More from my recent trip to Nigeria. But first a quick quiz;
What do you get when you combine single lane “highways”, drivers with no real driver education, and thousands (maybe millions) of road users? Ok let’s make it more interesting. How about we throw in pot holes and broken down tractor trailers. I’m sure you get the picture. See its really not surprising to read stories like this or this. It seems to happen every other day. Everyone in Nigeria probably knows someone or knows of someone who died in a traffic accident.
The sad thing is most of the time people have no control over things. You can try to drive as carefully as you can but sometimes that is still not enough. So what do you do? You hope and pray that today is not your day. However given the conditions it will always be somebody’s day. In 2012 an average of 11 people were killed each day. 4260 in total. To put that into perspective according to the Nigeria security tracker, about 1280 people have been killed by boko haram since July 2011.
I did a decent amount of road traveling too. Traveled by road from Jos to Abuja and back. Then to the east, to Awka then Arochukwu then Port Harcourt through Ikot Ekpene and Aba. The story everywhere is the same. The Enugu – Onitsha expressway which at some point used to be a dual carriage highway is now for the most part, a single lane highway. I can’t even use words to describe the road between Arochukwu and Ikot Ekpene. Yes Ikot Ekpene is in Akwa Ibom state, the oil-rich-send-representatives-to-Tu face-wedding-in-Dubai state. A sad state of affairs.
Arochukwu to Ikot Ekpene
Of course the official story by the FG is they are working on it. Rome wasn’t built in a day. Blah blah blah. It would be nice if there was at least some kind of nationwide highway plan. Until then I guess we will continue praying that today is not our day.
Filed under: Random Thoughts, Nigeria, roads
More observations from Nigeria….
The CBN has been pushing the idea of cashless banking and transactions recently. The idea is that using cash for everything is costly for everybody involved. Carrying cash from point A to point B, having to print new money to replace worn out money and so on. All together a good idea.
Nigerians seem to be on board too. Everyone seems to have bought into using ATM’s as opposed to walking into a bank. It was actually common to see lines at the ATM. This was true not just in Lagos but everywhere I visited. Now I know it probably has a lot do with trying to avoid the extra charges incurred by going to the counter. Still, Nigerians respond to incentives just like everyone else.
POS terminals on the other were non-existent. ATM’s are important but the terminals are what make cashless living logical. The whole point is to be able to do business completely without having to use cash. Walking to the ATM to withdraw cash to pay someone seems cumbersome if you could just pay them electronically. POS terminals however don’t seem to be that popular. I had to wait until my third day to see the first business actually accepting debit card payments. And just as I expected, it did not work. The network was down that day.
POS terminals probably haven’t taken off in Nigeria because of reliability. There is just no guarantee that they will work when you need them to. If people don’t trust them to work then carrying cash is the smart thing to do. Unless you like awkward situations. I guess the challenge to truly going cashless in Nigeria is solving the “network is down” problem. Hopefully a smart entrepreneur somewhere is thinking really hard about that.
Filed under: Random Thoughts, ATM, Cashless, cashless policy, Nigeria, POS
First of all apologies for not posting anything in a while. I have this annoying thing called a dissertation to write. It should be over soon. I know what you are thinking. If you have a dissertation to write then why did you go to Nigeria? It’s a long story but bottom line is I had to go. But anyway…
I went to Nigeria. Did a decent amount of traveling in Nigeria too. Over the next few days I will write up my thoughts on many things I observed. Some good, others not so good.
First things first, the power situation has not improved. Or rather I should say the power situation in the place where I lived and the places I visited has not improved. While in Jos I heard there was light between 11pm and 4am most nights. Generators were still the order of the day. Makes me wonder what all the “power has improved” gist was all about. Of course this isn’t a good way to measure improvements in electricity supply. It may really have improved for others. More information is needed.
Secondly, the culture of settling is definitely back. Everyone from the airline staff to the customs guys to the guy whose job is to put the luggage on the thing seemed to ask for something for the boys. Maybe it was just the time of the year. Or maybe everyone has realized that “taxing people” is OK. I don’t know.
That’s it for now. More to come.
Filed under: Random Thoughts, Nigeria
January 24, 2013 • 5:56 am
If you haven’t already seen President Jonathan’s interview on CNN yesterday, you can see it here. It really wasn’t so bad. Lots of talking points but I won’t go into all of them here.
One thing that irks me is the way the government measures improvement in electricity supply. Basically by “asking people” on the streets. The SA to the president on something also frequently takes polls on twitter, presumably attempting to measure the improvements in electricity supply. I have nothing against that as a PR exercise. I do however think it unfortunate when “asking people” becomes the default way to measure improvements. Given that at any given point in time electricity supply would have improved for somebody but would also be worse for somebody else.
It is 2013 after all. It should not be so difficult to publish actual data on electricity generation and supply. It would probably take about 10 seconds for all the generating companies to publish their daily output. Maybe another 10 seconds for the transmission company to publish the amount of electricity it buys from the generating companies and the amount it sells to the distribution companies. Another 30 seconds for the distribution companies to publish how much electricity they buy from the transmission companies each day. It really should not be that difficult to publish these daily numbers.
The ministry of power and the NERC have websites. Publish them there. I know they have these numbers because every now and then they release it to the press. Unless they don’t really want us to know. Perhaps I should test the freedom of information bill.
Bottom line. It is 2013. Don’t “ask people” if electricity supply has improved. Publish daily numbers and we will see that electricity supply has improved.
Filed under: Random Thoughts, Data, Electricity, Nigeria
December 28, 2012 • 10:41 am
You probably know how it starts. “See Saudi, see Qatar. Is it not the same oil we have? They have gone so far while we are here moving backwards. It must be corruption.” Had a similar conversation over the weekend. The consensus seems to be that we have enough oil to do just as well as the oil-rich gulf countries. There is some truth to that. We were the 11th largest crude oil producer in 2011. Unfortunately (or fortunately) we also have a lot of people. 166m and counting. Would the story still be the same if we looked at per capita crude oil production? The charts below answer than question perfectly.
We have a lot of crude oil but not nearly enough to compete in the “oil money” league. At least not with the gulf countries. Oh wait we also have natural gas. Hold on.
Pretty much the same story. Bottom line is we don’t have nearly enough crude oil and natural gas to just live off. Qatar produces about 0.74 barrels per person per day while we produce about 0.02 barrels per person per day, using 2011 numbers. If we turned that to dollars then it comes to about $59 a day person or $1794 a month per person in Qatar. Nigeria? $1.2 a day or $36.9 a month per person. Or N5904 a month. That is a lot less than the minimum wage. We have oil but not nearly enough.
This is does not imply that we should not be better off than we are now. Of course we should. For one we should have a lot better infrastructure than we do. We just need to climb off our high horse. We have oil but only enough to be just an advantage.
NB: I assume a $100 a barrel oil price with countries getting 80% of that. A very generous assumption. The Oil output data is from the US Energy Information Administration
Filed under: Random Thoughts, Crude Oil, Nigeria
December 16, 2012 • 6:48 pm
Remember the N5000 note? And the alleged inflation effect? Wrote a paper with a colleague about it. What happened the last time we introduced new notes? The N100 and N500 and so on. Turns out nothing happened. Although something happens anytime we introduce a note. We panic. But not for long. You can read the paper here. Abstract below.
” The planned restructuring of the Nigerian currency to include a N5, 000 note has generated a lot of controversy. Much of the furor is centered around the supposed inflationary effects of introducing higher denomination notes, which provides the motivation for this paper. Using five different measures of inflation, from 1973 to 2011, we examine the effects of the introduction of new notes since the launch of the Naira in 1973. Our empirical results show that none of the currency restructuring episodes has had any effect on inflation. There, however, seems to be a short-lived positive effect on food inflation every time a new note is introduced. We attribute this not to the introduction of the note itself but to the change in inflation expectations following the introduction. However, the change in inflation expectations more than completely dissipates by the second month after which there is no subsequent effect.”
NB: Might be gated depending on where you are browsing. Contact me directly if you can’t access it.
Filed under: Interesting Links, Central Bank of Nigeria, Inflation, N5000
November 27, 2012 • 10:44 am
Seems like someone read the SLS guide to banking regulations.
“Hollande’s plan to limit speculative trading by French banks also could fall short of expectations. The government has said that new banking regulations, to be announced in December, will require banks to place their riskiest activities in separate subsidiaries. Activities such as high-frequency trading and agricultural-commodities derivatives would be “ring fenced” and subject to much-higher capital requirements than banks’ more-traditional businesses, Finance Minister Pierre Moscovici said on Nov. 15.”
The banks are still winning so far. I wonder if Nigerian banks are just as inventive at working around regulations. Probably.
Filed under: News Stories, Banking Regulation, Nigeria, SLS
November 14, 2012 • 3:53 pm
You may have already heard but just in case you haven’t. The FG has cancelled its contract with Canadian firm Manitoba. The partnership was supposed to hand over the day to day running of the national grid to Manitoba.
The privatization of the grid was a key part of the proposed reforms in the electricity sector. Manitoba was picked as the winning bidder by the BPE in what many considered a relatively transparent process. Yeah, transparent and Nigeria in the same sentence.
So what went wrong? Well according to the FG due process was not followed. Hint: in political language that means we don’t want to tell you what happened. But just for kicks, it turns out the issue was about the BPE not having the right to award contracts. So even though the process was transparent and open and run by both the BPE and the ministry of power, the BPE couldn’t technically sign off on the deal. The FG through the FEC had to approve.
Now the FG could have just approved the contract organized by the BPE. Problem solved. That however is not what has happened. The FG has scrapped the contract completely and has given the ministry of power, who by the way had its minister changed a month ago, 30 days to “select” a new winning bidder. Yeah, due process.
Bottom line is the opportunity to make real progress in reforming the electricity sector has been lost. It doesn’t matter who they select now. We all know that whoever is “selected” as the new winning bidder will have the contract revoked once the next administration comes into power in 2 years.
In the interim, private investors will probably stay on the sidelines. If they can’t trust the government to reform the sector then they probably won’t put their money on the table. Time to service those generators people. We are still going to need them.
UPDATE: looks like GEJ has changed his mind. In the press event yesterday he denied the Manitoba deal had been cancelled. A reversal of the reversal. Hopefully there isn’t a reversal of the reversal of the reversal coming next.
Filed under: Random Thoughts, Electricity, Nigeria, Politics, reforms
October 8, 2012 • 9:35 am
Brent Crude Oil Spot Price data by YCharts
1. Oil prices are very volatile. How do prevent an oil based economy from suffering from volatility of its main export? Assume the worst. Plan for the lowest possible price and save everything else.
2. No one can predict the future. We don’t know when oil prices will crash but we know they will at some point. Better to start planning now. The last time prices crashed we were saved by our excess crude account. We need to have something next time it happens. Else we will have to go cap in hand to …..
Is $85 a good benchmark? No it is not. You don’t have to fear a catastrophe to see oil prices dropping below that. Is $70 a better benchmark? Probably.
Filed under: Random Thoughts
August 28, 2012 • 7:11 am
Money does not last forever. The average £5 pound note lasts about a year. A friend who should know told me the N20 note lasts 3 months… I don’t quite believe him. Naira notes however don’t last forever. Every now and then they need to be replaced.
Once notes are certified as damaged they are taken to ‘the Mint’ where they are destroyed. New currency totalling the same amount is printed to replace the destroyed currency. This is a constant process. Not necessarily done everyday but done regularly.
Where does the introduction of a new currency come in? Well this just means that anytime old currency is destroyed, the old type of bills are not be printed. Instead the new type of bills take their place. In essence the amount of money circulation is the same as before, just with different notes.
Say, for example, N10bn worth of N100 notes are scheduled to be destroyed. The Mint could choose to print N10bn worth of N5000 notes to replace it. The key point is that it still has to be N10bn worth. Could be coins, notes, whatever. The amount of money in circulation does not change.
Except in cases where the CBN orders everyone to exchange their old notes for new ones, which they have NOT done this time, this process takes a while and most people will not see the new currency for a while.
The moral of the story is the introduction of new bills doesn’t change the amount of money in circulation. The CBN isn’t going to dash anybody notes. New notes are only printed to replace old notes. ( or for other liquidity management reasons) There will just be an extra new kind of note to exchange your other notes for or to do business with.
Filed under: Random Thoughts, CBN, Currency, naira, Nigeria