Political expediency vs Economic rationality

My name is Adamu Ikemefuna Olakunle. I am 55 years old. I have six wives, one concubine and 30 children. Hadiza, my concubine is my first love but three of my wives I inherited from my father and the others I married to further my business interests. For reasons not relevant to my plea for help in this write-up, I won’t go into why Hadiza and I are not married.

I am well educated and have a business, OG Oni Deltoid E&P Ltd that was thriving but is now facing sustained pressure from competitors. My first wife Tamunoibi is highly educated, intelligent and has incredible understanding of the murky world of finance. She is the CFO of Deltoid and her brilliance explains more than half of why Deltoid remains somewhat competitive. The business has been earning enough to make my family one of the most talked about in the society. We own several private jets, travel around the world on expensive vacations, drive in choice cars some of them bullet-proof, we basically live babyboy lives. Unsurprisingly my wives don’t always see eye to eye and I suspect detest each other. In order to maintain peace among my wives and their children, I gave them about 50% of the shares of the business. Tammy, being co-founder and CFO owns 13% with the other wives, also educated and intelligent in their own way, owning about 7.5% each.

Some years ago, when Deltoid was really thriving, I took out a big mortgage. The mortgage was for an estate befitting of our status with one main house and six other wings. The wives occupied the wings and I the main house. The mortgage was based on a multiple of profits earned by the family business.  Although the mortgage was based on total profits, my share of profit was big enough to pay for the monthly repayment as well as cover most of the maintenance of the estate – as big man consign. As part of the peace deal, I agreed with my wives that they could spend their share of profits or any other earnings however they deem fit with me having no control or influence. So far, the wives unsurprisingly only spend their profit on their own wings and leave maintenance of everything else to me e.g. the footpaths between wings, the golf buggy-like vehicles they use to move around the estate and even the education and upkeep of the children. The wives on a monthly basis rotate on who occupies the main house with me, so I never need to go to them. As you can imagine, we’re talking big money but as big man, I was happy to bear the expenses.

But in the last year profit has come under serious challenge and Tammy has been raising alarm. I haven’t been paying as much attention to it as I’ve always let Tammy take care of the financial part of the business. She says we are facing a new kind of competition, mainly from disruptive technology and that this new threat may be around for a while. With Deltoid being a price taker, our previous approach of using financial engineering to overcome business challenges won’t work this time. In fact things are so bad now that the bank that provided the mortgage says I’ve been running an overdraft account for quite some time and that if I want to keep the estate, some serious cut backs and lifestyle changes have to be made. But Hadiza my love reminded me that I should have a fall back option in that it is my share of the profits that has been paying for the family’s larger than life lifestyle and all of my wives should still have majority of their share of profit intact.

You can imagine my shock when my wives revealed that they all had no money to immediately cover the overdraft. How I did not suffer a heart attack is a miracle.

This is why I am writing this piece as my wives and I need your help, yes you reading this. I have been racking my brain on the options available to me and can only come up with two options. I need to know which option is best or if there are others.

Option 1 is that I assume full control over all family profits. I will consolidate the family’s budget into one, assess what each wife’s wing needs and give them money on that basis. It makes little sense for me to have full responsibility for the estate but only have control over half of family earnings. This option is risky as it involves dismantling the deal that is the bedrock of the peace in the family, which is further complicated by Hadiza – the wives know of her. Adopting this option will require that I become a peacemaker which has not always been my strongest suit.

Option 2 will involve me making it clear to the wives that my responsibility to maintaining our estate and lifestyle will be limited to my percentage share of earnings. I will from now on only maintain the main house and ensure there’s security around the estate to keep robbers out and only contribute a very small amount towards the education of the children, perhaps pay a maximum amount per wife irrespective of the number of children she has or what stage they are in life. The wives will need to ensure that they meet the other needs of their children. If they want the environment around their wings to be neat and tidy then they’ll need to pay for it. They are all educated, so they can pursue new careers to earn more in addition to whatever they currently or will get from Deltoid in the future. Of course, they can keep the earnings from any new career they pursue but if things at Deltoid get any worse, I will ask for their help.

So what do you think? Which option do you think I should go for?

I can sense that you’re thinking I have an option 3 that requires I sell the estate, downsize and attempt to live within my means. Unfortunately President-elect Buhari cannot sell Nigeria. So no, this is not a viable option.

Political expediency vs Economic rationality

Are we ready to be sacrificial?

So we all are agreed that our country is in serious need of change. We need improvements in security, infrastructure, health, energy, unemployment, education, food, economy, politics and governance, in fact it doesn’t matter which strata of society you look at, we need major help.

Unfortunately we also have to contend with corruption, mismanagement, dwindling government revenues and impending austerity whilst trying to deliver the improvements erstwhile stated. Besides these contending challenges, we also have a nation that is struggling with inter/intra ethnic disharmony from years of ‘divide and rule’ strategy initially imposed by the colonial masters but more recently by “cabals, vested interests and ruling elites”. Further, the underdevelopment among regions and states is unequal meaning some regions in spite of our challenges have developed better than others.

We currently use a top-down revenue allocation structure that besides the Niger Delta derivation formula, seeks to distribute revenue in an equitable manner. In the words of the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) from their recent review of the revenue sharing formula, “the need for distributive justice, fairness and equity in the allocation of resources as enshrined in the 1999 Constitution guided the review exercise. According to him, the basic principles taken into cognizance include the indivisibility of the country, public opinion and weighted constitutional responsibilities and functions of the three levels of government”.

What we can deduce from the above is that resources are not shared based on developmental needs of the states or regions. In effect the government will find it difficult if not impossible to allocate more revenues to say Borno state to help it recover from the aftermath of boko haram without other states screaming blue murder as a result of reduced federal allocation. Our current allocation structure lends itself to a zero-sum game. If we are going to make effective use of our revenues and develop at a pace that is reasonable given our human and natural resources, then we need it to be less so. For example, the Buhari campaign promised a N300b (circa $1.5b) regional development fund (RD Fund) for each geopolitical zone with each zone receiving N50b (circa $250m). The SW region represents about 15% of Nigeria’s GDP based on rebased figures, the RD Fund will represent circa 0.32% of the region’s GDP. I understand the need to be equitable in dividing the RD Fund equally, but what impact will less than 1% of GDP really have on the SW region? Does this offer the most strategic use of our meagre resources? Will it not be better to allocate funds to the region that is most in need or the region that offers more strategic opportunity of realising the nation’s economic diversification goal, e.g. through improvements in the agricultural sector?

A widely held wisdom in financial markets is that besides good business results, successful companies also achieve success through efficient and proper allocation of capital. The importance of efficient resource allocation cannot be over-emphasised as poorly invested capital can act at a minimum as a temporary tax on future productivity. The way the Jonathan administration allocated revenues from the excess crude account (albeit due to pressure from state governors) is a good example of an inefficient use of revenues as little to no productivity has been gained from their disbursement. This is one of the reasons why we cannot continue to do things the way we’ve always done. We cannot afford to make fairness and equity the only driving force behind how we allocate national revenues. If we have to retain the top-down revenue allocation method, then we should let comparative economic advantage play a more pivotal role in the revenue sharing formula. So if allocating half of the RD Fund to one region offers the most strategic economic advantage that aids diversifying our collective dependency on oil, then that is what the government should do.

The reality is our resources are finite and we’ve so far been unable to avoid the resource curse known as the Dutch Disease. Similar to how corporations seek to achieve the optimal product mix that maximises productivity risk and reward, we need to also ensure that the capital expenditure of the federal government and/or invitations to foreign capital reflect the optimal resource mix that maximises our capacity and economic productivity. Of course this will require huge political capital to be spent by the President-elect as the returns from such investment or policy may not be realised during his term of office but he must convince Nigerians of the need for this path.

Further, the burden on the federal government to develop the whole of Nigeria at a pace that is almost equal among regions is too great to bear. Sacrifices will need to be made with allocation of resources being a near zero-sum game. We need to help the federal government allocate resources better and this goes beyond just appointing the right people. Regions that aren’t immediate beneficiaries of government expenditure will need to be sacrificial and keep the bigger picture in mind.

Of course there is another alternative which involves devolution of powers by giving the federating units more constitutional power to control revenue generation and natural resource exploitation. This should enable each unit to develop at its own pace using the resources available to it rather than depending on hand me downs from others. Besides the dignity from self-providence, the reliance on resources local to each federating unit could foster better inter ethnic relation once the ‘Abuja’ factor is removed from the resource governance structure. This alternative approach is one of the key points of the Kowa Party.

The Buhari government is still in its honeymoon period, it also benefits from added advantage of its party being the majority in the National Assembly. It will be a real shame if it fails to seize this opportunity to make positive structural changes necessary to unshackle and unleash the potential within Nigeria.

But are we ready to be sacrificial for the greater good?

Are we ready to be sacrificial?

Political Pay & Finance Reforms

Here’s an excerpt of an opinion piece I wrote last May:

1. Salaries and Allowances paid to all public office holders within the Legislative and Executive arm will be the same as that of the Federal Civil Service.
2. Political campaigns can only be funded from:
 – grants from the political parties to which the aspirant belongs.
 – funds raised by the aspirants electoral campaign office directly from members of the public.
 – the maximum amount a member of the public can donate directly to an electoral campaign office is N250,000.
 – the maximum amount an individual official member of a political party can donate to the campaign fund of the party is N5,000,000.
 – the maximum amount an official individual electoral political party aspirant can donate to the campaign fund of the party is N15,000,000.
 – the maximum amount an institution can donate to a political party is N25,000,000.
 – no foreign organisation can donate any funds to any political party or electoral campaign office of any political office aspirant.
 – no foreign individual can donate any funds to any political party or electoral campaign office of any political office aspirant.
 – every donation worth more than N250,000 to a political party or electoral campaign office must be declared and registered with INEC.
 – within three months of the end of each general election, INEC is to publish on its website the list of donations registered with it.
3. Members of the legislative arms should be permitted to hold jobs outside of their legislative roles provided that:
 –  such jobs do not, in addition, take up more than 25% of their statutory working hours;
 –  they declare how much was earned from all outside jobs;
 –  they declare how many hours they worked;
 –  they declare who paid them;
 –  such jobs do not necessarily need to relate to their political role.
Political Pay & Finance Reforms

Congratulations to President-elect Buhari

Congratulations to President-elect Muhammadu Buhari and the APC on wining the mandate to lead the nation for the next parliament. The APC ran a very good campaign, and deserve its victory. Whilst I rooted for Prof Sonaiya of Kowa, I very much also wanted President Jonathan and the PDP to lose, so I’m satisfied with 50% victory. It is an incredibly proud moment to be Nigerian.

Now that the presidential election has concluded, I am sure the President-elect and his VP know that this is just the beginning. The task and challenge ahead are incredibly considerable, difficult decisions have to be made. I could have rooted for APCs top ticket during this election, but I, like many other Nigerians, have reservations about some characters/persons in or around the highest decision making body of the campaign and party.

President-elect Buhari’s first cabinet will either allay or confirm these fears. I hope he picks his cabinet purely on merit and not on political power play, negotiation or payback. Further, he will need to brush up on his understanding of economics and theories because his personal incorruptibility wouldn’t be enough as an excuse this time, he will need to make sure unscrupulous people can’t pull one on him with dodgy policies. I hope and pray that President Buhari does well and delivers on at least institutionalising anti-corruption, security, agriculture, energy and enabling INEC. I am keenly looking forward to him revealing the composition of his first cabinet, and what target he’ll set for his team for their first 100 days in office.

The fact that Nigerians have voted out an incumbent at the federal level is great for our democracy. Now that we’ve confirmed we can do it, the next step has to be making it easier for credible people to contest elections without the sponsorship of a godfather. We need to attack godfatherism in our politics. Whilst Ambode may be a better candidate, it is clear that Bode George and Seye Ogunlewe are an encumbrance to Jimi Agbaje. Furthermore, if we want independent candidacy to be introduced into our politics then we need to deal with this godfatherism phenomenon. Further, dealing with the effect of slush funds in our politics goes hand in hand with reducing the necessity for godfathers. We have to get to a point where majority of campaign financing comes from ordinary citizen’s donations rather than cabals or vested interests.

Being more open-minded to parties such as Kowa is one of the ways ordinary Nigerians can help with reducing godfatherism and slush funds. Those parties can’t run against the APC/PDP on money, so they have to be really strong on ideologies to differentiate themselves and hope that that is enough to swing voter apathy their way. Ideological politics has to be encouraged by ordinary Nigerians and there is no better or cheaper way of doing this other than supporting parties running more on ideology and less with slush funds.

One of the big manifesto points for Kowa is improving the quality and structure of our education. Kowa’s ideology on education is such that education should be used as a tool for solving societal problems not just for collecting name-suffixes. For example, rather than the “establishing 12 new federal universities in the North palliative” of the Jonathan government, Kowa will first look at the challenges of the North, then seek to establish universities or other institutions that will provide the kind of education that will help solve or improve the Northern economy. Universities focused on producing agricultural specialist, nurses or other healthcare professionals etc is what will be sought to be established. This approach wouldn’t only be qualitative, it will also benefit from being embraced quicker by the locals as direct linkages between problems and solutions will be clear as the approach will be akin to teaching how to fish rather than handing them fishes to eat.

In addition, I hope that by 2019 the Buhari government would have supported our electoral process to an extent that an end to end electronic voting will be possible i.e. not just accreditation, but voting itself will be electronic. INEC should be encouraged to register eligible voters over the next four years rather than at specific windows. The fact that just over half of the 18% of Nigerian’s that voted gave President-elect Buhari his mandate is clearly not good enough. If we can go one step further and enable diaspora Nigerians also to vote, then we will know that we have truly arrived as a democratic nation.

Unseating an incumbent is a great feat indeed, but taking our foot off the gas now will be a great disservice not just to President-elect Buhari but also to us. With governance being a continuum, our criticism of President Jonathan’s government should be transferred to the Buhari led one – of course within reason. We cannot afford to do anything less. As soon as the election season concludes, Nigerians that are non-partisan need to do their best to encourage PDP to be a strong opposition. Doing anything other than that will be tantamount to cutting off our nose to spite our face. The next four years will be challenging but pretty interesting.

God bless the Federal Republic of Nigeria.

Congratulations to President-elect Buhari