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Mauritius’ central
bank has said commercial banks need to push up credit growth, the slow
pace of which is contributing to the excess levels of liquidity in the
market.

In a statement seen
by Reuters on Sunday, the Bank of Mauritius said there was a proposal
to cap the holdings of commercial banks in government paper to
encourage more aggressive lending.

Some bank officials
have expressed reservations about the new banking model recently
introduced by the Central Bank, which is to be operational from
October. They are of the opinion that the problems of the industry runs
deeper than mere change of business model.

A source at First
Bank Nigeria, who pleaded anonymity because he was not authorised to
speak on the issue, said the industry is still getting a hang on the
issues raised. According to him, some banks may begin serial meetings
as the week begins. “An exposure draft had been circulated by the CBN
earlier, so the provisions are not new,” he said.

In the new
circular, the Central Bank stated that commercial banks would have to
discontinue activities not related to core banking, their primary
objective.

“It is a choice
between setting up a holding company in order to retain these
businesses under one roof, which implies massive structural challenges,
or selling them off (which I imagine the apex bank would prefer). Now,
if you put yourself in the shoes of the Nigerians who’d have to make
these decisions, do you imagine they would willingly let go?” he said.

Availability of required capital

The Central Bank,
in the new guidelines, said new capital requirement would range from
N10 billion to N50 billion, depending on the level of business they
want to operate. Banks that operate regional banking will require N10
billion, national banks will require N25 billion, while banks that want
to operate international licence would require N50 billion minimum
capital.

The source at First
Bank said the new capital requirement for banks who desire to continue
running their international branches may be realisable.

However, he
expressed worry over the efficiency of investing such an amount of
money when most banks are still struggling to get back on their feet.
“Question is, in the current circumstance, is this the most efficient
use of such resource?” he asked.

According to him,
the new banking model may not necessarily be the way out for the banks
as the issues arising in the industry were not all generated because of
the absence of specialised banking.

“I do not think
this would aid monitoring and improve regulation by the regulatory
body. These are not the reasons why the industry imploded in the first
place.”

He added that this
new process may not also necessarily address the huge percentage of yet
unbanked Nigerians, and that the deadline given to the banks may be
moved, even though the banks are ready for the transition.

Another banker, a staff at Zenith Bank, stated that the initial stages of the transition would not be without some confusion.

“To me, it won’t
change much. In fact, it may cause confusion. You could consider this
from various angles. From the viewpoint of the body of the present
operational staff, most of these banks already have members of staff
specialised in these varying banking services. Limiting them to just
one form of banking would mean that all the staff that are in other
sections would be rendered jobless, unless they would be sent on
special trainings to fit into their new job descriptions, and not all
banks would do this,” he said.

Sunday Salako, a
member of the National Economic Management team, however, said going
back to the basics is the best move to take now.

“That was what we
were doing before. There used to be merchant banks, community banks,
finance houses, and the rest of them and then we had commercial banks
that focused mainly on core banking, retail banking,” he said.

He blamed the
current crisis on the universal banking approach, which allowed banks
to engage in all forms of finance activities, including insurance
underwriting. “Now, they want to go back to the old template. It is a
good thing, going back to the basics. Perhaps, if we didn’t have all
these mumbled up, some of the fraud uncovered in August 14 may not have
occurred at all.”

He also added that
this model would help banks take up functions that they would be
convenient with and that can suit their available funds. “Each bank can
decide on which type of business it would like to run, according to
their expertise and capital accessibility,” he said.

In 2002, the
Central Bank, through the Universal Banking guidelines, authorised
banks to engage in non-core banking financial activities either
directly, as part of banking operations, or indirectly, through
designated subsidiaries.

The Central Bank,
in a circular last week, said the primary objectives for its current
reforms was to ensure the protection of depositor funds by ring fencing
“banking” from non-banking business; redefining the licencing model of
banks and minimum requirements to guide bank operations going forward;
effectively regulating the business of banks without hindering their
growth aspirations; and facilitating more effective regulatory
intervention in public interest entities.

By the circular, the CBN stated that all existing universal banks
are required to prepare and submit their plans on ensuring compliance
with the requirements of the new banking regime not later than 90 days
from October 4, 2010.

Are you standing at the threshold of
your retirement or have you already retired and are wondering what your
investment options are? There is good news for those approaching
retirement or already retired. Along with other options including bank
deposits, bonds, mutual funds, stocks and real estate, annuities
present yet another opportunity in the Nigerian financial market.

In 2009, two regulatory bodies, the
National Insurance Commission (NAICOM) and Pension Commission (PENCOM)
jointly issued a document that regulates the conduct of annuity
business in Nigeria in compliance with provisions of the Pensions
Reforms Act 2004. The Act provides that a retiring employee is entitled
to receive retirement benefits through programmed withdrawals, by
purchasing a life annuity, or a combination of the two.

Most of the retirees under the 2004
pension dispensation opted for programmed withdrawals instead of life
annuities. Following the release of the new regulations, some life
insurance companies in Nigeria have responded positively to the call on
them to introduce annuity products to align with the economic realities
that retirees face and thus create a better pension environment for
Nigerian workers. It is expected that more retirees will adopt this
option.

An annuity is an important retirement
planning tool and is simply a contract between you and an insurance
company. In return for a sum of money the insurance company is obliged
to provide you with a steady and stable source of income for life. A
range of annuity products are now offered by life insurance companies
in Nigeria with various features. Choosing the “right” one for you is
dependant on your specific needs, preferences and financial standing.

Immediate or deferred annuities?

An immediate annuity is ideal when you
want the income to start right away whilst with a deferred annuity you
are building up value over a period of time to be converted to income
later on.

With a single life immediate annuity,
you deposit an amount with the insurer, who begins to make regular
payments. You choose a deferred annuity if you want to build your
account value over time and convert it to income in the future.
Deferred annuities can be bought with a lump sum payment or a series of
regular payments that could be monthly, quarterly, biannually or
annually.

In some plans, policyholders can choose
an increasing annuity at five percent per annum guaranteed for ten
years and thereafter for life. In others there is the option to choose
an increasing annuity at ten percent per annum guaranteed for ten years
and thereafter for life. By choosing an increasing annuity one is more
likely to be protected from the effects of inflation.

Income for life

Issues such as increased life
expectancy and anxiety over whether one’s savings may get exhausted
within one’s lifetime, are to a large extent addressed by annuities;
the reliable and steady source of life income offers comfort and a
sense of security almost replacing pensions as a reliable retirement
tool. Even those close to retirement age can still invest in an
immediate annuity and begin receiving income from it almost instantly
which comes with a tax deferral advantage.

Annuities offer some stability

Annuities are a dependable option for
those who seek some protection from the risk associated with the
investment of lump sum benefits and the chance of losing part of their
savings through investment failure that other options tend to suffer.
Assets are managed by professional asset managers who provide you with
variety of asset classes including mutual funds, stocks, money market
instruments, direct real estate and Real Estate Investment Trusts
(REITS), and combinations as appropriate. Naturally the value of your
annuity will vary depending on the performance of the underlying
investments.

Annuities have a place in estate planning

Annuities provide the option of leaving
money for one’s heirs after the death of the investor. A couple can
hold an annuity jointly and so after the death of one partner the other
will continue to receive income from the annuity. This gives investors
comfort in the knowledge that in the event of the death of one partner
the other will continue to be secure. A guaranteed death benefit
ensures the policy beneficiary will receive at least a minimum amount
if the original owner dies within the guaranteed period.

Whilst annuities can be a good
alternative with many advantages, as with all investments, there is a
downside that one should be aware of and which must be carefully
considered.

Annuities can be inflexible

Annuities are sometimes regarded as
inflexible retirement tools when compared to other options such as
bonds. Let’s assume you decide to invest your money in a diversified
portfolio of blue chip, corporate bonds. When you invest in bonds you
receive interest payments periodically, and thereafter, on maturity you
have your money back. There is also the option to sell your bond prior
to maturity. The difference is, that with an annuity, the full value is
surrendered to the insurance company in return for lifetime income; you
don’t necessarily have the right to get your money back. One continues
to have access to your money in a deferred annuity until you convert
your accumulated assets to a revenue stream.

Will the insurer survive?

Your annuity is only as certain as the
strength and solvency of the company you invest with. Insurance
companies are heavily regulated and the annuity business is closely
monitored by National Insurance Commission, and the Pension Commission.
Insurance companies are also rated by professional agencies; this
should also guide in your selection of a strong, reputable institution.
Further, an annuitant is able to change his or her insurer after two
years if they are dissatisfied or concerned in any way.

Be aware of charges

The set-up costs, commissions, and
annual investment management fees associated with annuities can be
confusing, making it difficult to decipher how much you are actually
paying. Ideal for providing stable steady income, they tend to be
limiting when it comes to catering to sudden significant expenses. If
you need the money sooner than expected, you will incur “surrender
charges” which can be steep. All these costs add up and will certainly
eat into any profits the annuity earns.

If all you want is an alternative source of income and are more
inclined towards a conservative, quiet retirement plan, then annuities
might be a good option. Before you enter into any transaction that is
hard to reverse, it is important to go through the fine print as
tiresome as this may seem. You must understand how it works and
consider it alongside other alternatives, so that you can make an
informed decision as to the one that is most appropriate for you. As
always, maintain a diversified portfolio and don’t put all your eggs in
one basket.</

According to the figures from the
Nigerian Stock Exchange, 12 states, from 1999 to date, have raised
about N374.6 billion from the bond market. This is apart from over N2.6
trillion which the Debt Management Office (DMO), on behalf of the
Federal Government, has raised from the same market. All these reflect
the huge sums many state governments borrowed from commercial banks at
great cost to the states’ treasury.

When Edo State, under Lucky Igbinedion,
blazed the trail in 2000 to successfully raise N1 billion, it opened
the gates for other states to rush to the market, which provided an
alternative and cheaper window to augment their receipts from the
federation account. Delta State soon followed in the same 2000 with N5
billion in two tranches, then Yobe (2001), and Ekiti (2002) States,
with N2.5 billion and N4 billion respectively. In 2002, Lagos floated
the largest sub national debt issue at the time with N15 billion for
various projects in two tranches.

The success of these issues attracted
others and soon Cross River (2003), Akwa Ibom (2004), and Kebbi (2006)
followed with N4 billion, N6 billion, and N3.5 billion respectively.
Imo, Bayelsa, Kaduna, and Ebonyi are currently in the market to raise
N18 billion, N50 billion, N8.5 billion and N20 billion.

Debt Management Act

However, the plausible question to ask
at this point is, where has all the money gone? The desire to restore
modesty to the manner in which states and federal government bonds were
raised prompted the government of President Olusegun Obasanjo to pass
the Debt Management Office Establishment Act 2003.

Thereafter, the president invoked
section 24 of the DMO Act, which demands that states must obtain the
permission of the minister of finance before issuing bonds. The point
was to ensure fiscal discipline in the manner states funds are raised
and appropriated. To get the minister’s consent, states were required
to submit three years financial report and the approval of the state
house of assembly. The consent of the minister of finance would
translate into the signing of an Irrevocable Standing Payment Order
(ISPO), which allows the interest and principal payable on the bond to
be deducted at source from the federation account.

Lanre Oloyi, spokesperson of the
Securities and Exchange Commission (SEC), said state governments that
raise funds from the bond market are expected to deploy the proceeds
for that which they stated it would be used for.

“There have not been any issues about funds misappropriation,” he said.

“The market is rule based and due
process must be followed and complied with. If there are instance of
states not acting responsibly, they would have been so advised,” Mr.
Oloyi said.

SEC is responsible

According to him, SEC has the
responsibility to ensure that states use the funds judiciously, adding
that the commission conducts monitoring exercise and on-the-spot
assessment.

“If there are issues, we advise the
state accordingly, without necessarily having to make it public. The
fact that we have not made such findings public does not mean that SEC
is sleeping. We are always alive to our responsibility,” he said.

The commission, after a similar concern
raised some years back, actually cleared some states of wrong
application of bond proceeds. According to SEC, under the former
director general, Suleiman Ndanusa, Edo, Ekiti, and Yobe States did not
misapply the proceeds from the bonds which they raised from the capital
market then. This clearance came at a time when Charles Soludo, who was
then the chief economic adviser to President Obasanjo, took a position
that states should not be encouraged to raise funds from the capital
market because such funds were not properly utilised.

However, out of the four states which
were evaluated, the report only blamed the Edo State government for
lack of co-ordination and adequate supervision of the projects. It said
that lack of co-ordination by the Edo State government stemmed from the
involvement of many agencies and ministries in the execution of the
identified projects.

Up till now, the Iyekogba Housing
Estate in Benin City, for which the funds were raised, is yet to be
completed, and the occupants have moved in without the basic amenities
which were promised as at the time the funds were being raised. Delta
and Lagos State governments, which raised N5 billion and N25 billion
respectively, were not mentioned in the SEC report.

Not much monitoring

However, a securities dealer who spoke
off record said SEC may not have done much in monitoring how states
deploy such funds. He said even though the commission is supposed to
guide against irresponsible bond issuance, some states still go ahead
to raise funds just to offset recurrent expenses.

“Only a certain percentage of their
annual revenue are supposed to be raised as bond in order to keep it at
a responsible level. But what we find is that many states are trooping
to the bond market.”

He said the latest effort by Ogun State
and the attendant political crisis that it has generated is good enough
reason for people to begin to ask how much of these funds are put to
judicious use.

“SEC and CBN (Central Bank of Nigeria)
have come up with rules to contain irresponsible bond issuance. The
guidelines under which state bonds can be considered as liquid assets
is one of them. State bonds already have a problem of illiquidity at
the secondary market, as it is difficult to sell,” he said.

Victor Ogiemwonyi, managing director of
Partnership Investment Limited, said the important thing is for
investors to get returns on their investment. “It would really be
difficult to monitor how states utilise the money unless an on-the-spot
assessment is carried out on the projects they have said it would be
used for.”

The CBN in July released guidelines for
states wishing to float bonds, among which must be a law enacted by its
House of Assembly, specifying that a Sinking Fund, fully funded from
the consolidated revenue fund account of the issuer, is in place.

According to the guideline, states
must, “put in place a Fiscal Responsibility Law with adequate
provisions for debt management and ensure that proceeds from the issued
bonds are specifically disbursed to the projects they are meant for,
with the execution monitored by the Securities and Exchange Commission
(SEC).”

The guideline also stipulated that that there should also be a
credit rating at inception and throughout the tenor of the bonds. The
credit rating would be determined by a rating agency registered or
recognised by SEC.</

Some market operators have expressed
divergent views on what appear to be a race to issue bonds by some
states at the Nigerian capital market.

In the last eight months, Ogun, Bauchi,
Kano, Kwara, Niger, and some other states have all shown interest to
issue bonds before the end of the year.

While some states are still struggling
to meet the requirements for bond issuance, with states like Ogun
currently battling with the legality of its legislative support for
bond, other states like Bayelsa, Ebonyi, and Kaduna have already got
the approval of the council of the Nigerian Stock Exchange (NSE) to
float N50 billion, N20 billion, and N8.5 billion respectively. Last
year, Lagos State raised N50 billion in its first tranche bond and it
was oversubscribed by N8.9 billion.

Some of the bond requirements include:
the submission of the state’s audited accounts for the preceding three
to five years; a favourable credit rating report; a feasibility report;
and an irrevocable Standing Payment Order.

However, while some analysts believe
the rush for bond is worrisome because many of these state governments
have few months left for their administrations to end, hence, the
opportunity to channel the money raised to other purposes, others say
since the utilisation of proceeds from a bond issue is predetermined,
state governments need the funds to achieve their various developmental
plans for the state before they leave office.

David Amaechi, an executive member of
the Shareholders Association of Nigeria, said although the bond market,
a debt instrument platform, has always been an avenue for states to
raise developmental funds, “the present rush to issue bonds, especially
when next year’s election is fast approaching, shows there are hidden
agendas for the funds.”

Mr. Amaechi said bond issuance will
also increase the debt profile of a state and “this will be a burden
for the incoming government.”

“The only assurance investors have on
such bonds is that return on investment is guaranteed. Government bonds
are risk free, even when the purpose for the fund is not achieved,” he
said.

Meanwhile, Bola Oke, finance analyst at
WealthZone Company, an investment firm, said state governments are only
trying to take advantage of the bond market following the continuous
loss of confidence at the equity market.

Ms. Oke said many states approached the
bond market because it is “a safe place” to supplement the low
allocation they get from the federal government.

“State governments will always seek for
more funds since there are several projects to be done. And investors
shouldn’t worry about their money because these funds are fixed income
securities. The cash-flow from them is fixed,” she said, adding that
state bonds are good investment outlet to portfolio managers.

Ikazoboh’s advice

Emmanuel Ikazoboh, the interim
administrator of the NSE, has advised market operators to invest in
fixed income securities to lower their risk exposure in the market.

“Awareness is gradually rising
regarding investments in bond as many state governments and corporate
entities have applied to raise funds on the market via bonds. It must
be noted that investment in bonds guarantees a fixed income. Until the
late eighties, the bulk of investment through the Exchange was in debt
securities, before equity investments took the centre stage,” Mr.
Ikazoboh.

As part of the Exchange’s commitment
toward encouraging more investments in government bonds, the NSE
council, in January, 2010, reduced transactional charges on bonds.

“Investors should take advantage of the
fee reductions to include fixed income securities in their portfolios.
It is heartwarming to say that the Exchange’s trading platform is
effectively configured for trading bonds,” he said.

Bond preconditions

In the meantime, Afrinvest West Africa
Limited, an investment bank, in a report on bonds, said a
well-functioning bond market requires some preconditions. Some of which
are: a reliable regulatory framework, an efficient market
infrastructure, effective corporate governance culture, a functioning
sovereign bond market that provides corporate and a stable and liquid
benchmark curve in local currency, and a developed credit culture.

According to the report, “accessibility, transparency, and liquidity
are also essential preconditions for ensuring that the Nigerian bond
market plays a meaningful role in the country’s economic development –
funding pressing infrastructure investment needs, financing government
deficit spending at both national and sub-national levels,
strengthening bank balance sheets, and supporting capital investments
in the private sector.” </

The economic
meltdown has indeed posed enormous challenges to the marketing
communication industry. The harsh economic realities have forced
several companies and brands to abandon marketing communication
platforms. It is true that the global economic meltdown comes with
harsh realities, but this should not force companies to shrink budgets
or in extreme cases, jettison marketing communication campaign in its
entirety. The reason for this is the long term value and benefits that
this brings over a specific period.

It has indeed
become expedient for brands to remain visible in the market place
during the recession. It is not being suggested that budget may not be
reviewed, but it would not get to that point that adverse effects
become noticeable on building and sustaining brand equity. The economic
recession can be a good opportunity for companies to rethink their
marketing strategy and explore new platforms to retain market share.

Some companies have
actually adopted a number of strategies that cannot deliver on brand
success in the past and all they want to do now is to drastically do
away with marketing communication. This is not the way out, as such
firms should go back to the drawing board and engage professionals to
develop workable strategies for them. It is pertinent to state that
brands will suffer in the long run when the effects of economic
recession thin out.

The economic
recession offers companies the opportunity to gain a deep understanding
of consumer behaviour. This includes purchase decisions, what motivates
consumers, what is the current lifestyle of consumers, even during
recession, and what value does the consumer want? All these are key
consumer insights that will go a long way in helping the brand achieve
market penetration in times of recession.

It is indeed
crucial for brands not to leave any gap for competition during times
like this. There is the critical need to communicate continuously and
also focus on internal re-tooling on such areas as quality, service
delivery, consumer bonding, packaging, production, channels of
distribution, etc. This is also without losing sight of the financial
margins in business.

In our clime in
Nigeria, despite the economic recession, people still expend a lot of
money on social events. There are some brands that still thrive, in
spite of all odds. For instance, a soft drink manufacturing company.
Some marketing team have been following up on churches where wedding
ceremonies take place regularly. That is a strategy that has worked
over the years as the brands are sold through a direct marketing
strategy. This is one effective way to increase bottom line while also
supporting the brand with communication.

It is even during
economic recession that some brands adopt other tools of marketing
communication to build share of voice and gain the consumers mind. It
has now become a warfare strategy for brands to battle to occupy a
larger percentage of the consumers mind.

This is exactly
what is happening with two major detergent brands: OMO and Ariel. The
brands have developed a strategy that will ensure that the consumers
have direct connection to the brands. It is also aimed at demonstrating
to consumers the need to prefer one brand to the other. The open market
activation, which has a celebrity as the anchor person, has endeared
the brands to the consumers. This is strategy that focuses on
increasing the bottom line and sustaining market share. The brands
adopted the experiential marketing approach to build brand equity
during the meltdown. This should be the focus of companies, rather than
taking harsh decisions that, in the long run, would affect the fortunes
of the brand.

Some days ago, the
managing director of a major QSR with foreign affiliation informed me
that they could not afford any communication now. He even went further
to state that they have just closed down one of their outlets. This,
for me, is not the solution. I believe a marketing strategy that should
target the potentials consumers around that axis of the outlet should
be developed.

There are some
major offices and residential homes around that area. All the company
needs to do is to utilise a direct marketing approach and reach out to
the consumers. For instance, the strategy could be to serve breakfast
to the consumers and this will win them over. Everything is not about
the recession alone, but the marketing communication channel to adopt.
Some companies are also in his shoes and over time, the brands suffer
while competitors take the centre stage of winning their consumers over.

The meltdown can
indeed be a veritable platform for companies to project brands and
achieve success in the market. The key imperative is to identify the
marketing communication tool that will leverage visibility for the
brand to succeed in the marketplace.

A major problem
with the Nigerian oil industry can be traced to its regulatory
mechanisms. While we should assume that such mechanisms could actually
help secure efficient operations of the sector, they have led the
sector into more murky waters.

For a number of
years, the Nigerian president doubled as the minister of petroleum.
Busy on many fronts, a number of issues must have gone without strict
oversight. Because the president was also the minister, the office had
more powers assigned to it. Some experts believe that because of this
setting, the minister of petroleum was allowed wide scope for
discretion and decision-making powers, without commensurate systems of
review and accountability.

The sector is
disparately regulated, mainly from the Ministry of Environment and that
of Petroleum. How coherent these two perform and how their powers
overlap or synergise are issues for another day. But there are many
areas we ought to worry about. One area of concern is that the oil
sector has created some of the most critical environmental and health
problems for the Niger Delta and the entire nation.

Who is the
governmental watchdog for the Nigerian environment? The answer to that
question may seem obvious. Do you say it is the ministry of
environment? You would be right. But that would be only to a point.

When we had a
Federal Environmental Protection Agency (FEPA) as a subset of the
Federal Ministry of Environment, the answer would have been right to a
larger extent than it is now. After the demise of FEPA, another agency
with a suspiciously long name emerged in 2007. We are talking of the
National Environmental Standards and Regulations Enforcement Agency
(NESREA).

Let me confess that
I had to visit their website to be sure I got that name right! The
duties of NESREA, as stated in the Act by which it was set up, are
lofty and should build confidence in the agency. However, there are two
key areas that raise serious concern. And they are related.

First area of
concern is the composition of the governing council of the agency.
Article 3 (viii) of the NESREA Act of 2007 specifies a membership slot
in the council for a representative of the oil exploratory and
production companies in Nigeria.

Why, we ask, is
this space created for the oil companies to regulate our Nigerian
environment? We note that apart from a slot allowed for the
Manufacturers Association of Nigeria (MAN), there is a provision for
the Minister of Environment to appoint “three other persons to
represent public interest.” There is no clue in the Act as to who these
three would be and on what basis the minister would select them. Would
there be representatives of fishers, farmers, or pastoralists? Would
there be youth whose future we are already squandering?

We have picked on
the objectionable inclusion of the oil corporations in the regulation
of our environment because these entities, while baking the petrodollar
pie, are also guilty of causing severe damage to the environment and to
the psyche of our peoples.

The submission of
this writer is that the oil companies should be in the dock and not on
the bench in hallowed chambers of environmental and sundry justice.
What they have done in the oil communities is nothing short of criminal.

The second issue,
which, as already mentioned, relates to the first objection above, is
the stipulation of Article 7 (d) of the NESREA Act. This section states
that the agency shall “enforce compliance with regulations on the
importation, exportation, production, distribution, storage, sale, use,
handling and disposal of hazardous chemicals and waste other than in
the oil and gas sector.”

It is clear from
the above that a factor has been inserted here to confer a certain
status on the oil companies that keeps them away from being regulated
by an agency that sets environmental standards in Nigeria and which is
supposed to enforce regulations in the land.

With the biggest
environmental abuser excluded from the purview of NESREA, the agency
must be truly and fully handicapped to play the role it ought to play
in regulating the environment. Consider what it would mean if the
United States FEPA had no say about how oil companies handle and
dispose of chemicals and wastes in the oil and gas sector.

This exclusion from
regulation of the oil companies is shocking and scandalous. However,
what makes it more objectionable is the fact that these companies,
which continue to commit heinous environmental and human rights abuses
in the oil fields and communities, are also elevated to the seat of
judgement over other lesser polluters of the Nigerian environment.

This is a sad
commentary on environmental regulation in Nigeria. It is unacceptable
and needs urgent re-examination and correction. A very basic tenet of
justice holds that an offender cannot be a judge in his own case. The
unholy wedlock between regulatory agencies and the oil and gas
companies is ripe for a divorce.

Perhaps, you will
tell us that there are other agencies that regulate the oil and gas
companies. You could list the Directorate of Petroleum Resources as
one. That would make a good joke if you were on a comedy train. The DPR
that is unable to tell us how much oil is extracted from the wells and
keeps a blind eye or raises hands controlled by political levers cannot
take the place of a central environmental regulatory agency.

NESREA needs urgent attention to help close the dangerous gaps created by her blind spots.

In the absence of
hard data, all manner of conclusions recommend themselves. And nowhere
is this plainer to see than in the economic sphere. Despite the
readiness of the more granular amongst us to take exceptions with
attempts by economists’ to elevate their calling into a science, I
don’t think one can argue against the need to assign responsibility to
some authority to regularly churn out data on the performance of
economies.

Comparisons across
economies based on such statistics allow assessments of the relative
efficiency of resource use. And within economies, they make it possible
to allocate resources more efficiently. While we may yet be reluctant
to grant the sacredness of “truth” to such data, one cannot but note
that in their absence, the commentariat is wont to run riot.

For illustration,
look no further than the Nigerian economy. The sense that most data on
this economy are available, as if from some sorcerer’s hat, has
encouraged all manner of claims, including what has become the most
laughable of the lot – that somehow, there is something in our
constitution that entitles us to be “the giant of Africa.”

Those who cavil at
this claim quickly direct attention to data on the power sector across
the continent. Three years ago, South Africa (with 4,447 kWh/capita)
had the continent’s highest numbers for “electric power (grid)
consumption per capita”. Egypt (1,375 kWh/capita), Algeria (849
kWh/capita), and Kenya (148 kWh/capita) followed in that order.
Nigeria, the slumbering giant, managed 134 kWh/capita.

In terms of the
usefulness of economic data, this set is especially intriguing.
Cross-country comparisons have meaning when you look at other
supporting data. In this case, both the numbers for population and
economic output help. With a population a whisker less than 50 million,
South Africa’s GDP (calculated at purchasing power parity) in 2007 was
estimated at US$496.2bn. Egypt (population, circa 78m) had GDP of
US$418.5bn. Algeria (population, circa 34m) had GDP of US$229.7bn.
Kenya (population, circa 39m) had GDP of US$59.94bn. “The Giant”, on
the other hand, with 149 million people, had GDP of US$303.4bn.

What to make of all
this? Obviously, the South African economy is much larger than the
Nigerian one, in spite of the latter having three times as many people.
Evidently, certain numbers may not matter as much! However, in terms of
the energy efficiency of the different economies, the Nigerian economy
might just be the better one. On the strength of these numbers, we are
doing about 61% of the South African economy while consuming a little
over 3% of the electricity generated there.

It is difficult not
to enter several caveats here. But is it the case that with all that
number ours might be a less efficient economy; throwing so much at the
development problem, and achieving a fraction of the performance of a
much more efficient economy. Put differently, how much does the power
sector add to economic performance?

“A lot!” is the
popular response. However, if we assume, as the organised private
sector is wont to, that the manufacturing sector will be the main
beneficiary of any increase in power supply in the country, then our
hopes in the redeeming power of more electricity might just be
misplaced. At least, this was the impression I got last week, listening
to Bismarck Rewane speak at the monthly business breakfast of the Lagos
Business School. Even if we had all the electricity infrastructure
running at full capacity, what would this amount to, if all
manufacturing activity in the country accounts for about 3% of GDP?

Another way to look
at this problem is to hazard a response to the hypothetical question,
“whether the manufacturing sector would not have accounted for more of
GDP if it had access to steadier supply of electricity from the mains”.
And what about the boost to other sectors of the economy from better
supply of electricity?

I imagine that
telecoms, wholesale and retail trade, and the services sector generally
will benefit from access to better electricity supply from the mains.
Not to talk of the small and medium enterprises subsector. One other
supporting number: one of the leading telcos in the country is reputed
to be the country’s leading seller of pre-owned power generating sets.
It is easy to see how this particular cost head plays, were the power
sector up to scratch.