Taming Unemployment – The Abba Moro Edition

It is the very nature of the capitalist mode of production to overwork some workers while keeping the rest as a reserve army of unemployed paupers.” – Karl Marx, Theory of Surplus Value.

According to the Nigerian Bureau of Statistics, Nigeria’s unemployment rate is 23.9%, while the 2012 Baseline Youth Survey Report suggests 54% of Nigerian youths are unemployed. The bad news is the situation shows no sign of getting better. If you believe the numbers thrown around, 1.6 million jobs were created in Nigeria last year. The numbers look good until you realize that over 2 million Nigerians enrol with the National Youth Service Corps (NYSC) annually. This means Nigeria is adding at least 500,000 graduates to the labout market (if we assume that all the jobs created are taken by unemployed graduates), . 

How bad is this? During the Great Depression, unemployment in England peaked at 22%, while the United States of America and Germany saw unemployment rise to 25%. This tells us two things: (1) The future of our youth is bleak and (2) Current government interventions are not working. One of my biggest challenges with our government is the one track solution for unemployment – direct job creation. While direct job creation is perhaps the fastest way to reduce unemployment, in most cases it creates a fiscal strain on government revenues, and does not provide a sustainable solution to a structural problem. According to Professor Subramanian Rangan at INSEAD, the expense of public employment programs may undermine a government’s fiscal position, while the actual labor market impact may be to simply divert job creation to favored areas rather than increasing overall employment for young people.

This is why young people must start paying attention to the electoral process. The solutions to unemplyment will not come from exploitative government officials like Abba Moro, the Interior Minister who supervised that tragic recruitment exercise to hire 4,500 people for the Nigerian Immigration Service (NIS). Let us consider this again -a federal minister charged 530,000 applicants N1,000 each to apply for less than 5,000 jobs. The exploitative and poor planned exercise led to the deaths of Nigerians. The same minister comes on national television and says “we will not be distracted by what has happened and we will setup a high powered panel to ascertain what happened in these centres.” He is still a federal minister, paid from the taxes of those lucky enough to be employed. Nobody has apologised or been sacked for the deaths caused. If this is not a classic example of killing a man and dancing on his grave, I dont know what is. The solution to such blatant idiocy is not violence, or the type of “revolution” many have asked for. The solution lies in a silent revolution, one effected through the ballot box on Election Day.

It is our collective duty to remember the bitterness, helplessness and anger; and channel these emotions into selecting candidates that will improve the level of governance at all levels. For the millions of young people without jobs, we must listen to political parties and candidates that show a clear sense of how to stimulate job creation. From simple solutions like job search assistance programs, to more difficult ones like fiscal rebates, or specific policies that remove the barriers to doing business, our votes should go to candidates that demonstrate a clear ability to solve our problems. For example, according to Roland Michelitsch, Chief Evaluation Officer and Manager at the International Finance Corporation (IFC), Mexico has experienced a 2.8% increase in employment from measures that reduced red tape and taxes for businesses. In many other countries, employment has grown by 5% or more on the back of an improvement in grid sourced power supply. The problem is not without solutions, contrary to what the responses of our governments suggest.

Yesterday was a reminder that we surrendered our collective power to an inept political class. It is also a call to action – we must register and vote to prevent people like Abba Moro from getting into elective office or appointed into senior government positions. Until that happens, we must brace ourselves more for painful tales like this one: https://m.soundcloud.com/onyinye-ough/eyewitness-account-nis?utm_source=soundcloud&utm_campaign=wtshare&utm_medium=Twitter&utm_content=https://soundcloud.com/onyinye-ough/eyewitness-account-nis

Back to the Matter

Yes, I know; I promised no more ASUU related posts but this was impossible to ignore. Our big uncle, Professor Mobolaji Aluko was kind enough to share the 2009 FGN/ASUU agreement for transparency. and I couldn’t ignore one more post to discuss the matter.

1. Funding: The only part of this agreement that ASUU and the FGN agree with is the area I find most disagreeable; that funding should primarily come from the government. It is clear that the era of government funding higher education is disappearing. While I don’t suggest government should disengage from funding universities completely in the short-term, I think recurring expenditure should be self-funded by the universities. Somewhere in that report, ASUU suggests the cost of educating one student is about N1.3 million per annum, maybe that’s the answer for those wondering how much it will cost to attend a university under this arrangement. Of course, if you pay N1.3 million, it must be for decent education and consumers will select the universities that provide the best value for money. There’s your incentive for quality improvement.

Many of the demands made by ASUU will be solved by agreeing some level of financial autonomy. If that does not happen, we will be back here in 2017 arguing about another strike. There’s no indication ASUU is averse to this, simply because a smart offer has not been put on the table. What is uncertain is if the government wants to start a discussion that involves a significant increase in fees, less than two years to a general election.

2. University Autonomy: I’m sure I wasn’t the only one surprised that ASUU insists only degree holders should be appointed to the governing council of universities. The fact that it needed to be clearly stated in an agreement should be a cause for concern about the quality of governing councils today. It is also interesting that most of the funding (local and international) to Nigerian universities must come through the National Universities Commission. Apart from regulating the curriculum and maintaining standards, NUC’s job should be limited to setting the overarching strategy for higher education.

I agree that a national examination (JAMB) is not out of place, but universities should be free to determine additional entry requirements, and apply such as they deem fit. While we are on this JAMB matter, surely it is time to revamp that process. It is inefficient running such an important examination on ONE day every year, across Nigeria. Oh, and paper based testing must be on its way to the museum. India got an American company, Prometric to handle its Common Admission Test; today you can take that entrance examination once within a 20-day window. If you don’t believe American companies provide technology solutions to India, you might enjoy this. Someone should tell those JAMB people and universities that admission tests can be computer based.

3. Salaries: I totally blame the government here, and my reason is simple. It is the prerogative of ASUU to try to maximize what its members earn, and all of us will do the same if faced with that situation. At least that’s what I’ll do. However, when ASUU comes to the table using salaries in South Africa (GDP per capita of $7,500) and Botswana (GDP per capita of $14,000), then the government must have been snoozing. Oh, did I mention Nigeria’s GDP per capita is somewhere around $1,500? I’m sure you get the point. But it is also good to remember that if we agree on how higher education should be funded, we won’t be arguing about salaries.

4. Allowances: I don’t think the negotiated allowances are too high, and made a case for this in previous posts. If we want to raise the assessment levels of post-graduate study in Nigeria, we need to align our goals with incentives. My theory on reward is simple: if you pay peanuts, you get monkeys. If you want to minimize inbreeding, you need to incentivize external assessment of candidates and make it a compulsory part of the appointment process. Again, this is a problem financial autonomy takes away.

5. Fringe Benefits: Honestly, some of the requests here are hopeful, at best. Vehicle loans at 2% and Housing loans at a rate to be determined by the University Senate are impractical requests. The request for loans at rates below inflation and the risk free rate should have been deleted very quickly. Again, it makes me wonder, who negotiated this agreement on behalf of the FGN?

6. Pension and Retirement: There is no dispute here, I completely support a retirement age of 70 years for academics. The previous retirement age (65 years) robs the university community of 5 years per person. If you assume 5,000 professors make it to at least 70 years, that’s 25,000 years of teaching gained. No argument here. On the University Pension Fund, I didn’t get the reason for not aligning with the existing pension scheme. If the Universities desire, they should apply to run Closed Pension Fund Administrators (CPFAs).

7.Fun Fact: It is interesting one of the advisers at that negotiation is the current Minister of Power, Professor Chinedu Nebo. If he is not too busy dealing with the former PHCN staff, maybe he can share his opinion with us on how to fix higher education.

In the words of the good man that shared this document with us, there you have it.

Let’s Talk About Higher Education

Last time, I stated how much I disliked writing rejoinders, but ignored the benefit that comes with such work sometimes. Sometimes, you get the author whose work is disputed to raise the stakes. I think that’s happened in this case, since the writer of that article deemed it fit to do another post. It’s bound to get boring if I keep responding to rants and facts about ASUU, so let’s broaden the discussion while selectively showing flaws in my friend’s arguments.

1.University Autonomy – For the last decade or more, the union has been firm in its call for autonomy of Nigeria public universities. Since this a fact based response, read this and Wale Babalakin’s suggestion to confirm I didn’t make it up. There is very little that can be done to improve higher education if 84% of revenues come from government subventions and the unwieldy Nigerian Universities Commission (NUC) continues to regulate universities. In a competitive market, universities should self-regulate and the market will pay for value. It also eliminates the NUC’s ability to regulate the curriculum and appointments within universities. Today, public universities are still not allowed to charge tuition fees for undergraduate programs, which is the foundation of the funding shortfall. The solution to this would be something similar to how the government solved the issues around power sector pricing using the Multi Year Tariff Order (MYTO). Both parties should develop a five year plan where the government systematically reduces funding to universities, while allowing for schools to charge tuition fees. While this is happening, government must cede more control to the universities to decide appointments, curriculum and other operational matters. This sets the context for a lot of what I’m going to propose in this post. I’ll leave you with the obvious question. Why will a government that complains of a rising wage bill and expenditure profile refuse to provide university autonomy? Anyone who can answer this will get a copy of Paying the Professoriate.

Hint: The only place government and ASUU seem to agree is that university education should be free, especially when debates occur close to elections. The writer himself alludes to this point with the example about Ekiti State University, and the unsuccessful attempt to raise fees.

2.Financial Aid: Every time the debate on autonomy starts, it is clear education is treated as a social benefit. It also suggests we are unaware that public funding of higher education is now a race to the bottom. In the United States (FY 2009), federal and private loans to students totaled $96 billion, exceeding public state appropriations to higher education ($78 billion). There is no way Nigeria can operate differently, and a more efficient use of government’s budget might be to focus on funding the students, allowing the universities to fund themselves.

3.Journals and Research Publications – I agree with the writer here, albeit with a caveat. Nigerian lecturers need to publish a lot more internationally; it is stupid to say otherwise. The current practice of limiting writing to in-house journals is clearly lazy, but there is a need to present both sides of the story. Academia is divided into two clear but interwoven activities: teaching and research; but it remains a zero sum game. Therefore, universities need better organized schedules to ensure both activities are balanced. I worked as a research assistant to a foreign professor in a Nigerian university for two years, and the experience was awesome. It was a daily learning exercise, but I also know the amount of work I put in to support his case writing and publishing. Today, most university professors (not to mention more junior members of staff) don’t have research assistants, even if they are shared by the faculty. Also, it is a lot easier to focus on research if you don’t teach four times every week.

Note: Claude Ake, whose soul I hope continues to enjoy a peaceful rest, built the Centre for Advanced Social Science to bridge this gap. Sadly, his death in the 1996 ADC plane crash derailed what was already looking like a fantastic research platform. The best thing that can come out of this discourse is to see a few distinguished academics take the lead on this.

4.Overpopulation – The writer makes a good case of saying the faculty/student ratio in Nigeria is not remarkably different to ‘developing’ countries, but like most of statistics, we should be concerned about what the data is silent on. Firstly, faculty/student ratios don’t include the use of adjunct/part-time lecturers, which skew the ratios. India, for example, has used part-time lecturers to ease the burden on the staff with mixed results. If you need to amuse yourself about development in India, you might enjoy this. There is more proof that we are comparing omelets with sausages, with this article that suggests 70% of lecturers in Latin America are part time as are 50% of those in the United States. A quick solution could be the use of adjunct lecturers with industry experience, who will most likely teach a few hours every month for a small salary. I wrote a post about this and other foolish matters almost two years ago.

Secondly, a deeper problem is not the faculty/student ratio but the composition of the curriculum. For example, a teacher in South Africa has a faculty ratio of 1/53 but has to take one class, twice a week. In Nigeria, with a slightly lower faculty/student ratio, the same lecturer has to take four classes per week. I’ve always thought the units needed to graduate in a Nigerian university were too much, and we can do with a review of the curriculum. Everyone should be happy with this – students get better learning schedules and focus on the important stuff, lecturers get more time for research, quality goes up on the y-axis as quantity drops on the x-axis. Why has this not happened?

Hint: Run a Google search on Nigerian Universities Commission; let me know what you come up with. It makes no sense for Abuja to keep deciding how and what to teach.

5.Comparative Salaries – I love how the writer uses statistics, and he’ll do a damn good job as a propagandist for a floundering government with this skill. However, for this debate, let me provide clarity. It makes little sense to compare salaries of lecturers between countries. For example while the writer is correct that Nigerian lecturers earn more than their peers in Japan and Norway, but less than the ones in South Africa. What does this tell you? Almost nothing. In the same study, lecturers in Ethiopia earn a lot less than most of the sampled countries, but their salaries relative to GDP is very high, 23 times the country average. What this tells you is that though salaries of lecturers in Ethiopia are low compared to their peers globally, they are actually very well paid compared to other Ethiopians of similar education. Seen what I’m trying to do? That’s exactly what the writer did in that piece, quite ingenious I must say.

6.The BSc to PhD Syndrome – If President Jonathan’s degrees read: BSc (Manchester), MSc (Manchester) and PhD (Manchester), will the writer have the same problem? I don’t think internalization is as big a problem as quality assurance. It is clear the writer is not aware of the promotions, otherwise he won’t be fixated on the “getting more than one degree from the same university.” The real solution will be to ensure the external examination process works like it ought to. For appointments and promotions, let the process go through a rigorous external examination process, where each faculty’s list is examined by a panel of five external assessors, with two foreign assessors among them. This will increase operating expenses of universities, but also raise the standard.

7.Physician, Heal Thyself – ASUU is not a gathering of saints, and I need to state this. Among the members, there are claims of sexual harassment of students, plagiarism and nepotism. It is difficult to take union that protects such members serious, and it is the responsibility of the senate in each university to take a hard stance against such practices. Simply put, if the autonomy of universities is ever going to stand a chance, the trust deficit between town and gown needs to be bridged. The problem here comes back to autonomy; university senates will always cite the method of appointing the university governing councils and vice-chancellors as a major obstacle to cleaning the Augean stable.

8.Funding: Alumni, Endowments and Grants – I have never been contacted by the University of Lagos since I graduated over a decade ago; unlike my brother who receives monthly letters (and sometimes financial requests) from his alma mater in the United States. It is clear Nigerian universities have ignored a viable source of funding, their alumni. By failing to run effective alumni offices, universities not only lose funding opportunities, they also miss out on the vital networking between students and successful alumni.

Endowments and programs like this will take Nigerian universities closer to autonomy, but the trust deficit must be erased before more corporate organizations participate in higher education. While many organizations term this as social responsibility, it will soon become clear there is a clear for-profit reason to support higher education. Organizations need people to succeed, and the quality of the manpower coming out of universities correlates with the ability of businesses to unlock value.

Finally, the message on research is stark. “If you want to stay alive, you must publish.” Universities must be forced to use inventions as a veritable source of funding. There is no point branding the place as a citadel of knowledge if some of this knowledge cannot be sold, simple.

9.Online Courses: A friend of mine has spent months trying to convince the eggheads at NUC that it’s a bright idea to accredit online courses in Nigeria. Of course, it’s taken them a long time to understand the benefit of democratizing education. Apart from creating global competition for domestic universities, this approach will improve course scheduling and reduce the current pressures on physical infrastructure.

I’ve crossed the 1,500 word barrier which means it is time to shut up. The journey to improving higher education should start here. Again, I am hopeful that the current strike will not be narrated around higher wages but a concerted effort to improve higher education. As Da Vinci reminds us, “study without desire spoils the memory, and it retains nothing that it takes in.”

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.

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.”