Thursday 5 November 2015

Of Ministers, Clowns, Hazards, and Lazard

http://theatlanticreporter.com/index.php/2015/10/26/of-ministers-clowns-hazards-and-lazard/

 
 
26th October, 2015
 
Temitope Oshikoya**

After a four-month hiatus, the ministerial orchestral band of thirty seven noisemakers finally arrives on the stage. The Ministerial list is a mix of professionals and politicians; party loyalists and non-party members. There are eleven lawyers, 5 former governors, three medical doctors, and three academicians. In the context of the President’s campaign platform of security, economy, and corruption (SEC), the issue of the economy appears to be the least favoured on the ministerial band.
What lessons can the fresh noisemakers on the musical stage learn from the previous noise makers of the immediate erstwhile administration? First, the new noisemakers should avoid serenading us with their ministerial megaphone melodramatic melody. The clowns or leading lights of the previous administration, especially the handlers of the economy certainly enjoyed running a circus.  They serenaded us with outlandish claims about the economy and inputs, never mind that under their watch the domestic debt quadrupled to 11 trillion naira. But their outputs clearly showed tangible deliverables in growing the misery, poverty and unemployment indices for the vast majority of Nigerians.

Second, the new noisemakers must avoid waxing us with the lyrics of blissful ignorance. With their mastery of colourful graphic and gimmick presentations, the previous clowns were very adept at hiding the icebergs that the economic titanic was heading towards. This much was exposed in January of this Year in an article titled: How not to manage the economy. Standards & Poor’s ratings, JP Morgan Index, and international media, which they initially carefully cultivated, later revealed their folly and economic ignoramus.
Third and more importantly, the new noisemakers must play their melody with a somber tune. The previous clowns were not only blissfully ignorant, they were absurdly arrogant. As Tony Marinho wrote in The Nation, they displayed the disease of “Ministerial Arrogance and Delusions of Grandiosity.” They certainly like to go about blowing their trumpets as the self-acclaimed “leading lights” of the previous administration.

Nigeria has several heroes at home and in the Diaspora in various professional fields in international public institutions and in the private sector. In particular, there have been Nigerians who have served as Head of the Commonwealth, Under Secretary General of the United Nations (UN), Head of the UN Economic Commission for Africa, Head of IFAD, Executive Director of UNFPA, and Secretary General of OPEC. There are others in the private sector, including a Nigerian serving on the board of Goldman Sachs.  
Unlike these silent heroes, the clowns like to go the extra miles to convince us that they are the greatest things ever since sliced bread.  They want us to believe that the former Director General (DG) of Budget has been appointed by the African Development Bank (AfDB) because of his performance in that prior role. Hogwash, we all know how far Nigeria’s budget, especially 2015 budget, has been widely off the mark and how fiscal leakages are now being plugged. This appears to be simply part of the attempts by the former Minister of Finance, who nominated the DG to serve as Nigeria’s executive director, ambassador or representative to the AfDB, to provide a soft landing to cronies just before a new administration was set to take over.

They also want us to believe that the current AfDB’s President got the position solely on the strengths of his expertise, experience, and exposure as a Minister of Agriculture in the previous administration. As this writer has noted in an article in the Guardian in April, 2015 on The Race for the AfDB Presidency,”more importantly, and beyond professional expertise, experience, and vision statement, the election of the AfDB’s President is a high-powered political affair reflecting an extension of countries’ foreign policy and commercial interest and sub-regional rotation.”
For instance, there was no way Nigeria’s candidate who was head of OPEC in 1995 would have been allowed to take up the headship of the AfDB under former Head of State, General Sanni Abacha. By the same token, if the March 2015 democratic elections had gone awry or the current Nigerian President did not come out to support Nigeria’s candidate, the Presidency of the AfDB would have eluded us!

Fourth, the new orchestra band noisemakers must avoid the revolving doors of the vaudeville theater hall. Some have raised concerns about former government officials being connected with their new employers. Some have been asking what role Lazard and its subsidiary played during Nigeria’s debt negotiations with the Paris Club.  In the USA, a prominent Senator has being championing the case against revolving doors by Wall Street bankers into government and vice versa. Specifically, earlier this year, the appointment of a former Lazard’s banker into a high profile US Treasury position was blocked as part of efforts to control the use of revolving doors.
All of which brings us to issues of moral hazards, which in economics imply people making the decision about taking risks knowing that others will bear the costs and burden of those risks. In this context, is it the case that the clowns and merchants of misery are bailing out after leaving majority of Nigerians with rotten apples of misery deriving from their economic mismanagement?

Finally, the new noisemakers must avoid the antics of the clowns and their town criers who think their clowns are meant to serve only their clans. With these musical musings, we wish the new noisemakers well in their new roles as Ministers of the Federal Republic of Nigeria.

**Dr. Temitope Oshikoya, an economist, writes from Lagos.

Sunday 31 May 2015

Expert Puts Cost of Buhari’s Economic Blueprint at N60 Trillion


Expert Puts Cost of Buhari’s Economic Blueprint at N60 Trillion



31 May 2015

Views: 4,626


• Calls for prioritisation of policies, programmes


By Kunle Aderinokun


It has been estimated that it would cost the President Muhammadu Buhari-led administration a total of about N60 trillion ($300 billion) to implement its economic blueprint.


A former Chief Economist of African Finance Corporation and former Director of Research at the African Development Bank, Dr. Temitope Oshikoya, gave this estimate in his report (made available to THISDAY), based on the analysis of the economic blueprint by BudgiT at the recent policy dialogue on APC manifesto.


In view of the enormous cost of implementing the economic blueprint, which represents 60 per cent of the nation’s GDP, Oshikoya advised the new administration to prioritise and sequence its policies and programmes.


He noted that the economic blueprint, which he termed ‘Buharinomics’, “faces a quadrilemma in trying to achieve equity, efficiency and effectiveness in a slowing economy.”

According to him, “as the administration faces difficult short-to-medium term policy choices and opportunity costs requiring trade-offs with long-term consequences, prioritisation and sequencing of its policies and programmes are in order.”



Oshikoya, who explained that the equity portion accounts for a fifth of the total cost of the blueprint, noted that the efficiency portion represents 38 per cent while  guarantees are 42 per cent.


While also pointing out that the equity portion alone requires an annual expenditure of about N12 trillion, he said the total annual revenue for the Federation account is less than N10 trillion.


He therefore expressed belief that “from reducing the cost of governance, the effectiveness pillar could yield N1trillion.” The extra burden, according to him,  will then “fall on the economy pillar with efforts made to plug the fiscal leakages from oil revenue and more non-oil revenue will need to be raised from increasing the tax rate, broadening the tax base, and increasing collection efficiency.”


Essentially, Oshikoya, who is the chief executive officer of Nextnomics Advisory, noted that “the vision of a social-democratic welfare state with a dynamic market economy is a noble one.”

“The immediate social inclusion equity programmes for achieving it partly work through fiscal stimulus to consumption and aggregate demand, Keynesian economics style. On the other hand, the efficiency related programmes are geared towards removing long-term supply side constraints to the economy through structural reforms for competitiveness and enhancing infrastructure investment-led productive growth,” he added.


Oshikoya noted that “the envisaged social democratic welfare state aims to tackle the vicious circle of poverty and high misery index, and inequality in social mobility, income, wealth and economic opportunity.


“The new administration plans to create a social welfare programme to provide N5,000 monthly for the 25 million poorest Nigerians. It will provide unemployment allowances for unemployed Youth Corps graduates for twelve months; one meal a day for all primary school pupils; a national identity scheme--NIS and a regional growth fund—RGF.”


“According to BudgiT, the total cost of implementing these direct equity programmes is N2.15 trillion or $10.8 billion.”


“Closely related to the direct equity programmes are the education and healthcare programmes to enhance the productive capacities of citizens, costing another N662 billion or $3.31 billion. These programmes include new vocational schools; new six universities of science and technology; and world class hospitals. In addition, BudgiT estimates suggest that N8.8 trillion or $44 billion per year will be required as national health expenditure,” he added.


He reasoned that prioritisation of all the equity programmes would be necessary, giving the total costing of N11.5 trillion or $58 billion.


“While the core social welfare programme could be initially scaled down by half”,  the economist posited that “establishing six new universities or new world class hospitals cannot be of immediate main priorities.”


He added: “It is also difficult to meet over the medium term the targets of increasing by two-half times the number of physicians per 1,000 population from 19 to 50, and increasing national expenditure per person per annum five times to N50,000. The RGF may be targeted initially as a Marshall Plan for the North-east, as the NDDC is essentially a RGF for the South-South.”


Besides, Oshikoya also said: “While the NIS is crucial to the effectiveness of the social inclusion programme, it should build on the ongoing biometric programmes at the CBN, INEC, and NIMC and the e-wallet programme in the agriculture sector.”


Oshikoya advised that, “the expenditure on social inclusive equity programme should initially be targeted at N5 trillion or about 5 per cent of GDP, and half of the current projected estimated spending. This benchmark, according to him, is in line with cost of social protection programmes in Ethiopia, Kenya, and Tanzania.


“According to Cash Transfers Evidence Paper by DfID, the cost of Ethiopia’s Productive Safety Net Programme is estimated at 5.3 per cent of GDP. Large middle-income countries spend less per GDP. India’s National Rural Employment Guarantee is estimated to cost 2.2 per cent of GDP; Indonesia’s Safety Net Scheme, which covers 84 million people or a third of the population, is estimated to cost 0.7 per cent of GDP.


“Brazil’s Bolsa Familia programme created in 2003 cost 0.36 per cent of GDP and covers 46 million people or a quarter of the population and has lifted million of families from poverty. The Brasil sem Miséria established in 2011 has a fiscal cost of less than 0.6 per cent of GDP at an average of $65 per family according to the IMF,” he added.

Wednesday 22 April 2015

Race for the AfDB Presidency


This article has been published by The Guardian on 22 April 2015 and Newsdiary Online on 14 April 2015
http://updates.hopefornigeriaonline.com/race-for-the-afdb-presidency/

THE election to replace Dr. Donald Kaberuka from Rwanda as the President of the African Development Bank (AfDB) will take place in Abidjan during its yearly meetings next month. Eight candidates are vying for the prestigious position of Africa's premier multi-lateral development bank, which turned 50 in 2014.

Based on depth of professional qualifications and breadth of experiences, Dr. Akinwumi Adesina, Nigeria's Minister of Agriculture, is one of the front-runners. He has international development and in-country experience spread across 14 other Anglophone and Francophone countries in West, East and Southern Africa.
Dr. Kamara of Sierra Leone, an economist, should also be a strong contender having served as Governor of Central Bank, Minister of Finance and Economic Planning and Minister of Foreign Affairs of Sierra Leone in addition to having worked at the IMF and the Commonwealth. Mr. Sufian Ahmed has a long-standing public sector experience; he has been Ethiopia's Minister for Finance and Economic Development for two decades at a time when his country became one of the darlings of the international donor community.

Mrs. Cristina Duarte has private sector experience at Citibank and serves as Minister for Finance and Planning for Cape Verde. The Tunisian candidate, Mr. Jaloul Ayul is also a Minister of Finance with private sector experience as former Citi banker and Managing Director of a commercial bank in Tunisia. There are three former AfDB's staff members.
Mr. Kodje Bedoumra, an engineer, brings with him experience of managing infrastructure projects at the AfDB, which is now the institution's largest portfolio, and as its former Vice President. He has also served as the Secretary to the Government within Chad's Presidency, as well as Minister for Economic Planning, and Minister for Finance.

Mr. Birama Sidibe, a Malian is now Vice President for Operations at Islamic Development Bank (IsDB). Mr. Thomas Sakala from Zimbabwe is a veteran and former AfDB's Vice President for Country and Regional Programming.
There are three key issues that the AfDB needs to address going forward. First, how many countries will graduate from its soft lending window of African Development Fund (ADF) in five to 10 years' time? The ADF lends to poor and low-income 35 countries - two-thirds of 54 African countries, many of which cannot borrow from the AfDB window. Graduating from the ADF-window implies that a country has raised its per capita income to become a middle-income country and successfully lifted a majority of its people out of poverty.

Second, what will the AfDB do differently that the World Bank cannot do? The World Bank's strength, arguably, lies not only with its financial lending (it provides three times what AfDB provides to some African countries), but also with its ability to drive and shape the development agenda and in-country priorities with its policy and knowledge capital.
Third, why should non-African countries provide additional finance either through the capital markets or donor funding to the AfDB and ADF and not to the World Bank or their own respective bilateral development agencies? In essence, what would be the value-added of a marginal increase in funding to the AfDB? On the other hand, why should African countries trust the AfDB if they feel that they need greater voice at the institution?

 In addressing these fundamental issues, the vision statement of Ethiopia's Suffian Ahmed stands shoulder and head above others, as recently posted on the AfDB's website. His statement is on three core tasks: "First, focus on our financing on what we are best at and what will make the biggest difference in Africa... .Second, bringing world class advisory capacity to the table in support of the countries we work with... .Third, invest in high quality management and operations---with the whole bank focused on effectiveness value for money and minimizing costs."
His statement then addresses four priority areas--infrastructure, agriculture, the private sector, and supporting fragile states. In each area, he has only three short paragraphs covering Africa's challenges, his in-country experience in tackling those challenges, and what he plans to do at the AfDB. The next vision statement that comes close is that of Dr. Kamara of Sierra Leone, especially in terms of packaging and presentation. Surprisingly, the vision statements of the other six candidates read more like mid-term research papers; writing as technical experts is quite different from writing a vision statement as presidential candidates for a continental organization.

More importantly, and beyond professional expertise, experience and vision statement, the election of the AfDB's president is a high-powered political affair reflecting an extension of countries' foreign policy and commercial interest and sub-regional rotation. While Eastern Africa and North Africa produced the two most recent presidents, Central Africa may claim that it is now its turn.
Being the largest shareholder and with a positive image from its successful elections, Nigeria could also note that it is also its own turn, especially with a South African now head of the African Union, which breaks a long-standing unwritten rule that the SANE countries - South Africa, Algeria, Nigeria, and Egypt with a combined GDP of over half of Africa's - should not be the head of continental organizations.

The AfDB's president is elected with a double, but simple majority of both African votes and total votes. In the earlier rounds of voting usually based on country and sub-regional voting shares and linguistic affiliations, the candidates with the least vote, possibly from Eastern and Southern Africa (17% of total vote), West Africa (3.7%) ex-Nigeria, and Francophone blocs (11% of total votes) who may fully support Mali or Chad, will drop out if North Africa with about 19% of total vote support for Tunisia.
During these earlier rounds, Nigeria's Adesina will scale through and possibly to the final rounds given the country's 9.3% total shareholding (16% of Africa's 60% vote). Non-African western countries generally prefer candidates from relatively smaller or low-income African countries with heavy reliance on official development assistance.

France may initially team up with Mali or Chad; Arab/Gulf countries with either Tunisia or Mali given the connection with IsDB; and China with Nigeria. Zimbabwe's candidate may be handicapped by perception of his country's image with the western countries, which may support Cape Verde, Sierra Leone or Ethiopia.
However, if the western countries with about 36% of total votes feel that their preferred candidate may drop out too quickly because of low votes, they will most likely coalesce around that candidate very early in the voting rounds to propel the candidate to the final round.

Dr. Kaberuka of Rwanda, now with less than 0.2% vote, benefitted from this strategy in 2005. Ethiopia, Sierra Leone, or Cape Verde may likely benefit from this networking effect this year.
In this regard, Cristina Duarte is probably one to watch as the undeclared and anointed candidate of the non-African western countries partly for being the only female and a Luso-phone candidate, with both private and public sector experiences from a country with low voting shares (0.09%).

The 2015 election for AfDB's presidency is indeed getting very interesting and the best counsel during the campaign process: Trust, but verify.