Monday, 28 April 2014

A symbol of monumental corruption

A Kogi State delegate at the ongoing National Conference, Hajia Ladi Ibrahim, last week called on the federal government to build a port in Ajaokuta, Kogi State to facilitate movement of raw materials and finished products from the Ajaokuta Steel Company.
Ibrahim, who is the chairman of the Financial Reporting Council of Nigeria (FRCN), also tasked Abuja on the need to begin proper dredging of the River Niger, so as to build Ajaokuta and Lokoja ports. The project, she said, would also reduce the burden on the roads.
The former Auditor-General of Kogi State said in a statement made available to newsmen in Lagos that it has become imperative to have a seaport in Ajaokuta, stressing that “no nation achieved industrialization without its steel industry.”
Ibrahim's assertion may be right but Nigerians are wary of further investment in, or for, the moribund steel mill.
Official corruption has, over the years, held down the Ajaokuta Steel Company and prevented it from operating optimally.
The company was expected to aid the economic transformation of the country, revamp the power sector and facilitate full industrialization of the country.
It was the Russians that facilitated the Ajaokuta steel project, which has gulped $4.6 billion (about N760 billion) of tax payers money. This amount at face value is more than the annual budgets of all the five states in the South-East geopolitical zone of Nigeria put together and if you consider the time value of money, it is more than enough to finance Nigeria's budget for three years.
Sadly, the Ajakuta Steel Complex today lies in ruins and remains a shadow of its potentials.
The company is an example of how a national leadership that lacks direction can ruin its own nation.  
The construction activities for the first phase of the Ajaokuta Steel project started under President Shehu Shagari in 1979 years ago but the plant has not been commissioned 35 years after.
The dredging and construction of a captive river designed for the plant was also marred in corruption as well over $10 billion was expended without even a bucket of sad dredged or a forklift acquired.
Everyone claims that this project is vital to the industrialization of Nigeria yet no one has been held responsible for the failure of this monumental project.
Ajaokuta Steel Company has remained a victim of the corruption that is ravaging the entire country and it calls for concern that a project that began almost 40 years ago will remain comatose as a result of corruption.
The steel company is believed to have the capacity of creating over two million jobs yet we daily lament the lack of jobs for our teeming youths.
I feel diminished as a Nigerian each time I remember the story of Ajaokuta Steel Company.
Horrible public utilities, lax security, terrorist attacks, smuggling, disgruntled youths and unbridled looting of the public treasury have become the hallmarks of our democracy.
What else could remind us of how lowly we have sunk as a nation than the monumental national embarrassment called Ajaokuta Steel Company?
United States based Nigerian Professor, Victor E. Dike, captured the issue succinctly in his work titled Corruption in Nigera: A new paradigm for effctive control when he stated that "...corruption diverts scarce public resources into private pockets, literally undermines effective governance, endangers democracy and erodes the social and moral fabric of nations."

Our VIPs have shamefully used the Ajaokuta Steel Company to systematically divert public funds into their pockets. The question then is, should we allow another round of public treasury looting in the name of breathing life into the steel company?

Monday, 14 April 2014

Nigeria’s GDP and the maritime sector

I am not an Economist and I do not lay claim to any form of expertise in economic matters. I however have a fair understanding of how the economy runs and I learnt a little bit about the dynamics of the macro-economy under one of the best teachers in that subject, Dr. Doyin Salami.
In addition to his faculty engagement at LBS, Salami is a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria.
In our MBA classes a couple of years back at the Lagos Business School, Salami dwelt extensively on GDP so it will not be out of place to relate what I learnt then to the maritime sector.
When the rebased GDP was released a few days ago, I quickly looked out for the contribution of the maritime sector but found none. Of course I saw a line on water transportation but that was not shipping. The water transport sector referred to only movement of goods and persons within the inland waterways. This, in my opinion, represented only an infinitesimal portion of the maritime sector.  
I was taken aback therefore when an industry operator made a case in defense of the inexplicable omission of the contributions of such a critical and vital component of the Nigerian economy.
The particular operator has a background in Finance and was in charge of economic planning in one of the Eastern states during the military era. I was taken aback because he is one of those who should know and who should have spoken out against the omission notwithstanding that he holds a board appointment under the present administration.
The rebasing of Nigeria’s GDP has brought the subject to the front burner with a lot of passion and public discuss on the subject. To advance my argument however, please permit me to refresh your minds and explain in a layman’s language what GDP is all about.  
Gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total value of all goods and services produced over a specific time period - you can think of it as the size of the economy.

Salami’s formula for calculating GDP was

                                                   GDP = C + G + I + NX

where:

"C"  = All private consumption, or consumer spending, in a nation's economy
"G"  = Government spending
"I"    Sum of all the country's businesses spending on capital
"NX" = The nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports).

It is clear from the formula that GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. It is usually calculated on an annual basis. Developed economies such as the United Kingdom and the United States of America release quarterly GDP figures. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
Measuring GDP is a bit complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total.
The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non-incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports as indicated in the formula above.
As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. It is not hard to understand why: a bad economy usually means lower profits for companies, which in turn means lower stock prices. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.
 With the above explanation which I drew out of my LBS notes, could there be a justifiable reason to leave out any sector of the Nigerian economy in the GDP calculation? Leaving out any sector simply means the sector did not add value to the national economy and that would be a fallacy as far as the maritime sector is concerned.
The maritime sector has three major component industries. They are the port industry, the shipping industry and the maritime business services industry. All three industries have direct and indirect economic impact on this nation.
The maritime industry has, in general, enjoyed rapid growth over the past decade following the signing into law of the Cabotage Act in 2003, the Local Content Act of 2010 and the Port Reform of 2006.
Not taking into account the foreign ships that visit the country’s seaports, the industry employed an estimated 150,000 workers in 2013 and contributed as much as USD15 billion to the economy. I am talking about contributions in terms of real economic activities undertaken by Nigerian-owned shipping companies; port terminal operators, shipping agents, clearing and forwarding agents, dock workers and others. Is there any reason why these contributions should have been omitted from the national data?
Our maritime practitioner’s argument was that shipping is a service sector and should rightly have been omitted. Really? How about rail services, wasn’t that captured? Was aviation not captured? Is telecommunication not a service sector? Was it not captured?
I am not entirely blaming the Jonathan administration for the omission; it has consistently been so over the years. I have taken the pain to go through our past GDP profiles and the story has not been any different.
Government might not be able to pull this one back for reasons of pride but going forward; the sector’s contribution should be well captured.
I am particular about correcting this anomaly in future because it is important that economic sectors were measured accurately to give potential investors good pictures of their values.
The idea behind rebasing the GDP is to help investors identify new opportunities in Nigeria, especially in areas that were previously not factored in.
On the flip side and like many Nigerians, one is not particularly excited about our $510 billion GDP figure and all the political gymnastics trailing it. I think what is important is the GDP per capita. Being Africa’s largest economy is definitely a great confidence booster for Nigeria but it doesn’t change anything. Nigerians are still among the poorest in the world with more than half living below the poverty line.  


Monday, 7 April 2014

What does Elochukwu want?

I am not a member of the Association of Nigerian Licensed Customs Agents (ANLCA) but I am concerned about what goes on in that association. I am very much interested in ANLCA and one way or the other; one has had the opportunity of making modest contributions to the oldest body of clearing and forwarding agents in Nigeria.
My relationship with ANLCA dates back to about 15 years ago and I have closely related with various leaders of the association during this period. Sanni Kamba, Peter Okocha, Sanni Shittu, Inua Mohammed, Ernest Elochukwu, and now Prince Olayiwola Shittu are all well known to me. Through my association with them, I developed a fair understanding of the internal workings of ANLCA and I believe I am competent to make informed commentary about recent developments in the association.
Sir Ernest Elochukwu was elected ANLCA National President in 2004. He practically had a smooth sail as his main opponent, Joe Eboje, died in a plane crash few weeks to the election. To the best of my knowledge, key leaders of the association rallied round Elochukwu all through his four year tenure. One of his die hard supporters at the time was the incumbent President of the association, Prince Olayiwola Shittu. I remember clearly that despite series of disaffection expressed about Elochukwu’s leadership style, Shittu would come to our Press Centre and defend him vigorously. Shittu and I had a real argument on my live radio programme in 2007 when I said ANLCA was embroiled in crisis. That was the true situation at the time but Shittu would not have any of such comment. I used to wonder why he would go out of his way to fight so hard to defend Elochukwu even when he had ceased to be the image maker of the association.
At the time, ANLCA and the National Association of Government Approved Freight Forwarders (NAGAFF) were sworn enemies. When Elochukwu’s tenure ended in 2008, it was clear that a second term was out of the question for him. By the time he was leaving, the association had fragmented with three clear factions emerging within the fold – one led by Prince Tai Oyeniyi, one by Austin Kelly and the other by Sir Elochukwu himself. His administration could not organise election and had to hand over to the Board of Trustees under Chief Henry Njoku. Njoku and his board ran the association for two years until 2010 when elections were called and Prince Shittu emerged National President. Now, Henry Njoku is a very matured leader; not one to rock the boat or seek to profit from the adversities of perceived enemies.
The least I expect of Elochukwu is maximum support for his successor and a man who has been fiercely loyal to him. Shittu’s shortcomings, if any, should have been discussed and ironed out behind closed doors while an outward appearance of mutual respect and cooperation should have been maintained by the duo at all times. But I daresay that has not been the case and there are several instances to support my argument.
One of Shittu’s major achievements, me think, is the mutual relationship he created with NAGAFF. Now I do not particularly agree with all the actions taken by Prince Shittu and I have had cause to disagree with him on several occasions, but I think putting an end to the cat and mouse game between the two leading associations is commendable. It is good for the freight forwarding industry and for entire shipping sector. With less acrimony, there will be more progress and development.
Elochukwu must have been alone in his opposition to that cordial relationship, for reasons best known to him. He was so uncomfortable he addressed a press briefing in his office in Port Harcourt to condemn the ANLCA/NAGAFF alliance.
The former ANLCA leader also tried to pull the rug under the feet of his bosom friend when he attempted to organise a stakeholders’ meeting of freight forwarders in Port Harcourt sometimes last year without informing the leaders of ANLCA and NAGAFF – the two major freight forwarding associations in the country.
For a man chosen to calm frayed nerves and reconcile dissenting groups within the fold of the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN), that action did not lend itself to good reasoning. How do you reconcile freight forwarders by undermining their leaders? And trust the leaders, they ensured that the meeting was truncated. So much for reconciliation!
Shortly afterwards, Elochukwu made an appalling public declaration that ANLCA owned CRFFN. In fact he fell a few words short of appropriating the ownership of CRFFN to himself. SHIPS & PORTS DAILY it was that reported his controversial comment through a story written by Obianuju Ozoeze. Of course the article went viral online and expectedly drew the flaks of many.
“It was ANLCA under my presidency that fought for the enactment of the CRFFN Act. During the election into the first Council we made sure that as many ANLCA members as possible got elected because there was provision for eight elected members. Not only that, during the appointment of the six non-elected members for the six geopolitical zones, I used my position as national president to influence the appointment of ANLCA members. So the first governing council headed by Tony Iju Nwabunike had not only him as Chairman and some of us as elected then but five other ANLCA members as appointed governing council members. The import of this is that CRFFN is owned by ANLCA,” Elochukwu had told Uju in self adulation. I thought he would issue a public apology but I should have known better. So much for CRFFN being freight forwarders’ council set up by an Act of Parliament! Little wonder the council found itself in the abyss within a few years of creation.
But Elochukwu was not done. He contested and won election into the Board of Trustees of ANLCA recently and he has decided to use his seat on the board to regain control of the association. He is championing a three month extension for the current executives of the association. On the face of it, that would look like he is doing his successor a favour but not so, the ultimate aim is to truncate Shittu’s second term ambition. Once the three months extension sails through, Shittu will be left with no choice but hand over to the BOT which Elochukwu hopes to chair. You can fill in the gap.

I think Shittu has done a lot for ANLCA and while it is not my place to campaign for a second term for him, it is also not Elochukwu’s place to hound him out of office. Shittu has succeeded where his predecessors failed and his predecessors should be happy for that.