of bonds and brains

By 1978, the GDP of China was $147b; Today China is a $4,900b economy, that is a 3,233% GDP growth in 31years. Can Nigeria grow her GDP by 178% in 9 years?

The Vision 202020 is a plan to make Nigeria one of the 20 biggest economies by 2020, i.e. in 9 years Nigeria will overtake Belgium (the 20th largest economy) which has a GDP $470b. Nigeria has a current GDP of $173b. For Nigeria to overtake Belgium by 2020, we would have to grow our economy by 178% or 19% in 9 years. Please note that Belgium has to "stand still" for 9 years, Possible?

 

Currently in Nigeria, there is corruption, no power, no roads, no security, no credit, yet the economy has grown on average 7% a year. Therefore, a lay argument will be to say if we simply double our power generation, it will bump our GDP to 14% a year.

 

GDP means how much productive active happens in a country, it is the addition of

To get a good GDP score, it means you have to spend money in your country on stuff and export stuff. Note that investment in shares does not qualify as investments under calculation of GDP, and all imports are deducted.

Therefore, it is clear that Nigeria GDP is low because we export oil and bring in billions of $, then we import everything, and the bulk of the population has low spending power.

So to grow by 19% a year Nigeria needs to develop the infrastructure that will make us export, and grow the spending powers of Nigerians by creating a middle class. Primarily we need to build up our infrastructure.

So the first question is how do we develop the infrastructure of Nigeria?

 

The Nigerian Urban development Bank recently stated that Nigeria would need N32t to repair and invest in new infrastructure. Clearly, we do not have N32t and we really cannot borrow it, that $213b, we cannot get it from oil sales because we make average $11b a year from oil, and immediately spend in on salaries and allowances. We cannot get it from import duty and VAT either, combined all non-oil revenues bring in average $5b a year. What about Foreign Direct Investments? We got $11b last year, even though this figure has been rising, it is not guaranteed, one bad MEND headline and poof! So where?

 

I think we should focus on our citizens offshore who are earning foreign currency, have access to credit, and can channel financial assets to Nigeria.

Nigeria is called the Giant of Africa why? It not because our landmass, Sudan takes that, it’s not our heritage Egypt has that, it’s not our oil wealth, Libya has that, it’s not our mineral wealth that Congo so what? It is our people.  It is not just our population of 150m in Nigeria but the 12m or so offshore.

The World Bank released a report showing that $21b was remitted to Africa in 2009; out of that figure, $10b went to Nigeria I.e. Nigerian citizens sent cash via Western Union and the like to their families etc. That is massive economic power, to put that in perspective, Western union payments of $10b bring in as much as FDI and Oil! Astonishing. That figure was just 6% of our GDP..

 

So is it possible to tap this group of Nigerians and raise the remittances to  say $30b a year from $10b? Yes, it is, considers that India got $35b in FDI in 2009 but got $55b in the same 2009.

 

However, we need foreign currency investments and not just remittances, remittances are simply cash sent home, FDI are cash sent in to make or take a stake in a business or enterprise. Our bad perception means we might not get the huge foreign FDI, but we already have huge remittances. The paper proposes we instead focus on increasing the level of remittances and locking them in as investments. Remittances are from Nigerians, they will likely understand the headlines about kidnapping, bombings and 419, oyibo wont. In effect, sell Nigeria to Nigerians.

 

What Nigeria needs to do is to create a series of 10-year dev bonds to invest directly in specific revenue generating infrastructure i.e. airports, tolls roads, inland port in Lokoja etc, each with its own earnings stream. Lets the investors pay directly to the bonds SPV, not the federation account, the SPV collect the fees from the project and pay back to the SPV which will pay off the investors., the coupons should be tax free and allow the repatriation of 100% the proceeds in forex with no restrictions back to the country where it came from.

In effect, break the total N32t needed for infrastructure into separate project based bonds. The main point is that we match the revenue projects to bonds and let the projects not the federation account pay off the debt. We can add sweeteners, the proceeds can be used to buy oil at discounted prices or pay for federal or state land at a discount. Central to this is that if Emeka can send back $100 to Chidi in Aba, he can invest $1,000 in a bond.

It is not mere patriotism, its business, if you invested $1,000 in a 10 year US, UK or Euro zone bond you would get 3% at best, in Nigeria you would get 8%.But Kalu, Nigerians offshore don’t have $213b, where will they get it from? They can take a mortgage. They might not have that amount in cash but they have access to credit, which we do not have in Nigeria.

Right now Tunde in Baltimore can borrow $1,000 from bank of America at 3% interest rate buy the Nigeria development bond earn a 4% premium, tidy and everybody wins. If without a remittance programme we get $10b with this programme, we will get a lot more. This will allow Nigeria build the infrastructure off balance sheet i.e. off budget

Yeah, but almost all the states in Nigeria have sold bonds, even the Nigerian govt has a plan to sell $500m bonds, yet we are still hungry, what different? The states have raised bonds mainly to smooth out their revenue streams, i.e. the bonds are not designed to be deployed to a particular project but are simply raised to go into the accounts of the state governments who spend as they see fit. If we consider that the federal and state spend far more on recurrent than capital projects, it then presumes that the bonds are raised to pay salaries and allowances.

In this model the states will generate revenue backed projects they want the FGN to fund from the Nigerian Development bonds, let the FGN set out specific revenue  and payback criteria to access the bonds, no Federal Character here, if states can match it the criteria, they don’t get the funds.

On the average, Nigeria spends about 30% of her budgets on capital (infrastructure) projects, that's hardly enough. This model will also ensure only capital projects are financed through the development bonds.

However, i suspect no one will invest in North Korean bonds if they are paying 100% a month. This is the challenge for Nigeria leaders, they must install confidence in investors, investors  must know that if they invest in Nigeria they will get their coupons back, that some politician will not take it way or some major will do a coup, We should be transparent, conduct a fair poll in 2011, pass the FOI, show we are serious about fighting corruption. Its important to note that Nigeria has never failed to honour any interest payments on any debt since the creation of Nigeria

Once we secure the infrastructure funding, the govt can them use the oil money for education and health and increase the minimum wages to grow consumption and recreate an educated middle class. As consumption grows, our GDP rises.

 

However, not just the offshore money but the brains as well. In every western university, there are Nigerians, learning or teaching, in every Fortune 500 company there are Nigeria working or doing business with them. Just as India and China used the brainpower and entrepreneur drive of her returning western-trained citizens to add points to their GDP board, Nigeria must do the same.

 

Imagine if Emanalo and Finidi both come back from Betis and Chelsea to manage Sharks and Enyimba. Now imagine if our doctors and engineers also came back.

Imagine our offshore doctors bringing in equipment and knowhow and pass on to the Nigerian based doctors. Imagine our lecturers bring in experience on how to access research grants to our local lectures, our engineers installing solar panels in Katsina. With all the money, we need brainpower and Nigeria has it in abundance offshore.

 

But not just Nigerians, lets get radical and offer Nigerian citizenship to investors willing to invest $1,000,000 in the 10 year bonds no questions asked, if the Chinese want to come , let then come, but let them pay. Just like the Canadian do the points based auction for immigration.

 

There is a unique opportunity for Nigeria, capital is flowing from North America to Asia, Nigeria should position Nigeria as a mid way destination, the bond yields, the distance, the market and the English language all favour Nigeria.

Time and chance happens to them all, let’s not let this chance go to waste

 

It is our problem, let us fix it.

remembering Rosa Parks, dont stand up

A decision is a powerful thing, a decision leads to events, and events are not singular, they affect people far removed from the decision maker, events lead to history.
At 6pm on the 1st of Dec 1955 in Montgomery Alabama, Rosa Parks decided to break the law; she refused to stand up and give up her seat, as was the law since 1900 to a white passenger on a public bus in Montgomery, Alabama, in response she was arrested by the police.

Her arrest led to the Montgomery bus boycott, which was coordinated by a young unknown black preacher, named Martin Luther King. The success of the boycott promoted Martin Luther King to national prominence made him the father of the Civil Rights movement, and led to the “i have a dream speech” and ultimately the passage of the Civil Rights Bill and the election of Barack Obama as the 44th President of the United States. Therefore, you see a premeditated decision is the most powerful thing in the world.

Back to Rosa Parks, it was bad for her, following the success of the boycott she suffered, she was in jail, sacked from her job, her husband also had to quit, and she had to leave Montgomery because she could no longer get a job there. She was hounded, they both suffered from ulcers, they never had children. when she was 91, she lived in a flat, could not pay her rents, she was about to be evicted, but the owners gave her the flat rent free, she survived on charity. Nevertheless, when she died in October 2005 she was laid in honour in the Rotunda of the US capital, the first woman in the USA to receive the honour. So a good decision might bring you pain, but offers great reward.

I do not think Rosa Parks knew her action that day would be so far reaching, in fact she had never met Martin Luther King before the boycott, Martin Luther was a new comer to Montgomery. She didn’t refuse to stand up from her seat because she wanted to help elect a black man into the White House in 2008, No, she just wanted to fight her own little fight in her little Montgomery.

In life, we will be presented with choices to make a decision, and sometimes the decision may not seem material at first, we could be asked to pay a bribe for a vote, we could be asked to take a bribe in return for a vote, the decisions we make will have far-reaching consequences.

We must not only fight the “Abuja” fight, we also should stay focused on our Local Government Areas and Wards . Rosa Parks was a civil rights activist, in fact, she was the Secretary of the local NAACP, but she did not take her fight for civil rights first to Washington, then Alabama then Montgomery, she started small in Montgomery then Alabama then Washington.

The lessons for Nigerians who just as Rosa Parks are living in the bondage of no roads, power or hospitals, is first make a premeditated decision to cause a change, then act local first with a global strategy in mind.
For example, go online to the Ministry of Finance Website www.fmf.gov.ng or Accountant General of the Federation www.oagf.gov.ng or the budget office www.budgetoffice.gov.ng. Print out 100 copies of the allocation your LGA receives monthly, go to your bad road/street, and distribute the copies to every house hold and challenge the ward chairman to get the LGA chairman to fix the bad road. Will it work? I do not know but at the least, the Ward Councillor will make a mental note to patch the road before those troublesome street tenants “spoils his gari”

Imagine if every ward Councillor was hounded in Aba to fix the roads, imagine if every Ward Councillor in Aba was hounded to clear rubbish from the streets?, imagine if every ward chancellor was hounded to set up a primary health care clinic in Aba? Imagine if every ward chancellor in Aba was hounded to set up a small SME for the “boys”? Just imagine if all Aba councillors were hounded for the 10 years we have had this democracy, there would have been no kidnapping in Aba.
Our problems are local, not international, your ward chancellor has no police escort, he still lives and sleeps in your area, his kids still go to the school next door, do you know him?

As we remember the First Lady of the Civil Rights Movement Rosa Parks, i ask you to make a decision not to stand up.
Let us fix our problem Nigeria.

Kalu A.

register to be voted for

Don’t just register to vote; register to be voted for also.



In one month Nigeria has witnessed a cataclysmic change in leadership, power changed from the North to the South, but not to the connected Yoruba with their sophisticated power structure and strong institutional human capital base, not to the commercially minded, republican Igbo but to the minority, people of Bayelsa state.

The people of the Delta have long been associated men, who fished at night and slept all day (literally), but without a shot being fired or the intrigues reminiscent of a proper African palace coup, a colourless Delta fellow became the most powerful black African in the world. Make no mistake the president of Nigeria commands oil revenues and juicy appoints he can dish out without going through any pesky congress.

What does this mean? I being a praying man, fully understand God is speaking to Nigerians, who have since crowded out His prayer request box with cries of “God, give us light”, “God give us water”, “God give us road”, so God answered Nigerian, “fellas, you can’t win a lottery unless you buy a ticket”.

In simple terms, Nigeria dodged a bullet in the form of YarAdua and his absence from governance, the Nigerian political class acted with maturity in following the constitution instead of a “gentleman’s” agreement by some old farts to rotate power amongst them. This maturity was enforced by ordinarily Nigerian in the mould of the “Save Nigerian Group” but most importantly by the direct and forceful pressure exerted by the United States of America. It was no coincidence that the Houses of Parliament agreed to “appoint” the Vice President as the “Acting” President only after a high ranking US official Mr Carlson met with the House and Senate leadership and a certain gap tooted general.

America does not want to fix a problem like Nigeria, for them, it is much cheaper to make sure no problem like Nigeria occurs. The problem with Nigeria is elections, because elections determine who controls the oil money and public spending. So fix the electoral process and you have fixed Nigeria, so goes the US theory. Hence to this end, the US signed a Bi National Commission pact; BNC, with Nigeria, central to that agreement is an explicit promise by the USA that they will do all in their power to ensure the 2011 elections are credible, free and fair.



Let me explain the strategy in simple terms, register to contest for a position, if you are running against a stronger opponent, you do not need to get more votes than your opponent, all you need to do is to prove your opponent cheated (stole a ballot box, used thugs etc) and i suspect the election tribunals will hand you the victory. This theory is not a product of the BNC pact, the election of Rotimi Amechi in Rivers was based on this precedent, but the BNC will seek enforce that precedent. Iwu was sacked because of the BNC, the new INEC chairman will be someone the US can work with, and the elections will be devoid of the “do or die attitude”. I predict that a large number of incumbents will lose out.

And the incumbents know this; they have sought to amend the constitution to help them in this event. First they have made the position of independent candidacy constitutional, they have said an indicted candidate can run, and most importantly they are looting the treasury (by increasing their constitutional allowances) to fund their re-election campaigns.



In 1999 many “smart” people (like you reading) stayed away and left the field clear for the “illiterate” politicians, the result has been years of corruption and mismanagement, do not let 2011 be like 1999. Many people are thinking, do i resign from my middle class job and seek the Governors House? Remember there are many non-executive positions, Ward Councillors etc, Do not only seek the high profile executive positions like Governors, Senators, etc, remember Ward Chancellor, LGA Chairman even State House seats also carry the power of change. Obama started as a community organiser.



Do not stand by, don’t just register to vote, register to be voted for also.



That’s one way of fixing this our problem.