An hungry man cannot think of savings, because he is unable to meet his physiological needs nor is he guaranteed of the day after today. This makes savings the luxury of the privileged rich. It even makes no sense to the rich, when $1 “today” will worth less “tomorrow”.

This position sounds sensible at individual’s level (micro economics) but should a nation cease to save because of not earning enough or because the value of dollar will fall in the future?

Everyone sees the need to save  (poor or rich) as insurance against a sudden stop in future income streams. But the rate at which emerging markets – China, Malaysia, Russia, Brazil, UAE, Saudi Arabia, among others have been building up their reserves in the last decade has changed the topic from “Should a Nation Save” to “How Much Should a Nation Save” (Optimal Level of Reserve Accumulation)?

China established special reserve account in year 2007 with about $250Billion. But, 4 years after inception, China has accumulated about $3 Trillion in the State FX Investment Corporation Account. China is virtually maintaining a reserve almost 50% of her GDP.

Oil dollars from the Middle East are not only buying up Canary Wharf, Landmark buildings around the world or assembling titles-challenging football teams; they are building intimidating international reserves. UAE’s international reserve is approaching a trillion dollar mark.

Norway had about $324 Billion in the renowned Global Government Pension Fund in 2007 and in the 2010 report by, Norwegian Ministry of Finance on management of the fund, projection is to double the existing fund by year 2020.

Olivier and Romain reviewed existing propositions on how to determine “How Much Should a Nation Save”? They conducted some mathematical calibration using data from 34 countries between 1975 and 2003. Such propositions such as Greenspan-Guidotti Rule that the ratio of Reserve to Short Term Debt should be 1, to much more complex insurance model of taking decision under uncertain and imperfect information were presented.

Naijanomics then identified determinants of, how much a nation should save as:

(i) Size of the economy

(ii) Income vulnerability – Volatility of earnings or probability of sudden stop in revenue

(iii) Exchange rate flexibility and

(iv) Opportunity cost of savings – the difference between interest paid on loan and interest earned on savings

What would have been expected of Naijanomics at this point is to utilise the models built by Olivier and Romain to help Nigeria determine what should be the optimal level of SWF the country should maintain. NAY! The primary decision to save or not to save has not even been resolved!

While countries such as Libya had 158% Reserve-to-GDP ratio, Hong Kong 121%, Saudi Arabia 109% and Singapore 103% as far back as 1990; Nigerian governors in year 2011 are taking arms against their citizens (with a pending court case) to stop the Federal government from maintaining a Sovereign Wealth Fund Account.

Nigerians saw a ray of hope when, President Jonathan on May 27, 2011 signed the National Sovereign Investment Authority Bill into law. The SWF was to replace the Excess Crude Account that Nigeria commenced in 2003. The fund was to take off with $1Billion deduction monthly from the EXCESS CRUDE REVENUE. (Excess in the sense that, it is an income above budgeted income).

How sad was it that, the state governors said they would not be able to pay November 2011 salary if the federal government should go ahead with the $1Billion seed capital?

We do not defend savings or SWF for the sake of savings. But because we do not consider the present utilisation of petro dollars as optimal in Nigeria, there is the need to have an escrow account in which the proceeds will be used for developmental projects only.

Botswana as far as 1966 had Pula Fund from Diamond, Uganda opened Poverty Action Fund as far back as 1998 from cash gotten from international aids, Venezuela had FIEM from oil proceeds since 1998 and our governors in 2011 are using the loophole in the 1999 constitution to stop SWF?

The governors raised the issue of transparency surrounding the management of the fund. This is a well-placed fear and we at Naijanomics nurse same fear. When one gazes into the way the Ghaddafis have managed the Libyan’s Oil Reserve Fund or the mystery behind the HH Sheikh Zayed Al Nahyans’ handling of ADIA, one is tempted to agree with the governors.

But instead of stopping the operations of the SWF on fear of probable non-transparency; we could have adopted the Norwegian model. So simple, but functional a model! Norway’s Ministry of Finance provides detailed guidelines while an independent finance manager (Norges Bank) handles all investment. The scheme is so transparent that everyone could see the basket of portfolio invested in. Besides the annual reports rendered to the public, quarterly management accounts are presented to the ministry.

On the claim that states would not be able to pay salaries if the deduction for the SWF is made is considered a campaign of calumny when November salary coincides with Sallah celebration. Should we believe that, if the price of oil should fall below the current price, the states will not be able to pay salaries?

Naijanomics is of the view that, the size of Nigerian economy and the propensity to grow is great. The oil proceed is considered volatile, but Nigeria is such an endowed country that, there are no immediate threats to Nigerian earning potentials.  However, the crisis-signal first showed its head in Argentina in 1989 but the financial crisis did not come until 2001, Mexico first showed signal in 1982 but the crisis came in 1995. Mismanagement in Greece had been accumulating years before 2011 and Nigeria cannot wait till the red flag is raised before our governors see the need, not only to save for raining days but to save towards developmental projects.





Structural Adjustment Programs (SAP) was the one-cap-fits all prescription of IMF and World Bank to developing countries during the early 1980s’ economic recession. The program comes with such incentives of obtaining loans at a very low rate to augment shortfall in earnings.

To obtain such cheap loans; developing countries were advised to privatise State-Owned-Enterprises (SOEs) and between 1988 and 1994 about 3,300 SOEs were sold in developing countries. It was posited that, privatisation will improve operational efficiency of privatised companies and will attract foreign investment.

The implementation of SAP in Africa became pronounced in the 80s. By 1981, Nigeria was actually beginning to cave under the debt burden of loans taken (even though there are claims, that most of these loans ended up in personal accounts of office holders); the oil glut of late 70s that resulted in dwindling oil revenues coupled with the international recession did not help the country’s case either.

SAP was implemented in Nigeria under the IBB’s regime (1985 -1993) with the basic policy elements of:

Deregulation  = Commercialise those industries that might not be able to attract foreign investors and privatise those that can attract foreign capitals

Realistic Exchange Rate = Devalue your currency so that your export will be cheaper (even if the price of your product is exogeneously determined, such as price of oil)

Debt-Equity-Swap = Transfer ownership of key industries to multinationals instead of paying your debt

Debt Rescheduling = Continuously pay only interest on your debts without paying down the principal (debt trap)

Realistic Pricing = Remove subsidy/incentives from all non-competitively priced essential goods and services.

There were lots of revolts from Nigerians (particularly from National Association of Nigerian Students) when the program was to be implemented but proponents of SAP asserted that there was “NO ALTERNATIVE TO SAP”.

Barely 15 years after SAP, we can see the unsatisfactory performance of privatised State-Owned-Enterprises despite the mirage of positive outcomes presented at the initial stage (short term).

We look at NITEL (Nigerian Telecommunication) for example. NITEL installed-capacity was reported to have increased from 295,370 to 780,000 between 1985 and 1993. Total revenue jumped from N280Million to N17Billion and profit after tax from N420Million losses to over N1Billion profit between 1985 and 1995 (unaudited accounts). Today NITEL is moribund, riddled in corruption with no viable investor willing to touch it with a long pole.

The deregulated banking sector comes to fore also.  Before SAP, Nigeria had 32 approved commercial banks. By 1992, there were 120 banks (commercial and merchant banks) and 500 finance houses. Today, the country has 20 struggling commercial banks with lots of debates still hanging on capital adequacy of some of the banks.

The introduction of FEM (Foreign Exchange Market) under SAP immediately devalued Nigeria currency from N0.77/USD to N1.76/USD. By 1995 Nigerians were exchanging N22 for $1USD in the official market and N84 for $1USD in the parallel market. Today Nigerians need N150 in exchange for $1USD.

If one is still in doubt of how much devastation the program brought on the national economy, (such as elimination of the middle class); a gaze at NIPOST, NNPC, Nigerian Railway, Nigerian Airways ghosts of once vibrant, important, publicly-run companies speaks further.

The challenge today is not just coping with the effects of SAP but with the fear that same old elements of SAP are been re-introduced into our economy under a different scheme of IMF and World Bank POVERTY REDUCTION STRATEGY PAPERS (PRSPs).

A common ground for the old concept and the new paradigm is that commercialisation under SAP was to reorganise those State –Owned-Enterprises into a profit making commercial ventures without subvention from government (this is the same objective that is been put forward by this administration for most of their proposals).

Campaign for realistic pricing of petroleum products is all over the airwaves just the way Professor Gana undertook the task of marketing government programs in the past.

Suddenly, Nigeria that paid out $12Billion as final payments for her debts to international lenders in 2008 is been issued International Standby Loan of $3.5Billion under the Flexible Credit Line of IMF. Same Nigeria is been encouraged to finance internal consumption with Euro Bond. Same Minister of Finance that supervised the depletion of Nigerian Reserve to paying down international creditors is to oversee the second issuance of Nigerian Euro Bond (after the $500 million issued in January of 2010).

Inconsistent policies towards Power Holding Company of Nigeria sends the signal that same destiny of NITEL, NIPOST, Nigerian Airways awaits NEPA.

Clear signals from the Central Bank of Nigeria about inability to sustain exchange rate at the present +- N150/USD is a preparation for further devaluation of the Naira.

One begins to wonder if the usual financial threats in which many analysts called blackmails from the Bretton Woods Institutions is responsible for the tacit second implementation of SAP in Nigeria or it is as a result of our leaders limited understanding of recent developments in the world economy (Greece, Portugal, France, Italy, Spain, US among others)?

Naijanomics is of the view that Nigerian government is reintroducing policy elements of SAP but this time not as a bundled program rather as pieces of well-sequenced action aimed at meeting Poverty Reduction Strategy Papers.

Their adopted strategy is to sell the short-term benefits of such programs to the citizens while they cover up the long term collateral damages associated with such proposals. We are been told how much will be saved in billions of dollar if “petroleum subsidy” is removed but they have not calculated how many people will be pushed further the poverty line?


Note: The reality and painting of abuses of the oil subsidy by the privileged few is quite scary and it makes economic sense to expunge the system of such leakages but certain actions such as functional local refineries is key.



How much is this unending-subsidy that every government since 1985 has been removing but it is never exhausted? The debate is often clouded with deception because same subsidy is an instrument of enriching the oil buccaneers and at the same time, a weapon of taking back the little government claims to do.

Students went on demonstration in 1990s (under IBB) because of one of the elements of SAP (Structural Adjustment Programme) that required commercialisation of the refineries and reduction of the subsidy on pump prices of petroleum products.

General Abacha after IBB also increased the pump prices and set up PTF (Petroleum Trust Fund) to utilise the saved fund from removed-subsidy for developmental projects. And between 1998 and date the pump price has been increased eleven (11) different times (from N11/Litre to N65/Litre) and the country is still awaiting another round of subsidy removal.

To conclude that there is no subsidy will be wrong but that the authority has been playing games with the figures and presenting only one side of the data is an open secret that needs annotating on.

Nigerian government does not hesitate to compare the pump price in Nigeria with pump prices in the US and UK to show that oil is still cheaper in Nigeria. Someone needs to raise it that, there is no ground for comparism. While US is a net importer of oil; it is more expensive to drill oil at the North Sea (UK) than at the Niger Delta. We should be compared with oil exporting, developing nations like Libya, Algeria, Venezuela, Saudia Arabia, Egypt among others when it comes to cost of petrol.

Record shows that Nigeria has the highest pump price of petrol among the key oil-exporting, developing countries (Venezuela 3p/Litre, Saudi Arabia 8p/Litre, Libya 9p/Litre, Kuwait 14p/Litre, Egypt 19p/Litre, Algeria 20p/Litre among others and Nigeria 43p/Litre). Nigerian government should be comparing Nigeria with US and UK when it comes to number of people depending on generators to have light or driving on bad roads with non-existent public transport.

Looking at the terrifying figures presented by proponents of oil subsidy removal; Nigeria spends $17.33Million daily on fuel subsidy and a whopping average of $485.33Million monthly because the actual cost comes to 96p while the selling price is 43p (53p subsidy on every litre) with only local refining capacity of less than half a million while about 32million litres required daily.

While this may be considered an economic waste (classical economic explanation) the other side of the figure not presented by government is how much is Nigeria earning? Simple arithmetic indicates earnings of about $242Million daily and $7Billion monthly (based on OPEC quota of 2.2mbp)

Because the country earns about $242Million daily is no justification why government should continue with $17Million daily subsidy but explanation should be offered that the subsidy has been crawling with the price our oil commands at the international market, since we have failed to develop enough refining capacity to meet our need.

Raising alarm on the increasing rate of the subsidy without mentioning that the present government in the history of the country (next to Obasanjo’s regime during 2008) is enjoying the highest rate of crude oil price is a tacit deceit. Not explaining that the whopping subsidy figure in Naira would have been better if Naira value has not been falling is another fact often hidden from the public.

Should we also believe the claim that the actual cost is 96p/Litre? Is it really possible for a litre of refined petrol to be costlier than a litre of crude oil, which contains light distillate, middle distillate and the residues? Otherwise 96p cost-claim for petrol (middle distillate) alone will translate to $153/barrel when the full bonny light was going for $110/barrel.

Devoid of all technicalities is the question why 53 years after discovery of commercial oil in the country we can only refined less than 2% of our required demand and 0.1% of our daily production?

Recent extensive analysis done by SUPA (Strategic Union of Professionals for the Advancement of Nigeria) shows that if Nigeria were to be refining the locally consumed fuel instead of just exporting crude and re-importing the refined petrol; government would have been making a profit of 22p/Litre (N33) at the current selling price of 43p/Litre (N65). That is because a litre of petrol would have been costing N32/Litre.

Beyond the deception with the figures; another line of argument is the need to save the subsidy for developmental projects. But our history does not support such hope. The only government that came close to trading off subsidy for roads construction was General Abacha. An attempt by Obasanjo regime to save excess earnings saw the wrath of state governors who believed that there was no provision in the constitution for Nigeria to save (because it was in an “unconstitutional account”).

Some are claiming that until subsidy is removed, smuggling of fuel into Cameroun, Republic of Niger and Benin Republic will not stop. It is never a good excuse to remove subsidy on ground of smuggling? Why not curb smuggling. Evidence has shown that the more the price goes up in Nigeria the more it goes up in the neighbouring countries (implying that selling across the border will always be more profitable).

And the most troubling explanation was echoed by the Central Bank Governor, Mallam Sanusi. “This subsidy is going to a small group of people. The greater Nigerian people are not benefitting …. the subsidy is creating a pool of funds for a cabal. These are the same people who borrow from banks and do not pay; the same people who are rigging elections.”

Why not block the leakages instead of using it as a justification to remove the subsidy?

We are discussing a country where what an average household spends in a week on fuelling generator is more than Eon’s household monthly average electric bill in UK for uninterrupted light supply. A country where an average household must source its own water, trust God more for security not the state. Same country where labour is presently struggling to secure $120 monthly minimum wage!

Naijanomics does not support perpetual subsidy but under present scenario; the most appropriate action would be to develop refining capacity of the country to meet local demands then remove the subsidy.


We are no proponents of subsidy. Subsidy breeds inefficiency but probity demands that true and complete picture be painted before a decision is reached and whoever doubts the need for government intervention should look into the Common Agricultural Policy (CAP) in the EU.


Conversion rate used N150/USD



When Nigeria got independence from Britain (1960), we needed just 0.71 Nigerian Naira in exchange for 1 USD. The prospect was good and subsequent developments in the oil market was great, such that by 1980, we could get almost $2 USD with just N1 Nigerian Naira (N 0.5445/USD).

It was so good to be true that Nigerian Naira that was been exchanged for N2/GBP in 1960 became more valuable than the great British Pound Sterling in 1974, and it remained so until 1985.

But as Nigeria marks her 51st Independence Anniversary; it is not surprising that we now need N150 in exchange for 1 USD and N250 for 1 GBP but the rhetoric is “how did we get here as a nation”?

Trend of Nigerian Naira Exchange Rate with USD & GBP

Simple economics would explain that Non-competitive export, Rising Inflation, Falling Revenue, among others could explain such, but the trend of Nigerian revenue over the years coupled with the OPEC as a cartel negate such explanation in our own case. A rapidly growing revenue matched with a rapidly devalued currency!

High revenue does not translate into high worth, particularly in a growing population. But this cannot be blamed on our growing population. At independence, Nigeria had almost twice of India’s GDP per capital and three times that of China. Today, China has four times Nigeria’s GDP per capital and India is almost twice.

How did we get here?

The country was so blessed with the oil boom of the early 1970s beyond the administrative capacity of the then ruling class that a commission was set up in 1972 (Udoji Commission) to come up with ways to share the “Excess Petro Dollars” among households. The commission submitted that workers salaries be doubled and be paid in retroactive to 6 months.

The minimum wage was increased by 131% from N312 ($506) to N720 ($1,168) in 1974. But as the country marks her 51st independence anniversary (2011), the state governments are unable to afford $120 USD (N18,000) minimum wage to Nigerian workers. How did we get here?

Three (3) years after doubling salaries; Nigerian government organised a 28 days mammoth jamboree (January 15 – February 12, 1977) for African nations. It is called FESTAC 77, an “opportunity for recounting the achievements of our ancestors”, according to the then Head of State (General Obasanjo). – Up till date, no African country has attempted such a jamboree again.

Here is our snapshots of events thereafter:

Head of State Tenor Brief
Shagari Oct. 1, 1979 – Dec. 31, 1983 A gentleman ill-equipped for the murky waters of Nigerian politics and the moneybags. The oil glut came down on the nation and rumours of money disappearing from the treasury. The phrase “Empty- Treasury” entered Nigerian diction.
Buhari Dec. 31, 1983 – Aug. 27, 1985 Stringent and upright officer but with little competency on economy. Changed the Nigerian currency in an effort to punish those who looted and stacked Nigerian treasury. A similar extreme monetary policy taken by Germany after the world war.
IBB Aug. 27, 1985 – Aug. 26, 1993 Epitome of recent Nigeria. Oil windfall as a result of gulf war not properly accounted for ($2.2Billion). Promulgated the most controversial economic policy in conjunction with IMF, so far in the history of the country (Structural Adjustment Programme – SAP).
Abacha Aug. 26, 1993 – Jun. 8, 1998 Ran a close economy because of non-acceptance by the international community. The isolation had its own setback but there was massive abuse of the Treasury by close associates
Abdusalam Jun. 8, 1998 – May29, 1999 Depleted the Reserve (despite normal earnings) by 79% within 12 months
Obj. May29, 1999 – May29, 2007 Spent the first 4 years travelling on excuse of image laundry for the country and was surrounded by same of old minions. Got down to work by the second term but was too late and the 3rd term did not materialise.
Yaradua May29, 2007 -May 5, 2010 No plan to become Head of State but later developed genuine intention for change but ill health never permitted him.
Jonathan May 5, 2010 – Till Date Still Strategising but we maintain our reservation.

One of the Nigerian renowned scholars, Professor Pat Utomi asserted that “it seems clearer everyday that the poverty that holds Nigeria hostage and devalues the lives of so many, comes from a divorce from creative application of the intellect to the solution of people’s problem by those who offer leadership and the implementing bureaucracies.”

Naijanomics agrees that, we got to where we are because; we have been ruled by people low in Economic IQ but high in Looting Co-efficient.



Data Source – World Bank and Central Bank of Nigeria.

Devaluation has its own economic merits but only when you have a competitive export (China)



She has the same qualification as her husband; they both stay in the same region and work in the same sub sector but her average earnings over time will be lower than that of her husband. It is the reality of wage gap differential between men and women. It becomes clearer when we pool women’s earnings together and compare with their male counterparts.

Average part-time female workers in UK in year 2000 earned 8% lower than what their male counterparts were earning, according to Institute for Employment Studies for the Women Equality Unit. Evidence however suggests that the gap has been reducing over the years.

Jeremiah Cotton stated that there is no doubt that there is a sizeable wage differential between men and women, the controversy however has been in explaining factors causing these differentials.

Actually, there has been no shortage of explanation. Going through some of the literatures, three main explanations are often provided (conventionally):

i.         Human Resources Factors (Skills, Education, Location, Working     Hours, Sector etc.)

ii.         Treatment Issues (Discrimination)

iii.         Estimation Errors (Use of Inappropriate Techniques for Estimation)

Those who explain the reason why men earn more than women on human resources factors believe that men averagely tend to be more skillful and productive than women.  The second group however refutes the excuse that men are more skillful or productive than women. They posited that, it is the way women-issues are treated at the working place that translates into them earning less than their male counterparts (Discrimation). The third group however blames the observed wage-gap differential on estimation error. This might make the wage-gap more of perception issue than reality.

To verify this; we analysed a panel data comprising of 71,561 records of working individuals observed between 1991 and 2006 by British Household Panel Survey

The raw differential over the period shows that women average weekly-wage is about 10.81% less than their male counterparts. Those who are married have the tendency of been less paid by about 10% and those with kids increased their probability of been less paid relatively to their male counterparts by 4.79% for every number of child they have.  However, women that worked in the Northern part reduced the gap by about 3.77% while those covered by Union reduced the gap by about 7.74%. It also shows that such gap becomes negative for women in Distributive Sector and Banking and Finance Industry. The gap generally declines as women obtain higher education and as they gain more experience.

After a series of tests on a comprehensive wage model; Education, Experience, Region, Industry, Union, Number of Children among others significantly affect what an individual earns but to explain the difference in what women and men earn, we decomposed difference in wages to a proportion due to discrimination in the labor market and other proportion due to differences in skill between the two groups. Decomposing these differentials using Oaxaca variant decomposition shows that skill and experience only explain about 9% of the hourly wage differential and 5% of weekly wage differentials.

If skills and experience only explain 9% of why women earn less than men, there are certainly other unexplained factors responsible for such a difference. The shocking realization is that these unexplained factors are significant.

Naijanomics however, concludes that it will be wrong to believe that wage-gap differential exists because of inappropriate estimation method (the raw data shows it exists). Neither does the explanation that it is the discrimination against women (the data used is not from Afghanistan) nor difference in skills (women have been proven to perform better in some analytical jobs than men) explain why women earn less than men. It is rather the non-financial cost of “MOTHERING” a home.

There are lots of responsibilities women handle that are not accounted for in the National Income Accounting. Women engage in so many non-monetised physical and mental engagements in the process, or in anticipation of “mothering” a home that socio-economic models find difficult to quantify.

If the cost of mothering someone like me, and the entire home is dollarized; women will actually earn more than men. Skills and education aside, those economic activies they render that are not paid for make women earn less.

This is written in recognition of unpaid-services, working mothers render to their families that invariably translate into them not fully earning their optimal economic income. (I need to pass a THANK YOU CALL to my mother)


Note: Initial data analysis was done as a postgraduate presentation at University of Manchester (Applied Ecoometrics, 2009) with Nkenchor Igue and Solomon Otajonor.



IOC: Why complaining of over-reliance on oil when you have over 100 exportable products? Have you thought of using the “Olympic Effect” to increase your export level of non-oil produce, because evidence has shown that hosting a mega-event boosts export by over 20% for host countries?

Naija: You know that these events often end up with large cost outlay, which are difficult to justify. Neither the income earned, during the event justify the cost nor the legacy of over capacity-velodromes and aquatic centres that no one will use thereafter make sense. My people also understand that, it will just be another avenue for your companies to drawdown our foreign reserve and for my boys to also earn their own commissions.

IOC: But economic benefits of hosting mega-events go beyond the financial derivatives. If you really want to send signal to international constituencies on openness of your economy, you have to consider harnessing the Olympic Effect, even if it is a World Cup. You can adopt the South African style; despite failing to win the Olympic bid of mid 90s, got the world cup hosting right 13 years later and you can see how well that has significantly boosted tourism in South Africa.

Naija: But it is too early to conclude that it is the World Cup effect that is encouraging tourists to South Africa these days. I am of the view that, the global financial melt down is making a lot of people to look at vacation somewhere outside the usual places.

IOC: Don’t underestimate how significant the effect of a mega event can be to the hosting nation. Seoul game was the instrument used to improve international relations between South Korea and the Soviet Blocks and to raise awareness for Korean products. Have you wondered how much openness and export boost to Chinese products since 2001 when the Beijing Olympic was awarded? The spontaneous changes to Italian economic scenario (Currency Convertibility, Treaty of Rome, Creation of EEC, among others) the moment Rome Olympic was awarded in 1955. Look at Mexico 1986 World Cup (trade liberalisation resulting into joining GATT).

Naija: There seems to be something peculiar to all these countries that ended up hosting these mega events that one cannot conclude, it is because they hosted mega event that their export increased. Besides, countries that unsuccessfully bid for those events still have evidence of export growth. Switzerland lost hosting right of 1948 Olympic to London but there was indication that export grew after then even without hosting the summer event (Amsterdam 1952, Belgium 1964, among others).

IOC: Yes, those who bid but did not win the hosting right still end up experiencing increase in their exports because Olympic effect on export is attributable to positive signals countries send during the selection exercise rather than the actual holding of the mega event.

Naija: Ooooh, that implies that we can achieve same, by just bidding without hosting?

IOC: Yes countries can boost export by sending positive signals during bidding but that may still be devoid of resultant openness that the actual event brings. It may sound so complex to you now but when you look at the Gravity Model of International Trade employed by Mark and Andrew (2011) used to estimate the permanent export effect the Olympic effect has, you will appreciate better.

Naija: But Okonla Iweaje, once mentioned that boosting export is easier to achieve when trading countries speak same language, use same currency, share borders and have same colonial master instead of hosting jamborees.

IOC: Those are standard trade determinants, which do not take away the permanent Olympic effect on export of hosting countries. I think, instead of lamenting over poor export in the face of abundant exportable products, you should consider using the Olympic effect to stimulate your export.

GEJ: OK. I will instruct Okonla Iweaje to set up a new committee for Abuja Olympic 2020 and an addition made to our 2020 goals. We can copy the non-oil export-led growth of China if hosting the Olympic has been proved to boost export.

Naijanomics: We actually have some reservations for the conclusion because the unobserved heterogeneity in the model was significant. However, there is something no one can deny peculiar to those countries: ASSURANCE OF SECURITY.

Tell Naija to first de-market the weekly slaughter of innocent women, children and hapless men of Plateau before we start talking of “Blood Coffee”.  Who will harvest Gum Arabic in Maiduguri, where police go to work with no assurance of returning because Boko Haram has more bombs than police has stocks of tear gas?

Who will dry and split the ginger from Kachia; process the hides and skin from Kano; Sheanut from Minna when old neighbours suddenly become sworn-enemies? Armed robbery flourish on the highway of one side of river Niger and kidnapping has high returns on the other side of the river?

Lack of security does not only result in loss of lives and properties but it retards growth and renders functional strategy ineffective in stimulating the economy.


Aim was to summarise “The Olympic Effect” by Andrew, K. and Mark, M in a conversational tone, but at the same time attend to one of the topical issues.





Every being is considered an economic-man and assumed rational. But we often bring this rationality into play in almost every decision we take (including our choice of belief), without our knowledge.

Nigeria is a very religious country, in which our beliefs come to fore in everything we do (Business, Sport, Social Interactions) but the question of this discourse (sponsored advertisement on buses) is to be treated from no particular religious inclination (Islam, Christianity, Hindu, Judaism, Sango or whatever belief) but rather using the simple principle of probability.

This looks into the likely Risk or likely Reward of our decision (as it relates to the question of God’s existence), Probability of Outcome, Cost of Decision and Weight of Outcome.

The question, “What if God does not exist?” leaves us with two extreme Possibilities.

(i) God Does Not Exist

(ii) God Exists

Our Choice /Decision is to:

(i) Live as if God does not exist
(ii) Live as if God Exists

These choices at the end will lead to 4 outcomes

a) Live as if God does not exist and later find out HE does not exist
b) Live as if God exists and later find out HE does not exist
c) Live as if God exists and later find out HE exists
d) Live as if God does not exist and later find out HE exists

These outcomes can only be found out after death, which implies no opportunity for amendment whatever choice made.

Cost of Outcome & Weight of Outcome:
For those who live as if God does not exist and later find out that God does not exist; they gain nothing and loose nothing at the end. (Since nonexistence of God will imply everything ends at death)

For those who live as if God exists and later find out HE does not exist; they gain nothing and loose nothing bar the worldly pleasures they would have enjoyed.

For those who live as if God exists and later find out HE exists; they gain heaven and loose nothing

For those who live as if God does not exist but later find out He does: they gain nothing and loose heaven.

Considering all these 4 outcomes; the most rational is to believe God exists. This is not because the probability of an occurrence is higher than the other (they can all be given 25% chance). Neither, because the cost of outcome is significantly different but because, the weight of outcome is great, if one does not believe and it eventually happens that God exists.

In investment decision and psychology of crime, what matters is not just probability of failure or probability of being caught, but how big the consequence of failure or sanction if caught.

Likewise, we conclude it is more rational to believe God exists and find out HE does not exist than not believing then later find out HE does.


Educated Presidents are Better Leaders. This is the conclusion reached by Timothy Besley and his co researchers. But prevailing scenario in Nigeria may negate history.

Data on 1654 political leaders in 197 countries (including Nigeria) between year 1874 and 2004 was analysed by those renowned scholars.

They analysed leaders who exit office randomly (death of the leader) by studying a fixed period of time before they came into power and after they left power. They then measured the economic contribution of every leader and how it relates to their educational attainment.

In Nigeria history, three of our leaders so far exited power as a result of death (Sir Abubakar Tafawa Balewa, General Sani Abacha and Alhaji Umaru Yar’adua). Sir Abubakar, was excluded from the analysis for 2 statistical reasons (His death was not random and the leadership fixed-effect was zero, because his regime was treated as base year for Nigeria).

This implies that, the data before, during and after General Abacha and the data before, during and after Alhaji Umaru would have fallen into the dataset if same analysis is to be conducted next 4 years, which will automatically consider Nigeria economic fortune or misfortune during President Jonathan.

The question here posed is: What will Nigeria economy look like, 4 years after the transition of Alhaji Umaru?

Despite the incumbent being the most educated of our leaders (so far), one thing been done differently from others is, scheming for longer stay in Asso Rock from beginning. (IBB waited till midway before becoming a “military president”.  Abacha stylishly worked till 1998 before all political parties adopted him as concensus candidate. OBJ feigned indifference until 2nd term was coming to an end)

General Abacha, was not consider among the highly educated in the research conducted by Professor Timothy Besley and his colleaques (Graduate = 0. College = 1). But looking at Nigeria’s economic figures, 4 years after General Abacha took over power:

Real GDP grew by 10% (N274B to N302B)

Inflation fell from 57% to 11%

External Reserve quadruple  (N67B to N262B)

External Debt fell by about 6% (N633B to N596B) even

Stock Market Capitalisation jumped from N47B to N282B (500% increase).

PTF constructed roads all over the country (not just Abuja) and supplied drugs to rural hospitals. On security front; the country recorded less religious crisis relatively.

Although some other figures were not positive, (such as budget deficit quadrupling) but “economic history and data” can not call such a regime a failure irrespective of the level of education of the then Head of State.

Prevailing situation and data on ground today are not supporting our a priori expectation that a highly educated president will lead to a greater economic growth and efforts expended on tenure elongation don’t give any signal that things will be different this time 2015.

Let Asso Rock get down to work and forget about tenure elongation (at least for now) and focus on providing stable electricity, generating employment, securing lives, among others, because economic history and data (1875 – 2004) expect better economic performance from an educated president.


If we assume that those who are low-paid (people earning below a certain income-line) are poor; we can use the Low-Pay Persistence Theory to conclude that the “The Poor will always be Poor”.

Most proponents of Minimum Wage in Nigeria have highlighted prevailing reasons why the base-pay should be moved from N,7000 to N18,000. Naijanomics is however positing beyond those present advantages to state that earning a Living Wage today goes beyond survival. It reduces the probability of next generation transiting into poverty.

But can Nigeria afford paying a Living Wage (N58,500 –as estimated by Nigerian Labour Congress in 2009)? YES.

But can the government pay the Minimum Wage (N18,000 – as signed into law in 2011)? NO.

Nigeria can afford and sustain the payment of living wage not only to the lucky-few that have jobs, but can also afford the luxury of paying same to the pool of the jobless (extreme economic imagination outside the scope of this writing).

But government will experience difficulty meeting the minimum wage  obligation because we are currently running about 3% budget deficit, in which 58.6% of the N4.2 Trillion is for recurrent expenditure and 12.8% is for debt servicing.

This is no budget review, but a brief gaze into the budget shows that the government will not be able to pay a living wage when almost 70% of entire allocation to Ministry of Police Affairs goes to salary and wages (N2.2 Billion out of N3.2 Billion). But, while the entire Ministry of Police Affairs has N299 Million as capital expenditure, the Office of the Secretary to Government of the Federation has N288 Million to repair general assets, another N299 Million to procure “Non-Tangible Assets” and a salary (N3.9 Billion) that can pay almost twice that of the entire Ministry of Police Affairs.

Another ministry has over N29 Billion to spend in which salary and wages is just barely over 2% (N614 Million) of the entire allocation. Same ministry has over four times (N2.6 Billion) of amount allocated to wages for “Research & Development”.  Construction and provision of fixed asset will gulp almost N22Billion (of course we have been buying transformers and high-tension-cables yearly, since 1999).

These figures may show structural imbalance but a peep into National Assembly, Presidency figures, among others will confirm reasons why the government can not pay.

We conducted an extensive Micro-Econometric analysis of Low Pay Persistence of about 10,000 economically active individuals in different households interviewed for 16 years  (British Household Panel Survey Data -1991- 2006) and we realise that there is a significant state dependence in low pay status in conjunction with some other individual heterogeneity such as educational qualification, geographical location, nature of jobs, and parental background.

In simple explanation; someone who is poor at a previous time (T1) has a high probability of being poor at subsequent period (T2) and “Initial Condition” particularly parental background has a great portion in determining future poverty status.

There is no need comparing the speculated N16 Million monthly earnings of a senator with the newly approved N18,000 pay for the other end, but the realisation that political office holders’ “official income” has increased at a rate 50 times more than other workers (15% increase relative to 800% increase) between 2006 and 2009 calls for action.

We see this action as a necessity and realise that Nigeria as a nation can afford paying her workers a living wage but government’s structural imbalances is making it difficult to even afford the minimum wage.

We conclude that, what these workers need is a “Living Wage” and not “Minimum Wage” and the reason all parties must see it as a “NECESSITY” is because, it does not only deliver the privileged-minority that have a job from the claws of poverty, but it also reduces the probability that their children will be poor.


No one needs to be an economist to understand the classical assertion that “money is sterile” and wealth can only be genuinely created through assets (physical or intellectual assets). But because providers of funds are often different from users of funds; probity demands that returns on used-funds should be appropriated between the two parties.

This return could be a fixed portion of one’s contribution (Interest) or a fixed portion of returns on one’s contribution (Profit Sharing). If this does not look like two sides of the same coin, it is because they are different with reservations. But why the hullaballoo about non-interest banking proposed by Central Bank of Nigeria?

I emphatically declare that there is nothing wrong (in principle or practice) about Islamic Banking. Besides the massive assets controlled by concerned banks (about $500 Billion) with average annual growth rate above 10%; Torah (which provides common dictum for both Judaism and Islam) forbids usury.

But when Central Bank of Nigeria (CBN) decides to designate a specialised Non-Interest Financial Institution to operate under the principles of “Islamic Commercial Jurisprudence” in a country where two brothers are ready to kill each other on varying religious beliefs, I have got some rhetorics for CBN based on the guidelines released.

Why dividing Non-interest banking and finance model into 2 (one based on Islamic Commercial Prudence and the other on “Any other principle)? When CBN could simply license Non-interest banking based on any non-interest principle and allow banks like JA’IZ Bank (and other Sharia Compliant bank like IBB in UK) to define their product compliance?

This categorization will not raise any issue if there are guidelines (in pipeline) for Amadioha Commercial Jurisprudence, Sango Commercial Jurisprudence, Penticostal Commercial Jurisprudence, Protestant Commercial Jurisprudence, Rosicrucian Commercial Jurisprudence, among so many that we know have different business ethics.

We do not need the division the niche categorization is bringing. A non-interest banking licence which enables each institution to tailor its products towards its market of interest would have served all without all this religious sentiments in which CBN seems to be the one playing the drum.

If I were to deposit my cash in a non-interest-giving institution, I will need to know where they are investing my cash into to consider the risk of return and the weight of outcome. And I will certainly recline if it comes to financing gambling, speculation, unjust enrichment, exploitation or unfair trade practices. But when CBN defines “dealing in pork” as a non-permissible transaction (a big segment of livestock farming); is there an economic or religious justification for this?

My last employer in the banking sector then avoided touching livestock financing like a plague simply on business justification but when CBN picks out a particular animal that gives a company like Smithfield Food annual revenue of $12Billion (4 years ago) greater than aggregated internally generated revenue of so many single states in Nigeria within same year (Abia, Kebbi, Katsina, Plateau among others) then CBN creates the avenue for the hullaballoo when each institution could simply decide product areas based on their belief or strategies.

If “murabaha”, (credit that enables customers to make purchases without taking an interest-bearing loan) becomes prevalent; the banks can veer into procurement for customers and avail the goods to customers with margins. There are more technical areas for CBN to handle than simply bringing grey areas of a presumably mere product that has been exalted to a sub sector.

Why requesting evidence of a technical agreement executed by the promoters of proposed institution with an “established and reputable Islamic bank or financial institution” when a technical agreement with a “reputable bank with background in the product/service they want to offer” would have sufficed?

CBN is licensing banks based on Belief-Jurisprudence and they are marked to be regional banks such that they shall be entitled to carry on banking business operations within a “minimum of six (6) and a maximum of twelve (12) contiguous States of the Federation, lying within not more than two (2) Geo-Political Zones, as well as within the Federal Capital Territory (FCT)” and we blame those who accused CBN of regional agenda? A bad reminder of post-election North East, North West, North Central, South East, South South and South West?

The same bank has the permission to receive commissions and fees, all it needs to do is not to share such with depositors (less, it may look like earning income without any outlay)?

CBN is either mixing up facts or simply trying to becloud simple reasoning. Islamic banking was an approved product for former Habib Bank, just the way other specialized products were approved for other banks then but present stature giving to Islamic banking is different and should not be used as history of subject in the discussion.

Likewise the much references to Islamic Banking of Britain; when FSA authorised the first wholly sharia-compliant bank (IBB) in 2004, it was clearly stated that the bank will operate under a single piece of legislation that applies to all.  “The FSA’s policy towards Islamic banks, and indeed any new or innovative financial services company, can be summed up simply as “no obstacles, no special favours”. We are keen to promote a level playing field between conventional and Islamic providers. One thing we are clear about is that we are a financial, not a religious, regulator.”

CBN should give interest-free-banking licence to those considered competent and let each institution carve out its market niche with related products. And whatever name an institution chooses to adopt should be left to them (as long as it does not contravene those exclusive names in BOFIA). Besides nobody will be forced to go and bank with any bank.

No problem with Islamic Banking, CBN is the issue

Soludo evoked the 1st Pillar of Basle Accord (Capital Adequacy) to bring down some functional but marginal banks in 2004. Sanusi evoked the 2nd Pillar of Basle Accord (Asset Quality) to bring down Soludo’s mega but toxic-asset infested banks in 2010. We must know that the 3rd Pillar (Internal-Based Ratings) can bring down any institution built now and customers will always be victims of this financial chess game.