Roman Oseghale's blog

________Leadership and advancement


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Brace yourself……….2016 will be tougher!

Brace yourself……….2016 will be tougher!

The Nigerian Naira has been on a free fall lately and the CBN not able to do anything about it, at a point it even hit N280 to a dollar with a lot of Nigerians complaining and blaming the new government, the economic reality of world events shows that the increasing strength of the dollar is not peculiar to Nigeria alone and the world may be bracing for a tougher 2016.

 

In 2014, with the fall in oil prices, the International Monetary Fund (IMF) reduced its prediction for the world economic growth for 2015 from an estimated 3.8% to 3.5%, a reduction of .3% in total world GDP with Nigeria’s GDP growth reducing from the initial 7.3% projected growth to 4.8%, a reduction of 2.5% and was still the third highest only next to China at 6.8% and India at 6.3% growth and compared to South Africa, Africa’s second biggest economy which grew by only 2.1%. This meant that despite the fall in global oil prices, Nigerian’s economy was still projected to do well above world average, Nigeria was seen as Africa’s engine of growth.

Sub-Saharan Africa’s GDP was projected to grow at 5.8% through 2015 from 5.1% in 2014 surpassing that of the world average and only next to that of emerging and developing Asia that was projected to grow at 6.6%. The European Union projected to grow at 1.8%, Latin America and the Caribbean at 2.2%, Middle East, North Africa, Afghanistan, and Pakistan at 3.9%, with the United States and Canada at 2%.

The Bad News!…….

At the closing end of 2015, the world GDP did not meet the reduced adjusted figure of 3.5%, in fact the world GDP grew by 3.3% and it is project amidst all the global economic chaos to reduce further in 2016 with a projected growth of 2.7% with Sub-Saharan Africa reducing from 5.8% growth in 2015 to 3.5% growth in 2016, this means that the economy of Sub-Saharan Africa will shrink by a whopping 2.3% in revenue and the world as a whole shrink by 0.6% in growth. Apart from America in 2016, the forecast is that the year will be another year of repair, recovery, reform and risk for most countries. (The Economist, 2015)

The Federal Reserve of United States has been speculating that it would increase interest rate for some time, it finally confirmed this last week and further driving up the value of the US dollars in the international market. Why this is so: A strong economy will attract investment from all over the world due to the perceived safety and the ability to achieve an acceptable rate of return on investment coupled with low inflation rate. So the increase in interest rate will cause a massive flow of dollars back into the US economy with corporations, multinational and individuals buying up dollars worldwide to re-invest in the US economy causing disruption in demand and supply of the dollar in the international and local markets.

The second factor is the fall in global oil prices which has also reduced the amount of petro-dollars for oil producing countries like Nigeria, Saudi Arabia and Brazil. With less dollars now coming into these economies and corporations and multinationals moving money back to re-invest into the US due to increase in interest rates, most economies that depend on the petro-dollars as their main source of foreign exchange will face serious challenges in 2016.

The Signs are here!……….

Saudi Arabia……..Saudi Arabia hikes petrol prices by 40% at the pump

With a fall of more than 60% in global oil prices since mid-2014 to below USD$40 a barrel, Saudi Arabia is facing its biggest budget deficit in history of USD$90 billion, the government of Saudi Arabia has had to increase petrol pump prices by 40%. Public revenues are the lowest since 2009 when oil prices dived as a result of the global financial crisis. Saudi income for 2015 was 15 percent lower than projections and 42 percent less than in 2014. (Aljazeera, 2015)

Brazil……Brazil’s Fall: Disaster looms for Latin America’s biggest economy

Brazil, South America’s biggest economy is scheduled to host the Olympic Games in August of 2016, but there is serious doubt if the country can meet up as the country faces political and economic disaster. Fitch became the second of the three big credit-ratings agencies to downgrade Brazil’s debt to junk status on December 16th, 2015. Brazil’s economy is projected to shrink by 2.5% to 3% in 2016 not so different from 2015. Brazil’s problems is even made worse as its political differences has made it almost impossible to tighten up its expenditures which has been riddles with massive corruption in the petroleum sector over the years. (The Economist, 2015). The currency, the Brazilian Real, has dropped to its all-time low since its introduction two decades ago, as at September 23rd, 2015 the currency had lost 35% of its value against the dollar with CNBC describing it as “This Currency’s Collapse is astounding”. (Yang, 2015).

South Africa……South African Rand: 2016 Will be Tough, 3 finance ministers in one week

Barclay’s 2016 forecasts confirms the South African rand is predicted to struggle in 2016, the country has had to replace three finance ministers in one week to find a way to stabilize the economy from its current free fall by restoring confidence to the market, but the move seem not to be working as planned. The currency is struggling in the current global financial market which is characterised by losses in the commodity market. The Rand fell to its all-time low losing over 35% of its value to the US dollars since January with investors withdrawing from the SA economy. (The Economist, 2015).

Mexico……Mexico’s Peso Falls to Record Low against Dollar

The Mexican peso has also been recording a free fall against the US dollars, the currency has devaluation of about 18.3% since January of 2015, dropping to an all-time low since 1993, and the Mexican government revaluation as a rout in commodities followed an auction of oil blocks that many analysts declared a failure. A decline in crude prices discouraged demand when Mexico took its first step toward dismantling the state oil monopoly. (BloombergBusiness, 2015).

Canada…..Canadian dollar recovery will have to wait

The Canadian dollar is at more than an 11-year low versus its U.S. counterpart, Unemployment was 6.6 per cent in November 2014, but 7.1 per cent this year, recent Canadian data, compared with the same figures released in late 2014, show the economy is in significantly worse shape now.

The Others……

The Chinese has had a slow economic growth which has also affected a lot of their trading partners, and their currency, the Euro has had its share of the economic woes but the bottom line still remains most of these countries saved for the rainy days when the oil prices were high. Japan has lost 15.6% of the value of its currency to the US dollars since January 2015, some may say it’s not high but to the Japanese economy it is a massive devaluation.

Nigeria is in a crisis situation and in Crisis situations you take tough and decisive measures other than that you might find yourself in a total collapse of the economy. Those blaming President Buhari for taking these tough and decisive measures must study crisis management and read about how Brazil’s indecisiveness is pushing the country and South America’s largest economy into a deeper sink hole and mess.

The oil Prices might fall further…..

With the depressed market oil prices caused, it is said, by the US and Saudi Arabia not cutting back on production when demand has fallen and the removal of the sanctions against Iran which begins to disappear January 1, 2016. Whether America likes it or not, Europe was going to unilaterally nullify the sanctions in 2016, as they want the trading partner back. There will be a flood of infrastructure sales to Iran in exchange for cheap crude for Europe. Iran has more than 500,000,000 barrels of high grade crude already loaded and ready to ship the moment the sanctions expire. The price of crude may drop to $30 a barrel in the first quarter of 2016. If this all comes to pass the Naira and other currencies from the petro-dollar economies may fall even further posing greater challenges for these economies.


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Of Corporate Governance and Ethics,……….Why Nigerians should stop complaining about the fines imposed on MTN and Guinness Nig. Plc.

Of Corporate Governance and Ethics,……….Why Nigerians should stop complaining about the fines imposed on MTN and Guinness Nig. Plc.

You break the rules, you pay the fine!…………..

Nigeria is any investors’ haven, with a population of almost 180 million and growing at an average of 2.5% annually. Nigeria has a middle class of 23 million making up about 4.1 million households, the largest in Africa and is projected to add an additional 7.6 million middle class household in 16 years. Nigeria has a Return on Investment (ROI) of 36% compared to 6.6% global average and ranked 4th in the world on ROI. Nigeria is a power house for Multinational Corporations.

PIC. 15

Africa has for long being a place where Multinationals break the rules and regulations on Corporate Governance without any consequences due to weak laws, corrupt government officials, international pressure on governments, and the exertion of Corporate Power to subvert justice. Billions of dollars leaves the Nigerian shores every year as in profit to the countries of origin of the operating multinationals without a substantial Corporate Social Responsibility (CSR) to the countries where they make the billions.

MTN Nigeria….Communications, South Africa

In 2001 MTN came into Nigeria with a prospect of 10 million Nigerian customers, within 5 years MTN had 32 million customers, though operating across Africa and the Middle East, Nigeria still remains its biggest single source of profit. (The Economist, 2014). In 2013 MTN posted a worldwide revenue of USD$12.9 billion with Nigeria being the highest contributor of 35% of the total revenue, giving the Nigeria share to be USD$4.52 billion. The worldwide Profit after Tax was USD$2.81 billion.

The USD$5.2 billion MTN fine at the present exchange rate only represents 115% of its average revenue in Nigeria and more than 100%.

Guinness Nigeria Plc…….Alcoholic Beverage, United Kingdom

Guinness Nigeria, a subsidiary of Diageo Plc of the United Kingdom, was incorporated in 1962 with the building of a brewery in Ikeja, the heart of Lagos. The brewery was the first outside of Ireland and Great Britain. Products includes Beer Brewing, Bottling and Marketing of Guinness Foreign Extra Stout, Harp Lager, Malta Guinness and other Beverages. In 2013, the company recorded a total revenue of USD$790.1 million, with profit for the year being USD$76.54 million. (Guinness Nigeria Plc. 2013)

The N1 billion fine imposed on Guinness and at the present exchange rate represents 0.63% of the company’s average revenue and less than 1%.

Europe and North America, the law is supreme!

The calculus of crime

Assessed against this methodology, even apparently hefty fines look pretty weak. Recent big penalties, GlaxoSmith-Kline 10.8% of revenue, Abbott Laboratories 12.3% of revenue, BAE Systems 2.1% of revenue, and Barclays 0.5% of revenue have been far lower than a crime calculus of this sort would suggest is needed, even allowing for the fact that some firms, like Barclays, get discounts for co-operating with the authorities. Britain looks particularly lenient. Its antitrust laws impose fines of up to 10% of revenues; American regulators levy penalties of up to 40%, and the European Commission goes up to 30%.

In some cases companies have been made to pay more than 100% of their annual revenue as penalty, depending on the magnitude of such crimes.

While people are crying wolf in Nigeria, let’s look at some of the fines imposed on Multinational Corporations abroad on the breach of Corporate Governance.

1. Abbot Laboratory………Pharmaceuticals
Crime: Promoted anti-seizure drug Depakote for unapproved usage
Revenue: USD$4.7 billion, Fine Imposed: USD$1.5 billion, Percentage of fine to Revenue: 32%, eventually negotiated to USD$500 million representing 12.3% of revenue.

2. Johnson & Johnson………Pharmaceuticals
Crime: Illegal marketing of anti-psychotic drug Risperdal and other medications
Revenue: USD$9.7 billion, Fine Imposed: USD$2.2 billion, Percentage of fine to Revenue: 23%

3. Halliburton………Energy
Crime: Bribing Nigerian officials
Revenue: USD$1.1 billion, Fine Imposed: USD$579 million, Percentage of fine to Revenue: 50%

4. Intel………Technology/Telecoms.
Crime: Paying manufacturers to favour its products over those of its rivals.
Revenue: USD$4.4 billion, Fine Imposed: USD$1.45 billion, Percentage of fine to Revenue: 33%

5. UBS……….Finance
Crime: Sham accounts destroying documents, tax evasion.
Revenue: USD$2.2 billion, Fine Imposed: USD$788 million, Percentage of fine to Revenue: 35%

6. Siemens……….Technology/Telecoms.
Crime: Kickbacks and Bribes to win contracts in Iraq, Venezuela, Bangladesh, Israel and Russia.
Revenue: USD$8.2 billion, Fine Imposed: USD$1.6 billion, Percentage of fine to Revenue: 19.5%

7. Pfizer……………Pharmaceuticals
Crime: Misbranding painkiller Bextra and promoting it for unsuitable uses.
Revenue: USD$8.6 billion, Fine Imposed: USD$2.3 billion, Percentage of fine to Revenue: 27%

8. British Petroleum BP………….Energy
Crime: Gulf of Mexico Oil spill.
Revenue: USD$30.6 billion, Fine Imposed: USD$34 billion, Percentage of fine to Revenue: 110%

9. Eli Lilly & Co………….Pharmaceuticals
Crimes: Marketing of anti-psychotic drugs Zyprexa for non-approval uses.
Revenue: USD$4.3 billion, Fine Imposed: USD$1.42 billion, Percentage of fine to Revenue: 33%

10. Samsung……………Technology/Telecoms
Crimes: International Price Fixing on DRAM memory chips.
Revenue: USD$9.4 billion, Fine Imposed: USD$300 million, Percentage of fine to Revenue: 3%

11. Timewarner……………Media
Crime: Deceiving Investors about the details of a merger with AOL
Revenue: USD$1.3 billion, Fine Imposed: USD$2.4 billion, Percentage of fine to Revenue: 192%
12. Boeing……………Defence
Crime: Contracting scandal
Revenue: USD$2.2 billion, Fine Imposed: USD$615 million, Percentage of fine to Revenue: 28%

13. American International group (AIG)…………..Finance
Crime: Improper accounting, bid-rigging and skipped payments to state workers compensation fund.
Revenue: USD$14 billion, Fine Imposed: USD$1.6 billion, Percentage of fine to Revenue: 12%

14. Shell………….Energy
Crime: Damage to land in the Niger Delta, Nigeria.
Revenue: USD$26.3 billion, Fine Imposed: USD$1.5 billion, Percentage of fine to Revenue: 6%

15. Prudential Finance……Finance
Crime: Deceptive Trading
Revenue: USD$3.4 billion, Fine Imposed: USD$600 million, Percentage of fine to Revenue: 17%

16. Bank of America…………..Finance
Crime: Allowed a select group of traders to make ‘improper traders’ including after 4pm market close.
Revenue: USD$16.4 billion, Fine Imposed: USD$676 million, Percentage of fine to Revenue: 4%

17. AstraZeneca………Pharmaceuticals
Crime: Illegally marketed anti-psychotic drugs Seroquel for unapproved and unsafe uses.
Revenue: USD$8.1 billion, Fine Imposed: USD$520 million, Percentage of fine to Revenue: 6%

While Corporations are being made to face the full weight of law in developed market, most are clamouring for the safe landing of multinationals who have broken similar rules in Nigeria. Behavioural changes are the most difficult to achieve, and this difficulty is often underestimated. The dangerous assumptions is that if something makes sense then companies will fall in line and change their ways of doing business to conform with the new or existing demand. Unfortunately, this seldom happens as easily as anticipated. Companies do not fall in line simply because they do not either have the skills for the change or the rules are not in their best interest. Most of the above cases did not just happen but were influenced by the populace who are the market and customers, they pushed for the law to be enforced.

Example was the trouble in the North Sea in September 1991 when Shell UK, a member of the Shell Royal Group of Companies wanted to sink its Brent Spar, a large oil storage tanker facility and loading Bowie, a cylinder that stood 463ft high more than twice the height of Big Ben and weighed about 14,500 tons. Since the company could not justify the refurbishing that the facility needed, they decided to decommission the Spar. While the company had to find a way to dispose the Spar, they never chose the best option of recycling but chose what was economical viable to them at the expense of the environment.

Shell UK decided to sink the Brent Spar with all the sludge contained in it, Shell UK a powerful Multinational Corporation and using Corporate Powers had influenced the regulatory body to overlook the environmental impact of their decision. It took the intervention of Greenpeace International an NGO with global interest on preserving the environment, Greenpeace through confrontations, protects, and boycott of Shell’s products forced Shell to step down from their decisions after months of face-offs. We must play our parts and help government enforce laws and in most cases where government are not living up to the standard, we must push and make sure such laws that breach Corporate Governance and Ethics are enforced, and we must not be seen making excuses for these corporations.

While we might argue that the fine is huge, there is always room for negotiations, most of the companies listed above negotiated their fines, it will surely set the tone for future business ethics, and companies will know that government has woken up to their responsibilities.


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Nigeria, identifying the right Leadership between the intelligent and the ability to wield power

Nigeria, identifying the right Leadership between the intelligent and the ability to wield power

“Franklin Roosevelt was a great leader. He saw how to use the levers of power to affect change” —— Pete du Pont

What sets a leader apart is not that he has power, but that he has the wisdom and maturity to use the power wisely, choosing between an intelligent person who cannot wield power and a person who can wield power has always been a major mistake in the ascension to power in most corporate and political settings causing a major setback and in some cases a total collapse in the business activities, leadership positions or government as a whole. You cannot separate leadership from the ability to identify and appropriate the use of power, but the followers must trust the use of such power, the followers must be able to identify and see clearly that it is not just enough for the leaders to exercise such powers, they must see the power as being used to protect freedom and give all people hope for the opportunity to see the fruit of their own labour.

PIC. 14

When such powers are eventually used to protect the people it develops into trust and such trust builds the general output of any organization or country, the trust is a critical factor between the leader and the followers, it is a form of chemistry that cannot be explained in lay terms, it is only explained in the submission of total will of the followers to the direction of the leader knowing and believing without doubt that his instructions represents the general interest of all.

The intelligent has almost in all cases risen to the height of an organisation or government through their ability to fashion out theoretical solutions to problems, they are quick in following some of the best models of solving challenges and problems theoretically, they are seen as fashioning out ways to combat problems with formulas not minding the human psychology of resistance, ego, indifferent and personal interest.

The question has always been on the forefront, how to we pick the next leader or who do we give the leadership role to within an organization or more importantly in government. So between two people who have risen in ranks and are contending for the top job of any organization, between the very brilliant who knows the theory solutions and who cannot wield power and the averagely intelligent who can wield power, who should the organization or country hand over the mantle of leadership.

Most people recognise power as the ultimate control that the leaders at the top of the organizations or government exerts from their positions as being the overall boss down the hierarchy. To think power starts and stops at the formal authority is the biggest mistake most organizations and governments make in picking their leaders, the leadership born from formal authority is just a title attached to an office, without knowing the principles of power itself and how to combine it with the office and title often leads to failure with the consequences as loses borne on the organization or government which in most times results in billions of dollars before the damage is realised

A leader who cannot wield power can be likened to a soldier going to war without his rifle and hoping to stand before the enemy and order them to surrender. The greatest of leaders are those who with their intelligence can also wield power or those in spite of their intelligence are able to wield power. After all some of the Fortune 500 companies and governments that have gone bankrupt or near bankrupt was not because the CEOs or government leaders were not Ivy League graduates but because they lack the style of leadership on how to use power. The leaders and CEOs who had taken over the mantle of leadership to revive the situations were in most cases graduates from the average universities who have trained themselves on the use of power.

There is power at every level of leadership which leaders can access but most fail to recognise them and are often underutilized. A leader might have more power within an organization or government than his subordinate, but if the subordinate wields it more effectively he might exercise more influence within that organization or government, that is the reason some junior staff are more loyal to the managers or general managers than to their CEO’s or heads of parastatals are more loyal to ministers and governors than to the presidency.

The power of position, this is the power that is derived from a person’s title or position within a group, organization or government

The power of charisma, this is style or persona used by a leader to generate influence and used to accumulate power.

The power of relationships, through formal and informal networks both inside and outside of their organizations, a leader is able to build influence and power.

The power of information, Information is power and those who have firsthand information often use it to their own advantage, this form of power is generated through the use of evidence deployed to make an argument and often when it is right you gain favor and appreciation either through from boss or followers.

The power of expertise, this is the intelligent mind, it is the power and influence that one builds through developing, communicating and knowing some special knowledge known only to you or being a genius at using theories to solve challenges or problems.

The power of punishment, this is the ability of a leader to use his position to discipline and to sanction for failure to conform to standards or expectations.

The power of reward, when a leader has the ability and capacity to identify or reward individuals for their efforts and results.

When the top job is given to the intelligent man that cannot wield power

Psychology has it that people are mostly attracted to people who exhibits the traits which they lack, the danger of bestowing the top job whether in an organization or government to an intelligent man who cannot wield power is as dangerous as losing the whole treasury. With time what happens is the leader gather around himself powerful individuals to help him exert the power which he so desires to run the organization. The intelligent in most cases is power derived from expertise, who has been elevated to power of position which often results from rising in ranks of the organization and government, they are often seen as an individual who should not be denied the position because he has worked so hard. The bitter truth is there are different levels of power and the ultimate power of any organization or government lies with the man at the very top.

Very soon what starts to happen is those individuals that help him exert the power he craves for starts to use it to their won advantages, he soon finds it difficult to confront them on any wrong doing since he needs them and their support to achieve his results, for men will always find the opportunity to better their own cause unless they find themselves under a strong leadership to be honest. What eventually happens is the gradual breakdown of law and order as each person he relies on builds their own loyalist within the organization or government. The leader who originally lacks the power of punishment, power of charisma, and power of relationship slowly loses grip on the power of information as people shift their loyalty to the new power block within the organization or government who now exerts more influence through the maximum use of power gained from their new positions.

To gain favor or buy back loyalty most leaders resort to the power of rewards, this is where the organization or government starts to lose money, undue rewards is given to gain favor, and those who are paid for favor soon become sycophants who will never tell the truth but only what the boss wants to hear and still owes their loyalties to those who still hold the influence within the organization or government. A classic example is the past president Dr. Goodluck Ebele Jonathan who was seen as a PhD holder though not out rightly intelligent, he could not wield power.

When the top job is given to the man who can wield power though averagely intelligent.

The averagely intelligent leader but has the capacity to wield power, he is seen as a n nonsense leader, the leader those who lack integrity and honesty dread to work with. The leader though not the smartest person around knows that the only way to accomplish his goals is to enlist the services of intellectuals to work with him. He knows he has full control, he knows the bulk of work stops at his table and he will take the blame for any failure which he is always ready to own up to. He knows his integrity is at stake and he is not ready to compromise it. He would rather push himself and his team to the limit in order to achieve their aims.

He delegates responsibilities and hold everyone accountable, he is not the mean spirited leader, he must exhibit emotional intelligence to a high degree but also make everyone understand that the results expected is the reason they are occupying their positions. Through his power of position he passes down a message that he is in charge and he is not ready to compromise that position. Those he has chosen to help lead are called to high standards because he has control over the power of punishment. So each leader within the organization knows that there is consequences for wrong doings and are always on their toes to do what is right and to call others to the same standards.

The leader exhibit such power of charisma which ultimately pulls people to him and this helps him in building an amazing influence and this influence develops into the power of relationship, people want to associate with him, not just because he is the leader but because there is a connection between them, he has been able to develop a bond of loyalty. This bond of loyalty is the ultimate step to the power of information, those loyal to you will always furnish you with the right information and will never withhold anything from a leader they see as representing their interest. They know whatever they withhold will definitely affect them too on the long run. With the trust the performance becomes unconditional and both the leader and the followers give their best. There must be trust within power to get maximum performance, and with a common vision, attention is focused and it will be a natural process which will boost output and of course this allows the leader the ability to use the power of reward.

The ability to wield power by a leader ultimately affects the performance of people within the organization or government that is why a person can be so successful through performance under one leader and is a failure under another leader while performing the same task.