Dinner with Atiku Abubakar

I’ve always wondered if there’s a method to political success in Nigeria; if you need a certain amount of native intelligence and/or charm to succeed, or maybe you just need to be at the right place at the right time. I hoped the invitation to dine with Atiku Abubakar could answer some of my questions, but at the end of the day, I left with more questions than answers. Anyway I took some notes during the session, let’s hope they make sense.

1. Richie Rich – Atiku reminded us he was a millionaire in 1993 when he first ran for President. When he was asked how he created wealth, he mentioned a lucky break with an Italian partner that morphed into the company now known as INTELS. Predictably, he didn’t see a conflict of interest that a serving customs officer invested in a port and logistics business. Lesson: We must take the current when it serves or lose our ventures.

2. Image is everything – AA was honest about his motives for joining our famous micro-blog, Twitter. He needs to connect with young people and most importantly set the record straight about his time in government. Throughout the session, he only got upset when questions about corruption were asked. According to him, despite not being convicted in and out of Nigeria, it is frustrating to keep dealing with this albatross. All through the evening, he felt like a man trying to repair a damaged reputation. We wish him well as he rewrites history.

3. Baba Iyabo – I loved how he subbed the chicken farmer. AA told a story of two men that went into a shop in London; one of them carried a bag into the store while the other man strolled in empty handed. Both men left the shop with two bags each, just before the shop owner raised an alarm that someone stole a bag from his shop. He then asked us to try to figure out who stole the bag. If you get the correct answer, there’s a prize for you. Hint: Check Point (1) for clues.

4. Militancy – It’s not normal for a former high ranking government official to speak candidly about security issues like AA did. He blamed two former governors for building armies that morphed into militant groups in the Delta: the one that was rewarded with a state pardon and the custodian of perpetual injunctions. Though he doesn’t have a clear solution to the issues in the Delta, especially agitation for resource control, he got a few marks for being candid about the problem.

5. Boko Haram – Full marks to AA here. Basically, he showed how the appointment of a Fulani from the Sokoto Caliphate to solve a problem in an area dominated by Kanuris was a missed opportunity by the Federal Government. If you need more education on this matter, I suggest you read the 3rd chapter of Toyin Falola’s A History of Nigeria. Lesson: If you don’t know where you’re coming from, deciding where to go becomes a lot more difficult.

6. Political Ideology – One troublesome boy suggested that AA had no political ideology, jumping from one party to another in search of a presidential ticket. He reminded us that he never left the PDP; instead he was prevented from being registered. He joined a rival party because he believed that nobody should be prevented from exercising the right to contest for office. After plenty talk, AA cast his vote as a free market lover; but not before he confirmed that our parties are fingers of a leprous hand, God bless Bola Ige.

7. Budget Reforms – When he was asked how to ensure Nigeria’s budget drives development, his answer jolted me. He suggested oil revenues should be devoted to capital expenditure only, while other revenue sources will fund recurring expenditure. For a country that relies on oil for 70% of its revenues, AA’s suggestion will flip the budget completely. What he didn’t say was how this will be achieved, though it is clear that such a plan must involve significant cuts in the structure of government at all levels.

From the polo top, to updates bout Arsenal’s game, it was clear AA was keen to engage the audience. I’ll give him full marks for trying, but overall it was an underwhelming experience. I left the session thinking unconvinced he is the man to lead Nigeria’s transformation. He will only earn my vote because he’s the best of the pretenders to the throne, not because I think he’s capable of transformative leadership. It’s a long time till 2015, so there’s enough time to change my mind.

There, you have it.

What’s in a Name?

Last Sunday, as we prepared for church, I checked my wallet to see if I had enough money to meet the usual offertory requirements. As I counted my paltry stack of notes, my wife jocularly called me “Khashoggi.” That was her cheeky way of reminding me to contribute more of our meager earnings to the Lord’s vineyard. Ordinarily, I would have replied with a joke, but for an inexplicable reason, that name awakened the anthropologist in me. I decided to ask about thirty people, mostly born in the 80’s and 90’s, if they knew the origin of the slang, Khashoggi. They must have thought it was dumb question to ask, and all said it meant someone with a lot of money, or as one put it, “someone with a lot of cash and swagger.”

I doubt if Adnan Khashoggi knows how famous he is in Nigeria. The infamous Saudi arms dealer and businessman will surely be more intrigued to know very few Nigerians know him, or can pick him out in a photo album, yet his name is instantly recognizable. One of our colloquial descriptions for a successful and wealthy person is the surname of a man known for gun running, money laundering and bribery. At the peak of his wealth, Adnan Khashoggi was one of the richest men in the world, worth over $4 billion. A lot of that wealth was linked to various deals like the Iran-Contra arms for hostages deal, Lockheed bribery scandal and money laundering at the behest of Ferdinand and Imelda Marcos. Here we remember his yacht, Nabila, used for the James Bond movie Never Say Never Again. It is convenient to forget the yacht was later sold to Donald Trump, as a broke Khashoggi moved from one prison to another.

Like Khashoggi, Francis Arthur Nzeribe was a notorious arms dealer.  He was known for his willingness to replicate real life version of the computer game, Call of Duty, in several African countries. In Nigeria, he is best remembered for the bloodless coup against democracy in 1993. The story of how Bassey Ikpeme wrote her judgment at midnight in Clement Akpamgbo’s chambers has been repeated over several hectoliters of beer, so it is befuddling how Arthur Nzeribe can still walk the streets of Oguta without a false moustache. To rub salt into our collective wounds, he was “elected” into the National Assembly as a Senator, representing Orlu constituency, and served two terms. Thankfully, Osita Izunaso spared us more agony, and defeated the self-acclaimed democrat in 2007.

Let’s move forward to a few weeks ago where I heard two former governors in the South West hailed as messiahs by the popular Yoruba musician, Yinka Ayefele. I doubt if Mahatma Ghandi or Lee Kuan Yew were ever praised with such eloquence. These men, who should be listening to the sonorous voices of mosquitoes in prison, sat pretty among the crème of the society. My biggest concern was an incumbent governor who witnessed, with a smirk, how his fraudulent predecessors were “ostracized” by society. No doubt, he is a wiser man after that experience; he won’t dare steal a penny from the public purse.

It is similar to how our Universities dish out honorary degrees, and traditional rulers fall over themselves to give chieftaincy titles, all to individuals who should be behind bars. We abhor corruption on the pages of the newspapers, yet we honour and accommodate corrupt family members and associates. Our monuments and streets are named after criminals, yet we want generations unborn to wipe the slate clean.

If you need proof the joke is firmly on us, look no further than the location of the EFCC’s Lagos office. For those who are yet to be invited, it is somewhere in Ikoyi on a street named after Festus Okotie-Eboh. But then again, what’s in a name?

The Punishment for Treason is Death

I originally encountered Max Siollun  when I read Oil, Politics and Violence (OPV), his excellent book on the history of Nigeria between 1966 and 1976, a period dominated by military coups and a bloody civil war. Soldiers of Fortune is a deserving sequel to such a powerful book. Siollun does an excellent job of curating the power tussles and resulting coups that dominated the 80’s, and traces the transition of Nigeria’s military from an ideological group to one intent on shedding blood and seizing power as a means of self-preservation. The book is a unque peek into the subterfuge and paranoia that defined Nigeria’s leadership between 1985 and 1993; and how a small group of professional coup plotters played a deadly game of musical chairs with the Nigerian polity.

 

There are three key themes from this book. Firstly, it reminds the reader of how military coups need a complicit populace to succeed. The term “coup baiting” explains the deliberate attempt by civilian interests to form public opinion against a sitting government, setting the tone for a military takeover. This explains the false dawn that accompanied coups, and the unearned legitimacy the populace gave to succesive military regimes. Despite questionable economic policies and laughable diplomatic gaffes, the militarry managed to rule Nigeria for 16 years without interruption. This is a lesson to Nigeria’s political class, and a reminder that the mistakes of the 80’s and 90’s can re-occur easily. Secondly, the Orkar coup demonstrates how coup plotting was driven by ethnic allegiances and perceived victimisation of particular tribes/people. The perceived exploitation of the Niger-Delta was a key theme of this coup, and it was not coincidental that the key actors were mostly from that region. The suppression of ethnic protestations by successive military government explains today’s instability where several parts of the country are under siege from regional warlords. Finally, we are reminded of how unprepared Nigeria’s leaders have been. It is arguable that apart from Babanginda and perhaps Abacha, Nigeria has been ruled by accidental leaders. Soldiers of Fortune is a reminder of how the country’s growth was stunted by a mix of leaders who were unwilling and/or unable to develop a clear roadmap for growth and development.

 

My most poignant chapter of the book is the portion devoted to the trial and execution of Major-General Mamman Vatsa and nine others. I remember reading about this coup in the papers, and watching footage of the trial on television. It was difficult not to shed a tear for General Vatsa, shackled in leg chains with handcuffs occupying his wrists beside an expensive wrist watch. He looked out of place, but maintained a resolute and dignified posture while men around him crumbled. In the end, the soldier and poet was killed to satisfy his childhood friend’s paranoia despite pleas from different pressure groups. It is ironic that General Bali remains the highest ranking officer to publicly question Vatsa’s guilt, when the same man delivered the terse nationwide broadcast that announced Vatsa’s execution. Siollun reminds the reader of those terse words, “in the military, the punishment for treason is death.” It is the biggest indication of the game of Russian Roulette that defined my childhood. A time when the mantra was first self preservation, before the common good.

The Devaluation of the Naira and Other Stories

It was Claude Ake who described Nigeria as a disarticulated economy, that produces what it does not consume, and consumes what it does not produce. This description summarizes the dilemma that faces Sanusi Lamido Sanusi and his team at the Central Bank of Nigeria (CBN).

It is no news that what we suspected is eventually happening. The Naira is under significant pressure, and the CBN has emptied its artillery to protect our beloved currency. In various official publications on the exchange rate, the CBN has indicated target exchange rate corridor of NGN150: US$1 ± 3% corridor (i.e. NGN 145.5 – NGN154.4). At the close of business yesterday, depending on who you talked to, the Naira closed at NGN165 – NGN168. At best this is 11 Naira above the CBN’s target.

At an “expected” emergency meeting of the CBN’s Monetary Policy Committee (MPC), three drastic measures were announced. The most celebrated was the 275 basis point increase in the Monetary Policy Rate (MPR) from 9.25% to 12%. This is the rate at which the CBN gives loans to banks, and is the nominal interest rate anchor. This means interest rates will go up in a bid to encourage savings in the Naira, as interest rates, for once, will provide real returns (after adjustment for inflation). This will reduce the supply of Naira in the market, thereby reducing demand for the US Dollar. The downside of this is a resulting increase in lending rates, and a re-pricing of existing loans, priced using a floating rate (usually the prime lending rate of the lender).

But this does not tell the full story. The apex bank also increased the Cash Reserve Ratio (CRR) from 4% to 8%. This is the proportion of bank deposits held in cash by the CBN; therefore this huge increase in CRR means a sharp reduction on the amount banks are able to lend to the real sector. If we assume an industry balance sheet size of N9 trillion, that is N360 billion that could have gone to private sector loans, taken out of the industry.

By reducing the Net Open Position (NOP) of banks from 5% to 1%, the CBN has effectively reduced the amount of foreign exchange a bank can hold at any time. The Net Open Position is simply the difference between assets and liabilities of a bank held in a foreign currency, usually measured as a percentage of the shareholder’s funds of a bank. This reduction will significantly reduce the volume of foreign exchange deals on the inter-bank market and autonomous purchase of foreign exchange, because of this reduction of the amount of foreign exchange banks can hold for mainly speculative reasons. This might mean a reduction in the short term profits of banks, as the treasury function, impaired by this rule, is usually one of the most profitable businesses of Nigerian banks.

The MPC is a team of nine, and the vote to increase the NOP was unanimous. The vote on increasing the MPR was 8-1, while that for the CRR increase was 7-2 (2 members voted for 200bp increase). The unity in the voting patterns suggests a room of worried policy makers. The CBN has blinked, and the result could be harsh.

We know lending rates will go up significantly, and supply of credit will reduce. If you are an existing or intending borrower, this is the time to say a prayer. It will be harder and more expensive to get a loan now, like it wasn’t already very difficult. Government is the biggest borrower in the economy, therefore its borrowing costs will increase, as government securities will be priced higher to accommodate for this MPR increase. The effect on the bond market could be interesting. An increase in the risk-free rate (the rate at which the FGN borrows) will mean states yet to issue sub-sovereign bonds might be forced into offering a higher coupon rate. The same will apply to corporate debt.

As always, unpredictability is an investor’s worst nightmare. This sharp depreciation will affect investor confidence, at least in the short term. So, it is safe to assume a few wrinkles were added to the face of a certain Mr. Aganga at the Ministry of Trade and Investment last night.

How does this affect us, the ordinary Nigerians? Our taste for imported goods from Brazilian weaves to Rich Tea Biscuits will come at a higher cost. . That is the price we pay for being so dependent on imported goods. The road ahead is cloudy; we have not been in a similar position since the rocky days of 2008/9. It is never good to be a harbinger of bad news, but it is time to tighten our belts and build up healthy cash reserves. One principle that never changes in difficult times is the well known mantra “CASH IS KING.”

For Whom the Bell Tolls

My father introduced me to the brilliance of Ernest Hemmingway 20 years ago. Before one of our visits to my ancestral home in Ikole-Ekiti, he went against his trend of buying me African literature by buying me Hemmingway’s The Old Man and The Sea. This book, for which Hemmingway won both the Pulitzer and Nobel prizes, became my companion during this trip to Ikole. My relationship with Hemmingway blossomed when I read A Farewell to Arms, Men Without Women and In Our Time but the connection with Hemmingway was incomplete. I had not read what I consider the greatest book ever written by an American, or anyone for that matter.

For Whom The Bell Tolls is one of the most profound books I have ever read. The novel is told through the mind of Robert Jordan, a character inspired by Hemingway’s experiences in the Spanish Civil War. Robert Jordan is an American who travels to Spain to oppose the fascist forces of General Franco. Death is a primary theme of the novel. Almost all of the main characters in the book contemplate their own deaths. A related theme is the camaraderie in the face of death, and the surrendering of one’s self for the common cause and the good of the people. Robert Jordan and others are ready to do “as all good men should” – make the ultimate sacrifice.

When I closed the final page of this novel, I could not help but remember those who visited this earthly realm, made it theirs and departed before we had the opportunity to thank them. So this post is really a thank you note to those who are not here to read this but remain in my heart forever.

It is for Segun Afilaka – A dedicated Liverpool fan who will never walk alone, a wonderful friend who remained in touch even when distance made it difficult, who I will always remember for the time we shared especially in 2000, when with many others we held hands and supported the Super Eagles tirelessly at the National Stadium during the Africa Cup of Nations.

For Okey Mmaiye – A great guy, whose support during the Pub Culture days will never be forgotten, who lit up those Jaja Hall and BQ days, whose journey sadly ended one lonely night on his way home.

For Lanre Balogun – An older brother, whose generousity will always be remembered, whose devotion to his brother remains an example to me of how to treat and protect mine.

For Bolaji Durosinmi-Etti – A classmate in high school who had no airs about him, whose impeccable dress sense stands out till this day, who while on his last visit to Nigeria took out the time to seek his old mates to relive those high school years a few months before he departed this earthly realm.

For Boye Ayodele-Oyefin – My favourite cousin, who taught me how to remain happy and courageous in adversity, whose maturity was way beyond his years, who put a smile on my face till the Lord called him to rest.

For Tunde Lawal, whose ebullient spirit could never be caged, whose PLAY parties became the benchmark of entertainment in University, who appeared at that party to say goodbye to many of us that fateful night.

For Yomi Doherty – My egbon, who introduced me to the wonderful world of Donkey Kong, whose quiet demeanour and gentle smile seemed out of place in this chaotic world, he left us the wonderful gift of Leah, his beautiful daughter.

All these men lived life to the fullest, they touched my life in so many positive ways and most importantly they were all good men. While they are not here to read this, it is my prayer that one day they will all know what they meant to me. Though our ranks our depleted, our memories are enriched with the good deeds of these men and many others who are now on the other side.

I’ll close this post with the words of John Donne who said “any man’s death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bells tolls; it tolls for thee.”

This quote reminds us of our mortality. For when a funeral bell is heard it is a reminder that we are nearer death each day, it is also saying we are all one and that, when one dies, we all die a little.

On the 13th of October, it will five years my friend and brother Morakinyo Akinkoye joined the saints.

This is especially for him.

Morakinyo Akinkoye Feb 25 1979 – Oct 13 2006

Is This the End of the Greenback?

Since its emergence as the global reserve currency after the Second World War, the United States (“US”) Dollar’s role as world’s currency has not faced the level of scrutiny it currently faces. Following the demystification of the US economy by the Financial Crisis of 2007-2009, and resulting fiscal deficit, there have been calls to review the role of the US Dollar as the global reserve currency.

America enjoys several benefits from this role. Seigniorage, the income a country generates by issuing its currency, appears to be one. The profit derived from the issuance of additional currency to non US residents who hold US notes and coins is estimated to be about $10 billion annually. Also, the high demand for the Dollar ensures its protection from fluctuation. The global demand for the Dollar has in effect, insulated it from volatility. There are also socio-political benefits. America is the world’s largest economy and considered to be the bankers to the world, allowing it wield enormous political influence. As Henry Kissinger said, “he, who controls money, controls the world.”

The US also bears the burdens attached to such responsibility. The high global demand for the Dollar, and the need to maintain liquidity, makes it difficult for the US government to run a surplus budget. The exposure of the US economy to creditors such as China has significant disadvantages to America. The prophecy that the Chinese government will take a swipe at the US in order to overtake it as the world’s leading power is not improbable. The effect of China dumping the over 11 million US treasury securities it currently holds will collapse the US economy. China has in recent times, had the ability to artificially manipulate the value of the Dollar by intervening in its own currency by largely underpricing its Renminbi when compared to the Dollar, thereby leaving it undervalued.

The global economy has benefited from the US Dollar being the global reserve currency. Its use as a global medium of exchange cannot be overstated; largely reducing the cost of international transaction and greatly reducing currency risk that may arise in transacting with more than two currencies. The value of international trade that is invoiced in Dollars is much larger than the total trade conducted by the US and countries with currencies linked to the greenback. Also most countries can protect the value of their currencies by intervening with their Dollar dominated foreign reserves. Where the market forces are not favorable to a country’s currency (the supply of the currency outweighs the demand, which will lead to drop in value of the currency), the country can purchase the excess supply of its currency using its Dollar reserves. This stabilizes the value of its currency. Though this act of intervention divides economists, it is still common practice among numerous countries, notably Nigeria.

However, these benefits also come with drawbacks. One of such is that the US can take certain monetary steps without considering the global economy. The Stiglitz Report claimed that “US monetary policies were implemented with little consideration of their impact on global aggregate demand or demands for global liquidity and were thus a cause of instability in exchange rates and global activity” in reference to America’s response to the excess Dollar liquidity in the 1970s. There is the increased risk of doomsday if the Dollar fails. The “Triffin Dilemma” propounded by renowned economist Robert Triffin, asserts that where a single currency (such as the Dollar) acts as the global reserve currency, the increased need to fuel global liquidity will lead to an increase in the supply of that currency. This will result in an increased budget deficit of that country supplying the currency which will one day erode the value of that currency.

The world has put its eggs in one basket. Will the global economy survive the failure of the Dollar? Is the US really too big to fail? Using the Dollar as the global currency reserve creates a systemic risk to the world that is too large to overlook. The question on everyone’s lips is, “to be or not to be”? Has the Dollar outspent its usefulness as the global reserve currency? Is it time for the Dollar to vacate this position for another currency or group of currencies?

March 23, 2009 is a day of significant importance. On this day, Zhou Xiaochuan the Governor of Central Bank of US’ largest creditor, China, called for a replacement of the Dollar as the dominant world currency. He suggested the creation of an international reserve currency issued to a stable benchmark, disconnected from individual nations. Should China’s Renminbi replace the Dollars as the world’s global reserve currency? China has relaxed restrictions on its currency allowing foreign holders trade its currency to some extent. This has encouraged numerous trade partners like Nigeria to adopt the Renminbi as a tradeable currency. However, China’s currency regulation is far from perfect. There are allegations that China is intervening in its currency, as the rate its currency currently exchanges, does not reflect the growth in its economy. There is no guaranteed independence of the Chinese Central Bank from the political leadership of the country, a major flaw in its system. The alteration of the Renminbi for the US Dollar does not remove the systemic risk of the use of one currency as global reserve currency.

Will a dual or multiple global reserve currency system solve this problem? This system will solve the primary problem of over reliance on only one currency as the global reserve currency. However, this system also brings along its own complexities. First, it is more complex to transact in more than one currency. Secondly, where the dual currency system applies, holders automatically double the currency risk they face.

The ‘savior’ appears to have arrived or so it seems. The proposed system is an improvement on Keynesian idea of an international reserve currency issued by a supranational bank. The Stigitz Report suggests the Special Deposit Receipts (“SDR”) issued by the IMF be utilized as the global reserve currency. The report further proposes that a Global Reserve Bank should be set-up by the IMF to run this. Global currencies will be issued to the IMF in exchange for SDRs in similar quotas with the IMF quota creating a global security backed by a number of currencies. The exchange rate of the SDR will be an average of all the currencies held.

In conclusion, it is clear that though the Dollar is not dead, it is terminally ill. However, the world should not be quick to jettison the US Dollar until a well-structured alternative is available. The proposed SDR appears to be a good alternative; the intricacies have to be properly worked on and all nations be carried along in the process of establishing the new global reserve currency.

Welcome….

I’ve finally decided 140 characters is too little to share my silly, random thought. I’ll probably post silently for a few years days, and someday, after one too many pints of Guinness, I might share this with remorseless critics.