Roman Oseghale's blog

Nigeria, Education Expenditure, and the Poverty Trap.

Between 1981 and 2016, Nigeria’s GDP grew from $61.1bn to $405bn reaching an all-time high of $569bn in 2014. Yet from 1981 to 2016 Nigeria added 90.4 million people to Poverty which has continued to increase to date.

On the 25th of May, 2018, I had a session on Channels TV on why we have had increasing “Economic Growth” over the years and why Poverty in also growing creating what is called the Poverty Trap for citizens of the country.

Economic growth should lead to Economic Development and further lead to Human Development, while Nigeria has had Economic growth over the years, it has not led to both Economic Development and Human Development.

Main while other countries that have recorded Economic Growth have succeeded in reducing poverty over the same period. China has lifted 789.5 million people out of Poverty, Indonesia has lifted out 78.7 million people out of Poverty, Thailand has lifted 29.4 million people out of Poverty, Bangladesh has lifted 24.3 million people out of Poverty, Malaysia has lifted 2.93 million people out of Poverty, and India has lifted 137.2 million people out of Poverty.

Find out how government’s lack of investment in Education (Human Capital Development) and how school fees has plunged the average family in Nigeria into what is called the Poverty Trap and Economic Stagnation for the country.

Watch the complete session and understand why Poverty will continue to increase in Nigeria despite increasing economic growth.

 

How Deforestation Through Illegal Logging is Fuelling The Cattle Herdsmen and Communal Conflicts.

Nigeria: IntelServe CEO Traces Nigeria’s Socioeconomic Challenges to Poor Funding in Human Capital Development.

Roman Oseghale, Head Consultant and CEO of IntelServe Inc. a Canadian Business Analytical Services Company spoke at the Oct. 2^nd, 2017 edition of The Platform under the topic “Education Funding and it’s Socioeconomic Impact” where he reiterated the importance of Human Capital Development using data to back up his research. He stated that no nation among over 100 countries that has been surveyed in the research relegated education and prospered, everything Nigeria is facing today is as a result of poor education funding, he stated that the blue print for national development was Human Capital Development and that the answer was right in front of everyone but no one is looking in the right direction.

His research and presentation at The Platform revealed how the socioeconomic activities of the country is falling apart because of governments inadequate investment in Human Capital Development (Education and Skills) in the youths of the country. In 2017 with a projected GDP of USD$408.3 bn, a population of 182 million, Nigeria’s education budget is USD$1.77 bn representing 7.4% of the budget and 0.43% of expected GDP at the end of the year compared to USD$3.038 bn in 1981 with a GDP of USD$61.1 bn with a population of 75.7 million which represented about 30% of the budget and 4.97% of the GDP.

Compared to other countries that were surveyed, Nigeria has only spent USD$52.79 bn from the federal level in 46 years despite being one of the most populated countries. Brazil has spent USD$1.6 tn, Chile has spent USD$131.2 bn, Mexico USD$939.8 bn, Canada USD$1.68 tn, United Kingdom USD$2.88 tn, Germany USD$3.74 tn, USA$ 18.01 tn, Egypt USD$161.3 bn, South Africa USD$372.6 bn, Thailand USD$234 bn, Indonesia USD$282.6 bn, and Malaysia USD$214.4 bn to mention a few.

He pointed out that investment in the knowledge economy was the main driver of economic growth, he made it known that because of lack of education investment, Nigeria has continued to slip down the Global Competitiveness Index, from 83^rd position in 2005, to 127^th position in 2010 and has remained at 127^th since…he stated that countries that invest heavily in education were moving up the ranks, examples were Indonesia from 69 to 41, China from 48 to 28, Malaysia which stayed at 25, Singapore from 5 to 2, and Philippines from 73 to 57.

He stated that Nigeria was relatively stable in the 60’s, 70’s and early 80’s and had a balance in its socioeconomic activities because the country was investing in Human Capital Development which reached its peak of 4.97% of GDP approximately 5% of GDP as stipulated by the United Nations in 1981. He stated that the country may not understand the concept of education beyond an institution, a place where knowledge is obtained, certificate and degrees are given, and a tool that moves a child out of poverty, he argued that education was the weapon used in balancing all facets of the socioeconomic activities and as education funding continued to drop those facets of the society started falling apart creating a threat to both social and economic stability of the country.

He pointed out that education is an investment and not an expense, a tool used for economic growth and sustainability and that education is the weapon used to balance the socioeconomic activities of any country, if you destroy education you destroy everything. He stated that once public education is underfunded and destroyed, the country invariably destroys the socioeconomic activities and every facet of the socioeconomic factors starts to fall apart. He stated that education is the glue that holds the socioeconomic activities of a country together, whIle education is the lifeblood of the socioeconomic system, funding is the lifeblood of education. 

The research showed that from 1982 education expenditure started dropping and dropped below USD$1 bn in 1986 and stayed below USD$1 bn, it wasn’t until 2006 that education expenditure climbed above USD$1 bn again in 20 years. He pointed out that education expenditure did not reach USD$3 bn again until 2011, the sane amount government spent in 1981…..it took government 30 years to spend the same amount they spent in 1981 on education. And all the while education expenditure was reducing, population was increasing.

Through his research he was able to point out how Nigeria was ahead of many Asian countries in per capita income in the 60’s, 70’s, and early 80’s because of Nigeria’s investment in Education, but as soon as Nigeria stopped investing in education and the Asian countries picked up, their per capita income grew and surpassed that of Nigeria. He stated that government has abandoned Human Capital Development and it was destroying all facet of the society.

He developed a model which he used in his presentation to show what happens when education is underfunded and how the socioeconomic activities of the country falls apart: Stating that underfunding education leads to fall in Per Capita Income, which leads to population explosion, increase in poverty, with poverty leading to crime, at the same time with poverty also leading to social unrest, and social unrest leading to state/regional instability which leads to economic loss for the country. On the other hand population explosion also leads to environmental degradation which leads to health issues and leads to economic loss for the country.

The research showed how Nigeria’s per capita income started falling after we stopped investing in education, Nigerians were poorer for 25 years without knowing it through fall in per capita income. In 1980 per capita income was USD$871 and from 1981 per capita income started dropping and did not go above USD$871 until 2006 when it reached USD$1,015, first time in 25 years. This is because as level of education and skills dropped, people’s earning power also dropped while spending on education is also recorded in the Adjusted Net savings of the country as investment assets and not expense.

He explained that as people’s earnings dropped population soared, this is because prosperity caused people to have smaller families, uneducated people saw many kids as their assets for old age, educated women used contraceptives, families often choose to educate the male child when in the midst of poverty, and also education delays marriage……women on average stop having kids at age 40, so a girl child given out in marriage at age 15 has a window period of 25 years to keep having kids unlike a girl child that pursues education and graduates at age 24, marries at 26, and starts having kids at age 28….as a working class mother, she only has between 10 to 12 years to have kids. Also working class mothers space out their kids so fertility rate is much more lower compared to a stay at home and uneducated mother.

He stated that Nigeria’s had one of the lowest annual growth rate in the 60’s and 70’s with 1.99% in 1960, Egypt, South Africa, Thailand, Indonesia, Malaysia Chile, Brazil, Mexico, Canada, to mention a few among the surveyed countries all had higher population growth, but the reverse is the case today, Nigeria’s Population growth as at 2014 was 2.66% with an average of 2.52% in 55 years and fertility rate of 5.6% is among the highest in the world, and as population increased poverty also increased.

He stated through his research that Poverty leads to increasing population, and increasing population leads to increasing poverty, as population increases, per capita income continues to fall…from 47% living below the poverty line in 1981, representing 35.6m of the total population, Nigeria’s population living below the poverty line increased to 70% in 2010 representing 114.7m of the population and reaching 120.4m in 2013. By 2014 Nigeria was ranked the 6^th country in the world with the highest percentage of people living below the poverty line. He explained that all the agitations, kidnapping, instability in the country today is as a result of poverty which was caused by our lack of investment in Human Capital Development.

The research highlighted the worrisome part, extreme poverty has continued to drop in the world and by region, total living in extreme poverty as a percentage of population in the world dropped from 52.7% in 1981 to 10.7% in 2013. While the largest regions with extreme poverty has also continued to drop…Sub-Saharan Africa has dropped from 52.8% in 1981 to 41% in 2013, South Asia from 61.4% to 15.1%, East Asia/Pacific has dropped from 78% to 3.5% in the same period.

Nigeria share of extreme poverty as a percentage of people living in extreme poverty in Sub-Saharan Africa has continued to increase….from 17.6% in 1981 to 28.4% in 2011, and to 32.2% in 2013….while Nigeria is 18.8% the population of Sub-Saharan Africa, Nigeria share of extreme poverty is 32.2%…..which means that as at 2013, one in every three persons living in extreme poverty in Sub-Saharan Africa was a Nigerian while in 1981 it was one in every 5.6 persons….while extreme poverty is reducing in Sub-Saharan Africa, that of Nigeria is increasing. Nigeria share of extreme poverty increased by 83% between 1981 and 2013.

The research also showed that among all the largest world developing nations: China, India, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia, Mexico, Philippines,…..NIGERIA IS THE ONLY COUNTRY WHERE GDP IS GROWING AND EXTREME POVERTY IS ALSO GROWING. China reduced extreme poverty from 84% of population in 1981 to 6% in 2017, Indonesia from 72% to 12% with all other countries reducing as well, but Nigeria moved from 47% to 70%.

He stated that as poverty increases, crime increases…..data showed that Nigeria’s prison population increased by 26% between 2011 to 2015 while population increased by 10% during the same period, with offence against properties and offence against persons being the highest. He further stated that as at today, Nigeria has under aged children in prisons because of petty stealing and street trading, stating that while the country has refused to invest in these kids, the country is incarcerating them.

He further explained that the social unrest in the country today, from the North East, South-South, South East, and South West is as a result of poverty and lack of Human Capital Development. He stated that no educated person who is prosperous will become a miscreant to the society.

“The War against Terror is Bound up in the War against Poverty”…..General Collin Powell

The research showed that as at 2013, Nigeria had 10.5m kids outside school which represented 20% of their age bracket, while many claim the number is now more. He warned that Nigeria had the second largest number of kids outside school in the world after Pakistan. While Nigeria is 2.5% of world population, it holds 4% of the total number of kids outside school in the world from the 263m kids as estimated by the United nations.

He stated that of all the countries survey where terrorist cells operates, the countries with terrorist cells had three things in common: Low education expenditure, high poverty rate, and high number of kids outside school. He further warned that we must start to consider the consequences to both state and regional stability as only 87 countries out of 196 countries of the world have populations greater than 10.5m. He pointed out that between 2014 and 2017, a total of 125 kids have been used as suicide bombers in Nigeria with 83 in 2017 alone…..increase of 96.7% in just one year. Group like Boko Haram is using financial incentives to lure kids due to poverty.

Boko Haram has killed over 20,000 since 2010, while over 2 million has been displaced, which has caused the economic loss and stagnation of the North East of the country, while the Gulf of Guinea is now rated the most dangerous waters in the world due to kidnapping and ransom. In 2016, 54 attacks were carried out costing over USD$ 700 in economic damage while about 1000 seafarers were subject to attack in 2015, all were blamed on poverty and lack of economic opportunities with the youths.

Nigeria is also slipping down on all worldwide indexes….from a rating of 118 amongst 163 countries in the Global Peace Index in 2008, Nigeria has slipped down the ladder to 149^th position, while the country has also slipped down the United Nations Human Development Index from 142 in 2010 to 152 amongst the 188 countries rated. This also led to the economic loss for the country which saw FDI reduce from USD$8.84 bn in 2011 to USD$3.13 bn in 2015 (65%) at the height of the Boko Haram Insurgencies.

He urged the government to make every efforts to register kids that were not in school, and also those that are past high school age to be registered to train for one skill or the other to reduce crime, he warned that all global rating on Nigeria was not looking good and government must invest more in Education if the country is to survive global competition as the Global Competitiveness index is mainly driven by education, hence the country will become a dumping ground. With 182 million population, if the youths are not empowered to create wealth, they will become a threat to national security in the country and region as it is already happening.

 

Roman Oseghale, an Architect, Consultant, and a Business Analyst is the Head Consultant of IntelServe Inc. a Canadian company which is into Consulting and Business Analytical Services spoke at The Platform on May 1^st, 2017 on developing sustainable economic growth for Nigeria. Mr. Oseghale argues that Africa which is one of the 6 continents is the richest in Mineral Resources but the poorest in per capita income, he noted that 1/3 (33.3%) of all earths mineral resources is buried in Africa, 2/3 (66.6%) of all global mined diamond comes from Africa, 1/10 (10%) of global oil reserve is in Africa, 75% of all cocoa beans is from Africa, and Africa is home to some of the rarest mineral resources.

Presenting a research that cost him about 600 hours of work, demonstrated how Investing in Human Capital Development has been the secret to how progressive nations have developed a Sustainable Economy and growth over the last 60 years. He stated that the Netherlands which does not grow cocoa processes 13% of all cocoa beans worldwide and Europe and Russia which equally don’t grow cocoa processes 38% of all cocoa beans, and the tens of products manufactured from cocoa are shipped back to Nigeria and Africa to be sold, and while the worldwide cocoa industry is estimated to be over USD$100 billion, Africa’s share is just 2% percent (USD$2 billion) despite producing 75% of the cocoa beans.

He stated through his research that developing a Sustainable Economic Growth ensures both economic and political stability in any country and is the gateway to creating wealth, building confidence in any economy and prevents the devastating and inefficient impact of corporate premature failure and death. Using analysis from both Business Survey and Business Intelligence and gathering both qualitative and quantitative data, Mr. Oseghale took the country back 57 years to 1960 and matched these data along timelines to know where Nigeria deviated from the progressive economic growth of the 60’s and 70’s. He also matched the data with those of 80 other countries across the 6 continents for the 57 years to be sure of his hypothesis.

He stated through his research the direct correlation between education expenditure and per capita income of countries and that all progressive countries were operating the Knowledge Economy, he stated that progressive countries develop individuals and as they earn more or create wealth, it ultimately increases the GDP of the country. He stated that Nigeria and most African countries were still operating the mineral resources economy and if the country was to make progress it must switch over to the knowledge economy and treat education as an investment rather than an expense stating that education is an economic tool for growth and sustainability.

He stated through his research that in the 60’s and 70’s, and early 80’s, Nigeria invested in education pushing to reach the United Nations stipulated mandate of 26% of budget or 5% of GDP on education Investment both on Federal and State levels, and reached an all-time high of 4.9% of GDP in 1981. He argued that for the UN to have stipulated that 26% be invested in Education and 15% in Health, a combined investment of 41% of the budget on investments which has to do with direct investments on human capital only proves one thing…..that Human Capital was the greatest assets and true wealth of a nation and not mineral resources as Nigeria and most African countries seem to think.

The highlight of his presentation was how the research showed how Nigeria was ahead of countries like Egypt and a lot of the Asian countries in Per Capita Income in the 70’s and early 80’s when Nigeria heavily invested in Education and treated it as an investment while those countries did not invest as much in education and treated education as an expense. But the reverse was to start happening from 1982, these other countries started investing heavily in education building a knowledge economy having realised that the knowledge economy was the future and the key to economic growth and sustainability while Nigeria kept reducing its education expenditure and reaching an all-time low of 0.77% of GDP in 1991 and it has remained at 0.8% annually ever since. While population was increasing, Nigeria’s education expenditure was reducing over the years and the country did not increase education expenditure in 30 years.

In 1981 at USD$3.038b representing 4.9% of GDP, Nigeria’s education investment remained below USD$1b for 20 years, between 1986 and 2006, and only climbed to USD$3.3b in 2011 after 30 years. His research also shows that no nation amongst the 80 countries used for the survey and research ever reduced education expenditure for more that 3 to 4 years in a row but Nigeria did not increase hers in 30 years. He noted that Nigeria was the only country that had the highest increase in population between 1981 and 2014 (134.5%) but only increased education expenditure by only 53.7%, while countries like Egypt increased in population by 101.5% and increased education expenditure by 1,709%, Thailand increased in population by 40.1% with increase in education expenditure by 2,625%, and Indonesia increased in population by 68.5% but increased education expenditure by 2,469% in 33 years from 1981 to 2014, and this is the reason these countries are ahead of Nigeria today.

The research also showed that the Federal Government has only invested USD$48.8 billion in education in 44 years (1970 – 2014) despite having a large and fastest growing population compared to countries like Brazil that has invested USD$1.5 trillion, Chile USD$120.5 with just 10% of Nigeria’s population, Mexico USD$882.6 billion, Canada USD$1.6 trillion, United States USD$17.2 trillion, United Kingdom USD$2.7 trillion, Germany USD$3.5 trillion, Egypt USD$148 billion, South Africa USD$354 billion, Thailand USD$218.9 billion, and Indonesia USD$222 billion. He stated that these countries and the others used in the survey treat education as an investment and economic tool of growth and sustainability, and that is why they have a progressive economy.

The research also highlighted the cost of our negligence, how Nigeria’s public education sector and infrastructure is now decaying and the country not able to meet up with the massive number of students seeking university admission yearly. He also stated that most of the kids are now seeking admission outside the country which is now costing the economy billions of dollars yearly, and while we may think the country is only paying school fees and upkeep, Nigeria is losing billions in Intangible assets annually as the country is losing its best brains.

He concluded that government must start treating education as an investment rather than expenditure and must immediately return the country back to the economic model of the 70’s when government invested in Human Capital Development and provided the citizens with the right skills noting that the knowledge economy was the future and no nation has ever recorded progress in economic growth and sustainability with the relegation of education.

He also stated that government should develop skills acquisition centres, stating that education does not just end with students graduating from the universities but they must be armed with the right skills to succeed and increase productivity, which ultimately benefits the country and that government should provide incentives of low interest loans for graduates of skills and acquisition centres who wish to go into manufacturing, he stated that this is the model the Asian countries have been practicing and that’s why they have been able to turn their countries to the manufacturing hub of the world.

 

________Why we must look at data before reaching a logical conclusion!!!…….

Read the full article

https://leadershipandadvancement.com/2017/02/25/the-dollar-recession-obasanjo-jonathan-and-buhari-the-unknown-truth-behind-the-economy/

 

 

________Why we must look at data before reaching a logical conclusion!!!…….

Data allow your political judgements to be based on facts, to the extent that numbers describe realities. ——-Hans Rosling

There are 3 preliminary fundamental factors investors look at before investing in an economy, if these factors are good then they move to the next phase of country assessments before investing their funds… these factors are:

1. Stability (Political, Regional, and State)
2. Return on Investments (ROI)
3. The country’s balance sheet

If these factors are good, investors will flood your economy, but if these factors are not in good order, the investors will either not come in or those already in the country will start divesting their investments…..

In the book “The End of Poverty” by Prof. Jeffrey D. Sachs the renowned Harvard Trained Professor of Economics and Director of The Earth Institute, and Professor at Columbia University describes and lays out the 8 factors that can push a country into what is called “Poverty Trap”……….a situation where it is almost impossible to get the citizens of the country out of poverty. Why countries fail to achieve economic growth and how something as complex as a society’s economic system has too many parts and why you cannot focus on one part alone, and how problems can occur from one part and spread to different parts of the economic system bringing the economy to a halt.

He goes on to explain that just like Clinical Medicine where a simple convulsion can lead to brain problem, or heart problems which can spread to the liver, kidneys, and the rest of the organs of the body and may eventually kill the patient……..in Clinical Medicine, doctors sit a patient down to examine the cause of an illness by taking comprehensive qualitative data like history of the illness in the family, what kind of diet the patient eats, past injuries, etc…….these data are collated and transformed into a quantitative data to help trace the PAST source of the illness, how it affects the PRESENT and should be treated, and how it can be averted in the FUTURE to help the patient live a normal life.

Like Clinical Medicine, Professor Sachs describes Clinical Economics as how to diagnose and trace the cause of every economic problem by looking at all the components and how these components have interacted with one another from the past and how they have brought the economy to its present state. To understand Nigeria’s present economic challenges we will look at the major contributing factors from year 1999 to 2016.

Obasanjo, External Earnings, Foreign Reserve, Excess Crude oil Account, and Foreign Direct Investments……..

Between 1999 and 2008, Foreign Reserve increased by USD$47.75 billion (845%) and Foreign Direct Investments net yearly inflow increased by a marginal of USD$7.2 billion (716%).

When President Obasanjo took over office in May 1999, Foreign Reserve was about USD$4 billion, FDI into Nigeria that year was USD$1 billion, and Crude oil price as at May 1999 was USD$24.5. On average, Obasanjo sold crude oil in 1999 for USD$32, his first 4 years in office Obasanjo sold crude oil at an average of USD$46, and his second term he sold crude at an average of USD$70.6, and overall 8 years at an average of USD$58…….Obasanjo ensured political, regional, and state security.

Obasanjo also had the advantage of privatising most government agencies and companies, BPE was said to have privatised over 400 companies and agencies, and the administration racked in billions of dollars from both non-refundable bidding prices and outright purchase. Obasanjo also had the opportunity of launching the innovation of that time “GSM”…..this also brought in billions for the government…..Obasanjo knowing the essence and strategic importance of an increased foreign reserve decided to save most of the funds from both crude sales and the privatisation exercise. Between the Foreign reserve and Excess Crude Account (ECA) Nigeria had USD$102 billion.

Having a large foreign currency reserve is an important indicator of a country’s ability to repay foreign debt, for currency defence, and also used for credit ratings which ultimately attracts Foreign Investors into the country…….and as Nigeria foreign reserve grew with Obasanjo paying off both the London and Paris Club debts, the increasing foreign reserve was able to defend the local currency (Naira) and the naira started to appreciate, when Prof. Soludo became governor of Central Bank in 2004, Naira was N147 to a dollar and by the time he was leaving in 2009, the Naira had appreciated to N117 to a dollar.

What this means is that if an investor brought in USD$500 million in 2004, by 2009 the USD$500 million will be worth USD$628.3 million (500m x 147/117)……..a whopping USD$128.3 million in 5 years just by investing in the economy, an average of USD$25.66 million per year in profits through the currency (Naira) appreciating……..this is not taking into account profits generated through operations in the country.

“Nigeria reached a deal last October with the Paris Club, which includes the United States, Germany, France and other wealthy nations, that allowed it to pay off about $30 billion in accumulated debt for about $12 billion, an overall discount of about 60 percent”……..The New York Times April 22, 2006.

In 2006, seeing Nigeria’s economic progress Standard and Poor’s, Fitch, and Moody’s started credit ratings on Nigeria, in general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of a country thus having a big impact on the country’s borrowing costs and investments through FDI’s, Nigeria’s S&P credit rating was BB- (stable outlook), by August 2009 S&P moved Nigeria up to B+ (Stable outlook)……..Why?……..With a reduced external debt, increased foreign reserve and external earning of 43% of a GDP of USD$169.5 billion, Nigeria’s balance sheet was looking good, and investors flooded Nigeria. What this means is that we had huge savings (assets), our income was good (revenue), and most of our debt (liabilities) paid off.

“The big three of the credit rating industry, S&P, Moody’s, and Fitch holds 94% of the credit rating market share. S&P includes the factors of the political score, economic score, external score, fiscal score, and monetary score. These broad factors can be classified into two categories and they are political and economic profile, flexibility and performance profile. In terms of Moody’s evaluation process, it includes four factors. They are an economic strength, institutional strength, fiscal strength, and susceptibility to the event of risk. The Fitch’s process for evaluation is quite similar to that of other two”…….Alpha Rating.

“Earlier this year, two credit-rating agencies rated Nigeria’s credit as BB-, which is below investment grade but puts it on a par with developing nations like Turkey, Ukraine and Brazil”…The New York Times April 22,  2006.

At the end of 1999, Nigeria’s Foreign Reserve was USD$5.65 billion and Foreign Direct Investment Net Inflow was USD$1 billion, by year 2004 and Obasanjo’s diversification of the economy Foreign Reserve increased to USD$17.3 billion and Foreign Direct Investment inflow was USD$1.87 billion. By 2005, as Foreign reserve increased to USD$28.6 billion, foreign direct investments inflow was USD$4.98 billion, by 2007 foreign reserved reached USD$52 billion and Foreign direct investments inflow reached USD$6.035 billion……and by 2008 with a foreign reserve of USD$54 billion, Foreign Direct Investment reached USD$8.2 billion. Between 1999 and 2008, Foreign Reserve increased by USD$47.75 billion (845%) and Foreign Direct Investments net yearly inflow increased by a marginal of USD$7.2 billion (716%).

Explanation in Layman’s Term: Suppose you want to invest in a company, you look at the balance sheet…..the assets which is equity plus the liability…….if total assets exceeds total liability (debt) then you know the business is solvent, it can pay its debts, if total assets is increasing and liability decreasing, then you know it’s a good company, but if total liability (debt) is increasing and assets reducing then it is not a good company to invest in.

Or if you want to loan money from the bank…..what the banks does is calculate your net worth, your assets plus your liabilities……this will give the bank a total of what you are worth, but it does not stop there….the bank also looks at your income to see if you are able to service your loan….once your assets exceeds your liability with a good margin and you have a good income to service your debt the bank approves the loan…..this is how the credit score of an individual is calculated.

This was exactly what Obasanjo did with the economy……..he increased Nigeria’s assets (Foreign Reserve), reduced our debt (London and Paris Club debt), and our external earnings (Income) increased as a percentage of our GDP……..this increased our credit ratings and investors flooded the country. This basically showed the investors that the economy was properly managed and it boosted their confidence.

Jonathan Administration!..…Data Shows the FDI had been shrinking since beginning of 2012, and the Economy was in Steady Decline with companies moving their funds out.

During the late President Musa Yar’Adua’s tenure in office before his death…..in fact Obasanjo left USD$52 billion in the Foreign Reserve, it was Yar’Adua who increased it to the all-time high of USD$62 billion, what Yar’Adua did was to follow the economic policies of Obasanjo….which boosted investors’ confidence.

When Jonathan assumed office he started out by doing the direct opposite of what Obasanjo had done, the direct opposite of economics……..he was decreasing the Assets (Foreign Reserve), increasing debt (Liabilities) and at the same time External Revenue (Revenue Income) was decreasing. This greatly affected the economy…..most people failed to look at data and hence don’t know this fact……those who support and commend his administration support out of ignorance…..

From 2009, the Jonathan Administration should have seen the warning sign, in fact the warning signs were there but greed they say blinds everyman from reality, as the US produced more oil so did they cut down on import and Nigeria being a monolithic economy that depends on about 90% of its external earning from crude started to take the hit…

The blame has consistently been heaped on President Buhari and his body language, with many claiming that the President brought the economy of the country to a standstill by causing investors to leave the country……but a critical look at the data says otherwise…..Like Investments banking which follows the flow of liquid cash, Foreign Direct Investments follows regional or a country’s stability, Return on Investments, and a country’s good balance sheet.

Amidst the growing believe that the economy was healthy, the economy had been in a steady decline since 2011, Foreign Direct Investment had been reducing, and most of the companies must have been following the country’s balance sheet and security situations, and in-house economists and consultants warning of the dangers ahead.

By 2010 when Jonathan became President, our External earnings as a percentage of GDP had started falling as compared to the size of the GDP…….25% of the GDP….it meant that our External Earning was not growing but our GDP was increasing. Nigeria at this point still enjoyed the S&P rating which put the credit rating of the country at B+ (Positive outlook) till December, 2011.

While crude was sold at an average price of USD$110 per barrel, the depletion of the foreign reserve had not started taking its toll on the country’s balance sheet at this point…..and ironically this was the same time HRH Lamido Sanusi Lamido, then governor of Central Bank started raising the alarm over the long term implications of depleting the foreign reserve. Still enjoying the ratings, FDI reached all time high of USD$8.841 billion in 2011….by this time regional and state security started breaking down.

All that was to change at the beginning of 2012, the depletion of the foreign reserve started taking its toll on the balance sheet of the country coupled with the fact that debt was increasing, by the end of Jonathan’s tenure his administration had added USD$21.8 billion, as debt increased, foreign reserve decreasing, and external earning decreasing, investors started becoming weary of investing in the country as confidence declined in the market.

By 2012, S&P had downgraded Nigeria’s credit ratings to BB- (Negative), this grading according to the Credit ratings is below investment grade, and as soon as they did this investors’ confidence eroded from the market, this rating remained till March 2014 when Nigeria was now placed on BB- (Negative watch outlook) what this means is that they had to monitor the economy……by this period external earnings had reduced to 18% of new GDP…….Nigeria’s credit rating remained in BB- (Negative) till February 2015, it wasn’t until March 2015 before it moved to B+ (Stable outlook) just days to the elections…….while the dollars that should have been saved found their ways into the economy expanding it, making it look as if it was good, the opposite was happening to the balance sheet of the country, people spent like there was no tomorrow, but refused to understand the long term economic consequences.

Ironically……this was the same time Nigerian’s were celebrating Jonathan, but the implications was to follow……….in 2012 as Nigeria was getting ready to rebase its economy showcasing that it was now the biggest economy in Africa……investors were staying away, by 2012 FDI had reduced from a yearly inflow of USD$8.841 billion in 2011 down to USD$7 billion in 2012……by 2013 FDI net inflow had further reduced to USD$5.6 billion, by 2014 with a foreign reserve of USD$37.5 billion…..FDI net inflow further reduced to USD$4.6 billion, and by 2015 with a foreign reserve of USD$31.3 billion, FDI net inflow had reduced to USD$3.1 billion. All time low since 2004.

It was simple!!!!!!!…….investors had seen it coming……Foreign Reserve was being depleted, debt was increasing, external earnings was decreasing……the US which is Nigeria’s biggest oil customer was now producing oil and buying less quantities from Nigeria, and above all, Nigeria as a monolithic economy where oil accounts for about 90% of its external earning…….if crude price should fall they will lose the value of their investments. From 2009 to 2015, Nigeria’s foreign reserve had reduced by about USD$31 billion (50%), ECA reduced by about 95% and Foreign Direct Investments net inflows reduced by a marginal of USD$5.712 billion (65%)……companies had seen it coming and have been moving their funds since 2013……

On February 23, 2015, before the presidential elections the Vanguard Newspapers reported “Capital flight: Economy hard hit by USD$22.1 billion outflow in 5 weeks”….in a survey made by CBN, the apex bank confirmed that USD$22.1 billion went out of the economy in 5 weeks with an average of USD$4.5 billion per week. USD$3.083 billion went out the week ending 31st July, 2014, USD$4.2 billion the week ending 30th, August, USD$4.1 billion week ending 30th of September, 2014, USD$5.29 billion week ending 31st October, 2014, and USD$5.35 billion week ending November 30th, 2014.

“A great deal of intelligence can be invested in ignorance when the need for illusion is deep”……Saul Bellow

Nigerians must not invest a great deal of intelligence in ignorance because of the dislike they have for the president who have stood his ground that it is no longer business as usual…..it is tough, but Nigerians must understand that the economy cannot collapse in one month….it is a series of systematic failure over a period of time. Those who saw the problems in its anticipatory stage, the reactive stage and did nothing before it got to the crisis state are those that did the damage.

For those blaming the presidents body language and policies…..data don’t lie, foreign companies spend hundreds of millions of dollars annually studying market, industry and world business trends before investing, those who have already invested perform either quarterly, bi-annual, or annual review of whatever country they are operating considering these factors, and if they perceive any danger, they divest their funds and move the funds out while they may still remain in the economy for skeletal operations.

Analysing Nigeria’s Balance Sheet and its Credit Ratings……..2006 to 2015

As President, Obasanjo managed the economy with a good balance sheet for the country…..this was what attracted FDI’s into Nigeria. Between 2008 and 2009…..we had USD$102 billion between the Foreign Reserve and the Excess Crude Oil Account (ECA), this represented our assets and was also our Equity. Our liabilities (debt) had being reduced and our External Earnings (Revenue Income) as at 2006 was 43% of our GDP. What this means is that our DEBT TO EQUITY RATIO was low, our Equity superseded our debt, and this was why Nigeria was moved from BB- to B+ in 2009, this was a good balance sheet for investors.

By 2010 the depletion of the external reserve started, and with sales of Crude oil averaging USD$110 per barrel a year, and nothing added to the External reserve, by 2012 Jonathan’s government had started borrowing which further compounded our problems and the country’s balance sheet……by the time Jonathan was leaving External Reserve (Assets) had been reduced to USD$31 billion, Excess Crude Oil Account (Assets) empty, he had increased Nigeria’s debt (Liability) as confirmed by Okonjo-Iweala by USD$21.8 billion to reach USD$USD$63.7 billion, External Earnings as Percentage of GDP (Revenue Income) was 18% of GDP……..which meant that our liquid assets had been reduced from USD$102 billion to USD$31 billion, and our liabilities increased from USD$40 billion to USD$63.7 billion.

This was the disaster!…what this means is that he reversed everything……our DEBT TO EQUITY RATIO as a nation now became higher,……this was the reason that from 2012 when the debt started increasing, our credit ratings started dropping, FDI’s started reducing into Nigeria and were taking out their funds….though Nigeria’s external debt as at 2015 stood at about USD$10 billion, up from less than USD$4 billion Obasanjo had left it….the rest being internal debt…..the problem is that Nigeria does not have a structured system where government can raise taxes to pay these debts, hence the burden on the payment still much rests with government revenue from oil.

IS DEBT BAD????……..OBVIOUSLY NOT!……..But this is the difference, China has a Debt of USD$27 trillion (Liability) though over 90% in internal debt and an External reserve (Liquid Assets) of about USD$3 trillion, China has a DEBT TO EQUITY RATIO of 9 to 1, if we do not value its fixed assets……China’s borrowings (Liabilities) are being converted into fixed assets…..so when you eventually value the TOTAL ASSETS of China it might be greater than its Total Liabilities or a little below it. That is why China’s credit ratings has revolved around A-, A+, A2, A1, Aa3, AA-…..all graded by S&P, Fitch, and Moody’s…..you can see why investors are flooding to China.

SO how did GEJ and Okonjo-Iweala get away with it?…….it was simple!……..dollars flooded the market through both spending and corruption……which falsely created a healthy economy but with a bad balance sheet.

1. All the Excess crude oil sales were diverted into private pockets that eventually ended up in the economy which would have given Nigeria between USD$30 billion to USD$40 billion.
2. Depletion of the foreign reserve ended up in private pockets and flooded the economy…USD$31 billion.
3. The emptying of the Excess cruse account…..USD$40 billion
4. The borrowing of dollars was used for re-current expenditures (salaries and travels) and they also ended up in people’s pockets and flooded the economy……..USD$21.8 billion.

In essence the supply of the dollar was so much that it created stability for the demand in the economy even when the companies were mopping funds and leaving.

President Buhari and his many challenges!…………

The dangerous assumption is that if something makes sense (at least to the people proposing it) then everybody will fall in line and change their ways of doing things to conform with the new demands. Unfortunately, this seldom happens as easily as anticipated. People do not fall into line, sometimes because they just do not have the understanding and the skills required, and sometimes because they perceive, accurately or not, that the changes are not in their best interests….. From the book “Strategic Analysis and Actions”

What Buhari simply did was to open the books and show Nigerians the true reality of things…..the Jonathan administration only gave the illusion that all was well while things were going bad…..the credit ratings, limited inflow of FDI’s and massive withdrawals of dollars by companies are there to confirm this.

What Buhari is simply doing which many do not understand is the fact that he is restoring the three preliminary factors that encourage Foreign Direct Investments, namely?

1. Stability (State and Regional).
2. Increasing the Foreign Reserve to defend the Naira which will increase ROI for investors.
3. And as Foreign Reserve is increased, it increases the assets base of the country and puts the country’s balance sheet back in green….

Without these factors in good conditions no foreign investors will want to come into the economy, those who feel the president don’t know what he is doing don’t really know how things work…..these are what he is doing and he is taking them one by one because they demand huge funding.

While oil companies were still operating in Nigeria and trying to break even with the new oil prices…..the Niger-Delta militants reduced the country’s capacity from 2.2m bpd to 1.4m bpd…..reducing Nigeria’s capacity by 800m bpd (36%)…..the implications of this is as oil prices fell, companies need more output to break even….so a company that is allocated 300,000 but can only pump 180,000 because of the reduced output might not be able to breakeven…..such company will not wait, they will move their funds to where they are able to make profits….as corruption fights back the economy suffers….the truth is we are our own worst enemies….money does not remain idle, it is always looking for where there are opportunities.

Buhari has been able to restore if not in total……about 95% order back to Borno State and the North East where Boko Haram held sway for years under Jonathan…..regional and state security is one of the main drivers of FDI’s. Buhari is massively investing in Infrastructure…..he has paid for most of the railway lines and construction is fully going on…and most of the funding to be paid for the projects under his administration to take off he has paid…..all with selling crude oil at less than $55 per barrel, output of 1.4 m bpd and he is still increasing the foreign reserve. The recently oversubscribed Euro bond show that investors’ confidence is returning to the market but all these will not happen overnight.

The United States Economy, Fracking, and Crude Imports!……

By end of 2016, the US trade deficit had reached USD$762.5 billion, Budget deficit had reached USD$590 billion and total debt was at USD$19.9 trillion. Without closing both trade and budget deficits, debt will continue to increase.

President Barack Obama inherited a USD$10.4 trillion debt, after he  took office and had to fix the economy, the United States had to borrow massively and as at the end of 2016, the US debt stood at about USD$19.9 trillion.

Apart from borrowing to finance the wars and fixing the economy, the United States have been recording both trade and budget deficits for years. By end of 2016, the US trade deficit had reached USD$762.5 billion, Budget deficit had reached USD$590 billion, Without closing both trade and budget deficits, debt will continue to increase No sitting government likes to raise taxes…why?…..they become unpopular, so the only option is to keep borrowing and each time the government does that the debt increase.

According to the US Energy Information Administration, in the year 2000, fracking accounted for less than 2% of the United States oil production, by 2016 Fracking accounted for more than 50% of the United States oil output.

Prior to 2008, US multinationals had been investing in Hydraulic Fracturing Technology but yielding very little dividends and results, but all that was to change when technology started getting better paving the way to extract crude from huge shale deposits. According to the Energy Information Administration, in the year 2000, fracking accounted for less than 2% of the United States Internal oil consumption, by 2015 Fracking accounted for more than 50% of the United States oil output.

From just 23,000 fracking wells in year 2000 producing 102,000 barrels of oil per day, the US now has 300,000 fracking wells pumping out 4.3 million barrels per day……a whopping 3500% increase in output over 16 years……

By 2009 when the Obama administration took over the Whitehouse, government had to embark on a massive economic bailout to avoid a collapse of the economy, by this time fracking technology had started yielding positive results and the administration seeing the positive impact of reducing trade deficit through local oil production supported the industry with policies in 2013. By 2015, the US Senate also threw its weight behind the move by approving a measure to lift the 40-year ban on crude oil exports as part of a USD$1.1 trillion spending bill approved that will fund the US government until 2016.

From January 2009, oil output from Fracking continued to increase with a decline in net import, by September 2013, both Crude oil Net Imports and Production reached an equilibrium of 7.79 million barrel per day, and by May 2015, the United States Crude production had reached 9.69 million barrel per day and import reducing to 6.62 million barrel per day.

Recommendations………

We cannot continue to depend on oil…..the US output is now more than its import and for Nigeria to survive its economic challenges it must diversify its economy. Nigeria is a country to 180 million people with about 53% falling within the working age group, the country is a powerhouse. The country needs constant power to drive industrialization, we must make this the focus of this administration, for if the government does not put the population to use through productivity chaos could set in.

Oil Multinationals in the US are now pumping millions into research and development to better the processes and procedures of fracking to bring down the prices, the challenges ahead now is if crude from fracking is delivered at $50 to the International market tomorrow, we would be forced to reduce price to below $50…..what happens when Fracking delivers crude at $30 per barrel?….we must move away from crude if the economy has to survive.

Nigeria is a country of 180 million people with over 53%, over 90 million within the working age group, diversifying into massive manufacturing is the best way forward for Nigeria, and the country can supply the whole of Africa using its strategic location.

Government must have a strategic data management centre to that translate data to economic indices for government use to either support existing policies or change policies when data shows a different thing happening in the market.

Playing the Clown to Divert Attention…………

From the book……48 Laws of Power: Law #21 “Play A Sucker to Catch A Sucker- Seem Dumber Than Your Mark”. Misdirection is one of the most valuable strategies for business, marketing, and even game. Play stupid!.

Truth be told…99% of the people never saw Trump as the so called “moron” and other names he was called before this election….Trump was seen as a brilliant businessman…. Though he has been a public figure most of his life, Trump never talk so stupidly in public like he did during the campaign….the name Trump was a Brand…and you don’t build a brand by being an “idiot” or a “moron”….or in other words…can a so called “moron” or an “idiot” build a USD$3.7 billion empire?….

Learning to divert people’s attention by looking stupid from your real intentions gives your victims an aura of confidence….confidence that makes them believe you can’t think smarter than you are acting.

Trump planned all the way to the end using another of the strategic law……while Hillary and her campaign team stopped and changed strategies to manage damage control……Trump didn’t care about the damage…in fact he escalated it….why?…..because that was the real strategy to blind the opposition…..he gave us all so much to talk about….his stupid acts, his immoral behaviors, the impossible things he said he will do.

While the media was constantly analyzing Hillary Clinton’s campaign strategies and mapping out the key States she will win….the media was analyzing Trumps stupidity, careless talk, and lack of experience!….he gave them a sense of superiority and this totally disarmed the suspension of his strategies.

Trump made Hillary Clinton and her campaign team feel smart…smarter than him….by doing this we all concentrated on his “Acts” rather than “Campaign Strategies” while he concentrated on Clinton’s campaign strategies. Looking back…….he was ridiculed and laughed at by Clinton and the Media after every debate, Clinton felt superior and boasted of experience!

Trump wore expensive saggy oversized suits….talked in a lousy manner….and we all concluded this can’t be the next US president!….but Trump reached out to the dissatisfied…those in the hinterlands, remote villages and rural America….those who felt left out…those who did not care how he talked or dressed…..those who had the geographical spread and coverage to give him electoral college votes rather than popular votes…..that was the strategy…..

When bloomberg.com released an article on Nov. 10th, 2016 titled “Trumps data saw a different America…and they were right”.

Trump concentrated his efforts in those places to secure his electoral votes…….his data team had seen it….Hillary Clinton, the media and the whole of America concentrated their efforts on Trumps Character…..the very thing he wanted everyone to see….he completely diverted everyone’s attention from where the decision makers were. While he played the character of a nuisance in the city….he held on to the ideologies of people in rural America.

Having traveled 38 hrs driving through the hinterlands, villages, and rural America in July….I noticed all the houses had Trumps banners and posters….The Democrats failed to notice this because they felt Trump was so stupid….

Till the end Hillary Clinton and the democrats believed victory was theirs…..Trump challenged the fairness of the elections….making everyone believe he knows he will lose…..Hillary and the Democrats prepared for a victory speech at the Mighty and grandiose Jafits Center using the American map colored in blue as the stage, decorated with the best hands, and witnessed by thousands…

Trump on the other hand chose a medium size hotel with hundreds in attendance……..no aura about the stage…..it exemplified one who was not sure of victory…..he never gave a hint about his strategies to the very end…..and to perfection!

The Chinese have a phrase…

“Masquerading as a Swine to kill the Tiger…..the hunter always has the last laugh…..masquerading as a swine works wonders on those who like the Tigers are arrogant and overconfident…….the easier they feel they can prey on you the easier you can turn the table on them”.

The man the media called “moron” and an “idiot” is today having the last laugh…..

 

____How the ghosts of Nigeria’s dead agencies and institutions are coming back to hunt the economy.

This is part I of a four series write-up addressing each institution or agencies as an engine of economic sustainability.

There is no free lunch in economics, if you plan and invest today you will reap in the nearest future, but if you fail to plan or invest today, you will suffer the consequences in the future.

There are 25 rich countries in the world and they all have something in common…..they invest in building strong institutions, and countries from the developing world that has followed this economic model are on a sustainable growth path……..No nation has ever survived or retained Economic growth with dead agencies and institutions, they are what help sustain organic or generic growth in an economy and help reduce or stop capital flight, in short they are the backbone of any economy…..this is why President Buhari must resuscitate these agencies and institutions if the economy must grow, survive, remain sustainable, and reach its potential.

Common sense will tell anyone that Nigeria had a striving economy and a strong currency in the 70’s and early 80’s when the country had strong working agencies and institutions which included:

1. Good and well-funded educational system.
2. A well-funded and managed healthcare sector.
3. Security (Police)…. Stability and protects both local and international tourism.
4. Transportation…….A Striving Aviation Sector (Nigerian Airways), Nigerian National Shipping lines, and the Nigerian Railways.
5. A working petroleum refinery sector, and a growing manufacturing sector.

As corruption destroyed these agencies and institutions, people sort for their services outside the country resulting in capital flight and putting a strain on the country’s dollar reserve.

I wrote an article in June 2016, and titled it “Nigeria, the Illusion that was Called a Growing Economy” highlighting how the economy was not sustainable because we neither have the factors that grows an economy in an organic or generic manner and the agencies and institutions that helps sustain such growth, comparing it to that of South Africa and some other world economy and why South Africa may overtake that of Nigeria again. By mid-August 2016, that forecast had come true……why?……it was very easy to forecast.

First, Nigeria has no other major source of foreign earning exchange except from the oil and gas sector, second, as oil prices fell creating a deficit in trade balance and shortfall in the dollar reserve, government will continue to tighten the nozzle on importation by reducing the dollars available for import and that will cause increase in demand resulting in increase in the value of the dollar against the Naira. Third, the agencies and institutions that would have helped retain dollars within the economy and stop capital flight are all dead hence as people seek for their services offshore it causes massive outflow of dollars and increasing demand.

While there is so much emphasis on the petroleum refining and manufacturing sectors, emphasis are not given to Education, Healthcare, Aviation, and Marine……these sectors are actually the most volatile, if these sectors do not exist or cannot provide satisfactory services, the citizens are bound to look for them elsewhere, and as they go beyond the shores of the country to seek them, they result in capital flight putting a strain on the Dollar and ultimately increasing its value against the Naira..

The dead or non-existence of these agencies is actually a double jeopardy for the economy…..even if these agencies were working, the simple principle in economics is that when people get richer import tends to increase, that is because they are able to afford more luxury and foreign products increasing the number of container vessels coming into the country, afford to send kids abroad to school, go for medical check-ups abroad, travel more for holidays abroad…..so you can imagine what will happen in a growing or expanding economy when the country provide substandard or cannot even provide these services.

An Unstable Currency and a Fluctuating GDP…..

Nigeria may continue to have the biggest economy for a while in Africa in term of nominal GDP, but calculating inflation and currency depreciation and converting to dollars which gives the Real GDP, South Africa will continue to have the edge….this is because they have less inflation and currency is very stable compared to the Naira…..these agencies and institutions are what help sustain their economy.

This was the reason why at the end of 2015 Nigeria’s GDP was USD$481 billion and by Mid-August 2015, eight months later the GDP had dropped to USD$296 billion a whopping USD$185 billion. There is too much pressure on the dollar and it is causing inflation and depreciation.

President Buhari and the Fight against Corruption……..

What kills institutions?…..it is corruption, the obvious truth is we will only be deceiving ourselves if we think we can grow healthy institutions with corruption rampaging the country. Buhari knows this too well and that why he said “if we don’t kill corruption, corruption will eventually kill us”…corruption is the largest obstacle to economic growth and sustainability, the president knows this too well and that is why he has thrown all weight behind the fight.

It has robbed us of healthy agencies and institutions mentioned above and the economy suffers the consequences today, with these agencies and institutions dead, resuscitating them with funds that will eventually be stolen will only bring us back to square one.

Agencies and Institutions that Help Sustain Economic Growth………………

“Good and working institutions are the lifeblood of any economy”

Without reviving and investing in these agencies and institutions, the economy will continue to be subjected to capital flight, the unfavourable crude oil prices has exposed the huge demand on forex these institutions continue to impose on the economy, without these agencies and institutions being able to generate a trade surplus or balance for country the economy will continue to collapse during bursts due to trade deficits, they have become the loopholes and drain pipes in the Nigerian Economy.

1. Education!…………Nigeria’s Underfunded Educational System.

Education is a Massive Source of Foreign Earnings for other Countries and a Drain for Nigeria.

Note: Nigeria has the highest number of students per capita studying outside the country in the world.

In the 70’s and 80’s, students from other parts of African came to Nigeria to school, but today the reverse is the case, another factor is the growing population and the government’s inability to use data and statistics to plan. If you want to know how the government has failed over the years in expanding the schools to accommodate the growing population, just go back to the public primary school you attended and see if a block or an additional primary school has been added in that area since you left, then find out what the population of that area was over 40 years ago you attended the school.

Every year about 1.5 million secondary school leavers sit for exams to gain admission into either private or public universities in Nigeria but only 600,000 are granted admission, so what happens to the other 900,000 students?..….this is a humongous figure to be overlooked by the government, in fact it is disaster for the economy. What we have failed to understand is that our negligence has become a massive gain for other countries and a massive drain on our foreign reserve and it is exerting massive pressure on the economy.

In 2014, the Guardian UK released the UNESCO rating for top 20 countries that attract international students, The United States was top on the list with 740,482 students, followed by the UK with 427,686, and France with 271,399. Two African countries made the list, South Africa 11^th with 70,428 students and Egypt 19^th with 49,011 students. The interesting thing however is how much these international students inject into these economies, the US Department of Commerce announced in 2015 that International students contributed more than USD$30.5 billion to the US economy, that is an average of USD$42,000 per student annually from school fees and consumer spending. International students contributed GBP14 billion to the UK economy in 2015, and expected to reach GBP26 billion by 2025, AUS$19 to the Australian economy, and USD$8 billion to the Canadian economy.

This is not surprising considering how much these countries invest in education and invariably setting a standard that attracts foreign students and limiting mass exodus of students from their countries, the U.S annually invests an average of about 15% of total Government Expenditure on education, that is about USD$595 billion of its USD$3.95 trillion budget for 2016, and spends an average of about 5.2% of its GDP on Education, that is about USD$940 billion of its USD$18 trillion economy. The UK invests an average of about 13.2% of total Government Expenditure on education, about GBP102 billion of GBP772 billion annually, and about 5.5% of its GDP on education, that is USD$156.7 billion of its USD$2.85 billion economy.

If we choose not to compare Nigeria to the Mighty United States and Great Britain, one thing is certain from the top 20 countries that attracts foreign students, they all invest massively in education. Coming home to Africa, the South African government has demonstrated the same model of investment in their economy, government’s total expenditure for 2016 is R1.46 trillion (USD$106 billion), and 20% is to be invested in education, that is USD$21.2 billion, and has always averaged between 19% to 20% annually. The Egyptian Government Expenditure on Education in 2014 was EGP105.3 billion (USD$12 billion) from an EGP790 billion (USD$90 billion) budget, representing 13.3% of the budget.

Nigeria’s investment in the educational sector is pathetic, looking at the 2016 budget and all subsequent budget over the years, it clearly shows government neglect of the sector which has led to the decadence the sector faces today. From the N6.07 trillion 2016 budget, education got N369.6 billion representing 6% of the budget, the interesting part is the N369.6 billion only has a value of USD$1.16 billion, even if we use the old exchange rate of N155 we are only going to get a little above USD$2 billion.

The disturbing part is this, Nigeria with a population of 180 million people has an estimated population of 62.3% between the age brackets of zero to 24 years, which is 112 million people, this is the educative age from kindergarten to being a first degree graduate, yet the country only invests USD$1.16 billion on its future leaders. South Africa with a population of 54.9million (about 30% of Nigeria’s population) has 46.4% between the age brackets of zero to 24 years, representing 25.4 million of the population and the government invests USD$21.2 billion on education. Egypt with a population of 94.6 million people (about 50% of Nigeria’s Population) with 52.5% of the population falling between the bracket zero to 24 years and representing 49.6 million of the entire population spends USD$12 billion on their educational sector.

While the United States Government spends an average of about USD$10,000 per student annually, the UK government spends SD$9,500, the South African Government spends USD$1,200, the Egyptian Government spends USD$280, the Nigerian government spends an average of between USD$10 (Ten) to USD$15 (Fifteen) annually per student.

WE CAN ALL SEE WHERE THE PROBLEM LIES……….government’s failure to invest in education over the years created a steady decline in both expansion, infrastructure, and services. The graph shows government’s neglect in education expenditure declining from 1981 to 2006 before it started picking up again……….25 years of neglect in funding coupled with a period of massive population explosion resulting in decayed infrastructure and services, the graph only goes to explain the trend that characterized Nigerians schooling abroad.

From 1985 to 2005, the Nigerian government spent USD$1 billion and below on education…..during the 70’s and early 80’s Nigerians schooled at home and those who travelled went for either a Master’s Degree or a PhD, only very few from either very wealthy homes or on government scholarship did their BSc abroad. But in the late 80’s when the schools started feeling the impact of the neglect, standards started falling, students started leaving for BSc abroad, and by early 2000…….secondary school students also followed.

The truth is diversifying the economy through manufacturing or agriculture is not the solution…..this is because as the economy improves and people get richer and can afford these services beyond the shores of Nigeria, the mass exodus will increase and will continue to put a strain on the economy. Example was the diversification of the economy in the early 2000 which created a larger middle class and increased Nigerian students in foreign schools by 71% between 2007 and 2010.

Population Explosion and a Decreasing Education Budget……………

In 1981 Nigeria had a population of 76 million people and a GDP of USD61.1 billion of which about 45 million fell between the educational age brackets of zero to 24 years and government expenditure on education was USD$3 billion representing 4.9% of GDP, from 1982 the budget on education started its decline, and by 1986 it had fallen below USD$1 billion annually up until 2006 before it was increased to USD$1.196 billion……by this same period the Nigerian population had increased to 143 million and about 89 million people were now between age brackets of zero to 24 years.

By 2010, with a population of 159 million people and about 98.6 million between age brackets zero to 24 years, a GDP of USD$369 billion, the education budget was USD$3 billion the same it was 29 years ago in 1981 but this time around representing 0.81% of GDP…….less than 1%, …..a whopping 109.2% increase in population but zero increase in education budget. The irony is that by 2016 with a population of 180 million people and 112 million between age brackets of zero to 24 years the education budget has declined to USD$1.16 billion….136.8% increase in population from 1981 and a -61.3% decrease in education budget….while population is increasing, expenditure on education is decreasing at an alarming rate.

But looking at a country like South Africa, it is the direct opposite…….in 1981 South Africa’s population stood at 28.3 million with a population bracket of zero to 24 years being 13.1 million, education budget was USD$4.2 billion. But as population increased so did education budget…..by 2016, the population had increased to 54.9 million……94% increase in population and education budget had also reached USD$21.2 billion…..405% over a period of 35 years. Egypt not surprisingly has also demonstrated the same trend.

The Capital Flight…………

Recently the Central Bank Governor, Mr. Godwin Emefiele stated that Nigerian’s appetite for foreign education was also a major factor causing the recession and that Nigerians spend about USD$2 billion annually on foreign education. While the cause is true, Mr. Emefiele must critically examine his figures, more than 50% of those who pay school fees abroad source for their forex from the black market, secondly, the Central Bank does not sell upkeep or allowances to students and such funds are sourced for from the black market.

Emefiele’s claim can also be challenged by recent publication from University World News, which claimed that a source at the Central Bank had told the news agency that the apex financial institution processes about two million foreign exchange applications annually for students abroad – at all education levels.

As at 2010, Sanusi Lamido Sanusi said Nigeria had 71,000 students in Ghana costing the economy USD$1 billion annually, and in 2010, Nigerians spent USD$1.56 billion in the UK education sector. Exam and ethics International reported that Nigerians spent USD$10 billion in 2012 on education outside the country. Nigeria has about 18,000 students in the UK, about 8,000 students in the US, 9,000 students in Canada, 9,000 students in Malaysia, 5,000 students in Ukraine, and about 2,000 students in South Africa, Russia, Sweden, Germany, Norway, Republic of Benin, India, Saudi Arabia, Australia, just to mention a few.

The Foreign Strategy and our daylight Ignorance…………….

In Feb. 2015, ICEF Monitor reported that the British Council had projected that Nigeria will lead the world in tertiary-age population growth through 2024, the council projected that population age between 18-to-24 years will grow from 16.1 million in 2013 to 22.5 million in 2024 representing an annual growth of 3.1% surpassing that of China (-2.9%) and India (0.3%). We now see why data and up to date statistics helps make critical decisions and why recruitment agencies for foreign schools have flooded the country over the years.

The second thing is our ignorance born out of lack of critical reasoning…….the British, Americans and other foreign countries come to Nigeria and establish their schools which run their curriculums and calendars for both primary and secondary schools, where do we think these kids are going to end up after their secondary school education?……..kids that have been trained in either the American or British system of education will obviously end up in their system for tertiary education. The schools are just strategies for future economic gains.

What has now become prevalent with these schools is the fact that they now organize foreign excursion for their students, sending these kids to foreign countries for holidays thereby psychologically preparing them for schools abroad at the same time putting a strain on the economy through the trips……government should start imposing heavy tax on schools who practice these acts.

Number of Foreign Students outside Their Shores and their Trade Surplus…………..

In 2015, Forbes magazine reported that The United States had about 290,000 students studying abroad in 2015, but with an influx of about 742,482 students into its economy, the United States had a trade surplus of 452,482 students. In 2013/2014, the British Council reported that 28,640 UK students went abroad to school, but the British had 493,570 foreign students come to the UK to study that same year creating a trade surplus of 464,930 students contributing to the UK economy.

Coming home to Africa…….Institute for International Education reported in 2012 that South Africa had 6,378 students studying outside the country, the same South Africa has 70,428 foreign students schooling in the country and has a trade surplus of 64,050 contributing to its economy. Egypt has 19,744 students studying abroad, and at the same time a host to 49,011 with a trade surplus of 29,267 students contributing to its economy…

The question then remains, with the humongous number of Nigerian students abroad draining the country’s foreign reserve, we do not have foreign students in Nigeria on a trade balance or trade surplus for the country…..it is a massive trade deficit that is killing the country.

The Nigerian Government must change its strategy of investment in the annual budget of the economy…..education is a critical institution for economic sustainability….and any country that abandons it’s educational sector abandons both its progressive and economic future.

 

 

 

 

“A great deal of intelligence can be invested in ignorance when the need for illusion is deep”……Saul Bellow

Is Nigeria breeding high level educated illiterates or an intellectually lazy generation?……Why you should never jump to conclusions based on headlines or photos..

What is Critical Thinking?

“The Objective analysis and evaluation of an issue in order to form a judgement”

Why are people jumping to conclusions reading headlines and posting photos without critically analysing the situations?…..People have been circulating this photo on social media claiming President Buhari and his team went to Germany for Negotiations unprepared, what are the processes of negotiations?….and let us analyse the possible case scenarios…..

 Why did President Buhari Travel to Germany to see the German Chancellor?

1. Cooperation between the two Nations, which includes: Shared interests, further cooperation on security, humanitarian for IDPs, rehabilitation of North-East, including Trade and Economic Relations.
2. Foreign Investments.

• Government negotiations don’t just happen and are not concluded overnight, it is a long process that must have been set in motion for weeks, months, or even years before sitting around a table with the negotiation team having the due advantage setting most of the conditions…..these are due to negotiation processes and bureaucracy.
• The negotiations can follow both formal and informal procedures done behind closed doors with technical experts at the negotiation stage, either in total secrecy before the final decisions are announced to the public or every milestone and progress is announced.

Possible Scenarios.

First Case Scenario……Pre-Negotiation stage!

Looking at the above reasons why Buhari Traveled, if the negotiations are just starting, Nigeria is the country seeking cooperation and direct investment, hence Nigeria will be the one to put together a proposal to the German government. The possible case scenario here will be that Angela Merkel and her team are perusing the proposal from the Nigerian Government over lunch or dinner before handing the documents to experts to work on the two proposed areas. The Germans may seek further documents for further clarifications at this stage through questions, and someone from the Nigerian side must take notes…..this is clearly shown in the picture. It is always advised that when negotiating, one or two people should take notes so that there is full concentration from those talking.

Second Case Scenario…….The Final Stage!

An agreement has been reached and both parties have converged to sign the documents which has been drawn up by the German government.

Note!

There 3 stages of negotiations….1) Pre-Negotiation (First Phase), 2) Conceptualization (Second Phase), and 3) Detail Arrangement (Third Phase)….The Second Phase which is the Technical stage is never done in public neither in front of Camera men or photographers, this is because a lot of private information is exchanged between both countries. Majorly Corporations and Countries sign Non-Disclosure Agreements (NDAs) at this stage just in case an agreement is not reached hence such information can never be discussed in front of Cameramen to the public.

What we are witnessing in this photo is a high level briefing allowing a press coverage either at the Pre-Negotiation Stage where the Nigerian government has just submitted a negotiation proposal to the German government and its being flicked through or the German Government has concluded on the final stage of the Negotiations and are handing over their documents or both parties are actually signing the agreement reached on all negotiations which are the final documents and the documents are on the German side because they are signing their part of the documents.

Everything was later sealed with champagne and dinner!

 Conclusions!

On October 14^th, 2016, the German Chancellor Angela Merkel announced that “In Terms of cooperation, the German Government will earmark 18 million Euro for Lake Chad and about 50 million Euro for overall area”.

These goes to prove that this was a conclusion stage where both parties had come together to sign the agreement documents and celebrate it over lunch or dinner…….these negotiations must have been going on for months and part of the German governments conditions must have been that President Buhari must end the Boko Haram Insurgency in the North-East, it is not surprising that the same day President Buhari left for Berlin was the same day Boko Haram released the 21 Chibok girls stating the participation of the International community which may have included the German government and hence their confidence that peace will be restored to the troubled region and the government’s willingness to invest 68 million Euros in that region.