Tuesday, December 30, 2014

Don't Fear Oil Prices and Deflation

Most Americans are happy that the price of oil has tumbled, helping consumers while hurting nasty regimes abroad. There are always worriers among us, though, and what has them alarmed today is that this decline will tip the U.S. into a damaging round of deflation. There's no need to join them in their gloom. Deflation isn't something we should fear.
What matters is what's causing prices to decline: an increase in productivity or a decline in economic activity. Only in the second case is there a serious danger that the Federal Reserve should try to respond to. Similarly, rising prices can be a sign that monetary policy is too loose, but can also reflect declines in productivity.
And so changes in the price level, or prospective changes in it, can easily lead central banks astray. A run-up in oil prices, much of it caused by supply disruptions, made the Fed excessively concernedabout inflation in 2008, which is one reason it was slow to react to the financial crisis. (When Lehman Brothers Holdings Inc. collapsed that year, the Fed was so concerned about inflation that it initially declined to cut interest rates.)
The current fall in the price of oil is creating a bias in the opposite direction. It's stirring up fears of deflation and leading to calls for looser monetary policy. This reaction is less likely to prove catastrophic than the error of 2008. But it is still an error. If inflation expectations are falling because markets expect the Fed to run an excessively tight policy over the next decade, or predict a long depression, it's a reason to loosen monetary policy. If they're falling because markets expect more abundant energy, on the other hand, it's just a reason to celebrate.
There are, however, two wrinkles worth noting. One is that although the fall in the price of oil doesn't appear to reflect any weakness in the U.S. economy, weakness abroad may be a factor. But that's a reason to loosen money elsewhere, not in the U.S. A second is that there is areasonable argument that monetary policy in the U.S. has been a little too tight even leaving aside this price decline. If that's correct, then some added pressure for loosening, even if that pressure is based on a mistaken worry, might not be such a bad thing.
If money has indeed been too tight, then it might not be a bad thing for fear of deflation to exercise a countervailing pressure on the central bank. That fear, however misguided, might make the Fed less likely to raise interest rates prematurely.
To contact the author on this story:
Ramesh Ponnuru at rponnuru@bloomberg.net
To contact the editor on this story:
Timothy Lavin at tlavin1@bloomberg.net

Friday, December 19, 2014

Dr. Alex Otti: Is He The Messiah Abians Await?


The last time I rooted for a candidate in a Nigerian political election, that candidate turned out to be a disappointment, after twelve years in the senate. That candidate was Senator Uche Chukwumerije. I had hoped that with his level of education, experience, and personal integrity that he would bring considerable political pork to Abia state, especially his senatorial zone; unfortunately, he did not. What has that to do with Dr. Alex Otti and his desire to be the next Abia state governor, you might rightly ask; a whole lot.
Time was, when I used to worry about the direction Nigeria is going; especially, given its huge potential (yes, that word again, in use for the past 54 years) to make its mark in both the regional and international economic, social and diplomatic community. Though some of that potential seems to be on the path of realization, though gradual, it has been largely in the wrong direction. However, when one recalls the universally approved/acceptable sequential order of progressive development – home>community>city>state>nation – one is forced to lower its expectations of a greater Nigeria and focus on the local governments and states. So, in this 2015 national election; in this another opportunity to make a choice, to take their destiny in their hands, to live out that oft-used adage that “change begins from you”, Nigerians have been presented with a choice at every electoral level to, again, take their destinies into their own hands. One state in Nigeria very desirous of change, given the stunted growth it has experienced due to its comatose state for 16 years, is Abia state.
One would wonder why the fuss about Abia state. Here is why: Abia state is an Igbo state; it is where the commercial capital of the Igbo nation –Aba- is located; Igbos were/are supposed to be a progressive people, an enterprising people, and a people on the path of recovery from a brutal civil war that left almost a third of its population dead. Therefore, it was – and still is – expected of the leadership to be in a hurry not only to recover from the devastation of the civil war but, also, to apply all the other attributes symbolic of the Igbo people to move the region beyond every other region in Nigeria – something like the nation of Israel after 1948. This has not happened, even though we have had leaders from across every age bracket, academic level, and of every sector.
Since its creation during the military regime, Abia state has not been blessed with a visionary leader leading up to the 1999 return to democracy. The excuse has always been that the military are not known for their infrastructural and economic development of states and nations, a claim I find spurious at best. Evidence abounds of military administrators in many states of the nation who had proven their mettle in the states they had opportunities to govern, and some of them are still alive today. The problem with Abia state, even when one or some of its own have been military administrators, is that the wrong person, always lacking in vision, desire and drive to succeed, seems to find a way to rise to the top. This flawed system of selecting inept and incompetent leaders has continued even into the democratic dispensation.
In 1999, the state’s political leaders under the PDP threw up Orji Uzor Kalu, a thirty-something charmer and sweet-talker with friends in high and curious places, a wad of cash, and the willingness to spend it. Working in his favor was a state and an electorate with little or no experience of civilian leadership in more than two decades (the aborted attempt under IBB that gave us Ogbonnaya Onu, and Shonekan contraption cannot qualify as civilian governance), and an expectation that this young, educated – still questionable – business mogul, will bring his wealth of experience to bear in Abia state and turn it into a paradise; very lofty expectations that quickly turned into a nightmare not just for the people but for the prospects of the state for eight years. What was unfortunate and mind-boggling to an outsider was that the same suffering Abians elected, or allowed to be selected, the same man who has not performed in his first four years. Whatever excuses that may be proffered by the electorate on how or why OUK – as he is popularly known – won a second term, the truth is that people rig or allow elections to be rigged (I was in Nigeria during the 2013 elections and did witness the resigned attitude of the voters as their brothers, cousins, and uncles snatched ballot boxes for stuffing in well-known locations under the watchful eyes of the police). So, in inadvertent complicity, voters of Abia brought upon themselves the institutionalization of corruption and mediocrity at Umuahia.
Fast-forward to 2007, Theo A. Oji, a former member of Orji Uzor Kalu’s inner cabinet and, by all intent and purpose, an insider to – and continuation of – the failed immediate administration, was foisted, or allowed to be foisted, on the people of Abia state; again, with unintended complicity by the electorate. For the past eight years, TAO or Ochendo – as he is popularly known - has been busy running around in circles, moving problems from one location to another, repainting patched-up houses, and construction gargantuan carbuncles dubbed Legacy Projects with little or no economic value, all over the capital city and virtually neglecting the local governments. One would have expected that having, as he claimed, been emasculated and shackled in his first term by his former boss that he, TAO, would have worked hard to convince the people of Abia that he has a different pedigree from OUK when it comes to governance. Sadly, the fruit had not fallen far from the tree these past eight years. For a career civil servant, a man who has been in the system and knows what the state needs, and how to meet that need, TAO is as equally disappointing as his predecessor; trying to prove otherwise will be a futile exercise to the many unemployed Abia graduates, the unpaid civil servants and pensioners, and the many women who suffered miscarriages plying the deathtraps called roads in the state.
So, what now? Why Alex Otti? Good questions! The “what now” is that the opportunity to effect a political change of leadership, which presents itself every four to eight years, is here again. Abians, again, have the opportunity of choosing between continuation of nepotism, mediocrity and the status-quo, or take a leap of optimistic fate and go for the unknown. After all, if you have taken the same medicine for 16 years without positive results why not try something else. The February 2015 elections presents an opportunity for Abians to convince the world that they are not, and can never be, comfortable in their present state of regressed development; an opportunity to exhibit some backbone, to show that they have a stake in the survival of the state, and that they would not stand by, or in ignorance, while a few visionless miscreants run roughshod over their state, or deny them of their rights to make their votes count.
As to why Alex Otti, I ask: Why not Alex Otti? Rephrasing; why Abaribe, Nwogu, Ikpeazu, Udensi, and a thousand others who have declared their intent through one party platform or another? Assuredly, most – if not all – of these people have some kind of leadership qualities which could be beneficial to the state in one form or another. Unfortunately, they are all long-term politicians, and we have had them for sixteen years with nothing to show for it. Change means a complete deviation/departure from the norm; a 360-turnaround; a move in the opposite direction, and a rejection of the usual humdrum. That is what Abia needs now; hence, the emergence of Alex Otti.
I do not believe in divine callings when it comes to Nigerian politics; but, when a man leaves a lucrative or plum job in the business community as a Managing Director of a bank in Nigeria (unlike in US and Europe where you are really nothing far removed from the counter teller), with all its attendant trappings - and there and many - and with an assured 3 years left on his contract, to come and run for governor of a state in Nigeria either there is something mentally wrong with that person or he really has a divine calling to answer to. I am convinced that there is nothing mentally wrong with Dr. Alex Otti, so this sudden and strange career change must truly be a divine calling; one not to be missed by the Abia electorate. Dr. Otti has attained the constitutional age to run for governor, has the academic qualification needed (if any), and the good health to carry out the daily duties of the office. What he does not have is the political and administrative experience to run a government, and that is both an asset and a liability It would be a liability in a developed democracy like the US and UK, but not in Nigeria.  When it comes to running a state in Nigeria – especially one in need of a life-saving transfusion like Abia – the less political and administrative experience you have, the less encumbrances.
 Abia state needs economic development, not career civil servants with a penchant for nicknames. It needs infusion of investment capital, job-creating manufacturing projects, solid rural roads for transportation of agricultural goods; it needs to develop its share of solid minerals, to make it less dependent on monthly federal allocations; it needs a leadership not afraid to take risks, who is willing to reach out to Abians outside his political party to recruit progressive minds into his government, someone not tied at the waist with so-called political godfathers, a leadership not afraid to make bold decisions and step on big toes; one devoid of the stomach infrastructure mentality and unburdened by demands for political “settlement” from sponsors. Abia state does need a miracle, and it takes a miracle worker to perform miracles.  It is my strong belief that Abians will find all of these qualities in Dr. Alex Otti.
Those who have reservations about the candidacy of Dr. Otti point to his political and administrative inexperience as a handicap. While they may be right, one also needs to not only refer to his success at Diamond Bank, but factor in his experience as an observer of the goings-on in the nation and Abia state these past 16 years. So, it is not like he just dropped in from a galaxy somewhere, or one of the so-called “Ndi Abroad” from some foreign self-exile. He has been around and, obviously, at some point got fed up with the waste of opportunities by the previous leadership. A look at the alternatives provides the state with the same group of political octopuses ready to dip their tentacles into every pot of the treasury available; a continuation of the same scratch-my-back-I –scratch-yours, or cover-my-ass five fingers of a leprous hand that have laid the state comatose in 16 years. To continue with that lot in any way is, without doubt, a death sentence for Abians and the state.
Of course, the mere fact that Dr. Otti has offered himself for service to the state does not mean he will win. People get to a point where they are comfortable in their situation; they become afraid of change, because they are well-adjusted to a certain mental or physical state and this forces them to redefine the meaning of progress and development; that is the situation with Nigerians today, as I noticed from the conversation among passengers on a bus from Arochukwu to Port Harcourt in November. The main task ahead for Dr. Otti is to convince the people that they can do better, they deserve better, and that they can be better. Convince them that there is light outside their various hermitical abodes; that water and light can be on 24/7, that roads can be devoid of potholes, and that healthcare can be both accessible and affordable by all. Convince them that the angel they cannot rely one can be better than the devil they know. Engage the youths and the university students to get involved in who becomes the governor in their state, because they are the direct beneficiaries of a functional successful state government. It is a huge task for him, but with the assistance of progressive minds, it can be achieved.
Dr. Alex Otti may not be the best candidate in the field, but there is none close enough to being as good as him; he may not be the messiah that Abians are looking for, but he may just be the one sent to make way for the messiah. He may not have a magic wand to wave and, with fiat, fix all of Abia’s problems, but he may very well be the one who lays the foundation for a continuous progressive leadership in Abia state. He may not have political godfathers the likes of Chris Uba and Emeka Offor – because they come with hooks and strings, or the political experience of the Arthur Nzeribes and Ogbonnaya Onus; thankfully, he does not need them to run Abia state. For anyone to succeed in Abia, he/she needs to run the state as a business, and this is why Dr. Otti is the right candidate for the job.
I am joining the many Abians both in Nigeria and Diaspora who endorse the candidacy of Dr. Alex Otti. Though I may not be one of those privileged enough to cast votes in February 2015, the success of the state is equally important to me as it is to those in Nigeria.  The interaction of Abians in the social media convinces me that the people of the state are yearning for change, and not just at the adult level; the youth have finally realized that their progress into adulthood is shunted by inept and incompetent government, and a change for better is needed. I hope that, in the world of the late K.O Mbadiwe; “when the come comes to become, the happen will happen”. When it is time to vote, the citizens of Abia state will do the right thing and change their future, and that of the state, for the better.
I hope, this time around, I will not be disappointed.

Monday, November 17, 2014

Akwa Ibom Stadium: Alternative Uses for $96m

As my people are quick to say, what is good is good. Yes, I do agree; and might add that what is worth doing is worth doing well. So it was that Ibomites – as the people of Akwa Ibom call themselves – and Nigerians marveled at the state-of the-art stadium unveiled recently by the government of Akwa Ibom state. The presence of the current Ghanaian and Ivorian presidents, along with the ever-loved Jerry Rawlings, former Ghanaian president, in the company of President Goodluck Jonathan, added pump to the ceremony. Indeed, it was a stadium befitting of a state which has blazed the trail in development in modern Nigerian governance.

Akwa Ibom state boasts a population of about 4 million people scattered over 31 local governments, with an estimated 1.5m people within the 14-59 labor force age bracket. It is an agrarian state, with few solid minerals but plenty of the Black Gold off-shore; therefore, its federal allocation – NGN260b in 2013, an average of NGN21.6b monthly (plus NGN1.13b IGR -2012) – topping the list of the 36 states and the FCT. So, the state has enough money to throw around. The state’s GDP is estimated at $13.7b (2013), with a per capita income of $2,779 (2012); compared to Nigeria’s GDP of $522b and per capita of $2,800 (2012), Akwa Ibom is a state from which much is expected. It is heartening to say that the governments have not entirely disappointed.

Having said that, Akwa Ibom is also a state infected with the same national plague that bedevils the Nigerian nation; misplacement of priorities, high unemployment, and lack of rural roads, electricity, and adequate rural health clinics are still problems in the state. Granted, the government has made noticeable strides in some of these areas; however, for a state that’s internally-generated revenue (IGR) depends on food crops, or agriculture, high priority should be place on not only modernization of agriculture but, also, provision of access for movement of the produce. While the flash and dash of the state is mostly evidence in the major cities of Uyo, Ikot Ekpene, etc. places like Nkana, Obotme and the rest of the rural communities seem to have been forgotten. The roads are hardly passable, the lights are more of a twinkle, primary education facilities are far and few between communities and the residents in these communities are at a loss where they belong, Abia or Akwa Ibom. So, having all these priority needs, was spending $96m on a stadium a wise decision? My guess is that it depends on what the state government considers important.

The sum of $96m is equivalent to about NGN16.3b, which is a lot of money to spend on a stadium with very little benefit to the majority of the state’s population. With this amount, the state can provide any of the following: 4 23-km roads which will greatly benefit rural farmers and dwellers; 31 rural clinics to provide easy access to primary healthcare where it is needed most; 20 primary schools (by Nigerian standard) to decongest existing schools; 2 four-year universities, or 4 two-year polytechnics to increase admission space for intending students; one fully-operation hospital in each of the three senatorial zones for secondary and tertiary healthcare services; 16 vocational training centers for training of tomorrow’s engineers in various fields; 31 rural recreational facilities to provide unemployed and unemployable youths an outlet to relax and  let off frustration; or 6 strategically located food processing plants (2 in each senatorial zone) to harvest and process the state’s agricultural resources for both consumption and export as a revenue earner and source of employment. There are many more uses for NGN16.3b; however, since it chose, instead, to build a 30,070-seat stadium, any of the above-listed is considered an opportunity cost of building the stadium. Now, what does Ibomites stand to benefit from this 30,000-seat stadium?

Of course, as with everything Nigerian, the stadium is cited at Uyo, the state capital, meaning that residents outside the state capital wanting to participate in any function going on in the stadium will have to fund their way to the place. Since it is not the official home of Akwa United FC, the Nigerian premier soccer team based in Akwa Ibom, the prospects of a steady stream of revenue to the state, during Premier League season, is very dim. Expectedly, the team will on occasions, play important matches in the stadium; thereby, attracting paying fans. Unfortunately, since Nigerians prefer to patronize European soccer teams – for reasons yet to be discerned – the stadium will never be of full capacity for any of the Akwa United FC games. Now, when one factor’s in the cost of admission to these marches, say NGN1000-1500, affordability becomes an issue; thereby reducing access to only those who could afford to easily spend such amount. It is estimated that on any given Akwa United FC match, the stadium will be a half capacity – 15,000. For matches involving the Super Eagles, Falcons and/or any of the junior national teams, ticket prices will likely double that of the local team, further restricting access for many soccer fans and reducing government projected revenue from these matches.
Another use for the stadium are likely to be concerts by popular national and international artists whose tickets run into the north side of NGN5, 000 per show – affordable only to the very rich; athletic events like track and field which holds twice or three times in a school year and attract very little in terms of revenue; and Holy Ghost nights, and sundry weekend activities, by evangelical churches who attract huge crowd to these events and are able to rent the stadium. Unfortunately, with these kinds of clientele, the stadium will experience exponential deterioration due to overuse of its facilities. Businesses are less likely to avail themselves of the stadium for their conferences and AGMs, because the state already has a conference center and a 3-star hotel, and these business events do not attract huge crowds. Of course, state-sponsored events are free at the stadium, and do not generate revenue. Basically, the recovery period for the expended NGN16.3b would take up to 30 years – well beyond the contractual maintenance period entered into with Julius Berger. If one should go by experience, especially in Nigeria, the stadium would be in the same state as the Abuja stadium today in the next 10 to 15 years.

Like I said at the start of this write-up; what is good is good, and worth doing well. Nigerians do appreciate beautiful things, and will like to be associated with such beauties. Unfortunately, such appreciation is very flighty and short-lived. We have had such breathe-takers as the National Theater, Iganmu, the National stadium, Surulere and, in recent times, Tinapa, the Abuja stadium, Nnamdi Azikiwe airport, and many other magnificent national and state landmarks, only to watch them deteriorate with such speed, and within such a short period of time, that one wonders if Nigeria is some deserted island in the middle of nowhere.

This stadium, as beautiful as it may look today, as admired as it may be by not just the Ibomites, but the nation as a whole, and as jealous as other states may be of Akwa Ibom today, this is not a gift that keeps on giving to the people of the state. A progressive government does not invest NGN16.3 on one structure – not infrastructure – when citizens of employable age and education are jobless, and the rural farmers cannot bring their harvest to the market. It will not spend that amount of money on a stadium when infant and adult mortality rate remains high, and access to primary education and healthcare for the poor is still a problem. A progressive government would have invested that amount in job-creating ventures, which will generate more tax revenues that would be used, in due course, to build such a stadium.


For now, the state has made its choice and the people are happy. For now…..

Friday, November 7, 2014

Abia State: TAO, the Legacy Projects & Job Creation

Legacy:
1.       A gift of property, especially personal property, as money, by will; a bequest.
2.       Anything handed down from the past, as from an ancestor or predecessor.

Projects:
1.    Something that is contemplated, devised, or planned; plan; scheme
2.    a large or major undertaking, especially one involving considerable money, personnel, and equipment

Legacy Projects:
1.       A large or major undertaking, especially one involving considerable money, personnel, and equipment, handed down from the past, as from a predecessor.
In preparation of this article on the much-publicized legacy projects of the T.A. Orji administration in Abia state, it was important for me, and I hope the readers, to first understand the definitions of both legacy and projects in the context with which it is being applied by the Abia state government; that is why I selected and combined what I consider to be the likely definitions of both words to come up with a suitable definition of legacy projects as may be used by a government or its agency. Now, let us attempt to look at these projects, and their economic and social benefit to the people of Abia state. First, why are they necessary?
I will refer to the reason proffered by Ms. Susan Rice, the US ambassador to the UN, for why the coalition of US and EU partners toppled the Gadhafi administration. According to her, there were no foundational structures upon which to build a civil and democratic society; there were no judiciary, civil service structure, fiscal and monetary policies, etc., upon which a democracy could function. Gadhafi was running everything by himself as he wishes. For a democracy to function, one must have a functional and well entrenched legislative, judiciary and executive institutions – along with their various attendant bureaucracies. These structure/institutions, supposedly, were lacking or not functioning in the appropriate environment in Abia state for the 20, or so, years of its existence.
To anyone who cared to listen – and there are many -, the Theo Oji (TAO) government have been quick to shout it from the rooftops that they inherited no economic and social foundational structure from their predecessor, the Orji Uzor Kalu (OUK) administration, even though the current governor was part and parcel of that previous administration for the better part of its tenure. So, one is inclined to accuse him of culpability in the maladministration of the state by the much-maligned OUK administration. In any case, that is not the issue for review here.  Yes, given his youth and exposure outside the shores of Nigeria, and having experienced the benefits of good governance in developed countries, many expected OUK to attempt to lay the social and economic foundational structures TAO is doing now; unfortunately, one can take the horse to the stream but one cannot force it to drink. Admittedly, OUK was a disappointment to Abia state and her citizens. I had the opportunity to tour government offices in Umuahia in 2002, including the governor’s office, some commissioners’ offices, the secretariat, and those of some permanent secretaries; to put it modestly, most of these offices were not suitable for junior staff of the Biafra government at the height of the civil war.
Of the many legacy projects touted by the TAO administration, my attention was drawn to seventeen, of which ten were of particular interest. Some of them are the ministerial offices, government guest house, renovated federal and state secretariats, the broadcasting station, the house of assembly and constituency offices, high court, account allocation office, and the new governor’s lodge. One would easily notice that none of these legacy projects include a factory or an industrial complex of any kind, a specialist post-primary institution designated to the training of young Abians in the sciences and technologies of the future, an agricultural production and processing industry, or plants for the manufacturing of anything. That is, there are no continuous job-creating and sustaining projects on the list.
My argument is not the usefulness of these projects in some ways; yes, they are very useful in their own ways. However, in a state with a very high rate of graduate unemployment, very low functional industry concentration, and very minimal provision of social infrastructures beyond the two major cities of Aba and Umuahia, the construction and/or renovation of office buildings all over the capital city does not go far in providing a permanent or continuous solution to the huge unemployment problem facing the state.
One could argue that the construction projects provided employment, and created accessory business for the communities around these construction sites; that may very well be so for as long as the construction lasted. What happens to the hired hands when the project is completed and the construction company packs up and leaves? They go back to being unemployed and a security risk and a burden to government and society; and, since buildings last for decades – regardless of how many the governments construct in a fiscal year –they can never secure permanent employment. Therefore, there will always be frequent downtimes in employment among this segment of the workforce.  The ministerial offices, court houses, constituency offices, governor’s lodge and guest houses, the secretariats, and account allocation offices are simply government providing better working environments for the existing staff; there are no new recruits to the existing staff strength attributable to the construction of a new or modernized building. Therefore, their construction or modernization does not lead to a reduction in unemployment in Abia state in any way; neither does it improve the efficiency of the current workforce, or reduce the cost of governance in the state. At best, and for a period of five years, they just provide a comfortable working environment.
A second set of these legacy projects, like the Dialysis and Diagnostic centers, modern market, youth empowerment vehicles, and the international conference center, though necessary, will only create minimal employment opportunities. Twelve years of experience tells me that a fully utilized dialysis center capable of accommodating 16 to 20 patients during two 8-hour work shifts needs only three nurses per shift. That is 6 people right there. A diagnostic center also requires about that many staff. As for a conference center, unless it is in use, it only requires a janitorial staff of about 4, and a clerical staff of about the same number to run it. Were it to be in use, it would only employ temporary staff for the duration of the conference. Again, not much is there in terms of tackling the state’s unemployment figures. Construction of a modern market is the same as building a new secretariat; government is only attempting to decongest the city center by moving the congestion to the suburbs. A few more stalls may have been added in the new location for the benefit of those who never had one; other than that, employment could only come from the market authorities adding a few more people the existing staff strength to help keep the market clean and secure. Altogether, not more than 50 permanent jobs would be created by this set of legacy projects.
Of immense curiosity to me is the youth empowerment project: the idea of buying transportation vehicles of any kind for use by the unemployed on some contractual agreement with the state or its responsible agency. In doling out these vehicles, the government may be well-intentioned; however, in a society where a reliable tracking system is, to say the least, non-existent, how would the government know that its intent is being realized? Most of the beneficiaries of this arrangement are city dwellers, since the program is not really grassroots-based or replicated in the 17 local government areas of the state. Also, the terrible state of roads outside the two major states makes this venture less profitable for rural dwellers where these services are much needed. So, though the idea may be lofty and the goal well-intentioned, the result is only favorable to a small percentage of the unemployed.  Also, as with many government projects, once the TAO administration ends in May, 2015 the chances of the state recouping its investments on this transport-for-employment scheme vanish with the administration.
Legacy projects are two-fold: monuments in forms of office buildings, or industries in forms of factories which create jobs; the likes left behind by the late M. I. Okpara and his team – Modern Ceramics, Golden Guinea Breweries, Nkalagu Cement Factory, Rubber and palm oil plantations, solid interconnecting roads and rail system, etc. These legacies not only provided direct employment to the people of Eastern Nigeria, they spurned secondary and tertiary businesses like distributorships which, in turn, created more jobs; a much-desired multiplier effect. With today’s Abia state legacy projects, such results as witnessed by the Okpara projects cannot be envisioned. Now, were the diagnostic and dialysis centers to be replicated in all the 17 local governments of the state, the prospects of increased employment would be increased, and rural beneficiaries, kidney patients, will not have to travel long and tortuous distances to Umuahia to avail themselves of the services. That would have been a plus for the state government.
A preferable legacy project that would go a long way towards reducing unemployment in the state, as well as preparing its citizens for the jobs of tomorrow, would have been a well-funded, well-equipped technical and vocational training centers in each of the local governments of the state; creation of industries geared towards the extraction and processing of the natural resources of the state, like gold, salt, limestone, lead and zinc; a small business loan program under a contracted financial institution  tasked with not only disbursement of such loan, but complete recovery of same, with minimal interest, at the end of a generous period of time. Abia state generates about NGN5 billion a year (broken down to less than NGN500m per month), close to the same amount it collects every month from the federal government as allocations. So, it would have been more beneficial to the state if the legacy projects were focused on laying the foundation for increased IGR in the years to come.
This piece is not a criticism of the TAO administration, though many – especially, those in government – may see it as so. It is rather an opportunity for stakeholders of both the current and the next administration to review where the state is headed, what it needs to get there, and how it can go about acquiring that need. One thing is undeniable; Abia state needs to create jobs for its citizens, and in order to do so it needs to significantly increase its IGR; to achieve this, it needs to invest in revenue-generating ventures, and office buildings are not high on the list of such ventures. The state, with all its natural resources, cannot continue to run cap in hand to Abuja for salvation.

Felix Oti

Felix.oti@gmail.com

Tuesday, September 30, 2014

Economic Blueprint for Attracting Business & Commerce in Igbo land

As the saying goes; “a road once traveled, can always be traveled again”. In the first Republic, under the leadership of Drs. Akanu Ibiam and Michael Okpara, the then Eastern Region was economically self-sustaining, building upon the foundation laid by the colonial masters. 
For the region to get back to the successes of the first republic, it must strive to be a player in the current global economic dispensation, where trade borders are seamless, technology is cheap, and venture capitalists – both local and foreign – are aplenty.
To be able to know where you are going, you have to know where you are coming from, how to get there, and what you need to get to your destination. In the case of the Igbos of Southeastern Nigeria, it is obvious where they are coming from, economically.
Where Are Igbos Coming from?
Today, the region is badly in need of good governance, reliable infrastructure, rail system and seaports, steady water and power supply, agricultural and manufacturing industries, security, improved educational infrastructures and modernized academic curriculum, agricultural, bio-medical and scientific research facilities, a stable government across the region, and business-friendly laws.
Where Are Igbos Going?
In terms economic development, Igbos would want, and do desire, to be at par with countries like Taiwan, Hong Kong, Israel, and Singapore, just to name a few.  The four factors of production – resources, labor, capital, and entrepreneurial spirit - are in abundant supply in the region. What is lacking is a vision and a mission to better harness these factors, a strategy or plan to implement that mission to achieve that vision. The big question is: does Igbos have the stomach and determination to embark on this arduous task of economic development? If the will is not there, the way will not be there either.
What do Igbos Need to Get There?
First, you have to know what you have to be able to identify what you need. In terms of natural resources, the region is abundantly blessed. Underground in the five Southeastern states of Nigeria and parts of Edo and Delta states lay the following natural resources and their uses:
1.      Salt:  is used universally as a seasoning
2.      Gold: monetary exchange, investment, jewelry, medicine, food & drink (vitamin E), industry, electronics, coloring
3.      Lead: used for automobiles, mostly as electrodes in the lead-acid battery,  It is used in solder for electronics
4.      Zinc: The metal is most commonly used as an anti-corrosion agent, as a white pigment in paints, and as a catalyst in the manufacture of rubber.
5.      Gypsum:  used as a finish for walls and ceilings, like cement blocks in building construction, fertilizer & soil conditioner, surgical plaster ingredient, a major source of dietary calcium, mushroom cultivation, dough conditioner, shampoos and conditioners.
6.      Coal: power generation as fuel or for cooking, chemical fertilizers and other chemical products.
7.      Limestone: main raw material in cement and mortar manufacture, for road construction, in glass making, used in paper, plastics, toothpaste, paint, tiles as either cheap fillers or white pigment, in sculptures, petroleum reservoirs.
8.      Phosphate:  Inorganic phosphates are mined to obtain phosphorus for use in agriculture and industry.
9.      Lignite: brown coal for power generation in coal plants
10.  Marcasite: used to make or coat jewelry
11.  Iron-ore: main source of metallic and steel iron,
12.  Clay: for medical (anti-diarrheal) and agricultural uses, as building materials
 All of these natural resources could be developed to any stage desired for either local use or exported to generate revenues; what is lacking is strong commitment by the people and governments, and the requisite vehicle to drive a development plan.
Southeastern Nigeria Development Corporation (SENDC)
The first step would be for the southeastern governors, industrialists, and academicians locally and in Diaspora to commit to the following:
1.      Agree on a proposal to set up and fund a Southeastern development trust corporation.
2.      For the state governments and legislators to agree on a certain percentage of the states’ monthly federal allocation as contribution for regional economic development
3.      For industrialists to, equally, agree to contribute a certain percentage of their net profits to this development fund.
4.      Academics to commit to drawing up a technical education master plan, and the establishing of vocational training departments/schools in state universities to be funded by indigent banks and other financial institutions.
5.      For all stakeholders to agree on setting up a well-represented corporation to draw up and implement an economic development plan for Igboland, something akin to NDDC.
6.      A broad-based and effective public relations/publicity campaign structure that will be responsible for promoting the benefits of doing business in Igboland
Attracting Investors
As the saying goes: “if you build it, they will come”; apart from a quick return on their investments, investors look for ease of entry into any market, unencumbered movement of capital (funds), uninterrupted access to internet technology, accurate and on-time information, and ease of exit. The existence of cheap modern technology has made it possible for any government, region or community to put in place the technological resources required for efficient and effective conduct of business in any part of Nigeria. Governments of the Southeastern zone must ensure the following:
1.       Removal or relaxation of restrictive international business laws, and replacing them with business-friendly ones which would include tax breaks for certain class of investors, generous lease agreements, build-operate-transfer (BOT) joint-venture agreements, ease of purchase/financing/sale of business entities, ease of issuance of investment and/or partnership licenses.
2.      A safe and secure environment devoid of fear of armed robbery, kidnapping, financial fraud, economic sabotage, disruptions and intimidation by community groups and powerful political figures
3.      Steady power and water supply, efficient telecommunication and internet services; independent power-generating and switching capacity
4.      Good rural and urban inter-connecting roads and bridges, airport/airline, seaports, and rail systems for timely, effective and cost-efficient movement of raw materials, finished goods and labor force.
5.      Assurances of commitment to prudent fiscal management, and transparency in dealings with investors.
6.      Establishment of a business ethics watchdog responsible for resolution of problems with host communities.
In Igboland today, there is abundance of venture capitalists and investor, locally and in Diaspora; New business and investment consulting experts; abundance of cheap but educated labor force, and a highly trained technical and vocational workforce within the zone. Equally not lacking is a requisite entrepreneurial zeal – the willingness and commitment to take a risk at success – among the people of the zone.
These days, governments are incapable of doing everything alone; governments and the governed frequently come together to create a third vehicle – public/private partnerships - for the development of a community, state, region, or nation. For Igbos to get to where they want to be, we must take the bull by the horn, set a developmental goal and timetable for our land, and make the necessary sacrifices required to achieve that goal. It takes planning, time, and commitment from everyone.

Mr. Felix Oti (B.Sc. Econs)
Principal Partner: Oti & Associates, PC.
Felix.oti@gmail.com; (682-221-9323)
(Income Tax, Personal Finances, Business Development Strategies)

Member: National Association of Business Economics (USA); American Economists Association; National Economics Association (USA)

Thursday, May 8, 2014

The Chibok 200: Dilenma of A Nation

On April 14, 2014, a bomb blast on a commercial motor park at Nyanya, on the outskirts of Abuja, Nigeria's federal capital territory, left 75 people dead and about 200 wounded; 22 days ago, just a few days after the Nyanya blast, the same group who claimed responsibility for the bombing at Nyanya, the now-dreaded Boko Haram sect, raided a secondary school at Chibok in Borno state, northeast of Nigeria, and carted away over 200 senior secondary school level 3 girls who were in the middle of taking their West African Examination Council exams. In both incidents, as he has always done over the years, the Nigerian president vowed to bring the "perpetrators of this dastardy act" to book.

While bombings and killing of students in remote schools and colleges have been a norm for the sect, the abduction of over 200 girls, some of whom braved the unknowns of the night, and risks of death, to escape from their captors, was a new twist to the excesses of Boko Haram. What is more confounding to Nigerians is the fact that for 22 days, a combined team of the Nigerian army, navy, airforce, Directorate of State Security, national Intelligence Agency, and a 250,000-man police force, among the most brutal in the African continent, have not been able to locate a herd (forgive my choice of words) of 200 teenage girls in the forests bordering Nigeria, Chad and Cameroon. Not only that, there is no credible intelligence report as to where these girls are. Questions have even been raised by some in government circles who doubt the veracity of this abduction claim; even the person of the First Lady, Mrs. Patience Jonathan, had insinuated that something is not right here; complaining that the First Lady (this is Nigeria, everyone is a first lady of some fiefdom all the way to the local government level) of Borno state has twice refused an invitation to come and see her in Abuja (not that she, Patience, made any efforts to fly down to maiduguri). Therefore, she - the Borno first lady -must be hiding something.

To buttress these doubts, the president, in this recent media chat, complained that he has not been furnished with the identity of the missing girls, especially their pictures, names, etc.; thereby, insinuating that he could not do much without the pictures of these girls. Meanwhile, the world - and Nigerians - watched and waited for the self-styled giant of Africa to do something about her missing citizens. It was not untill the Christian Association of Nigeria, CAN published the names of 180 missing students, about 160 christians, that the concern reached fever pitch in the southern part of Nigeria. It was not until, as has always been the case, the few concerned ordinary Nigerians, joined by the international community, began to openly voice their frustration at the inpetitude of the Jonathan administration concerning this abduction issue that increased activities began to emanate from Aso Villa.

All along, the president have been promising Nigerians that he will do everything possible to free the girls; besides prayers and fasting organized by churches and retired General Gowon, there were no other concrete evidence that the government was doing anything beyond what it had done before now. Convinced by the release of the names of the girls by CAN, and subjected to gross international ridicule, the president finally set up a committee to...... frankly, I have no idea what the committee is supposed to do. All this while, the US and Chinese, later the British, have been offering to assist in the location and possible freeing of these girls, if only they would be approached by the Nigerian government. So far, until today, their offers were declined by a president who considers it more shameful to admit the limits of your capability and seek assistance, than sacrificing 200, or so of his country's teenagers to a brutish Muslim sect.

Why was the government incapable of locating, pursuing Boko Haram, and freeing the girls? A few reasons:
1. The Nigerian military is not trained in guerilla warfare; therefore, unable to match the skills of Boko Haram. They also lack the necessary tools to track their movements - the casualties of corruption in the military.
2. The Nigerian intelligence community do not have the required training to infiltrate organizations like Boko Haram. Not that allocations are not made annually for these trainings, the funds just disappear into the pockets of a few senior officers. This cuts across every intelligence agency in Nigeria.
3. The Jonathan administration still believes that Boko Haram is a political tool controlled by the opposition, and used to destabilize his government. So, he felt that with the win of a second term, the organization will disappear into thin air
4. The southern consensus was that these are muslims killing each other, so let them destroy themselves. Unfortunately, one thing about oil is that it has a way of rubbing off on all the five fingers.

The Boko Haram issue has exposed Nigeria's soft underbelly; it has exposed the confusion and ineptitude of the administration, the weakness of the Nigerian military to our neighbors - a very dangerous thing, because now they will regard our supposed might with a grain of salt. Worse still, Boko Haram will be more emboldened to widen their attack beyond the northeast, as they have shown by the two explosions in Nyanya within a month. They are aware that the Nigerian military is incapable of defeating them, or even matching them weapon for weapon. Thanks to the corruption and graft that left the Nigerian army with scraps as fighter jets and immobile tanks and howitzers.

President Goodluck Jonathan, though a kind-hearted man who may have meant well for Nigerians, has shown himself weak in the face of threats. He has appeared confused and cluless at times when strong leadership is requires; when decisive action is needed to nip a problem in the bud, and in doing so, exposed himself to ridicule and laughter by his political enemies and even friends who doubted his choice as president in a time Nigeria needs a strong hand to tackle the Boko Haram problem. In many issues of national interest, he dilly-dallied for too long that one cannot help but feel sorry for him. One is hard-pressed to figure out whether this is his character or if he is following some advise of his leutenants.

This national crises needs a collective action, it should not be left for the government alone. The international community should not wait for the administration to ask for assistance before offering what they can; after all, 170 million people are more important than a handfull in government. As for Mr. President, to whom much is given, much is expected.

I will leave it at that