Mortgage Sturves: A Conversation

Lepa, how far?

I’ve actually put on some weight…

Abeg no kill me with laugh. Anyway, I dey watch the launch of one mortgage sturves for TV yesterday. E be like say na serious thing because everybody for government dey there. 

Yes, it was the launch of the Nigeria Mortgage Refinance Company (NMRC). It’s quite a big deal because it can be a truly er, transformative policy of the Jonathan administration and for future governments.

E be like say anytime wey I come here, for your mind you believe say I no get work. Abeg groove dey tonight so talk quick quick, wetin be the koko of this thing? And how person fit take align? 

Well, the problem is a straightforward one – Nigerians need lots and lots of affordable houses (estimated at 17 million units) but currently there just isn’t any way for them to buy houses other than buying land and building the houses outright. In most advanced countries, you buy a house with a mortgage and spread the payments out over 20 to 30 years. So what you would normally pay as rent will go towards owning your own house.

But in Nigeria, it is estimated that there have been less than 100,000 mortgage transactions since 1960 because it is simply too difficult to get one for many reasons including land laws, identification problems and general economic stability. However the biggest problem with mortgages in Nigeria is that there is no long-term money i.e unless you are the government, it is difficult to find anyone to lend you money for the 20 – 30 years that is required for a typical mortgage. This is the specific problem that the NMRC is planning to solve.

But sebi we don get Federal Mortgage Bank from time? How this NMRC own take be? Na another office wey we go dey go queue dey beg people make dem give us loan? 

No, this is going to work differently. For starters, the government is only going to own a maximum of 20% of the NMRC so its going to be predominantly owned and managed by the private sector.

That one na bank na? Abi wetin government own go be if na private people get am?

The difference is that government is providing a guarantee to the NMRC. So even though it is not owned by government, private investors can be confident that if anything or everything goes wrong, the government will step in to keep the show on the road. The effect of this is that the investors can confidently invest in a lower risk and long-term vehicle for the sole purpose of increasing the number of mortgages and houses in Nigeria.

You dey talk, I dey hear but I still never understand…

The best way to think of this is to imagine a market where the product being sold is mortgages. All the banks in Nigeria are currently retailers which means they sell the mortgages they have and when they run out of ‘stock’ they cant sell anymore. The NMRC is however going to enter the market as a wholesaler. So it will sell wholesale mortgages to the banks who will then sell them to you the homeowner.

So I no go need to go their office go collect my mortgage?

No, in theory you will continue to apply for mortgages the same way you do now but where a bank would normally reject you for a mortgage and charge you something like 24%, they should now be more willing to lend you money and at cheaper rates.

Hmmm… Naija banks sha. My sister husband collect mortgage last year. Dem don write am letter to increase the monthly payment 3 times since dem sign the agreement. On top say dem force the guy make e transfer him salary account to them. Me I don tell dem say dem never collect mortgage sha. This one wey dem dey do na slavery

Yes, things are quite difficult at the moment and anyone who has taken a mortgage in recent times is a real hero. But the reason why they are increasing your sister’s mortgage everytime is because the bank funded the mortgage with short-term loans which means that everytime the bank has to refinance the original amount and costs increase, they have to pass it on to your sister.

The NMRC will solve this problem by making long-term money available to the banks to lend to the public as mortgages. First of all, the World Bank has given the government a $275m loan at zero percent interest for 40 years. Then it is also raising N6bn in equity from private investors. This is before it goes to the bond markets to raise around N50bn at roughly 12% interest. You can already see that when you combine these various sources of funding, the interest rates on mortgages in Nigeria will come down significantly from the current 18-24% range.

Like how much you feel say the interest go come be? If my sister husband hear this one, the guy fit give my sister belle on top excitement. The guy mortgage dey wear am like shirt as we dey talk

It’s hard to tell but I think we can safely guess that rates will be lower than 15% at the very most.

So you talk say NMRC go be wholesaler. How dat one go take operate?

Like I said earlier, the banks will continue to write mortgages in the normal way. So this means they will verify your identity and income and everything else to determine you are credit worthy. Then let’s say you find a house you want to buy for N10m and you have N2m of your own money to put down as a deposit, the bank will lend you N8m for say 20 years at 14% interest.

The NMRC then steps in after this – the bank will be able to sell 85% of that loan i.e. N6.8m to the NMRC. What this means is that rather than the bank waiting 20 years for you to repay the loan, they then have that N6.8m to lend to someone else almost immediately. You will continue to make your monthly payments as normal but the bank will now pass your payments on to the NMRC who now own your loan.

Taking the analogy further, previously if the bank had N50m to lend to 5 home buyers at N10m each, in theory it would have exhausted its funds. But now it will have a further N43m (85% of N50m) to lend to another 4 borrowers and then another N37m to say another 4 people. And so on…you get the gist. So as long as the bank is able to write the mortgage, the NMRC will be able to buy it from them and increase liquidity in the market. So that original N50m might fund mortgages for 20 people instead of the previous 5 people. This is a very simple assumption but in theory this is how it will work.

Going back to your sister’s husband, the fact that NMRC can borrow long term will mean that hopefully, their mortgage payments will stop increasing and changing randomly. Now you may be able to have constant predictable payments for 2 or 5 years even.

Hmmm….so mortgage go plenty pass as e dey now. E come remain the house wey people go buy…

Yes, that’s the other side of the equation. The government is betting that by increasing the demand side i.e. making mortgages more available, the supply of houses will increase to meet the demand. So when developers know that they will be able to sell their completed houses within say 6 months, they will be able to get loans from the banks (who also know what the demand for mortgages is) to fund the development of houses.

But how dem wan take do all our land wahala for Nigeria? Because na Governors get all the power when we dey talk land matter

That’s a good question. I think the government has adopted a pragmatic solution

Wetin be pragmatic?

There’s no way the government can get a land reform bill passed anytime soon and this is critical to ensuring that houses are built for the mortgages to come. So what they have done is to start the programme with 14 pilot states where the governors have agreed to cooperate with the housebuilding objective by fast tracking things like CofO and all the documentation required for building a house.

I guess the government is hoping that if the programme is successful in those 14 states with a lot of houses being built (and creating jobs), it wont have to beg the remaining 22 state governors before they also make similar agreements. So we might get some kind of quasi land reform without actually doing the hard work of changing the law. This is of course assuming that mortgages become popular in Nigeria.

So where Nigeria get this kind idea from?

It’s loosely modelled after America’s Federal National Mortgage Association better known as Fannie Mae

Haaaaa…. I don hear that name before o. No be dem put fire for America economy for that 2007 abi na 2008 wahala?

Yes a lot of the problems from the Great Recession started at Fannie Mae because it turned out that a lot of the mortgages they were buying from the banks and mortgage lenders were bad i.e. the people who owned the properties were not properly checked to ensure credit worthiness so they started defaulting on their loans and Fannie Mae got into trouble.

So that kind yawa don sure for Nigeria? When the thing go start make I know as I go take arrange myself?

One of the things that caused the problems in America was that banks had an incentive to write so many mortgages since Fannie Mae (and Freddie Mac) would buy them off them anyway. This led to a kind of frenzy where everyone was going crazy and building so many houses beyond even what was really needed.

In Nigeria’s case, we are so far behind in terms of housing and mortgages that it’s going to take a while for us to get to that kind of point where the market completely crashes and takes down the economy with it. Having said that, this is not an excuse for complacency; real estate crashes are very common as a root cause of many economic crashes. Our fellow MINT country, Indonesia for example, suffered a devastating economic crisis in 1997 that started when banks started to make crazy real estate loans. By the time the economy exploded, 15 million people lost their jobs and the economy shrank by 20%. 50 banks were closed with a further 38 being nationalised. In fact, it was only in 2005 that the Indonesian economy managed to reach the GDP level it was in 1996 after it had to be bailed out with $23bn from the IMF. There is something about real estate in an economy that makes it prone to overheating and general misbehaviour by a lot of people.

We will have to make sure that banks and mortgage lenders are doing their jobs properly i.e. ensuring that they take account of lending risks properly before passing on the mortgages to NMRC. We will also have to ensure that the money is actually used for mortgages because some people might be tempted to pull a fast one with the cheap money and divert it to something else. Also, we will need to make sure housebuilding is not concentrated in the ‘luxury’ end while ignoring the affordable side of the equation needed to house as many people as possible.

O boy! You sure say this thing worth am so? I dey alright like this o and I no dey sleep outside. Make we just dey manage ourselves dey go…

Housing is a problem worth solving. For one, it will create a lot of jobs. It also lets people have a stake in the economy which has a way of reducing crime. When people own their own homes, they tend to look after their neighbourhood a bit better. So it can help to solve some social problems that are currently plaguing us.

Another thing is that it should help with better planned communities. If people start buying houses with mortgages, it should reduce the practice where people just buy land somewhere and build their house. Instead we will hopefully have houses built in communities where the basic infrastructure has been taken care of. Afterall who wants to go through the stress of supervising a house building project to make sure the builders are not stealing your cement? You simply go and look at a completed house and if you like it, you arrange a mortgage to buy it.

Your mouth dey sweet gan. But you never talk the problems wey this thing go face for Nigeria because I know say our specialty na to spoil something

I am worried that we don’t have the skilled labour to roll out mass housing in Nigeria so we might have to import people from China and Togo. This is already happening. Housing policy is also a very complicated thing that there are so many things that could go wrong. For example there is a Foreclosure Laws Bill that has been gathering dust in the NASS for a while now. Right now, it can take more than a year for a bank or mortgage lender to be able to take back a property when a borrower doesnt pay. This bill is supposed to simplify the process and make it easier but it is yet to be passed. When someone doesnt repay their mortgage, they are effectively denying someone else the chance to get a mortgage.

There is also the question of costs. A 3 bedroom house is estimated to cost $50,000 to build in Nigeria while the same thing costs $26,000 in India.

But Aliko na dem friend na. Make dem tell am make e reduce the price of cement. E no get where dem dey meet?

Yes, Nigerian cement is very very expensive which contributes to the problem. But Dangote and other cement producers will make a lot of money if housebuilding really takes off in Nigeria. So prices will have to come down through competition or something.

But my mind dey tell me say Naija land use wahala go make this thing hard pass how e suppose be

Yes, it’s going to be tricky. Under Nigerian law, all land since 1978 belongs to the government. An individual can only have right of use or occupancy. This raises an interesting scenario where after paying the mortgage, you own the house but you technically don’t own the land on which it sits. So in theory, one day government can come and tell you to carry your house away from its land.

So there are a lot of issues to be dealt with but as I have often heard you say, at all at all na him bad pass so maybe we need to start this so that the problems can manifest themselves and we deal with them. It’s worth noting that the government is not doing this alone – people like the World Bank, IFC and DFID are involved and providing a lot of technical support so fingers crossed we should have some kind of progress.

Time don dey go but e get one last question wey I wan ask and e dey very important. How this NMRC go take arrange Omo Onile boys make dem no scatter this policy?

That’s a good question. Let me get back to you on that one.




Auto Policy: So I Spoke To Aganga…

I got a message a couple of days from someone who’s worked with Olusegun Aganga in the past. He said he had read my blog posts on the auto policy and wanted to put me in touch with the Minister so I could hear his own side of the story.

Long story short – the Minister rang and we spoke for exactly 1 hour 3 minutes. If he’s ready my previous blog posts abusing him, he certainly didn’t show it. He was polite and answered all the questions I asked him. I expected a much more arrogant person but the person I spoke to sounded somewhat chastened or tired even.

I took notes so here goes.


I asked why the policy document itself had not been released and he said the ‘implementation document’ will be released by the end of January. This confused me a bit – It appears that he submitted his plans to the FEC without knowing when they would be approved. In any case, they are working on a document to bring together the ‘7 points’ of the policy and how they will be implemented. So we will keep an eye out for that.


This was probably the most interesting part of the conversation. He said that any manufacturer or dealer or whatever that is on ‘the programme’ will pay tariffs at 35% not 70%. I asked him to explain ‘the programme’ and he wasn’t quite clear on this, but I took this to mean they have signed up to the policy in one way or the other. According to him, the 70% tariff is a disincentive to encourage people to do some kind of assembly in Nigeria. According to him, those on ‘the programme’ who take advantage of all the incentives can actually end up paying 20%, less than they currently pay.

He said for every SKD (Semi Knocked Down) car assembled in Nigeria, the manufacturer will be allowed to bring in 2 FBUs (Fully Built Units) at 35%. Long story short, this policy will not increase prices according to him. In fact it might reduce prices.

This is all fun and games of course as there is plenty of money to be made from ignorance and misinformation in Nigeria. I told him I had heard some dealers already putting up prices and he said the National Automotive Council (part of his ministry) have a team that is monitoring prices weekly. It’s unclear what powers they have if they find dealers taking Nigerians for a ride but he said someone already tried it and Stallion Motors quickly released more cars into the market at the normal prices. According to him, Stallion were able to sell 1,500 cars by undercutting their competitors greed who then had to drop their prices.

The obvious problem here is therefore Tokunbo cars (and luxury cars which wont be assembled or manufactured in Nigeria). There is nothing for them in the policy so the full 70% tariff will hit such cars. Given that this is where the market currently is in Nigeria, people are going to feel the pain indeed. It might end up closing the gap between new and used cars to the point where people feel it’s better to simply go for new cars but then this doesn’t make cars any more affordable.

I am not allowed to disclose a particular change to the policy that will be announced next week but look out for it.


A Vanguard journalist mentioned to me a couple of weeks ago that the Minister had mentioned to them that there will be a ‘finance package’ in the policy. So I asked about this. He said that NAC, the OEMs and banks have been working together on some car loan schemes. He said that Rand Merchant Bank currently finances 1 in 3 cars bought in South Africa and they have said signed up to the policy and will be announcing some car loan schemes soon.


We got talking about Innoson and he mentioned that he currently uses an Innoson Jeep – the IVM G5 which he said costs N4m-N5m. According to him ‘when you enter it, you will know you are in a Nigerian car but it is our own’. He listed various problems with the car and also mentioned that the car was given to him by Governor Peter Obi who bought a few of the Jeeps when it was released in September 2013 to distribute to royal fathers in Anambra. This was in response to my question on using export discipline to get the cars to be improved quickly. He said all their complaints have been sent to Innoson who will be releasing the next model of the Jeep in the first half of this year and he hopes those problems will be fixed.

He said Innoson is currently at 40% local content in its vehicles and employs 7,000 people of which 4,500 of those work in its plastics business. He said that since cars are mainly made with plastic these days he reckons Nigeria can get round the fact we don’t currently have a steel industry (although he later mentioned part of the policy is to make iron ore more accessible to those who want to turn it into steel).

Question: South Korea or Mexico? Answer: South Africa

I asked what the vision of this policy is i.e. what do we want to become? I spoke about how Mexico manufactures over 3 million cars annually (even though there is no ‘Mexican car’) but exports more than 80% of them creating 500k jobs. I then mentioned how South Korea grew its car industry and we now have Hyundai and Kia. So do we want a Made in Nigeria car and be South Korea or do we want to be a manufacturing hub to create jobs and be Mexico. He said we can be both.

He kept going back to the South African industry for his examples which reflects the fact that most of this policy has been based on the South African market and input from the former South African minister for transport. He said his target market is the ECOWAS region of 300million people of which half is of course Nigeria hence why he thinks we can do both.

‘Look at Dangote. When we first started it was simply to address the local market, now we are at 28 million metric tonnes per annum which is more than local demand so we can export. I believe we can replicate this with sugar and cars’ he said.

FRSC and Customs

To tackle smuggling, he said that FRSC and Customs are currently working together on a computerised system of some sorts. According to him, before a car is registered, FRSC will be able to check immediately with Customs if the correct amount of duty was paid on the car. If the correct duty wasn’t paid, then FRSC wont register it. Presumably this will mean that any car smuggled in through Benin Republic and other such places wont be registered.

I asked when this system will be up and running and he said ‘soon’.

The Carmakers Are Coming

‘You know when we go to the FEC, you never know if your proposal is going to be approved that day or not. So when my policy got approved on October 2nd, I called the Nissan Chairman that same night to tell him. One week later on the 9th, they made their announcement that they were going to start car assembly in Nigeria’.

He went on to say that Toyota have said they will get back to him in March while Hyundai and Volkswagen are also coming based on this policy. Also TATA are coming to continue their partnership with Stallion motors for the assembly of trucks. He however said that the Japanese have requested him to put legislation in place

Ministry Funding

So I asked how all of these plans were going to be funded given that there is a big role for the government to play and his whole ministry only gets N15bn (N13bn recurrent) in the annual budget. He said ‘we have no money but the good thing is that our work in my ministry requires more brain than money because our job is to design policies’.

He mentioned how the US and Japanese embassies have committed to funding the construction of some of the auto parks they are looking to build across the country. He said NAC is funded by some levies so to an extent they are independent. His ministry has 17 agencies under it and everyone just fights for their survival basically. He mentioned that being a former Finance Minister gave him an understanding of how tight money is across the board so it is what it is basically.

CBN Governorship

I asked to try my luck with one last question and told him I have heard President Jonathan is going to name him as the new CBN Governor. He gave the boilerplate answer of how he is focused on his job and doesn’t concern himself with such things. I tried again by asking what will happen to all his policies if he gets moved to the CBN especially as he hasn’t legislated any of them. Same response. Finally I told him that surely if President Jonathan asks him to go to the CBN he couldn’t possibly say no. Same response.

National Industrial Revolution Plan (NIRP)

He kept mentioning the NIRP and I told him I have actually been looking for the document but I couldn’t find it anywhere. He said the document wasnt ready yet but he had started implementing it. According to him President Jonathan will be launching the document later this month. He said he has been working on it for a year and also implementing it in that time.

And The Rest

He talked about how Stallion couldn’t have imported 3 years worth of cars given that they have signed a deal to start assembling cars in Nigeria soon. He spoke about how everyone was carried along from the beginning of the policy design in 2011 and how it is expected that people will make noise now that their business model is about to change. Spoke about how the vested interests against the policy are well-funded and connected but he expects all the noise to die down soon.

On two different occasions he said ‘I don’t want consumers to suffer’ and ‘consumers must not suffer’. He also said he wants to be able to sleep at night after making policy. He also spoke about the different aspects of the policy from boosting skills to manufacturing parts and international standard accreditation for anything we make. The policy is also about tyres and he restated the well-worn line about how Nigeria’s rubber is the highest quality in the world so we should be making tyres and international tyre manufacturers have indicated their interest in coming to set up in Nigeria.


These are not my views. I have tried as much as possible to restate the Minister’s position as best as I heard and wrote them down. I think I have written about 4 times on this auto policy already and that is more than enough.

I am hoping you read between the lines of the above and come to your own conclusions.



It’s no news of course that Nigeria is a messy and difficult place to do business,nevertheless fortune will always favour the brave with spectacular rewards. So I am going to be doing some posts on ways to ‘hack’ some specific problems in Nigeria, with a technology bias int he solutions.

Personally, I think ideas are worth around 2 pence without execution. So if you think you can execute these ideas and you need someone to bounce ideas off, I am happy to do that for small equity 🙂


The first problem is something I saw in the papers a few days ago. Let me quote the relevant bits:

Mallam Idris Abdulrahman, who intended to travel to Kano, told NAN that sale of tickets on the day of the travel caused delays and put much pressure on commuters. He said that the delay at Ido would negatively affect the take off time at the other train stations such as Agege, Lagos and Ijoko in Ogun.

“Booking will enable the management to properly plan for us,” he said. Abdulrahman told NAN that many passengers had lost their valuables or got injured while rushing to buy tickets. Madam Alimotu Onigbanjo, who was waiting for a train to Ilorin, appealed to the corporation to introduce advance reservation without delay.

“The NRC management knows how things obtain in the advanced world; why can’t we adopt the same system here? “That is why you hardly see the elite joining train’’ Onigbanjo said. A student, Mr Sunday Okoroafor, who was to travel to Kano to resume studies, said that the NRC should begin online booking.

“The world is advancing daily; advance ticketing will remove stress from both passengers and the corporation’s workers,’’ Okoroafor said.

A lot of noise has been made by the present administration about train services coming back to life. Right now though, the thing is still an unholy mess and it’s causing passengers to desert the service as reported by The Vanguard recently (although freight services are still going strong).

There’s a straightforward problem to be solved here – simply organise the chaos in a way that makes it possible for commuters to get their tickets without too much stress. Indeed, touts, who have to live by their wits, are already taking advantage of this mess (by creating even more confusion for a profit) as reported by the same Vanguard a year ago:

As a result of the huge crowd, the ticket queue stretched past the ticketing office and those who could not wait or struggle in the line had to patronise the touts, paying additional N50 or N100 on the original cost to get a ticket for the ride.

Investigations revealed that the Lagos to Kano ticket that cost N1,950 became N2,000 in the hands of the touts who had smooth access to the ticketing office. The touts did not have to get into the ticket line

We already have Bus and Oya catering to the long distance bus travel market. Railway doesn’t look like fun now but I imagine it can’t get much worse (well, this is Nigeria) so given how bad things are and the pent-up demand for safe long distance travel, if the services improve even marginally, demand will also increase by several factors.

I reckon there are two ways this problem can be solved

a) If you are well-funded, simply buy up the tickets wherever you can find them – even if it’s from touts and keep them as ‘inventory’ on your platform/app/website/whatever. You probably won’t make any money initially (or you might) but once you start building up repeat customers and being known as a reliable outlet for tickets, things can get really interesting.

b) Simply walk up to NRC and make them a better offer than whatever it is the touts are offering them to shift the tickets. You can offer payment upfront as well as I am sure the touts are not so inefficient to the point of keeping much working capital.

The final piece of the jigsaw puzzle will be to figure out the most efficient way to get the tickets to customers painlessly as possible. For example, people might buy the tickets in advance from your website and then you have a guy in uniform in an office near the station where they can go and present a text message or whatever and pick up their tickets avoiding the chaos at the station itself.

That’s it.


This is something I have been thinking about for a minute. A 50kg bag of cement in Nigeria costs between N1,650 and N1,800 I understand. Now I cant find the link again anywhere but I am sure I read Aliko Dangote say during the whole ‘cement glut’ episode that factory prices (I think at Obajana) were around N800 per 50kg bag.

Nigeria is an interesting country – there is a cabal trying to dislodge the current cement cabal. They are called New Entrants Into Cement Production and of course they have a Chairman, a certain David Iweta. Anyway last year he was quoted as follows:

Iweta sees no reason why a bag of 50kg bag of cement should be sold above N800, since local manufacturers are using lime stones, which are sourced locally, as raw materials.

Besides, he notes that labour is available and cheap. He says, “I believe it is exploitation for Nigerians to pay above N800 for a 50kg bag of cement as retail price. Let them reduce it to N700 and see how the commodity will disappear from the market.”

Also, Iweta does not see wisdom in selling imported and locally produced cement at the same price. According to him, an importer pays $100 on cost and freight  per metric tonne of cement. He says the locally produced cement should be cheaper than the imported variety because the latter attracts duty and 35 per cent levy, which is another $35 per tonne.

“The local manufacturers do not pay these levies. So, their prices should be cheaper. Imported cement sells within the same price range as the locally-produced ones. This should not be,” Iweta stresses.

Also, a civil engineer, Harris Benedict, describes cement pricing in Nigeria as a ‘mystery’

If indeed you can get cement direct from Dangote at N800, then there is definitely some profit to be made from making the process more efficient. I spoke to a couple of people and some of the costs currently include

  • Minimum order size – you obviously cant walk up to the factory gate and buy one bag for N800. You probably need to order a whole trailer which might cost say N20m. This is already a barrier to entry.
  • Trucking costs – it will cost a fair bit to buy or lease a trailer.
  • Storage and working capital – if you are a distributor it will cost you money to keep all the bags of cement until you finally sell them.

There are probably more but somewhere in those 3 costs is a decent chunk of the gap between factory gate prices and what consumers end up paying, plus the distributors profits of course.

So what if you could eliminate some or all of those costs and deliver cement to buyers for less than the current N1,800? Here’s what I am thinking

a) What if you had a way of aggregating demand from small buyers? So if you could collect the demand from all the small guys who only want 10 or 20 bags at a time. If you find a way of getting enough of these guys, you can have enough demand to fill a trailer and buy from the factory direct.

b) Keep your costs as low as possible – just offer a service. Once you have enough demand, you hire a truck and pick up from the factory. Buyers will need to collect their orders within 24hrs as you will need to avoid those storage costs like a plague. You can even have a location where people come and collect their cement immediately its ready.

c) Charge a small fee per bag or percentage per order.

Nothing new here of course, it’s simply designing a way of cutting out the middle man and costs in the supply of a product. The challenge will be developing a system to aggregate those orders. There will be a lot of legwork involved in going around and convincing then signing up the little guys who regularly buy cement from distributors. Hey, you can even hide from view near a major distributor and watch as people come and go with their cement. This might be a way to get customers. But don’t let them catch you sha.

One final thing – payment. Do you collect money in advance or on delivery? This is a headache and I am not sure the best way to approach it. People wont be keen on paying in advance especially if you are a new business. If you operate a payment on delivery, you need to finance the purchase yourself with the risk that someone who ordered wont turn up to pay for their cement.

So a solution might be to collect say 15% of the order upfront and finance the rest. Non refundable of course.


That’s it for this edition of #Hacks. Where am I being naive? What have I missed? Or perhaps someone is already doing one or both of these. Nevertheless, accidents where birds fly into each other due to lack of airspace are almost unheard of (translated directly from a Yoruba proverb). I might also know people who have some coins to back people who can execute such ideas.

On this occasion, I have chosen not to charge people to comment on this post. Have at it.



From Nnewi To The World: With Apologies, My Alternative Auto Policy

I know I know. Yoruba people say you shouldnt go back to say ‘Good evening’ in a place where you have already said ‘Good night’. I did in fact promise not to write on cars again but if I break a promise so early in the new year, I have the rest of the year to make it up I reckon.

Let me try one more time. This time I will turn 180 degrees from abuse to praise singing. Here goes….


Chief Dr. (Dr.) Olusegun Aganga, Honourable Minister for Trade and Investment, The Golden Man of Goldman Sachs. You are in an Aston Martin while your enemies are chasing you in a 30 hour Lagos to Kano train. I pledge unalloyed fealty and stainless loyalty to your ever-expanding kingdom. After you Sir, it is you again. Sir, your enemies are at liberty to jump into the undredged River Niger if they cannot abide your relentless drive to develop the Nigerian economy. Happy New Year Sir. 

I write this open letter to you, not to heat up the polity as some are wont to do or prompt an investigation of me by the relevant authorities, but to propose an alternative automobile policy that is much simpler, cheaper and less painful to Nigerians and which can achieve all the things you want with the current policy. I know you are a busy man so I will go straight to the point(s)

1.  Sir, I’ve looked through your ministry’s budget and I cannot see any line item for the purchase of document shredders in there. Is it too late to add this? I ask because the first step of the Alternative Auto Policy (AAP) I am proposing is for you to gather all the copies of the current policy you are proposing and shred them. Please stay with me Sir, I am going somewhere.

2. Have you seen the video below? I imagine you have but on the off-chance that you havent, let me post it here again.

Rather than start from the bottom like the rapper Drake, my AAP proposes to start around the middle. The first step of this policy I am proposing is to adopt Innoson Vehicle Manufacturing as Nigeria’s de facto auto policy. Sir, they are already making cars in Umudim, Nnewi in Anambra State. So rather than wait for Nissan and the likes to come open plants here (in itself not a bad thing) let’s support Innoson in some smart ways.

3. The first step of my AAP is to completely ignore the Nigerian market. Yes, trust me this makes sense. Government support for IVM should be tied entirely to exports. So please, dear God, don’t get Mr. President to issue a directive to all government ministries and departments to only purchase Innoson vehicles. It will be very counter productive. Ignore Nigerians, trust me they are not worth the stress. I will explain this further below. Mandating government to only buy Innoson cars will ruin a fundamental part of industrial learning viz carmaking – the feedback mechanism. Also, knowing what civil servants can be like, they will quickly turn such a directive into a racket.

4. Hire a top-notch PR firm, preferably a European or American one to clean up the company’s image. They will take care of little things like Innoson listing Gmail and Yahoo! addresses on the contact page on its website. These are small things but they do matter – it might be the difference between them getting a feature in a popular newspaper magazine if the hack in charge is not impressed by such an email address. As a wise Nigerian man once said – packaging is everything. You will also need to spend heavily on advertising. Hire a firm that knows how to advertise across the continent.

5. So where do we export Innoson cars to? I suggest we use a crude measure to pick say 10 countries. According to the World Bank, Nigeria’s GDP per capita is currently around the $1,500 mark. Leave aside the accuracy or not of this figure for a moment – pick 10 countries in say Asia and especially Africa that are around that mark or less. So obvious countries would be Kenya, Ghana, Sudan (soon as they stop fighting), Uganda etc. You get the gist. We are looking for countries with an infrastructure deficit like ours. I reckon the IVM G5 stands a good chance in countries with bad roads like ours but which your Glorious Transformative Government is urgently addressing.

6. This is where you will start spending serious money. You are going to subsidise Innoson vehicles for sale in these markets. The price will have to be low enough to account for the lack of brand awareness and competition from established brands. Forget about making any profits at all, that’s not the point for at least the first 3 – 5 years. If people are going to enter a car named after an Igbo name from Eastern Nigeria, we will have to meet them halfway. Simply put, the price of Innoson cars exported to these countries will have to be significantly cheaper than anything on the local market. So prices will have to be tailored for each market.

Government support can be tied to a specific amount for each car – say for each IVM G5 sold in Uganda, the AAP can commit to paying $2,000 to ensure Ugandans take notice of the price difference.

7. Dont close your cheque book yet Sir. Another market share gaining strategy will be for Innoson vehicles to be sold with market beating warranties in those countries. I recommend 3 years parts warranty on all Innoson vehicles. Or more even. This is going to cost a lot of money because Innoson are basically untested fully by the market. The AAP hopes for the best but prepares for the worst. Once the rubber hits the road expect all kinds of feedback. Let us be humble – last year the great Toyota recalled almost 1 million cars to fix issues with the airbags. This life is a pot of beans and no one really knows what might happen when once the cars are out there in the hands of customers. Trust me, you don’t want Africans on the internet posting photos of broken down Innoson vehicles on Twitter, Facebook and Instagram. This means Innoson will have to maintain a high level of spare part stock to ensure it can answer replacement needs quickly.

This is why it is important to avoid going down the route of mandating government purchase of these cars. Civil servants have an incentive to change government cars as often as possible anyway so they wont really care if the cars have issues. Innoson wont get the brutal feedback it needs to improve from government sources.

It is also why Nigerians should be ignored in the AAP. I know what they are like – the easiest way to get them to buy the cars is to have it validated by ‘foreigners’. Also, ignoring Nigerians helps us resist the temptation of tariffs that our governments like so much. When Nigerians don’t buy the cars, the next thing will always be to target imported cars as the enemy, achieving nothing. In fact, I suggest that the price of Innoson vehicles in the Nigerians are raised as high as possible to make up for the foreign subsidy but the AAP will make cheap financing available for Nigerians who choose to buy them. But please don’t force them to buy it.

8. As part of this AAP, Mr Innocent Chukwuma will be promoted to Chairman (with his ownership structure of the company untouched). A CEO with solid experience of selling cars in emerging markets should be hired on a time bound contract of no more than 5 years. Aim for the very best you can find. We cant get someone like Carlos Tavares but you get the idea – talented, proven track record at the highest level and multi-lingual (he speaks 4 languages). Even if you cant find someone with auto manufacturing experience, someone with solid knowledge of international supply chains will do the trick.

Mr Chukwuma can return as CEO after 5 years by which time the process of weaning Innoson off the AAP should have begun.

9. As part of this AAP, kindly return all auto tariffs to where they were before. Thank you. No need to add more corruption and smuggling to the problems we already have.

10. Pray. Yes, you will need to pray. Against faceless witches and unnamed wizards. Against saboteurs and permanently bitter people. Nothing is guaranteed of course but you can make your own luck.

So why all this aggro in the name of a policy? Let’s be honest with ourselves, Innoson wont even employ 20,000 people anytime soon and the AAP is aiming for the export market. There are a couple of reasons for this. The first is to avoid the [Name withheld] situation where Nigerians feel exploited in the name of making one man very rich. If the government is going to pick winners, you can at least avoid the downsides of doing so as best as you can. If you are exporting the cars based on this AAP, the no one can really say they were ‘exploited’ to buy the cars which we are effectively bribing them to buy. I cant say this enough – leave Nigerians out of this.

The second reason answers the jobs question. Why are we doing this? The answer is something that is not easily quantifiable – pride. Be honest, you and me and millions of other Nigerians, want a car manufactured in Nigeria for reasons of pride. You cannot add pride to GDP but it will be there when Nigerians can boast about such cars in foreign countries. It will be there when news stories around the world are written about ‘the upstart car maker that began life in a sleepy town in eastern Nigeria’.

But most of all it will be there when Nigerians, unprompted, start buying Innoson vehicles based on a CNN report on ‘the Nigerian car maker that has come from nowhere to grab a huge share of the SUV market in Uganda‘.

Is this all too hard? Ehn, no be you talk say you wan industrialize Nigeria?

Remain blessed Sir. It is well with you and yours. You will eat the good of the land.


P.S Sir, I must confess that there is absolutely nothing original in this AAP I have proposed. Nigeria itself has been on the receiving end of such policies before. Have a look at the book extract below taken from the book Korean Dynasty: Hyundai And Chung Ju Yung

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