Engine Idling: What We Know (Or Don’t Know) About The New Auto Policy

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer – Adam Smith, An Inquiry Into The Nature And Causes Of The Wealth Of Nations, 1776 (Book IV, Chapter 8, Paragraph 49)
I am not a fan of the Minister of Trade and Investment and whatever, Olusegun Aganga. In fact that is putting it mildly. I think it’s important to say this so you can stop reading now if you are looking for an ‘objective’ assessment of this new automotive policy.
I have previously written a short piece about the experience of South Korea and how difficult industrial learning can be when it comes to making cars.
But I now want to try to do a rolling piece – which will be periodically updated – on this policy based on the available facts. I still cannot lay my hands on the policy document itself and I know no one who has read it. It does seem like there is a deliberate effort in place to keep the policy document out of the public sphere. This is infuriating to no end but I will try to remain calm.
1. I saw this photo and it annoyed me so much. It goes against everything Adam Smith warned against in that quote above more than 200 years ago
A novice like me can recognise Cosmas Maduka of Coscharis and Ade Ojo of Elizade at first glance. The rest of them appear to be from Dana Group, CFAO, Toyota Nigeria, Mercedes-Benz and so on. In short, all the car importers were able to have a meeting with the minister to discuss this new policy because of course, their needs are the most important, far above that of any consumer.
This is all the more irritating because these guys are not the ones going to pay for this hare-brained policy (yes, I can call it hare-brained even without reading it). It is Nigerians who are going to pay all the costs associated with the experiment.
Here is what Aganga is quoted to have said after the meeting:
The meeting with major automobile importers in the country was very fruitful as it provided the opportunity to iron out lingering issues. It also afforded us the opportunity to understand what their concerns are. They have all endorsed the policy but what they are asking for is a level playing ground for every player in the auto sector and also to have more input in the implementation of the policy.“This is not a problem at all because the next step we usually take with all the policies that we have is to have an industry group to monitor and work with us in the implementation stage. So, we have set up a committee to work with us in the implementation of the policy
Not one word about consumers who are the ones going to buy the cars. After the meeting, Cosmas Maduka was quoted as saying the new policy ‘is one of the best things to happen to Nigeria’. How does he know this? We can of course take this to mean that he, a car dealer, is looking forward to making more profits on the back of this policy – in other words, the government has created a market for him that he didn’t otherwise have. Fair enough.
2. So what do we know about policy? Well, Ijeoma Nwogwugwu of ThisDay Newspapers seems to have read it, judging by her last backpage column. We know that the cut off date for the previous tariff regime was October 3rd, 2013. Previously, import duties on cars (fully built cars) ranged from 20 – 35% while duties on commercial vehicles were 10%. The new policy changes those duties to 70% for fully built cars and 30% on commercial vehicles. This is to ‘encourage’ local manufacture of these cars that we have been importing. Yep, it is that easy – doubling tariffs on cars will turn importers to manufacturers, kind of like turning water into wine.
How this is going to work is unclear, given that the costs will be paid by consumers. Will consumers protest and stop buying cars causing importers to start manufacturing locally? Will these locally manufactured or assembled cars be cheaper than the ones being imported? Why is the first thing about this policy an attack on consumers.
Ijeoma goes on:
A third and very crucial element of the policy is to guaranty consistency through legislation. Accordingly, the government is proposing that key aspects of this plan should be legislated to give comfort to investors that there will be no abrupt policy changes
Right. This part of the policy that is ‘very crucial’ has not even begun (emphasis mine). A car plant is not beans. It is incredibly expensive to set up and once it is done, the investor cant simply carry the plant if the government reneges on whatever agreements were given. The most important thing that will give investors the comfort to put their money in manufacturing capacity is still being ‘proposed’. But the hammer has been swift to come down on consumers. Who are these people?
The usual fantasy figures have been rolled out to justify the policy – 700,000 direct jobs to be created in the short to medium term and a further 210,000 indirect jobs in companies supplying the car makers with a further 490,000 jobs to be created in companies supplying raw materials to the carmakers. It is unclear how many cars are expected to be manufactured to generate this level of employment but we know that we currently import 100,000 new cars annually (400,000 second-hand ones).
Mexico, by virtue of being neighbours with the USA and a highly skilled labour force, produced 3 million vehicles in 2012:
It’s worth pointing out that Chrysler has been making cars in Mexico since at least 1959.
The Brookings Institution recently crunched the numbers for car manufacturing employment in North America as part of an automotive policy recommendation to revive carmaking in the state of Tennessee [If you want to see what a serious automotive policy looks like, since ours remains hidden, you can download it here). I have pulled out the numbers to create a serious looking chart:
If you steal it without credit, you will turn to camphor
You can see how fantastic Aganga’s numbers look compared to Mexico’s 579,000 jobs (which haven’t much changed in 13 years). You’d think we would have moved past this nonsense of throwing around figures without any backing, but the practice is still alive and well. And we have not even spoken of automation in the car industry. While not comparing Nigeria to the UK, it is worth noting that the Nissan plant in Sunderland, the largest in the country, operates 24 hours producing 500,000 cars per annum and employing a grand total of 6,500 people. It is not just expensive labour that makes automation attractive, it is that robots don’t go on strike and hardly make mistakes. This is critical in an industry where the difference between profits and losses might just be the recall of one model.
3. The other thing we know about this policy can be gleaned from the current fight going on between Stallion Motors on one hand and all the other car importers on the other hand. As usual, the devil is in the detail but we can summarise the following:
  • It would appear that Aganga made the car importers aware of the date the new policy would kick in. It also appears they had all been in discussion for a while designing the best way to shaft consumers. The implication of this advance notice is that it presented the car importers with a mouth-watering arbitrage opportunity – import cars at 35% duty and sell them to unwitting buyers at 70% duty. No brainer.
  • The policy was announced on October 2nd and was to take effect from October 3rd. So any letters of credit opened after the 3rd would attract the new 70% and 30% rates. Any letter of credit opened before October 3rd would thus be subject to the old duty until February 28, 2014. In other words, from March 2014, the gap will be closed and all cars will attract the new rates irrespective of when the LCs were opened
  • Now, the car importing cabal, Auto Manufacturers Representative Group in Nigeria (AMRGN) are claiming that the policy announcement caught them by surprise i.e. they had no way of benefiting from it. This is a good thing as it means we have a level playing field. But…
  • AMRGN are claiming that Stallion Motors must have known about the policy announcement in advance because, allegedly, it ‘rushed’ to its (five) banks to open LCs to the tune of $382m. In fact, AMRGN claims it did this ‘rushing’ on the 2nd of October as the FEC was meeting in Abuja, after which the policy was announced.
  • Normally, according to those in the industry, Stallion Motors opens LCs for around $100m in any given year. So $382m, if true, is definitely unusual and bears all the hallmarks of activity based on inside information.
  • The Vaswanis, who are behind Stallion Motors, are of course no saints and they have plenty of form in this area. Indeed, the battle between Elizade’s Chief Ade Ojo and the Vaswanis is almost as old as democracy in Nigeria. The Vaswanis have also been deported twice from Nigeria in the last decade or so.
  • The Vaswanis, by their own account, claim that they (car importers) ALL knew about the new policy coming into effect and were thus ‘free’ to take advantage of the arbitrage opportunities. The implication of this is that the Vaswanis are claiming the other guys weren’t able to raise LCs while it did and such they are #bitter not better. It does seem that Stallion Motors, by virtue of being part of Stallion Group, have the largest balance sheet of all the importers. So when it comes to raising LCs, it would have been easier for them to do compared to the other guys.
  • AMRGN are now claiming that the government will be cheated out of N134bn of revenue as a result of Stallion Motors move as cars that should have attracted 70% duty will only attract 35% etc. This is probably an exaggeration given that the new duty will kick in in 3 months time anyway regardless of when the LCs were raised. It is very doubtful that Stallion can shift 3 years worth of cars in 3 months at significantly higher prices. But there can be no doubt that Stallion will make a very tidy profit on this.

What can we make of all of this? For one thing, leaking such sensitive information to one person is a very serious offence and crime against the Nigerian people. But then, Stallion are claiming everyone knew about it and were ‘free’ to take advantage of it. Who is being taken advantage of here? It is again the Nigerian people. The tariffs will be paid by ordinary Nigerians who buy cars. So what kind of government makes suya of its citizens just so some importers can make a fast buck? Either way, it is a tragedy.

Going by quotes attributed to Aganga, who is a tool of business interests anyway, I am inclined to believe the Vaswanis version of events, that perhaps they all knew of the policy in advance:

The new policy is an adaptation of the South African Automotive Policy. Since South Africa started manufacturing cars, the industry today contributes 7 per cent to the country’s GDP, it accounts for 12 per cent of exports, and is the second largest employer of labour there.

Also, Chief Ade Ojo was one of the first persons who approached me to adopt the South African model. It was for this reason I studied what my counterpart in South Africa had done to the extent that their minister became our consultant.

As a result, when the policy was eventually approved on October 2, Chief Ojo was in my office on October 4 to intimate me of the plans he has with Toyota to set up an assembly plant.
This is what I expect the policy will do: encourage investment and catapult us to industrialisation, not accusation being hurled by importers who want the status quo to remain.

They are clearly all in it together.

But it is in the interest of consumers for them to fight each other in this way, regardless of whatever the truth may be. This is the only hope for the consumer because the more they are able to ‘cabalize’ (word hereby invented), the greater our doom.

4. A couple of years ago I met Professor Pat Utomi and our discussion shifted to his time at Volkswagen Nigeria. He said that when he saw the direction policy was heading under SAP in the Babangida days, he recommended that Volkswagen Nigeria be converted to making rubber for cars. According to him, Nigeria has/had the highest grade of rubber in the world and he had spoken to the German manufacturers to source all the door and windscreen rubbers from the plant if the plans went ahead.

This is where the infamous quote credited to him that cars should not be manufactured in Nigeria came from. In any event, the backlash to his suggestion was sufficiently great that the plan was dead on arrival. Of course, his fears proved correct – car manufacturing died in the country and we had no rubber making to at least cushion the effects.

Today Nigeria does not even manufacture car paint not to talk of any other components. And these things have only gotten more complex with time. We used to manufacture tyres in the country, not anymore. (Innoson was supposed to start manufacturing tyres in Enugu last year but I am not sure this has happened).

What has happened here is that the government has decided on an expensive policy and has decided that Nigerians are the ones going to pay for it. I don’t know why it cannot put its money where its mouth is and back such a policy with cash if it’s so important and will do all the wonderful things its threatening to achieve.

Anyway, this is what I know of this policy for now. I will update the post below if any new information is made public. Or, horror of horrors, if we actually get to see the policy document.

FF

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The Word On The Streets X: The Aganga Sidebar Edition

I hope my friends won’t stop talking whenever I am around as this edition contains quite a number of things I ‘overheard’. Or to put it better – things that were said to me without the speaker realizing it might end up on a blog. Nevertheless, ‘names and places’ have been disguised 🙂

1. This was technically my first time ever in Abuja. I have been there before sometime around 1989 but it was so long ago that I have no recollection of that trip. Now, I have never been to Washington DC so I cant really compare. Indeed, the latest US census data showed that 7 of the 10 richest counties in America in 2011 were in the Washington DC region suggesting that there is a benefit to be had, financially, from living near the seat of power (defence consultants and contractors etc).

But Abuja stunned me in terms of giving an appreciation of how big the Nigerian government. Considering that there is not much business going on there other than the business of government, it is an awesome wonder as how large the machinery of paper pushing has become. Nowhere else illustrates this better than the Central ‘Business’ District. Business? What Business? The only thing going on here is government. And if anyone was in doubt, the CBN building intimidatingly towers above everything nearby – a not so subtle reminder as to who is the boss in town. All the big buildings are govt buildings resulting in a very dull look to the architecture. Driving around town reminded me somewhat of Beijing where all the buildings – both govt and private – were outrageously large as if to send a message to visitors that China is no longer a ‘small’ country.

My takeaway from Abuja was an appreciation of the sheer scale of the task that faces anyone who wants to attempt to fundamentally change the country. Such a person will have to contend with this beast of a system that produces very little but sucks so much life out of the rest of the country. A whole army of people will have their very existence threatened by any change to this system.

I don’t want to sound defeatist but…

2. So I had been told about the fish at Abacha Barracks as well as the general ambiance of the place and as such was looking forward to it. While at dinner with a few friends, I then asked if we could head to Abacha afterwards. ‘At what time?’ was the reply from one of my friends. It was 8pm then and she then told me that since the bomb blasts there on 31st December 2010, the place now shuts at 6pm. She also mentioned a number of other places that shut by 6pm for fear of terror attacks.

In a 2004 paper, Professor Paul Krugman wrote about the costs of terrorism and broadly listed them in 3 categories – the direct costs of the damage to lives and properties, the budget cost of the govt’s response to terrorism (increased security votes etc) and thirdly, the way people respond to terrorism. Obviously this 3rd one is the subtlest and hardest to quantify but the effect is real. The Basque region in Spain for example is estimated to be 10% poorer than it would have been without the effects of the ETA’s bombing campaign.

But there is evidence that things are getting back to ‘normal’ somewhat as evidenced by my friend;

Before, if I go to that hospital 10 times a day, they will check my boot each time and under the car for bombs. But recently, when I go there the guards will just say ‘Oga abeg dey go jare.

Ah yes, anyhowness is of course a sign of ‘normality’ in Nigeria.

3. It is true that infrastructure is expensive to deliver in Nigeria for various reasons but you have to wonder at some of the choices we make and how we make things much harder for ourselves. Driving to the Abuja airport on Bill Clinton Drive, there are some large ‘compounds’ housing various govt agencies from the Immigration to Prison Services and even the Air Force. What I couldn’t help but notice was that all these massive ‘compounds’ were fenced. These fences must have cost a fortune to build and yet you have to wonder what purpose they really serve. It seems building these huge fences is just ‘something we do’ whether or not it makes any sense. Rather than build these expensive fences, perhaps when clearing the land, it should be done in a way that leaves trees and hedges to do the job of providing a fence.

Another example was on our way back to Lagos from Abeokuta via Shagamu. I was looking at the streetlights (all not working of course) and noticed they were spaced only about 50 yards apart each. This achieves no purpose other than making the deployment of streetlights more expensive than they need to be not to talk of giving thieves a lot more bulbs to steal. You could easily double the space between the streetlights and achieve the same result i.e. lighting up the road at night.

The heaven of infrastructure helps those who help themselves.

4. I was a guest speaker at the biennial conference of the Nigerian Institute of Quantity Surveyors where I (attempted) to talk about how we can go about the business of Public Private Partnerships (PPP) in infrastructure deployment. The NIQS are quite organized I have to say in terms of how they run their own affairs. The biennial conference is also when they elect new members into their executive committees and I was rather taken aback at how serious the campaigning was. The event was at the International Conference Centre and from the moment I entered the place, people were shoving flyers for various candidates in my hands…all of them promising to bring uncommon transformation to the NIQS if elected. The NIQS presidency is not directly elected, instead the Deputy President is President-in-waiting for 2 years. So the highest elected office is Deputy President along with around 5 Vice Presidents and a few other positions.

I was looking at the poster of one candidate who was seeking election as Deputy President when a lady walked over to me and we started discussing. Next thing she saw the poster in my hand and said

This person is not serious. Look at all the things they are promising. I am annoyed because a Deputy President does not have the powers to do any of these things so they are obviously lying.

A bit Ifeanyi Ubah-ish. Only a bit.

[Aganga Sidebar]

It obviously does not take much to be made a Goldman Sachs Executive Director anymore. That is the only explanation for how this incredibly stupid man came to be made a minister in Nigeria. Amazingly, the guy’s first job was to look after the nation’s finances where his latent stupidity quickly bubbled to the surface and in no time he was shunted to another ministry, presumably where competence was not a core requirement. The problem now is that in the ministry of Industry, Trade and Investment he now runs, stupidity is still expensive in a minister and very much so. If Olusegun Aganga must remain minister, then I appeal to President Goodluck Jonathan to please send him to water resources as minister of state.

Since becoming minister, his track record of repeated failures is only bettered by his remarkable ability to manufacture alternative realities and parrot his talking points – like a kid who sticks his fingers in his ears starts singing an annoying song. So for example, when he goes on about how Nigeria is attracting so much Foreign Direct Investment, he will never mention that from 2007 to 2012, FDI has declined from $8.9bn to $7bn in that period.

The man is a fool.

But what is most annoying is how he has a spine made of chocolate (although I know people who are adamant that he has no spine at all). Observe for example how he removed the ban on imported furniture in 2010. After announcing the ban, he came under pressure from the local furniture cabal and being the tool that he is, he couldn’t stand up to them. So what to do given that he had already announced the ban? The coward found refuge in the halfway house by simply not gazetting the lifting of the ban. So as at today, the removal of the ban was announced but it remains banned anyway.

This is the man’s modus operandi – he is happy to stick it to ordinary Nigerians but is a shrinking violet when face to face to with the big business lobby or any organized lobby for that matter. The man cannot organize online company registration because he cant tackle the vested interests at the Corporate Affairs Commissions who have an incentive in maintaining the status quo. As usual his solution is to keep speaking an alternate reality….calling things that be not as though they were.

But the man is cocksure in his stupidity. He announces brain-dead policies with a now familiar brio that is entirely confident in its self-contained buffoonery. He fancies himself the driver of industrial policy in Nigeria never mind that he wouldn’t know an industrial policy if it landed on his lap wearing nothing but its birthday suit.

He has now shifted his infantile policy making to cars. 70% tariffs on imported cars designed in the most punishing way possible by being backdated to October 10th. But being the tool that he is, it is interesting but not surprising that a certain car importer somehow raised an order for a large number of cars just a couple of days before the policy was announced. This disgrace of a minister is happy to stick it to ordinary Nigerians and will get into bed with big businesses to inflict maximum pain. What is even more annoying about this new regime on cars is how it will revive all kinds of corruption and activity that have been dying a slow and steady death. Fayawo cars will now become a thing again and customs officers will build new houses in record time as a result of increased bribe revenues.

This minister wants to manufacture cars in Nigeria on the back of a policy with a 100% track record of failure. Perhaps because ‘this time, it’s different’. Afterall, none of the bans have been done by the magnificent Olusegun Aganga who will bring his unique brand of policy success to this one – if it fails it is because you are looking at it wrong. In short, it cannot fail.

Is it any wonder that the only people who seem to have read this policy are car importers and selected journalists who have had nothing but praise for it? In a half serious country, how can a minister announce such a wide-reaching policy without making the policy document public? But this is not strange when it comes to Aganga. I imagine he learnt his lesson with the watery Sovereign Wealth Fund bill so this time, he probably reckons you can only criticize what you see or read. There is only one copy and it is saved on his laptop – with a password.

Fool. You will be forgotten 5 minutes after you leave government. That day cant come soon enough.

[End Sidebar]

5. I have written so much on aviation in Nigeria that I had to end my hypocrisy and actually use the industry I have been criticizing. Before I left London, I booked a one way ticket from Abuja to Lagos with Arik online. The total cost came to £114.50 and it would have cost N29k if I had chosen to book in Naira. A friend of mine has been using MedView airlines lately and has only good things to say about them. I checked online and saw a MedView ticket for the same day for N17k. That is some price difference. (I couldn’t book MedView because I don’t have a Nigerian bank card and I couldn’t find my GTBank token to make an online transfer).

It’s hard to understand why this is so – lack of competition doesn’t answer all the questions as there are at least 3 airlines flying that route. The best hint of an explanation came while I was discussing with a friend about delays to flights in Nigeria and how bad the situation is. According to him, Arik is apparently the only airline that gives its pilots complete discretion over whether or not to fly. This is apparently part of their contracts. So if an Arik pilot feels there is something wrong with the plane or the weather, he can choose not to fly and will not face any penalty from the airline’s management for it. Contrast this with stories I have heard about how Jimoh Ibrahim used to order pilots to fly or not fly when he successfully ran Air Nigeria into the ground.

My conclusion therefore is that Arik charges a premium for ‘safety’ compared to other local airlines. This is of course not explicitly stated but it is the message they are conveying with their pricing. Of course it also helps that they are in a dominant position but my flight was full to the brim which tells its own story.

6. Naturally I was completely apprehensive before boarding the flight and I can confirm that people were praying for me in at least 3 countries to land safely in Lagos. But I think I ‘get it’ now when it comes to why Nigerians put up with so much madness just to fly around the country. It is, pardon the pun, a flight to safety. Flying is the safest way to get around Nigeria. You can disagree with this but you will be making a comment on the danger that is involved in moving around Nigeria generally.

I got to the airport in Abuja a couple of hours before my flight and went to check my bag in. As I flew into Abuja from London, I had my bag with me which ended up weighing 23kg – 3kg above the limit of 20kg. ‘You have to pay for excess Sir’ said the uninterested girl at the check in desk. N1500 later and a triplicate receipt filled, I had my bag checked in. The whole experience of moving through the airport is to experience the dictionary definition of discombobulation. Check your bag in one place then proceed 3 buildings away to board and then enter a bus back to the original terminal where you checked your bag in. You have to endure the blazing Abuja sun while some guy stands in the same sun, sweating profusely, to carry out a meaningless pat down before you board the bus.

Here’s the thing – by the time the whole back and forth wahala was over, I was dying [probably not a good word to use] to get on the plane and just escape the madness on the ground. Even though we seem to thrive on confusion and making lives harder for ourselves than they should be, people still realize the need for some relative peace and quiet now and again. The flight was perhaps the most peaceful time I spent in Nigeria. I even brought out my book to read albeit very briefly.

We need to make things better but we absolutely have to make sure that things don’t get worse than they currently are.

7. My friend took me to the airport from Lekki which took us around 20 minutes. Around 400 metres to the airport, we got into traffic and spent around 40 minutes there. As soon as we entered the traffic he rang his wife and told her he would be home in 20 minutes after dropping me off, clearly underestimating the traffic. After about 15 minutes in the traffic he said ‘I have concluded that Nigeria is bad for marriages…and not just on the fidelity side of things. Things like these just steal valuable time away from your marriage‘.

The queue to clear security was incredible. And don’t be silly, of course the air conditioners were not working. People, including yours truly, were drenched in sweat shuffling through the queue. I then noticed that the single fan in that area was trained exclusively on the Customs officer sitting at a desk doing one of those ‘bullshit jobs‘. I was enraged. So I went to the fan and turned it around to face the crowd. The customs officer, alarmed at her sudden loss of privilege, began to rant about me being careful and not damaging the fan as I turned it. I told her it was unfair for her to enjoy the fan alone which surely was put there for the benefit of passengers. She halfheartedly said something about passengers not damaging airport equipment and faced her front. I kept looking back till I crossed the scanners and the fan remained in the position I left it.

Sometimes, maybe things are just the way they are because a chancer is relying on people’s stoicism to get away with nonsense.

So why is there so much misinformation about what is going on at the airport? 2 years ago I wrote (click through to the spreadsheet) about revenues and expenses at our airports as well as passenger numbers. In 2010, we had less than 2.5 million passengers pass through MMIA. Given the way passenger numbers are counted – each trip is a passenger – it is possible that no more than 500,000 different people pass through the airports. This makes it easy to spread misinformation about what is actually going on there. There is absolutely no doubt that the place is getting worse. But if the vast majority of Nigerians don’t use the airport, you can get away with half-truths in the media. What about the ‘new’ terminal being built there? My best guess is that an old disused terminal is being refurbished. Perhaps things will change when this is done but why is the air conditioning that was working in May (when I last visited) no longer working? There was no such traffic the last time I was leaving Nigeria. Is it that we can’t handle 4 flights leaving the country in one night? Why are the roofs leaking everywhere around the departure gates? I counted 3 ‘containers’ collecting (and missing) the water that was leaking from the roof. This was not the case in May when I passed through.

I did not think it was possible for an airport like MMIA to get worse but anything is possible in Nigeria.

8. I was with a friend of mine in Lagos and we were discussing education. He’s recently moved his family to join him in Nigeria so I asked if they had found a school for their young child. Here’s what he said

We found one really good school and we have registered for the 2015 intake. When we even went there, they told us that their policy is to reserve 40% of their spaces for children of expatriates so nothing is guaranteed for us. Me I was even trying to tell her that our child is a British citizen but she said it’s not like that one that all the children in the school even have British or American passports so nothing special about our own child.

Me: [Laughing] So expat has to be oyinbo?

Him: You are getting it

9. I hung out with some friends of mine to discuss Nigeria. There were 2 bankers and one other guy who works in finance but thoroughly enjoys yabbing Nigerian bankers. An entertaining spot of banker bashing ensued as follows;

Nigerian banks are insane. What Afren is enjoying today should have been done by a Nigerian bank. They simply funded the development of the Indimi oil well [Mohammed Indimi’s Ebok oil field  OML 67 which produces 35,000 bpd] which Nigerian banks refused to fund. Or look at Arik – Nigerian banks are not allowed to lend to foreign companies so they lent money to Arik Nigeria. Arik Nigeria then set up an SPV offshore and lent the money to that SPV. That SPV then purchased all the airline’s airplanes. So in effect, Nigerian banks cant foreclose on Arik by seizing its planes as the planes are not even registered in Nigeria.

It was the same thing with HiTV. GTBank lent money to the local company who then lent the money to an offshore subsidiary which bid for the football rights it won.

Me: How much was GTBank’s exposure to HiTV again?

Banker Basher: Around N7bn. I mean, they didn’t even know how much HiTV was bidding for the rights.

Me: But surely they knew this? Why did they go ahead with the deal knowing the money was going to be lent to foreign subsidiaries?

Banker Basher: [Shrugs] Because they are insane.

The conversation moved on to manufacturing in Nigeria, how difficult doing business in Nigeria is and how no one really wants to do the hard work of building out the toughest bits of the value/supply chain. We were talking about rice and how the ban/tariff on rice has not only been a failure but was done too early. Here was my banker friend’s contribution;

I was talking to one guy who owns a big rice mill. The guy built the plant and then couldn’t find rice paddy to mill. The guy said he would enter his 4 wheel drive and start driving around rice farms looking for paddy. When he saw one farm with paddy, he got out of his car and wanted to call his accountant to discuss how much he should pay for the paddy. He checked his phone and there was no signal. So next time he went paddy hunting, he carried the accountant with him.

Banker Basher: This is where Aliko is different with his tomato business. He has already started planting the tomatoes now, 2 years before the plant is ready. Tomato grows quickly so the plan is to make all the mistakes in planting techniques now so that by the time the plant is ready, the flow of tomatoes will be pretty much guaranteed.

Hate to belabor the point, but this is why Aganga is such a fool. In Abeokuta, we were talking to a publisher who then told us that it is cheaper to import a tonne of books than to import a tonne of paper. Evidently, there was once a ban/tariff on imported paper at some point to ‘protect’ the local paper industry which is now dead. But alas, the ban remains in place obviously to someone’s benefit. The world has now moved on with the way the Chinese are able to print books for next to nothing. So the ban that was meant to protect paper manufacturers is now actively harming book publishing in the country. The same publisher went on;

We published 50,000 copies of this book [name and author withheld] in Dubai because that was a cost-effective quantity to sell based on our projections.

Me: How many did you sell?

Publisher: 27,000.

Me: What happened?

Publisher: The book got removed from the WAEC syllabus o. So that took away the student market. Apparently those people wey dey review the books for WAEC dey collect bribe. If say I know, I for even give them the money wey dem dey find make dem no disturb me. Na later dem dey tell me say when you give them the book make dem review, you go put N20k inside envelope inside the book make dem approve am.

Me: So when can you get the book on the syllabus again?

Publisher: We have to wait 4 years again. That’s how the system works.

Open one rot in Nigeria and you find more rot. Forget the fact that they are even denying book approvals for not paying bribes [the book in question is a very good one], what kind of books can get approved just by paying a bribe?

10. This business of social-climbing in Nigeria is a serious something. It’s amazing how people now take being seen on Instagram or Linda Ikeji and such like…hanging out with the right crowd and things. The delectable Tiwa Savage got married last Saturday and of course the wedding was the celebrity hotspot that day. Here’s my friend;

You wont believe that people were offering N70k to buy the aso-ebi off other people. Obviously not everyone who wanted to attend the wedding had the aso-ebi so a market in trading the thing formed

I don’t know how much the official price was for the aso-ebi but I imagine N70k contains a premium on the original price. Let’s call this the Instagram premium.

11. One of the most interesting parts of Nasir El-Rufai’s ‘Accidental Public Servant’ was when he talked about the dramatic change in lifestyle that happens once you are out of government in Nigeria. So for example he spoke about how as a Minister you could receive 200 calls a day and then the day after you are turfed out of office you’d be lucky to get 2 phone calls, to say nothing of the precipitous drop in the number of rams you receive as Sallah gifts. The system is brutal which explains why many will do whatever they can to remain in office at all costs.

Speaking to a friend of mine who works in government, he confirmed the above with an example;

You know say I dey Abuja dat time when dem sack Barth Nnaji. You no go believe say him escort no follow am reach house dat day.

Me: Eh?

I dey tell you. Obviously e fit be beef so as soon as dem announce say dem don sack the guy, somebody just withdraw him escort immediately. In fact, my guy dey tell me say the day wey dem sack Borishade [former aviation minister] the guy land for airport hear say dem don sack am. The guy get to call one level 10 civil servant make e come pick am from airport. Dem don withdraw him driver immediately.

Wonderful

12. Staying with government – one of the most common phrases you hear in Nigeria is ‘I am loyal’. People are always pledging their loyalty for as long as the person receiving the pledges remains in a position to dispense favour to them or in power. Naturally, Nigerians being Nigerians, there is a physical manifestation to all this loyalty pledging. In other words, loyalty must not just be pledged, it must be seen to be pledged.

Here’s another friend who works in government explaining this phenomenon

Loyalty is everything in government o. It is absolutely everything. For example if I go to an event and my Minister is there, it is an opportunity to show him loyalty. So when he is leaving, all of us, we can be like 30, will stand up and make sure we follow him as he exits the hall. He wont even look at us or acknowledge us but don’t be fooled into thinking they don’t want you to do it. We will follow him to his car and wait for him to enter. When he goes, he wont even wave to us or anything.

Me: So in short, you don’t want to be the person who doesn’t get up to escort him out of the hall?

Exactly. In fact, when you get to the event and you see your Oga, you can just go and stand near his table just so he knows you are there.

The physical manifestation of loyalty…you’d never know it was such a fickle thing.

13. Got into a chat with a lovely lady from Plateau state who doubles as a journalist and I got a bit of an understanding as to how political religion is in that state. Jonah Jang is apparently a minister in one church and a Pastor in another. This is to maximize the people’s exposure to his teachings I imagine. I am told his church (the name escapes my mind now) recently built a new church on like 7 floors. The first floor houses the church auditorium while the next floor holds the offices. Interestingly, the rest of the floors are apparently a hotel.

We got talking about the religious crisis in Plateau and her take was that the poverty that has been unleashed by the crisis has helped to concentrate minds.

There’s one suya seller near my village who used to sell a couple of cows in a day before the whole crisis. Now the guy cannot sell one cow thigh for love or money. He’s a Muslim married to a Christian. Left to him, no one will fight even for one day.

In my daily newspaper review (you can subscribe here), I have been astounded at how regular stories of pedophilia are in our newspapers. I have taken to tagging these stories as ‘News from Depravity Central’ but my biggest fear has always been that based on what is being reported, I shudder to think about what is going on unreported. Hear her –

My biggest issue in Plateau state now is not even the religious crisis. It is pedophilia. Because parents have to send their kids hawking to earn something, especially young girls, they are so exposed to these animals. Almost all the little children we have come across have been sexually assaulted. It is so rampant. The perpetrators started with riding motorcycles and when that was banned, they moved to religious fighting and now that the Task Force has curbed them, it is the same people raping little girls all over the place.

And yet this is not an impossible problem to begin to solve. Evidently, the people who send their kids out hawking don’t make a lot of money from it. Otherwise they would stop doing it after a while. The money earned is to keep body and soul together. This is one of the main problems that Brazil’s Bolsa Familia set out to solve. Parents were simply paid to send their kids to school instead of out working and exposing them to danger. Indeed, there are anecdotal stories about how parents would check their bank account on Fridays and not finding any money there, immediately know their child had been dodging school (the payments were tied to attendance), and if they are anything like Nigerian parents, administer the beating of their life on the kids. A beating for not attending school.

We can solve these problems. Because I cannot begin to contemplate what the future holds for a country when so many women who have been abused and had their innocence stolen at such a tender age reach maturity.

14. There is so much pent-up demand everywhere in Nigeria. To the extent that meeting this demand will surprise even the supplier in a lot of cases. 2 things I ‘overheard’ –

That Ebeano [Ebeano Supermarket in Lekki Phase 1] guy took a N250m loan for that his supermarket and paid it down within a year.

And

The Film House guy was telling me that when they opened in Ibadan, there was a queue for people to enter. He said people were begging them to please show one more film when they wanted to close that day. And they were willing to pay.

You are not allowed to make any jokes about Ibadan people. Stick with the issues – how do we ensure that our economy continually matches demand with supply?

15. Finally, I was fortunate to attend 3 different meetings with people from the Lagos tech scene. The first one was at a bank where tech people on one side and bankers on the other side discussed how to make it simpler to take payments online. You’d think something like this was a no brainer but alas, nothing is ever so straightforward in Nigeria. A combination of government legislation and low trust makes things a lot harder than they should be. What depressed me the most was how much of the conversation was dedicated to and driven by fraud. I don’t know if financial fraud in Nigeria is the highest level in the world but I am almost certain that the perception of fraud in Nigeria is the highest in the world. Even when a company suffers say, 2 incidents of fraud in 100, this 2% rate will drive everything else with the effect of making things harder for everyone else. Nigerians don’t trust Nigerians.

After discussing all the various problems and possible solutions – punctuated by lots of pizza and the life-giving drink that is Five Alive’s Pineapple Punch – we seemed not to have made much headway. So I told the bankers in the room that the danger in not finding a working solution is that Nigerian companies start going abroad to find solutions and the market is lost forever. One of the entrepreneurs interjected;

Oh we are already doing that. I use a company in Europe to collect our payments. Their charges are high but because we sell digital goods, we can deal with it. They do absolutely everything for us and there is no stress at all.

The second event was a session with Tayo Oviosu of Paga in which he discussed, as frankly as possible, everything about his business. We also got to ask him plenty of questions. The realisation from this event was that the competition for funding for tech businesses is coming from areas like real estate which offer the kind of crazy returns that make long-term investing in tech solutions a very long thing. The one thing that cant be taken away from Tayo is that he lives and breathes Paga and obviously works really hard at growing his business in very difficult circumstances.

The final event was to discuss founders and how to work with partners to build businesses. The thing I quickly realised about these gatherings are that they are very sane environments for discussions. People don’t shout to get their points across and there are definitely smart people on the scene. The trouble is that Nigeria is not very sane so there’s the possibility that solutions discussed in the tech scene don’t ‘connect’ with the real economy. The good thing about the event with Tayo Oviosu was that it had quite a few non tech people in the audience who brought a useful perspective to the discussions.

But I am hopeful. If problems and solutions are being discussed in a frank and open manner like this, there is less chance of people coming up with rash solutions that turn out to be not so smart long after they have been implemented.

16. I know I said the previous was the final point but I have to say this. It’s something I have written about previously but the poor quality of workmanship in Nigeria continues to shock me. Recently I moved house here in the UK and I decided to paint my son’s room. I used two different colors so I had issues with smudges around a few edges where the 2 different colors met. I was so annoyed with these smudges that I hired a painter to do the rest of the house.

Judging by some of the stuff I saw, if I were to move to Nigeria as a painter today, I would be able to charge a high premium for my ‘skills’. It is shocking to say the least. And it’s not just painting, it’s everything. Workmen are terrible. I stayed in a hotel and I was dazed by what passed for painting around the door to the bathroom. Throwing a bucket of paint at the wall would have achieved the same result.

A friend hired a guy to fix an air-conditioner in one of his rooms. He left the guy to do the work and went to work. When he returned, he found the AC installed but bizarrely, the guy installed the switch on the wall sideways. Of course when you ask why he did such a patently crazy thing, he will tell you ‘is it not working like that?’. One morning I found the hot water in my bathroom wasn’t running. So I rang reception and they immediately sent some guy to come look at it. He checked it and left telling me he’d be back shortly. Next thing the dude showed up with a bucket of hot water and I should ‘manage it for now’. I was livid and told him to get lost with the bucket. He ran away with the bucket as soon as he came and in less than 5 minutes, an electrician turned up and fixed the problem.

I am still wondering why they thought to try their luck with a bucket of hot water at first because the problem was fixed in less than 30 minutes and the electrician was either on the premises or somewhere very close by. I still have no answer to this question.

Nevertheless I remain loyal

FF