of budget Udoma Udoma who is also a lawyer though he has some business and financial experiences, Minister of finance Kemi Adeosun though with first degree in economics was widely seen as less qualified to hold an important ministry like finance looking at her past work history, Minister of trade and investment Okechukwu Enelamah was originally a medical doctor who later earned an MBA from Harvard and ICAN membership. Compare this with past cabinets, former President Obasanjo had produced some thing of US like economic team. His team from finance minister (Mrs Ngozi, Okonjo-Owella) , President economic adviser (Soludo, later made CBN governor), and Director debt office (Mansur Mukhtar), etc., were all top economists with minimum qualification of PhD Economics. It was said that in constituting his economic team Obasanjo was, at one time or the other, advised by World Bank consultants among others. Hence, all the three members listed above were involved with multinational finance corporation such as World Bank, IMF and African development bank, at one time or the other.

         In the United States, Council of Economic Advisers (CEA) is a United States agency in the Executive Office of the President in existence since 1946, it advises the President of the United States on economic policy. Among it functions are provision of an objective empirical research to the White House, and production of the annual economic report of the president. The US tradition of appointing members into the economic team has been characterized by invitation of respected economists, most of them academic economists working in top US universities. In most cases because their assignments involve technical areas of economics, politics was put aside when appointing members. Likewise, only those who are professional economists or in associated areas (but not anyone with no business with data/econometrics) were invited. Normally, the President nominate the chairman of the council while the senate confirm him. The current US president Donald trump who himself came from the business sector appointed a lot businessmen into his economic advisory team. Though, there were criticism on the domination by Billionaires over academics in the Mr. Trump team. Thus, what we have in Nigeria is not an economic team in the sense of what is obtainable in the US. If you look at the performance of the ministers in Buhari economic team, all of them can be described as moving at slow phase unable to accomplished 40% of the tasks at their disposal. They are as well not very creative as expected of people responsible for putting the Nigerian economy in position as one of the most dynamic emerging economies in the world. Ask, for example, the Minister of Trade what is the level of Foreign Direct Investment (FDI) coming to Nigeria or what is the position of Nigeria in term of FDI in Africa? The Minister of Finance will tell you that her ministry has made progress with Treasury single account and whistle blowing program, but what happens to her core job of managing fiscal policy in order to ease current tensions in the economy as a result of poor injections by her ministry, not making needed funds available on schedule, where it is most needed or create needed atmosphere for job creation? For the minister of Budget up to now his ministry is yet to achieve 70% budget implementation. Though, in fairness to them they have found themselves in the general climate of sluggishness and cautious approach of new government that took over from an opposition party that was widely seen as corrupt. The recessionary business climate did not favour them. Unlike Obasanjo or Jonathan ministers who found themselves awashed with cash from booming crude oil export. Thus in introducing changes to his economic team, Buhari shall look at weaknesses of the existing team and try to deal with them as appropriate. Mr President shall also listen to people complaints about the inadequacy of his team by complementing it with competent people from academic, business and diaspora. Let have an economic team that is worth the name.

Monday, November 6, 2017

Emerging Risks and Opportunties of investing in Nigerian economy from the perspective of Buhari's agenda

        Nigerian economy has just come out of recession that engulfed it from 2016 to 2017. Recession, not just in Nigeria, usually scare away foreign investors who want to avoid putting their money in negative growth territory. Added to this was Nigeria battle with Boko Haram, though that threat has subsided with government taken over of areas previously controlled by the insurgents. But, other security threats such as kidnapping and arm robbery remain. In the past four decades, the major stumbling block in the way of Nigeria as it moved towards achieving it developmental goals was corruption. Today not much can be said to have changed, despite Buhari government mantra about fighting corruption. But, some notable achievements have been realized in other associated lines. Particularly, government policy of single treasury account has helped federal government blocked leakages in its revenue and weeded out thousands of ghost workers and dubious contracts. Government has also created 'whistle blower' program that received alerts on corrupt transactions and acted on it. Risks associated with the movements in oil price are still the major obstacle in the way of Buhari efforts to stabilize Naira and rise level of foreign reserve. Just like in other developing economies, Nigeria problem is compounded by poor infrastructures to the extent that in some cases investors have to provide their own power and build access roads in order to stay in business. Nigeria has improved in the latest world bank ease of doing business ranking jumping 24 places from 169 to 145. This is another signal to foreign investors that Nigeria is really open for business. Many macro-economists have projected Nigerian economy to grow in 2017 and 2018, albeit moderately. The gradual appreciation in the price of crude oil is expected to translate into improvement in macroeconomic fundamentals such as foreign exchange rate, foreign reserve, inflation and interest rate. As more money enters federal government ownership, overall level of liquidity in the economy will improve. Likewise, the value of Naira and level of foreign reserve. But, government must improve its economic management process for it to achieve all these. Federal government shall, as a matter of necessity, involve more competent individuals in the management of the economy. In this regard Buhari shall expand his economic team by involving industrialists, academics, businessmen, bankers, and international consultants. Thus, Buhari shall learn from other countries and not keep things to himself and his weak economic team.

            The recent offer of Sukuk bond to investors by Nigerian government was over subscribed. This to some extent show the attraction of Nigerian economy to both local and domestic investors. It is clear indication that investors are optimistic on Nigerian economy. The massive infrastructural investments in roads, railways, power generation and airports embarked on by this government is a positive indicator of the future potential of the economy, all things being equal. Other government commitments like in boosting consumers demands through direct involvement in poverty alleviation programs, and gradual injections of liquidity into the economy were aim at returning the economy into path of grow. The general improvement in nation's security is a positive thing for the economy.  Already, Boko Haram has been subdued, Niger Delta militancy reduced, Biafra agitations tamed and other security challenges are being deals with gradually. According to the world bank, political stability, security, and regulatory environment are leading factors driving decisions to invest in developing countries. Despite recent improvement in Nigeria ease of doing business ranking, Federal government must do better than it is doing now to fight bureaucracy and red tape in the governance process. One important sector that all potential investors shall pay attention to is agriculture. Already this government has shown commitments to develop the sector through massive investments and discouragement of importation of food items from abroad. With population approaching 200 millions, Nigeria is a bigger consuming nation not only in Africa but the world. Thus, producers of retail products shall see this as an opportunity to invest their money where they will drive the highest benefits. Real estate investors have opportunity to invest in a developing economy hungry for shelters. Manufacturers shall see this as chance to expand their markets looking at the gradual improvement in power supply and government efforts to build all kind of infrastructures. As general election in 2019 is fast approaching, the implications of the election on the economy include possible inflation spiral. The usual unpredictable atmosphere that come with election will possibly delay some investment until after election particularly money coming from pessimistic investors. Despite that we shall expect more investors friendly atmosphere as government do everything possible to please voters and demonstrate that it is working for the interest of the nation. The political stability that is gradually becoming part of Nigerian democracy since 1999 has helped in reducing political risk,  thus improving the country's economic outlook to the rest of the world.

Friday, October 27, 2017

A review of Nigerian Economy under Buhari: 2015-2017

        Less than two and half  years is very short in the history of any country aiming to achieve revolutionary economic changes. Movement from the status of socalled developing country to industrialized country took decades for even the most successful countries in East Asia. It took China from 1980s to 2000s, South Korea and Taiwan from 1970s to 1990s, thus it is a long journey not something one shall expect in matters of months. Thus, in reviewing the performance of any government in power one must do  justice by looking all around. Including in reviewing governments who made campaign promises that were not (prior to announcing them) well planned and calculated in line with future expectations such as government revenues, expenditures and emergencies. One also has to look at poor judgements on the part of governments in failing to take advantage of opportunities that presented themselves at the time they do. It is a known fact that (at inception) Buhari government was very slow in responding to economic matters leading to some nicknaming him 'go slow' President. It took him about six months to appoint his ministers. His minister of finance was widely seen as not qualified for the job. Though, recent events have shown that she is a fast learner on the job. But, Buhari was also unfortunate to find himself in a period when the nation's major source of revenue was in declined, government treasury was empty and the nation political transition was in mess. It was in this atmosphere that Buhari thought the kind of economic prescriptions he used thirty years back would be applicable today. Alas, things have changed away from the economic thinking of that period.  You will all recall that in the 1980s there was nothing called Euro, China was restricted to it own geographical area, there was no information technology revolution that we see today, the forces of globalisation were slower, most African countries were under military rule, and the future prospects of oil exporting countries was positive. Within Nigeria itself things were then different from today, Nigerian population was under hundred millions, there was good power supply, roads, railways and airports were in better conditions, Naira was strongly valued, educational institutions were better than today,  and poverty rate was lower. Thus, it is not out of point if one say that Nigeria of today is different from Nigeria of 1980s by some 270 degrees (assuming we are moving in cycle).

Botswana, Burundi, Equatorial Guinea

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Even small African countries like Botswana, Burundi, Equatorial Guinea and medium economies like Egypt, Tunisia and Kenya, can confidently look forward to the influx of foreign investment.

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Even small African countries like Botswana, Burundi, Equatorial Guinea and medium economies like Egypt, Tunisia and Kenya, can confidently look forward to the influx of foreign investment.

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         Some Nigerians have forgotten the word 'Recession' but due to the devastating effects of negative growth on the Nigerian economy, the word has become very common on the mouth of Nigerians. From banks, manufacturers, retailers to consumers everybody was talking of recession. Most people you asked 'who is responsible for the mess we are in' would say Buhari not minding the condition the old man met the Nigeria economy.  Buhari was unlucky to unseat somebody who happened to come from the oil region of Nigeria. The result of that was sustained attacks on oil facilities which helped cripple Nigeria oil export. Buhari's slow phase at reforming the economy did not help matters. Unlike, the previous regime that did not 'side-step' the central role of economy in their transformation agendas, Buhari prioritized security and anti corruption over economy. Like some analysts had suggested, Buhari should have championed three agendas right from inception: security, economy, and anti corruption. Buhari failure to constitute a solid economic team was his major undoing. The collapsed of price of crude oil in the international market affected Nigeria in multiples of ways. One, it led to the drying off of government major source of revenue. This mean Buhari's government has little room for maneuver, hence, the resort to austerity measures. The result was immediate and very difficult to stomach by the Nigeria poor who were the major support base that brought Buhari into power. Due to lack of money various government projects were put on hold. Though, the federal government managed to pay salaries, the stories was different for state governments who failed to pay salaries. Two, the pump price of petrol was jacked up due to government inability to continue with subsidizing oil that went into billions of dollars. The result of that was seen in higher inflation where price of basic necessities and other commodities that depended on transportation increased. Three, the collapsed of foreign exchange earnings which depend on exportation of crude oil led Buhari to imposed restrictions on importations into the country, while the exchange value of Naira depreciated. One of the major sectors affected by this was food importation which led to  increase in the price of food items. The poor man was caught by surprised by this measure coming from Buhari government. An average Nigerian has never experienced any affluence living comparable to other oil producing countries of the world, even at the period when the international price of oil was high. The parasitic elites would not allowed that, to them the poor Nigerians  should not be allowed to test the luxury of modern world. Else they would revolt, thus instead of the ruling elites to compete with the elites in other nations at the same level of progress, their eyes were on the poor masses. Buhari came with tones of promises and an unprecedented expectation on the part of Nigerians, seeing him as a quick fixer. I remember telling some one that the expectation by most poor Nigerians that immediately after swearing-in of Buhari back on May 29th 2015, every body will started eating chicken in his home would have to wait.

       The developments in the last two quarters have restored some confidence and hope in the Nigerian economy. Unlike the negative and critical comments on Buhari economic agenda witnessed last year, the opinions of analysts have began to soften down a bit. The recent announcement of Nigeria departure from recession has helped a lot in this. But despite that, Nigeria is  yet to get back to its top position as  the biggest economy in Africa and top investment destination. In term of attracting foreign direct investment many other African countries are doing better than Nigeria. Countries such as Botswana, Burundi, Ethiopia, Guinea and Tunisia are performing better. This may not be unconnected with the negative economic headlines that came from Nigeria in the last one year. In economic diversification, Buhari can be put as performing fairly. His bulk of diversification has focused on agriculture. This is good in itself as it helps wean Nigeria off dependence on imported food stuffs such as rice. As claimed by Vice President Osinbajo recently, Nigeria now produces about 80% of the rice consumed in the country. Many foreign investors from India, China, and host of other countries have invested in local productions of rice and fertilizer; this too is part of achievement of Buhari government. Domestic businessmen such as Dangote, and Bua have turned their attention to farming promising to invest billions of Dollars. Importation of other agricultural products also reduced drastically due to the combined impacts of government focus on agriculture and exchange rate difficulties. But, diversification shall not only focus on the agriculture now that the price of food items has started to come down. Buhari government shall immediately turn it attention to industrialization and promotion of service sectors in order to boost employment generation. It shall implement policies that will drive local manufacturing and boost exports. Buhari shall embark on modernization of Nigerian economy in order to attract the most needed foreign investments. The level of prudence in managing resources achieved so far is commendable. The treasury single account policy has, from what many observers commented, reduced revenue leakages and give government control over its financial resources. This shall also be linked to government modest achievement in fighting corruption. Despite putting anti corruption war as the focus of his regime, Buhari need to do better than he is doing now. 

      The inflation level has fallen for eight successive month since  February this year. This was  achieved on the back of continue decline in price of food stuffs, stability in the market for domestic petroleum, relative stability in the foreign exchange market as well as gradual execution of federal government budget. Due to gradual appreciation of price of crude oil in the international market and government prudence in managing the economy, Foreign exchange reserves are up to $32 billion, from $24 billion a year ago. The return of stability in the oil producing Niger delta has help revamped Nigeria oil export to the world. Oil production is at nearly 2 million barrels per day, a significant improvement from 2016 when it languished for the most part below a million. This has helped in the gradual appreciation in  the value of Naira and our foreign reserve. These and the gradual move towards economic stability has resulted in increase in foreign direct investment coming to Nigeria. At about $1.8 billion, Capital inflows in the second quarter of 2017 were almost double the $908 million imported in the first quarter. The level of portfolio investment into Nigerian economy have also seen some improvements recently. The Nigerian Stock Exchange All Share Index (NSEASI) has seen dramatic gains in recent months, put at about 36% higher than beginning of 2017 value. Though, job generation programs such as N-power and school feeding program that provide indirect jobs more need to be done. Buhari government need to  be more creative when it comes to job creation. Close to 200,000 youths are benefiting from the N-Power Program, which recruits unemployed graduates to work as teachers, agric extension workers, and health extension workers. Nigeria must key into modern economic ideas to develop. Just like we are seeing in other countries around the world. Not far away from us, Ghana has been very creative in revamping her economy. Nigeria shall learn from countries like Ghana, Ethiopia and Morocco on how they go about modernizing their economies. The focus shall be on investing robustly in science, technology and innovation for productive knowledge. What happened to our education sector? Nigeria has only one university in  the top 1000 universities in the world. African countries such as South Africa, Egypt, Morocco, Algeria, Ghana, Uganda, Tunisia, and Ethiopia have better universities than Nigeria. Only a well plan program can rusticate the educational sector which serve as the spring board for Nigerian economic development. No country in the world depend solely on sending  her citizens to foreign universities to develope. Nigeria must stop the exportation of training of her people to other countries around the world who benefited handsomely at our expense. In term of infrastructural development, the government initiative at investing massively in railways, roads, and power supply  is highly commendable. This is one legacy that Buhari government is going to give to the Nigerian economy that will last for decades. The poor state of our infrastructures was a result of inability of previous governments to make wise use of oil windfall the country realized in the past. I wish this government the best!

Tuesday, May 9, 2017

Explaining our Journey into Recession: Nigeria's Trade with the rest of the World III

      The rallying point for the East Asian countries that facilitated their rapid economic growth was 'export push strategy'. Among other factors, the East Asian success stories pushed for macroeconomic stability and low inflation; they also avoid deficit financing at some stages of their development story. They do all they could to accelerate export including using preferential treatments, soft credits, protectionist policies, currency devaluation. Buhari government aim at reviving the economy should not just stop at supporting local firms to produce for domestic consumption but must include export push as done by the East Asian success stories. In both the developed and emerging economies, one barometer widely use to measure health of an economy is export. Export is at the heart of German economy leadership of the euro area economy, likewise the extraordinary performances of both Japaneses and Chinese economies. We can barrow a leaf from both the US and Germany where states and regions have specialised in exportation of specific commodities and services. In Nigeria, for example, Kano shall start by exporting Agro-allied products such as processed foods, Shoes, and Garments as well as retails services; Lagos can specialised in exportation of financial services, and electronics; while Port Harcourt specialised in petrochemicals.  Federal government must find ways to rekindle export rivalry between the 36 states of the federation including allocating export quotas to be filled by each state. The  main difference between the economic strategy of China and India from 1980 to 2010 is very clear to the observers of the region; while China aggressively push export growth, India on the other hand emphasized on producing for its domestic market. Today we all know who is the winner, China has moved hundred of millions of its citizens out of poverty while India's population remain one of the poorest in the world.

     The case of Japan and South Korea is worth mentioning here, these two countries are not very much endowed with natural wealth like most African countries, but that notwithstanding they were able to import the raw materials they need, process them into finish goods and export them. There example is a case of what is called 'forced growth'.  In the case of South Korea, at the end of the Korean wars that led to the creation of today's North and South Korea, almost all of the industrial capacity of the Korean nation before partition were located in the North. Thus, after the war South Korea was left with nothing but agricultural lands; but now compare where the two countries are today - South Korea is a developed economy while the North is a developing economy. Innovation and entrepreneurship are at the center of Israel successes over the last decades. Small firms that were established as start ups with contributions from academia, military, and business later turned to become export power houses, exporting everything from security software, microchips, to agricultural outputs. The successes of the US in information technology can rightly be linked to small businesses (start ups) established in Silicon valley in the 1970s and 1980s. In the last two decades, these start ups have become the engine of US economic growth, accounting for large percentage of total US exports to the rest of the world. The great Austrian economist Joseph Schumpeter, for example, see economic development as synonyms with innovation, without technological innovation there would be no development. But, the kind of development Schumpeter was talking about can only be actively promoted by a serious government, which is the case in the US, Israel, Taiwan, South Korea, Denmark and many other developed nations. Schumpeter also emphases the role played by entrepreneur in all these, who is the innovator that make it all happens. Thus, at the end everyone will see that entrepreneurs are the back bone of export growth around the world.

      In most times, in the management of foreign exchange, it is much easier and practicable to use manage float than fixed exchange rate system, as it is not easy to know the actual rate that brings both internal and external markets into equilibrium.  The amount of human and material resources that will be devoted to the task of determining fixed exchange rate will then be put elsewhere in the interest of the economy progress. Multiple exchange rates do no one any good, CBN shall go for single exchange rate for every one with interest in Forex . Multiple exchange rates encourage corruption and inefficiency. Some of the problems we are having today with our foreign exchange can be linked to the activities of speculators who hoard Dollar thinking they understand very well the mind game of Buhari and his economic advisers. As recent discoveries by EFCC and other security agencies have shown, a lot of Nigerian elites have buried millions of Dollars somewhere in their houses, farms, and other properties; which contributed in no small way to the scarcity of Dollar we are facing today. Nigerian banks cannot be said to be innocence in the speculative attacks on Naira, either on their own or in collaboration with some powerful elites Nigerian banks have been working to undermine Naira to their own advantage. We all remember what happened during former President Babangida military regime's deregulation of the economy, when virtually all our banks abundant their primary assignments and become overnight Bureau De changes. But no matter what, Buhari government must also control inflation in order to establish the needed economic stability for healthy economic growth. CBN must double on it current effort to subdue inflation including stabilizing the foreign exchange market and reduction in interest rate. Buhari government push to revolutionarise our agricultural sector shall be encouraged. Agricultural export shall provide a short term solution to our over dependence on crude oil export.


Saturday, May 6, 2017

Explaining our Journey into Recession: Nigeria's Trade with the rest of the World II

     Foreign Direct investment (FDI) has played important role in the growth and development of developed and emerging economies of today. US itself could not be where it is today without the contribution of businessmen from Europe during its early history. The same thing goes  with China in the 1980s and 1990 after opening its doors to the world, substantial foreign direct investment came from Chinese residing in Taiwan, Hong Kong, Philippines, Indonesia, Malaysia as well as from Japan and South Korea. Every country has at one time or the other protected certain sectors of it economy from competition abroad. Before now, Nigeria virtually have no any active policy in place to protect it local industries apart from the localisation policies of the 1970s and early 80s. This turn of event become worst after return to democracy in 1999, as elected leaders fear backlash from their citizens for putting protectionist policy that would lead to increase in price and reduction in welfare. While over the last three decades, we have failed to established ourselves as an exporting country; but we have become very good at exporting one commodity, i.e. Labour. It is estimated that there are hundred thousands of Nigerian expatriates working in North America, Europe and Middle East. While the remittances they have been sending home serve as important source of foreign exchange in this period of scarcity of Forex in Nigeria, on the other hand their absence has deprived Nigeria of needed human resources to achieve rapid economic growth and development. This particular issue has been the genesis of now growing market in medicine tourism, foreign education, and capital exportation out of the country that have contributed to deterioration in the value of Naira against world major currencies.

       Our rate of inflation is not sustainable as it erodes gains this government want to achieve in term of encouraging domestic production and exportation. The simple true here is that higher inflation means foreign countries who want to purchase made in Nigeria goods find it expensive relative to that of other countries like China. While  domestic consumers find Nigerian goods expensive compare to those imported from abroad. This is why it is important for Nigeria to be careful in fixing its foreign exchange rate to avoid scenario where it achieves opposite effect of what it intends to achieve. There are empirical evidences that linked higher inflation with depreciating currencies around the world. Hence, CBN shall watch over inflation as at the same time it tries to stabilizes Naira. At this point one is forced to ask the question what happen to our previous priorities of focusing on agro-allied industry as our export base? A simple visit to Bompai, Sharada and Challawa industrial estates in Kano state left one stun. There are hundreds of closed plants in the three locations that (before they stopped production) specialised in production of agro-allied products for Nigeria markets and neighbouring countries. But today they are closed down because they cannot compete with imported commodities that flooded our markets. Like i have made mention before, with our high interest rate, poor roads, lack of power and unfavourable government policies of the last three decades there is no way these industries would have survived. Thus, as Buhari government tries to build roads, power plants, railways and new airports, it must have these industries in mind. Particularly, how current reforms connect to the issue of reviving our manufacturing?

    The point i have been trying to make shall be clear by now. That Nigeria as exporter of primary products, with declining international price relative to final output they are processed into, will continue falling behind those countries who purchase raw materials from her and turned them into finished output. Raw materials, in themselves, constitute small part of total monetary value of inputs into production of  outputs.  At the end, the amount of money Nigeria receives from selling her primary products will be lower than the amount she pays for her imports. under this scenario, Nigeria has no other alternative than to start producing those imported products herself as it is cheaper to produce locally than import, taking into consideration the deterioration in her term of trade i have made mention of earlier. This is how countries like China, South Korea and Brazil moved away from being primary producers to manufacturing power houses with active government support to private sector producers. These countries put local companies first before firms from other countries. In Nigeria, if not of recent, foreign companies were given preferential treatment over their domestic rivals. Look at our West African neighbour Ghana which in recent years was able to attract manufacturers away from Nigeria despite small size  of her domestic market compare with Nigeria. At the heart of the attraction of Ghana to manufacturers over Nigeria is combine impact of business friendly policies, constant power supply, good infrastructures, and political stability. These factors persuaded many foreign firms to move their head offices from Nigeria to Ghana from where they export their finish goods to back to Nigeria. The size of Nigerian market in Africa is enough to give Nigerian government bargaining power over any foreign investor coming to Africa who want to enter Nigeria market. One such condition must be that before any foreign businessman is allowed access into the Nigerian market she/he must establish plants in Nigeria.

Watch out for the concluding part of this series.....

Wednesday, May 3, 2017

Explaining our Journey into Recession: Nigeria's Trade with the rest of the World I

     No country in the world can be defined as an island to itself, as every country in the world trades with others through selling commodities or services to them and buying other commodities and services from them. Nigeria can be described as a mono-economy that depends solely on the exportation of crude oil to the rest of the world for most of its foreign exchange, while at the same time importing everything from car to cotton underwear. Thus, contribution of Nigeria to globalization virtually amount to its position as a consumer nation that supply raw materials to more serious economies around the world. From this vintage point one can see some of the causes of Nigeria's  current predicament i.e. when you consumed more than you produced. This is to me what Buhari government has being battling to correct  through it recent emphasis on reduction in importation and localization of productions. The collapse of crude oil price clearly exposed our precarious balance of payment position and the subsequent deflation in our foreign reserve position. Thus, we have negative balance or rather we operate with a trade deficit. Unlike the  Gulf oil producing nations who have very large savings which they fall on when oil price collapsed, Nigeria as at the time Buhari came to power has no such luxury, but depended on borrowing from other nations in order to balance the deficit in its trade with the rest of the world. As many commentators have observed, it was the spending spree of the PDP years in power that brought us to where we are today. Had it been previous PDP governments have saved for period like the one we found ourselves today, we would not be in the present mess.

    I do not know what happens to Nigeria priorities in term of its foreign relations which previously have Africa as it focus? Do we have its foreign trade equivalence today? Figures from NBS show that Nigeria trade more with countries outside Africa than with African countries; if we can remedy this and focus on Africa it will go along way in changing our current economic fundamentals from consumer nation to a producer nation. Because with our relatively low industrial base we can be able to supply African countries with some of the things they need. If China, which is today the second largest economy in the world, started this way by producing first for it Asian neighbors before others, why not us. Our real interest rate is today higher than the average real interest rate in our main trading partners which means that Nigeria is a net importer of capital from these countries. But, international capital do not move freely as domestic capital does, it takes time and come with stringent conditions attached. Thus, when the Chinese said they would lend Nigeria some ten billion dollars to finance railways and energy infrastructure, you shall remember that there are conditions attached that includes buying the equipments needed for the projects from Chinese manufacturers, using Chinese companies for the project, employing Chinese labour and the interest rate charged on the loan is higher than what Chinese banks charged their domestic borrowers back home in china. In short, China is using its foreign loans to find markets for its exports. Another negative side of our precarious position is that nations that agree to lend us money do so charging premium for the risk of default doing that taking into consideration our international credit rating as provided by rating agencies such as S&P, Fitch and others.

    With current high domestic interest rate in Nigeria, it is difficult for any  domestic investor to borrow and invest profitably without some assistance from the federal government in, say, imposing higher tariffs on imported commodities from abroad that compete with locally produced goods. But, this also come with its negative side effect in term of higher inflation; thus, more worries for domestic consumers of the same commodities who are used to cheaper alternatives from China and other low cost countries. Another incentive for local producers is where government reduce the amount of tax paid by certain industries that are considered strategic in our economy. Specifically, tariff policy should be used by the Buhari government to attract foreign producers into Nigeria in order to establish local production plants to replace those being imported. Nigeria has failed to take advantage of it abundant cheap labour and lunch itself as Africa's cheap labour alternative to Asian producers, but instead continue to depend on oil which is not sustainable, more especially with increased agitations from oil producing states in the Niger Delta. Everywhere around the world, oil producing nations from Saudi Arabia to Russia have come to the conclusion that their future do not depend on oil.This explain Saudi authorities current change of direction through emphasis industrialization, tourism, and service industries. In this kind of atmosphere such as we are in here in Nigeria, the best thing for the government to do is to put things in place for possible attraction of foreign investors in order to bridge the gap created by low investment in the domestic economy. But, central in that arrangement is getting our foreign exchange right first, which as we are now the foreign exchange position is not in a good shape to perform that function. No foreign investor invest his money where he is not certain about the country's foreign exchange regime.

To be continued...

Monday, April 24, 2017

Technology Start Ups in Nigeria: how, why and where?

      Now a day, when the term Start ups is mentioned the first thing that come to mind is Silicon valley in the United States which as technology hub come to being sometime in early 1970s. The name Silicon itself originated from the silicon transistor which serve as the building block of transistors use in making computers. It started with two to three companies and decades later it becomes what it is today, the world largest technology hub. In this set up is found a unique combination of technological know how and business acumen, with seed capital provided by venture capital firms. Today celebrated internet celebrities such Mark Zukerberg, Sergey Brim, Steve Jobs, Bill Gates, Jeff Bezos and numerous other less well known started as computer/internet enthusiast who possessed good ideas without the needed capital and entrepreneurship skills to transform them into money. It was the venture capital firms that came to their aids by providing capital and entrepreneurship skills needed to create today giants such as Facebook, Apple, Google, Yahoo, Amazon, LinkedIn, Twitter, Cisco Systems, Hewlett Packard, Adobe, Intel to mention just a few. Today, Silicon valley has the highest concentration of millionaires and billionaires per head in the United States itself. This phenomenon of establishing Start Ups is fast spreading around the world. In a very recent global innovation ranking released by World Economic Forum, smaller countries like Switzerland, Israel, and Finland were put ahead of US which came fourth in how fast countries are innovating. This show how countries around the world are competing to stay ahead in term of technological innovation.

   Nigeria need it own Silicon valley with its combination of young technology geniuses and venture capitalists. Internet giants such as Facebook, Google and Transport companies like Uber have realized the potentials of Nigeria in this field and are working hard to get there first. The recent visit to Nigeria by Mr Zuckerberg is a clear signal of the potentials Nigeria has in this direction taken into consideration the abundant talents and huge population we have. Up till now Nigerian government does not have a clear blueprint on how to make Nigeria the technology hub of Africa. At the level of state governments, what are they doing to develop this sector? Virtually nothing, with the exception of Lagos where the concentration of various kind of businesses and talents led to the start of one to two start ups here and there, there is not much to show. It take combination of academia, businessmen and government to produce something akin to Silicon valley in Nigeria. Ideal places for such combinations in Nigeria will include Lagos, Ibadan, Abuja, Kano, Kaduna, Enugu and Portharcourt. Many countries around the world have established their own Silicon valley like hubs, India, China, Israel, Pakistan, Russia, Brazil to mention just a few.Young Nigerian entrepreneurs such as Oscar Ekponimo base in Abuja uses technology to bring wasted food to the hungry through his new software application Chowberry. People like Oscar Ekponimo are not few in number in Nigeria, there are hundred others waiting to be discovered. Nigeria shall learn from the example of Israel where government provides part of the money invested by venture capital firms in new start ups. In Pakistan young technology enthusiast are provided with free working tools, office location, and internet access to start developing there talents.

Saturday, April 22, 2017

Economics of Whistle Blowing: what next for Buhari!

      Because of the recent importance professional economics attached to corruption related matters, there is today a large body of literature on economics of corruption where corruption is rigorously study and analyzed. There is current change in academic scholarship from the era when economists saw corruption as a research topic for scholars of sociology and political sciences, to now when corruption is seen as very important in understanding the economics of developing countries of the world. There is no way one can understand economies such as that of Nigeria without delving into matters related to corruption. Here in Nigeria the most talk about issue is the new Whistle-blowing policy of President Buhari, the rate at which corrupt government officials are being exposed on daily basis, more especially the amount of money being discovered is alarming. Since coming to  office in 2015 President Buhari has made fighting of corruption the epicenter of his government activities. According to some government sources, Billions of Naira of stolen government fund have been recovered. But, of more immediate impact on people understanding of this government war against corruption is the whistle-blower policy which empower citizens to report any case of corruption to secrete phone numbers operated by the federal ministry of finance, from where government official will take the case and investigate. The new campaign has help in making government efforts to close leakages in its sources of revenue and ensure financial discipline. In just about four month of the start of the policy over 80 billions Naira of stolen money has been found due to the policy.

      There is wide spread believe that effective anti corruption war spur economic growth. The fight against graft in China, south Korea, Taiwan and Chile was instrumental in their economic successes. Nigerian government need to engage with its business community as they are very important in the present arrangements. It is a known fact that our business men have in the past collaborated with corrupt public officials to launder stolen money. Foreign investors are another important source of corruption, where they spread the ill practice from one country to another with the expertise of some one who has been in the business for a long time. But, government must be careful and very intelligent in it fight so as not to scare away foreign investors from coming into the country as this will have an adverse effect on economic growth. For example, according to some analysts poorly executed war on corruption in China has caused the country lost of about 1.5% of gross domestic product (GDP). Here in Nigeria, the epicenter of corruption (in the entire system) is the public service where enriching one self from government funds is seen as the norm. How much Buhari war against corruption is  contributing towards pulling Nigeria out of recession is not yet made public by federal government. But, figures from IMF and Nigerian Bureau of statistics show the economy is moving away from recession gradually.

      Considering the devastating impact corruption has on Nigerian economy, it is high time for Nigerian universities to introduce courses on Economics of corruption. This will help students of Economics, Business Management, Finance, and Accounting to know more about corruption. I can give an example here of what happened in the United States after the collapse of the Energy giant Enron, some business schools immediately started running courses on corruption related matters including students' visits to prisons in order to highlight to them the consequences of their future actions or in action. Finally, to make the current successes being recorded by President Buhari anti-corruption efforts sustainable, government must introduce an effective Whistle-blower protection framework. This will go along way in encouraging other people to come out and tells the true concerning the whereabouts of looted government funds. Buhari's government shall rise up to the expectation and expose all past leaders who contribute in installing Nigeria's corruption culture as well as put things in place to cleanse our national assembly off rotten members in order to pave way for effective legislation against corruption. Someone has described the two chambers of the national assembly as 'chambers of corruption'. But, whatever policy Buhari put in place it shall be done carefully and intelligently, i will suggest that people shall be encourage to vote-out the present governors, corrupt senators and members of house of assembly.

Tuesday, April 18, 2017

Questions on Nigerian Stock Exchange profitability

      Looking at the huge losses incurred by investors in Nigerian stock exchange (NSE) after the 2009 financial crisis, many professional investors were asking the important question of whether it was possible to make money by investing in the market. Since 2009 to date, the performance of the market has been moving up and down making the market one of the most volatile in the world. Beta as measure of investment volatility in the market has been high over the period, while profits paid (in form of dividend and capital appreciation) has not been high enough to compensate for the high risk. Considering the current unpredictability of Nigerian foreign exchange management system operated by CBN, how safe is it for a foreign investor to include Nigeria in his portfolio? Added to this is the fact that Buhari's government is yet to have a complete blueprint on ways to manage Nigerian economy in the face of dwindling revenue. According to conventional finance models, such as Capital Assets Pricing Model (CAPM) developed by Sharpe and others, and Arbitrage pricing theory (APT) developed by Stephen Ross, return to any investment is payment for non diversifiable risk. And, an investment is good only when it is able to earn an investor reasonable return with minimum risk. Taken the above into consideration, investment in the Nigerian stock exchange will look unattractive to investors. Of course, this is actually what has been happening over the years as the level of investments in the market keep falling.Though, the market has recovered some of its mojo, but it is yet to return to it pre-crisis level.

    Like other African stock exchanges, with the exception of South Africa's, Nigerian stock exchange is segmented from other major stock exchanges in the world. This has important implication, it means that Nigerian stock exchange is  good for inclusion in international investment portfolios created by various fund management companies and other global investors - since lack of integration means the market does not move together with the rest of the world markets. Hence, Nigerian stock exchange will be perfect for portfolio investment. But, on the other hand, lack of integration means absence of efficiency and underdevelopment of the market. Here the simple lack of efficiency will among other things means poor service provision, high cost of transactions and bureaucracy. Thus, foreign investors who decided to include the market (i.e. NSE) in their portfolio must be cautious and calculative. While segmentation of the market will provide opportunity for realizing non diversifiable risk as assumed by finance theory to be provided by any good portfolio. It is also argued,  under CAPM and APT models, that higher beta (due to volatility of the market) and high cost of transaction (due to lack of efficiency) will mean risk is high in the Nigerian stock exchange. In summary, looking at things from the portfolio diversification point of view, Nigeria stock exchange is good for investors looking to gain from investing in African stock markets. While from the perspective of efficiency and predictability of returns, Nigerian stock exchange look unattractive.

Saturday, April 15, 2017

2017 Budget: An Observation

    When President Buhari made 2016 budget presentation to the national assembly he apparently was unaware of the politics and corruptions that went with passing of budgets through the two chambers of our national assembly. Mr President state of mind might have been formed under the impression that the budget would be scrutinized diligently and pass over to him in due course to start the implementation of it recommendation. Alas, our honorable parliamentarians had different idea on mind. By the time the budget was pass it was already middle of the year, people in budget office (including the director) have lost their jobs, national assembly was in crisis due to budget padding, and Nigerian economy was on the brink of recession. Up til today, 2017 budget has not reached implementation level, and 'if' and 'when' it is ready for implementation what shall the world expect from it? According to the minister of finance about N1 Trillion worth of projects have been executed in the 2016 budget, a record in the history of Nigeria corrupt budgetary process. Is this a glimpse of what to expect in 2017 budget as Buhari government continue to pump money into capital projects? Already one can noticed the increase in number of infrastructural projects being undertaken by this government from roads, railways, power to airports buildings, as well as increase in commitment toward human development and social projects.

    In term of budgeting for development, Buhari government can learn from the example of China, Malaysia, Singapore and South Korea in the 1980s and 1990s. How they were able to maintained rapid economic growth with equity? According to authors of 'the East Asian Miracle', they combined rapid demographic changes with dynamic agricultural sector and rapid export base. They also maintained macroeconomic stability with human capital investments, strong institutions and effective legal framework. so far Buhari has shown his old conservatism in managing the Nigerian economy in the mids of cash crunched and falling global oil price. One area that Buhari is doing well is in creation of strong institutions and legal environment to ensure corruption free atmosphere for rapid economic growth and development. Looking at the borrowings arrangements of his government over the next two years one can rightly say that Buhari government would not back away from deficit budgeting. Deficit budgeting is not bad in itself in as much as the borrowed money is put into most productive sectors of the economy that will quickly facilitate the creation of conditions necessary for smooth repayment of the loan and the general development of the economy. My advice to this government is that it shall find it priorities and focus on them as time is of essence.