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Feb 16
Musings - A Day in the Life of a Female Academic

By Dr Ogechi Adeola​​

Weather Conditions:  Humid, Lagos, Nigeria

Occupation:   Teaching (well, knowledge impartation – theoretical and practical)

New Attributes (Physical): Front hairlines greying, change in eyeglasses prescription. Stress-induced?

Disposition check (Rational):  Jovial (am); Preoccupied (noon), Reflective (pm).

New Year Resolution:  Write more journal articles, Lose Weight, Shop less (in no particular order…)

It was a bright and undramatic Wednesday morning.  Feeling a bit bored, I decided to evaluate the New Year resolutions I had meticulously penned down on January 1, 2017. I was doing quite well on the first two on my list, struggling with the third. Remembering my measures of central tendency, I scored myself an Average using the arithmetic Mean, the Median and the Mode. Not too bad for the beginning of the year! I was writing more, eating less…well, still shopping. Some things just take time, I reckoned consolingly. A wide self-deprecating grin spread across my face.

Proud of my almost 40 days of forfeiting most of the culinary luxuries of life - ice cream, fruit cake, fruit juice, fruit pastilles, yummy chocolate bars and all, I basked in the euphoria. Seated at the breakfast table, I traded orange juice for green tea, calorie-laden white bread for a bowl of Quaker oats and a bar of Mars Chocolate for a handful of Almond nuts. With a belly still rumbling with hunger but 'will' satiated, it was time to prepare for the next class. I walked back to my office calmly without any premonition of the events that will follow shortly after.

A letter just came in the mail. Not the Postmaster kind of mail which is delivered from door to door. No, not a mail in an envelope neatly labelled with the recipient's name and address, placed inside the pigeon hole in the mail section of the ground floor of the business school.  This type pops up in your handheld device, with a distinct sound that announces its arrival, whether night or day. The address looked familiar, and so did the sender. Instinctively, I knew it was not from our climes, it came from far yonder. Did it bring good tidings? I wondered. I took in some breaths, momentarily paused and then I opened it. Well, I clicked on it as I walked on.

It started well, with some nice appreciation for my time (energy?), with some acknowledgement of my output (input?), and some other phrases in the valley of the hills called 'niceties'. Then came the bombshell. The harbinger of disappointing news. An anti-climax of some sort, it was for me...a rejection letter for an academic paper I had submitted since last year. I was quiet for a while, read the 'love' note a couple of times, stared at nothing... and gave little smiles to colleagues that passed by, oblivious of the silent tears welling up inside me. Walked in a mini daze.

I decided to read the email again as I sat at my desk. Perhaps, I missed out some parts. Perhaps, there were some 'alternative facts' I missed out. I read again. Same details as the first time. What was I expecting?

How can I describe my feelings? I had been hopeful. Flashbacks of events of 2016.  I remembered the sleepless nights, the midnight candles, and the endless search for data, the writing up stage and the chocolates I consumed as I worked tirelessly. Yes, I recalled the chocolates, vividly.

I didn't feel like doing anything again that day, I suddenly lost the zeal to put in much effort into that type of research activity, again. I just didn't have the energy to start some work where the outcome could not be predicted. However, a different kind of zeal unexpectedly surged forward. The zeal to binge suddenly returned from its far-flung journey of December 31 as I opened my black handbag and brought out 'my former best pal'. A giant bar of Mars Chocolate – big, black, yummy, foreign (well, 'made' in Dublin). Ever present in the handbag (out of habit), but I was never tempted to nibble, well since the new year.

I pondered. I mused. I reflected. I ate.

Compartmentalising my emotions, I went into the classroom, disposition best described as cheery. The session participants smiled at me, I smiled back as I orchestrated smoothly – with a belly filled with scrumptious chocolate (they could never have guessed!). We discussed the changing landscape due to digital economy - Uber, Airbnb, Amazon, Wakanow – strategies to succeed in the new economy. It was a good session.  Class over, it was time to go home. I made a mental note to replenish my depleted supply of chocolate…Aha!

Nightfall, the weather is cool. Taking another bite of my favourite chocolate bar retrieved from the kitchen pantry, I gradually forgot my New Year resolution as I pondered, yet again on the life of an Academic.The thrills, the highs, the lows….paper acceptances, paper rejections, conference presentations, travels, et al., feelings best described as ambivalent.

Suddenly, I felt an urge to pick up my phone again, a pull from my cocoa-binge-induced pity-party. A WhatsApp message. I clicked open. A friend just sent a quote from Dr Martin Luther King Jr.

              '...Accept finite disappointment, but never lose infinite hope.'

How profound! An Epiphany. Accept finite disappointment? Yes, I will accept the paper rejection and move on. Never lose infinite hope. Yes, there is a silver lining in every cloud. The tides suddenly turned. Once again, I am motivated. I am energised. I will pick up myself again. I will start again. I will work on the paper again, improve on it and resubmit to another journal. Opening the Venetian blinds slightly, I looked out of the window. Lagos skyline looked so beautiful. The clouds had gathered since sunset, and the winds blew cool breeze into my bedroom. Hope arose in my bosom. Like lightning flashing across the sky, two very compelling words 'I will' flooded my thoughts.

I will lift up my eyes to the hills... Psalm 121:1

I will publish more. Yes!

I will still lose weight this year. Yes!

I will not replenish my supply of Mars. A definite Yes.

I will shop less. Well…

Feb 08
Making Good Presentations – The Place of Preparation

Written by Dianabasi Akpainyang

Making presentations is an unavoidable part of life. Whether one is trying to convince parents to get a new pair of shoes, or making a sales pitch to a company's management team about a new product, or teaching a class of students a complicated subject, presentations are part of daily routine. With formal presentations, the need for effectiveness cannot be underscored. For a presentation to be good and effective, the presenter should of necessity, commit to adequate preparation and this holds true even for spontaneous (off-the-cuff) speeches common with government officials and top business executives.

The Need for Preparation

According to Dale Carnegie, "a well-prepared speech is already nine-tenths delivered." Consider also Abraham Lincoln's famous statement: "If I had six hours to chop down a tree, I'd spend the first four hours sharpening the axe", and you would realize that even some of the greatest orators to walk the earth valued the task of preparing well. Effective and adequate preparation is the lifeblood of successful presentations. It is the largely unseen proverbial drummer that beats away in the nearby bush while the happy bird dances brilliantly on the foot path. It is the quiet but unyielding force that propels great orators to delight audiences and birth revolutions. It is from the activities of the 'dark closets' of preparation, that podiums are lighted with candor, confidence, charisma and creativity.

Five Tips to Help You Prepare for Your Next Presentation

1.     Make out Time to Gather Information

Successful presentations are products of intense search and discovery of relevant information. Experts call this 'brooding over the topic'. Amazing orators like Abraham Lincoln confessed to the 'magic' that proper information gathering can do. Whether you are preparing to face an interview panel for a new job, or a committee to defend your contract proposal, or preparing to deliver some moralistic preachment to a congregation; in-depth information gathering should be a necessary first step to success. As you sit in silence in the car, bus, train or airplane, or as you lay on your bed during those still, silent moments before you drift away to sleep, you should think about the topic and write down striking thoughts. Use the internet, gather information from relevant print materials, and listen to people who would provide valuable insights, pay attention to underlying messages from events, widen the subject, enlarge the mind, push beyond the limits and be outstanding.

Having the right information on a subject does not only boost the presenter's confidence on stage, it also makes the audience feel a sense of fulfillment and satisfaction, especially if new and useful information which translates to learning is provided.

2.     Preach to Yourself

This is my coinage for reflection and deep contemplation; the necessity of the presenter to get deeply immersed in the message until it becomes 'his own.' Failure to first get absorbed and engrossed in your message makes you inauthentic and at best, academic. Research has shown that people are unconsciously drawn to a speaker who they feel has a real message to deliver in his head and heart and zealously desires to communicate that message straight to his listeners' heads and hearts. Preaching to oneself breeds belief and inspires passion for delivery. If the message is not understood, internalized and accepted by the messenger, one would not be surprised when a somewhat aloof and mechanical presentation activity is put forth.  

3.     Analyze Your Audience

Considering in advance, the peculiarities of your audience, is critical to success in presentations. Take time to decipher their needs. Find out the number of people you would be talking to, the time (before or after a meal?), their age range, professional standings (where necessary). Anticipate audience reaction and prepare to manage them. Some listeners would appreciate humor from time to time; some would consider you unserious or a time waster if you breach the solemnity of the occasion with what they think is unnecessary comedy. Some people appreciate more visuals than words; some prefer statistical analysis tools – graphs, tables and charts than sentences or pictures. Some appreciate bullet-point summary of the message. The mindset of your audience is important too. Speaking to a group of philosophers who may generally question most statements you make requires a different approach to delivering your best friend's toast at his wedding.

4.     Practice Delivery - Rehearse Aloud

'Practice makes perfect' is not just a worn-out cliché, it is an eternal call to duty in all spheres of life. Why would football players spend five days in rigorous training and strenuous exercise regimes only to run around the pitch chasing a ball for 90 minutes? How about other athletes, musicians, and so on who spend weeks and months to rehearse only to perform for a short time? Rehearsing a presentation the way you will deliver it is highly recommended by experts. Stand, move around, envision your audience, call out the words and act out your script in advance. This will not make you look inauthentic; it would rather serve as needed reminders when you step on that stage. Your mind would play back those moments, and echo those words as you said them in your room and you will have an easier time delivering the goods on stage.

Going through your presentation the way you would deliver it on stage would also help you restrict yourself to acting within the boundaries of allotted time. You do not want the surprise of discovering that you had run out of time just mid-way into your talk. This can dishearten as well as embarrass you. 

5.     Seek Constructive Criticism

As part of your preparation process, you should seek constructive feedback from colleagues, friends and family members. If possible, rehearse before someone who would be candid with feedback. You can subscribe to a speaking/communications club and make use of the feedback mechanisms of such groups. You may record videos of yourself rehearsing and forward to group members who would watch and criticize. You could send a copy of the presentation to experts to dissect the content and make comments. Integrate feedback and garnish your presentation to suit your audience and your style. At the end of the day, it should be your presentation by you!​

Oct 06
Spontaneous Deregulation Tests Regulatory Gaps in the Digital Economy

written by Austin Okere

Just recently, I facilitated a seminar for the Lagos Judiciary at Lagos Business School with the theme Digital Economy and Legal Regulation. The aim of the seminar was to share insights on the emerging digital economy with their Lordships, and draw attention to the imperative for regulatory evolution in the face of the pervasiveness of online platforms of the kind operated by technology giants, such as Facebook, Google, Uber and Airbnb. There is hardly an area of economic and social interaction these days that is untouched by these platforms in some way.

The Regulatory Gaps

To fill the regulatory gaps in the digital economy, these behemoths have resorted to what could be referred to as spontaneous deregulation. I first encountered this term in an article by Benjamin Edelman and Damien Geradin, and has arisen as a result of digital disrupters ignoring laws and regulations that appear to preclude their business model, which is typically based on providing platforms for crowd sourcing and giving rise to the sharing economy. Believing in the efficacy of their utility model and its appeal to a pent up global demand, these disrupters seem to see many rules and regulations as belonging to the past and impractical for today's innovative clime. They, therefore, simply ignore them, opting for their own version of self-regulation, usually based on a mutual rating system between service providers and consumers. It is this skirting of existing regulations that is referred to as spontaneous private deregulation.

These disrupters make the rules for themselves as they go along because, in fairness to them, as their platforms reshape markets, the scope of activity subject to regulation tends to decrease, and various forms of protection disappear. These companies operate in interstitial areas of the law because they present new and fundamentally different issues that were not foreseen when the governing statutes and regulations were enacted.

Two major areas in which these digital behemoths  have riled the establishment are in transportation and hospitality; the major 'culprits' being Uber and Airbnb. Uber, until recently a relatively unknown company out of Silicon Valley in California, employs 160,000 drivers today and is adding an average of 20,000 drivers every month. This transport services disrupter is now valued at $41b, and operates in many major cities across the globe. Airbnb, a previously obscure company with similar roots and reach, has over 1.5m accommodation on its platform, and is now valued at $25b.

The Need for 'Platform Fairness'

Axelle Lemaire, French Secretary of State in charge of all things digital, insists that France is open to platform operators, but consumers have to be protected. She is sponsoring a law to be passed by the French Parliament which will create the principle of 'platform fairness.' Karnataka State in India, where Uber piloted its India service two years ago, has directed taxi aggregators, such as Uber, to stop operations in the State until they secure a licence from the government, triggering sharp reactions from the corporate world. Getting a licence would mean no more surge pricing, complying with the maximum fares fixed by the government periodically and registering with local transport authorities. The question is" why has it taken the Karnataka government such a long time to wake up to regulatory gaps in her transport sector?" And how many other cities are in this quagmire?

The United States Supreme Court recently ended a decade-long battle over Google's massive book-scanning project, declining to take up an appeal by authors who claimed the company violated copyright law ''on an epic scale.'' The justices denied certiorari in Authors Guild v. Google, 15-849, leaving in place a ruling handed down last year by the United States Court of Appeals for the Second Circuit that said Google's project was permissible. The appeals court decision invoked the ''fair use'' doctrine, which permits some ''socially beneficial'' use of published works, such as news reporting or research, which would otherwise constitute copyright infringements.

Airbnb has had its fair share of issues with one of its largest markets, New York. A major concern is the legal regime within which Airbnb operates; one which is marked by poorly drafted laws that fail to account for challenges presented by the sharing economy. As explained by Airbnb cofounder Brian Chesky, "There were laws created for businesses and there were laws for people. What the sharing economy did was create a third category: people as businesses," to which the application of existing laws is often unclear. These new business models raise complex questions that have not yet been addressed by either legislatures or courts.

Because the threat of enforcement actions can have a chilling effect on start-ups and their users, state and local government officials should consider how their actions may affect burgeoning businesses. Officials should encourage the sharing economy's growth through collaborative efforts rather than seek to protect incumbent businesses.

Regulation Seems Too Slow in Catching Up

The slow pace of regulation evolution seems to strongly suggest that the legal profession itself is ripe for a technological revolution that will optimise the largely manual and laborious process of enacting laws and regulations in the face of the aggressive pace of digital innovation.

I recall the indignation of their Lordships when I cautioned that the learned profession could be more vulnerable than they think when it comes to disruption, and that emerging technologies like cognitive computing and other forms of machine learning can help narrow the gap between regulation and innovation.

Much as it may sound improbable, given its intrinsic consultative nature, I was not surprised when I came across an article on the World Economic Forum's collaborative platform, announcing that a Law firm, Baker & Hostetler, had done just that!

Green Shoots of Technology in Law and Regulation

According to the article, Baker & Hostetler has announced that it is employing IBM's AI, Ross, to handle its bankruptcy practice, which at the moment consists of nearly 50 lawyers. Ross, "the world's first artificially intelligent attorney" built on IBM's cognitive computer, Watson, was designed to read and understand language, postulate hypotheses when asked questions, research, and then generate responses (along with references and citations) to back up its conclusions. Ross also learns from experience, gaining speed and knowledge the more you interact with it."You ask your questions in plain English, as you would a colleague, and Ross then reads through the entire body of law and returns a cited answer and topical readings from legislation, case law and secondary sources to get you up-to-speed quickly," the website says. "In addition, Ross monitors the law around the clock to notify you of new court decisions that can affect your case."

Ross also minimises the time it takes by narrowing down results from a thousand to only the most highly relevant answers, and presents the answers in a more casual, understandable language. It also keeps up-to-date with developments in the legal system, specifically those that may affect your cases. According to CEO and co-founder Andrew Arruda, other firms have also signed licenses with Ross, and they will also be making announcements shortly.

This disruption, happening to the most unlikely profession, with a highly codified ethic, is a clear manifestation that no industry is immune from disruption in the impending fourth industrial revolution. Any industry that does not figure out how to be a part of it might as well write their obituaries. My takeaway, expressed to their Lordships after the seminar, was that the digital revolution is like a train whose drivers are the entrepreneur disrupters. The passengers are the global customers with a pent up demand for the value and convenience that they provide. Naysayers to this phenomenon can stand in front of the train and be crushed, stay on the platform and be left behind or come on board for a ride into progressive partnership.

Regulators still have much to learn about how to deal with digital platforms. They have no choice than to get more involved and get the needed expertise. But will they? The jury is still out.

Austin Okere is the founder of CWG Plc, the largest systems integration company in sub-Saharan Africa, and Entrepreneur-in-Residence at CBS, New York. Austin also serves on the World Economic Forum Business Council on Innovation and Intrapreneurship.​

Oct 06
What Do New Autonomous Technologies Mean for Global Business?

What Do New Autonomous Technologies Mean for Global Business?

Amazon aspires to make drone deliveries for its Prime service. Uber, the dominant taxi service for the digital age, is experimenting with self-driving cars; Google, which has been testing self-driving cars for years, is also rumored to have a taxi service in mind. How will new autonomous technologies impact the lives of consumers and shape businesses, and what is the role of governments in shaping them? Global Network Perspectives asked our Faculty, Dr 'Yinka David-West for her perspective.

GNP: How will new forms of autonomous technology—drones, self-driving cars, new forms of robotics—likely change our lives and create new business models?

Dr David-West: New forms of autonomous technologies will certainly have an impact on lives, society and business. As these technologies gradually reduce human-human interactions in favour of either human-machine or machine-machine interactions, we are bound to see changing business and interaction models. While these may ease existing operational and business constraints, their transformative nature also bring about disruptions in some industries and redefine the human capabilities required in others.

Firstly, business processes in service-oriented industries will be challenged to better support growing digital channels and relationship management strategies for the "always" connected customers with ever-changing value propositions. As such, software platforms (and bots) will form part of organisations' critical infrastructure. Secondly, in the case of industrial businesses, hardware advancements in machinery and equipment using sensors and wireless communications networks will become standard. These will lead to the real-time aggregation and transmission of data about the machine or the context in which it is being used as we see with health data and wearables.

In both cases, the increased use of information technologies will result  in a data surge (or overload) that will require analytical capabilities to help business managers draw better insights. In order to effectively harness this data, new organisational capabilities in the field of data sciences and related partnerships will be essential. The changing customer value propositions will demand for agile organisations with flexible product design capabilities to meet customer needs. In addition, new opportunities for operational efficiency, especially in the areas of capacity utilisation and reduced downtime, will also be harnessed.​

GNP: How have new autonomous technologies already impacted businesses working in your country or region? What opportunities and threats do they present?

Dr David-West: The impact of these autonomous technologies varies from country to country in Africa, especially due to the dependence on public infrastructure; a weakness of most sub-Saharan African (SSA) countries. For example, in the Global Information Technology Report 2016, the latest iteration of the Networked Readiness Index (NRI), which ranks technology readiness in 139 countries, shows SSA countries underperforming (see figure 1 for rank performance of SSA countries). Outside of South Africa and Mauritius ranked 65th and 49th respectively, other countries ranked in the bottom half.

While access to public infrastructure delimits impact in SSA, examples of existing opportunities and threats of different technologies are highlighted across industries.

LogisticsThe use of drones for logistics has enhanced delivery capabilities in cities plagued by persistent traffic congestions. This is an opportunity for emerging e-commerce marketplaces. This function transforms the job of a delivery agent from one that requires a driver's license to one that requires navigation skills. This ability has been tested by Nigeria's e-commerce marketplace, Yudala.
WearablesWearables and health tracking applications and devices like FitBit open up new business opportunities for the insurance and healthcare industries. Active monitoring of high-risk patients can reduce patient emergencies that may even lead to death. While these personal monitoring tools collect the data, aggregator health analytic systems from insurance companies are lacking.
TelematicsThe use of telematics in the transportation industry introduces opportunities such as enhanced transportation management, personalised insurance and management services for government, insurance providers and transport maintenance companies respectively.
TelecomsThe telecoms industry which provides a significant portion of SSA's infrastructure is also being revolutionised. In this sector, human data is gradually replacing human voice and messaging which is also threatened by non-human (machine-to-machine) data. Telecoms researchers, Ovum, estimate that by 2020 cellular machine-to-machine (M2M) connections will represent 3.4% of Africa's 1.3 billion mobile connections.

GNP: How are people and governments in your region responding?

Dr David-West:​ Generally, the responses are somewhat lackadaisical. However, telecom companies that are witnessing declining revenues from voice and messaging services in favour of data-oriented alternatives are being forced to review their business models and diversify investments. For example, the South-African MTN Group is a member of the African Internet Group (AIG), an internet platform company and member of the German incubator, Rocket Internet. AIG operates digital platforms across different industries and markets on the Continent.  To further enhance its digital service offerings, MTN has also established ICT startup incubators in South Africa and Nigeria.

Although several African governments are seeking to build digital jobs, governments' ability to understand and develop regulatory guidelines for emerging technologies usually occur after their adoption. ​

Aug 03
Increased MPR: Time to Rethink

An interview with LBS Faculty and Economist, Kelikume Ikechukwu on the recent increase in MPR.

CC: With the new MPR announced by CBN, what will be the implication for businesses?

IK:  First we need to look at why the government decided to raise monetary policy rates, from 12% to the current 14%. In the first quarter of 2016, GDP declined to -0.36% while inflation was also on the increase; inflation rose to 15.58% while unemployment was also rising.  Technically, we have an economy that is entering a phase of stagflation.  There was a need for central bank to check the inflatory pressure. Today, inflation is 16.48% showing that there is a problem. The government has done well by raising Monetary Policy Rate to check further rise in the general price level that is if inflation is driven by monetary phenomenon. The government has thought it wise that the only way they can check or curtail increase in prices is to check inflation raise in MPR rates. The challenge here is that when you raise MPR all other interest rates will rise.  The implication is that the rise in the cost of borrowing will shrink investment. As investment is shrinking unemployment will further rise meaning that government current policy may translate to further deepening of the economy.

CC: What is the implication for the average Nigerian worker?

IK: The average Nigerian worker has lost a lot in the past year; the real income of the average worker has been eroded, at this time last year the exchange rate was trading at below N197. Oil price was trading at N86 per litre. As at today, oil price is N147 per litre, kerosene price is N220 per litre, diesel price is N195 per litre. All of these costs translate to high cost of living, prices are rising, cost of living is rising. The average consumer's income has been eroded, the implication of raising MPR whilst your GDP growth is declining shows that households keeping money in the bank as savings are gradually eroding their cash holding. During periods like this, borrowers are at the expense of lenders, it is not wise for you to keep your money in the banking sector because money is losing value per day even as the exchange rate is rising. Right now the interbank rate is N312, whilst the bureau de change rate is tending towards N400. It means that our currency is eroding so whoever is holding money in naira is losing money.

CC: What advice will you give businesses and individuals on how to cope with this new increase?

IK:  For individuals and businesses this is not the best of times, however, increasingly one should begin to look into short-term measures to deal with the hiccup in the economy. For businesses, interest rate is now high so it is not advisable to do business because of the high cost. Businesses must look for alternative means of sourcing for capital. For households, this is not the time to waste funds and this is not the time to put money in any bank because the money will lose value tomorrow. What you can purchase today, you may not be able to buy tomorrow, because of the inflationary pressure and the exchange rate dynamics of the Nigerian economy.  

The household and the business entity should be pragmatic and dynamic on how they use their funds. This is a time to buy tangible assets, like gold and landed properties because they can be traded in the future for cash.

CC: What practical advice do you have for investors to cope with the increase in MPR?

IK: For investors, when interest rate is rising and bond prices are falling this is the right time to begin to invest in stock and shares. If you look at investment in stocks and shares when the economy is down all macroeconomic indicators are down this is the right time to invest because share prices are at the lowest.  This is the right time to buy bonds because bond prices are falling as interest rates are rising.


Aug 01
‘Recession: Government should develop robust capacity to anticipate’

By Dr Bongo Adi

The cycle of boom and burst recession is characteristic of capitalist economies. It’s natural.Economists largely maintain that once you have the combination of rising prices, falling output, and increasing government borrowing you are on the road to recession.

However, according to a recent work by Robert Schiller and the Nobel Laureate, George Akerlof, recession could also be set off by purely psychological factors induced by pessimistic rumours. This, according to them, is the work of “animal spirits” borrowing from Keynes.

Clearly, we have seen all the signals of recession manifesting in Nigeria: Output is in the negative territory; inflation is spiraling out of control; and unemployment is at an all-time high. In addition to these, we have the contagious pessimistic narratives of doom coming from every corner, inducing individuals to reduce spending. We also have the government’s own confirmed fallibility, imprudence, incoherence and sometimes, outright lies. The combination of these doesn’t inject optimism, rather demotivate individuals, making them cautious and paint a doomsday scenario. This definitely dampens consumer confidence.

Although, the practice is to declare a recession if the economy registers two consecutive quarters of negative growth rate, but technically speaking, if we begin to count the negative growth as soon as the economy begins to contract then it is clear we’ve been in recession since the beginning of this year.Some are of the view that we are in a stagflation – a period of rising inflation accompanied by high unemployment and deleveraging.

The government should stop playing the Ostrich and admit that things are really bad. At least, being honest about the situation rather than allowing the citizens to second-guess them should be part of the remedy. The fault is now theirs and not in the previous administration. I am of the view that the policy inconsistency of this government is worsening the situation.

We say we have floated the Naira and yet we don’t yet see the expected waves in the naira flow. The budget talks about reflating the economy yet the last MPC meeting raised the rates. I guess the policy makers are playing joggle with inflation, exchange rate and reflation. It’s a tough battle and there isn’t an easy way out. Matters would have been easier if the rest of the world weren’t also tending towards recession. But with recession looming all over the world and no hope for oil price picking up, the best the government could hope is to ensure they have robust anticipation of potential consequences of policy actions. That surely would help control the negative fallouts.​

Jul 19
Inflation: Coping Mechanisms for Individuals and Businesses

Interview between Ikechukwu Kelikume, Faculty, Economics and Corporate Communications Team.

CCT:  What is the implication of the announced 16.48% inflation for businesses and individuals?

I.K: The announcement of a 16.48% inflation rate, means that we have officially entered double digit inflation and this is due to a rise in the cost of fuel, a rise in the cost of diesel and a rise in exchange rates.  All of these means that when prices are rising it becomes difficult for consumers to buy. Another implication is that the purchasing power of the household is eroded; whilst for firms a rise in inflation could also mean that inventory build-up is rising, which technically means that firms will cut back on the number of staff.

On one hand we have the firms cutting down on production and the number of staff; on the other we have the consumers i.e. the household, reducing their consumption because of the erosion of their purchasing power. This is because many of these people are out of jobs, many are displaced which creates problems for the economy. Therefore there is a need for firms and households to begin to think through the current state of the Nigerian economy, we need to manage our funds prudently in order to survive the times.

CCT: Is this going to get worse?

I.K: For the next quarter we are expecting a further negative growth of GDP because activity wise we have not done much in Nigeria this year.  The budget was released late so we are expecting GDP to be negative in the second quarter. What this means is it that it is going to be worse in the second and third quarter.  However if oil price remains positive at the estimated 50 dollars come first quarter and second quarter of 2017, and if we are able to solve the security challenges we have currently in the Niger Delta, we will experience a positive growth in our macroeconomic indicators come first quarter 2017, but for now it is going to get worse. 

CCT: What advice do you have for businesses and individuals to sail through this?

I.K: For households and individuals this is the time we say 'CASH IS KING'.  This is not the time to hold your cash in one fat savings account, because every day as inflation goes up, unemployment rises and GDP falls. The value of your funds held in a deposit account is completely eroding, it means that your one million today may not necessarily buy what it should have bought today in two months' time.  My advice is to convert your cash quickly, to tradable or tangible assets for the household and manage your funds prudently by buying only the essentials. This is not the time to waste funds.  For businesses this is the time to be creative, this is the time to be innovative, this is the time to prudently manage resources and to trim down on cost.

Jul 19
High Employee Engagement and Work-Family Conflict: The Dilemma of Throwing Away the Baby with the Bathwater

Author: Dr Okechukwu Amah, Faculty, HRM & Organisational Behaviour

Engaged employees apply themselves totally to their job roles - physically, mentally and emotionally. Since the idea of employee engagement was introduced to management practitioners and researchers, organisations have been interested in what drives employee engagement and what they can do to entrench the drivers into their organisational environment on a continuous basis. This interest is justified because highly engaged employees are the main source of competitive advantage to organisations in a business environment in a constant state of flux and ever-increasing complexity.

Research results and case studies on organisational implementation of the drivers of engagement have both demonstrated the huge benefits derivable from highly engaged employees1. Apart from being the main source of competitive advantage for organisations, highly engaged employees are very innovative and have positive work attitudes. They have positive effects on operational cost, quality and customer satisfaction and they grow profit and revenue 3 times and 43% more than other employees respectively. The major driver of the excellent performance of engaged employees is their willingness to carry out organisational citizenship behaviour (OCB). OCB is a discretionary behaviour which is not captured in the organisational reward system but is very important in moving a good organisation to an excellent one.  Engaged employees are very active in OCB, through which they move the profitability of their organisations from good to excellent. The performance of OCB by engaged employees needs high level of resources. The dilemma arises because high use of resources, according to the conservation resources theory, leads to high level of stress. Thus, highly engaged employees have high level of work-family conflict2.  Work-family conflicts occur when intense involvement with work makes it difficult for employees to fulfil required family roles. Thus, a desirable construct, employee engagement, leads to an undesirable construct, work-family conflict. This is the dilemma that management practitioners are facing. I call this the dilemma of "throwing away the baby with the bathwater".

A recent study I carried out has indicated that this dilemma can be avoided if individuals can build adequate "resource banks" to tap into in times of huge demand of resources associated with being highly engaged. A resource bank is the combination of psychological and tangible resources that employees can draw from in time of high engagement. The resources include relational energy, core self-evaluation, job autonomy, training and technology, and organisational culture that favours work-life balance of employees.  A resource bank works in the same way that a bank account works when individuals are faced with huge demand for funds. An individual with a bank account can draw on it so as to make up any shortfall in periods of increased expenditure. The research result shows that the work-family conflict level for highly engaged employees can be reduced if they possess "resource banks" funded from organisationally provided and personally provided resources. The research discovered that having these resources reduces the level of the work-family conflict experienced by highly engaged employees and  helps them to achieve work-life balance, while remaining  highly productive for their organisations. Leadership style and behaviour provides a common ground for the development and acquisition of these resources. One of the organisational resources I find very interesting is the relational energy generated during positive interactions between leaders and their subordinates. Positive energy possessed by leaders is transferred to subordinates through the process of contagion, and helps employees to manage high energy demand arising from being highly engaged.  Through this research, organisations have data-based solution to apply in ensuring that highly engaged employees do not suffer high level of work-family conflict. The good news is that these resources will not add to the cost of business since they already exist within the organisation. What is required is for organisational leaders to be aware of what their style and behaviour does to the availability of these resources so they can make conscious efforts to make interactions with their subordinates more positive and enduring. This awareness can be achieved in a well-planned training seminar. There is also an ethical reason for organisations to manage the dilemma created by high employee engagement. The Bible, in 1 Cor 9:9, says "do not muzzle an ox when you are using it to thresh grain". Therefore, it is unethical for organisations to derive benefits from highly engaged employees and leave them to handle the negative consequences arising from their being engaged for organisational productivity by themselves. It makes business sense for organisations to help employees develop the "resource banks" needed to maintain high productivity at work while fulfilling family roles and responsibilities.

  1. Gallup studies, Corporate Executive Board, Ugwu (2013) & Anikan et al. (2014)
  2. Halbesleben & Wheeler 2008; Halbesleben, Jaron & Bolino (2009)​
May 20
Is Nigeria’s status as Africa’s largest oil producer under threat?

In September 2014, CNBC Africa reported that Nigeria's oil export to the United States for the first half of 2014 stood at 20 million barrels per day, while imports from Angola hit 23 million, thus rising above Nigeria for the first time. The issue then was what does the future hold for Nigeria's oil and gas sector as US patronage of Angola crude steadily climbs. (See

A month later, CNBC Africa in October 2014 reported in the media that, 'Nigeria could soon lose its crown as Africa's largest oil producer due to oil theft and poor governance. The International Energy Agency predicts Angola will overtake Nigeria as the continent's top oil producer from 2016, a status Nigeria won't be able to reclaim until the 2020s. Angola is expected to increase oil production whilst the IEA reports that Nigeria loses 150,000 barrels of oil per day to theft, the equivalent of 5 billion dollars a year'. (See

Subsequently, by second week of April 2016, several national and international media reported that Angola had overtaken Nigeria's status as top oil producer in Africa. This report was based on OPEC's latest monthly report which stated that Nigeria's oil production fell by 67,000 barrels per day (bpd) in March. The report said Nigeria produced 1.677 million bpd in March, down from 1.744 million barrels in February, while Angola oil output rose from 1.767 million bpd to 1.782 million.



Ventures in an article published April 18, 2016 highlighted some concerns Nigeria should have which seems worrisome.  (See Nigeria's vice-president, Prof. Osinbajo, visited Forcardos in April 2016 and it was reported that Nigeria is losing 250,000 barrels of oil per day in the Niger-Delta. (See This led government to declare oil pipeline vandalism as an act of terror and to consider several options in combating these acts of sabotage/vandalism, one of the options being deployment of a permanent anti-vandalism security force equipped with sophisticated military machinery to the Niger-Delta.


CRLE took the initiative to find out what can be done to enhance productivity in the oil sector and avert the occurrence or actualisation of the problems associated with Nigeria's drop in productivity in oil production which include low revenue and high debt for government plus mass retrenchment/job cuts in the private sector amongst others. Below is an excerpt of the interview CRLE had with a seasoned practitioner in the oil industry who is vast in leadership, ethics and good governance issues in the oil industry, Mr. Tunde Akintobi.


(Mr. Tunde Akintobi is an accredited Mechanical Engineer and has worked with various organisations such as the DELTA STEEL COMPANY WARRI, SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA (SPDC), TELECO, BAKER HUGHES and EXXON MOBIL. He retired January 2016 and is currently living in Calgary. He has worked in Aberdeen (UK), Houston (US) and Nigeria in Senior Managerial positions such as  Drilling Engineering Manager and in several other capacities. He has an Executive MBA from Lagos Business School and his interests are in economics, reading and blogging.)

Are you surprised that Angola is currently the biggest oil producing country in Africa?

The first thing I want to mention is that this is not the first time Angola is producing more oil than Nigeria. If you actually go through the data from prior times, there were times in 2009, 2013 and 2015 that Angola actually was producing more oil than Nigeria. So this is not new, what is happening is not new. One thing that is obvious to me from looking at some of the data is that if you look at the Nigerian and Angolan crude oil production profiles, and check the following web links  and, you find out that Angola's profile basically shows a ramping up, a gradual ramping up profile. In 1996, Angola basically was at about 500,000 bpd. By 2000, they were at about 750,000 bpd. By 2004, Angola was at a million bdp and then gradually ramped up to 2 million in 2008. If you remember in 2008, there was a global financial crash which affected aggregate demand for crude oil and Angola dropped to between 1.8m and 2m bpd. Since then, Angola has basically stayed within that band of production. So I would say Angola has been consistent and stable in ramping up and remaining at a plateau. If you turn to Nigeria's data, the profile shows that in the late 70s to 80s, Nigeria was producing up to 2.5m bpd. In early 80s, Nigeria dropped to as low as 750,000 bpd on a month-to-month basis, going back and forth between 750,000 and 1.75 million bpd till the late 80s / early 90s. By 1994 or so, Nigeria was back to 2m bpd until we got to 2.5m bpd in the 2005/2006 timeframe. By the 2008 global financial crash we were down back to below 2m bpd and since 2013 till date we have not been back above 2m bpd despite the historical high global oil prices in 2013/2014. We are now currently in the 1.7m bpd range. Looking at Angola's profile vis-a-vis Nigeria's profile, theirs has been consistent, while ours has been inconsistent. Nigeria has produced as much as 2.5m bpd since 2005, but we haven't been able to maintain even a 2.25m bpd plateau for various reasons such as vandalism, theft and leakages. Vandalization started with the Niger-Delta resource control agitation while theft and leakages predated that agitation. Another thing that the data suggests to me is that there seems to have been ''disinvestment'' in the Nigerian oil sector. We have never passed 2.5m bpd which we even had in the 80s. The story is not just about vandalism alone, but also about ''disinvestment''.  The oil and gas business has a long-term investment cycle. The period from oil exploration to oil production it can take 10 - 15 years. A country that does not have long-term orientation, plans and incentives for investment, regardless of the pipeline issues, will experience negative/low growth. Nigeria is not growing as it should. Irrespective of Nigeria being an OPEC member (Angola is also an OPEC member), the profiles show that Nigeria could and should have done better.

Should Nigeria be concerned or bothered by this low trend in Nigeria's oil production profile?

We should be bothered. Our concern should not be predicated though on the fact that Angola is the highest oil producing country in Africa, that's not the reason for worry. The reason for concern is that we are not fulfilling our potential and for a country which by now is still oil dependent for government revenues and forex earnings, with oil prices so low now and likely to remain in this range for a long time, then volumes really matter. If we are still dependent on oil (the bulk of government revenue is based on oil), we cannot maintain production and are actually losing production as it is looking now, it goes to reason that we have serious challenges. Our main forex earner has fallen in price and volume. You can see the pressures the government has been under recently in not being able to maintain a reasonable spread between the official and parallel market (which to me is the real market) exchange rates. The government has been talking about switching from being import-dependent to producing most of what we use in the country. It is going to take a while. In the short to medium term, we are still very much tied to oil and that's what gives us our forex earnings for importation. So, yes, we should be worried, but not necessarily because Angola has overtaken us. The fact that we are going down is worrisome and we should be bothered. From the brief on Angola's profile, Angola has been stable and we are the ones that are under-performing. Back in 2010-2012, we were doing more than 2m bpd, Angola wasn't doing 2m bpd in 2012. We are the ones coming down. So it's not that Angola overtook Nigeria in oil production.

In your opinion, what immediate action should the Nigerian government take to change the under-performance trend having regards to the low level of investment made by the Nigerian government in the oil and gas sectors?

I think the Minister for State in Petroleum, who is a seasoned industry professional, has basically laid out the problems, some of which are structural. So you have a situation where government has JVs, and partnerships with the IOCs. In some cases, government participation might be like 60% equity even though the IOCs are the operators. So, I will use the 60/40 example. Government is supposed to take 60% of the cost of exploring for and producing crude. Then government takes its taxes and royalties from the IOCs and then takes also 60% of the produced oil. Well, for a long period of time, government has been taking the oil but not paying its own part of the expenses. So, that's not investing, that's clearly not investing! Up to the extent that government owes some of the IOCs up to a billion dollars in unpaid expense bills. In the last 4, 5, 6, 7 years, government debts to the IOCs have been growing and that is not an incentive for them to keep on investing. I don't have the data right now with me, but if you take a look at the rig count, the rig counts have gone down low and that is not good because if you don't drill, you are not going to get oil. So, that there is the crux of the matter. The NNPC/NAPIMS remits revenue to the federation account but does not have control over its budget on expenses. So while it remits money to the government from the oil sales, it has to wait for the government to give it money to run its business. Of course, government may have contending priorities such as agriculture. As a result, money is being pumped into other sectors, while the oil sector is neglected. If NNPC is not remitting its equity expenses to the IOCs, the IOCs are going to scale down because it's going to affect their own profitability and that's not why they are in the oil business, after paying all the royalties and the taxes. So it's a basic investment issue in my opinion. There is also this other thing the Minister said about trying various other models one of which is called the IJV. Through the IJV, you actually get a part of the government e.g. NAPIMS or part of NNPC to actually join each IOCs to form a different independent company that operates independently and just reports profits. So they make investment decisions and for the funds, they don't have to wait for government to give them cash calls or not. If they don't have funds, they can go to the bank. This business is profitable, so get money from the banks, do the projects, make back the money and pay the banks. Then the profit is shared per equity between the two parties. So nobody is having to wait. So they are making investment decisions 5 years upfront, 10 years up front based on the economics. There is no politics involved. It is based on the profitability of the projects. The government part of the independent company then becomes a profit centre for the government rather than the situation we have now where NAPIMS is just a revenue centre with expenses (which includes investment) just relegated. If we have such a structure, obviously, there won't be this low level of investment going on. Nigeria's production costs are still below the oil price as it is now, so the oil is still profitable. And we have these reserves, these resources. It's just the fact that government is involved, politics is involved, so there is ''disinvestment''  , and that's a big issue.

Since Nigeria does not have such a model or structure on ground, for the time being, will the proposed restructuring of the NNPC by the government solve some of these teething problems?

Yes, that's what I actually mentioned. If the government can execute what the Minister for State has proposed, that can solve the problem.. Unleash the market forces, get the government and politicians out of the business and let them just take the profits. Let them be given their equity, equity profit, and there will be incentives for the companies and the IJVs to actually look at this and deal with it as a business. It's a long-term investment. In 10 - 15 years, they will make profit. And the banks will fund them because it's profitable. But with government involvement, there are instances where the IOCs and other companies have tried even to persuade government to go get funding from the banks/markets and all through the various regimes some will want to, some won't want to. There is just no consistency. Even with the current system, government could go to the markets to borrow money for its own part of the cash calls and pay back the loan from its receipts of oil, but they just won't do it most times. They are expecting the companies to carry them for free. A lot of the IOCs have borne this for years, but unfortunately they are at a point where they can't continue to do that. It is not as if government is paying interest on these money they are owed. We have not even calculated the time value of this money being owed them. You know it is also very inefficient considering the amount of man hours and effort on both sides Governments, IOCs and the workers have to put unnecessary processes in place just to keep this system running. The system is very inefficient as it is.

What are your thoughts about the Unions that are kicking against the restructuring of the NNPC?

I am not a very big fan of the Nigerian Labour Unions and for good reasons. Certainly they serve a good purpose in protecting the Nigerian worker, and I am not against that. But, what I find strange is the fact that when government tries to deregulate any sector in Nigeria, the Unions are always against it. Let's look at the telecoms industry. If the Unions had their way, we wouldn't have the vibrant telecoms industry that we have right now. Right now, the telecoms sector on aggregate has far more workers in it getting better paid than what existed in the period pre-privatization and the government is getting huge tax revenues from the sector rather than the huge expenses they used to have to make on NITEL. But at one point, the NLC was against the privatisation. The same thing occurred with the downstream petroleum sector. As we speak, diesel is deregulated right?


Are there diesel queues?


Before diesel was deregulated, I used to go from Lekki to Yaba to get diesel. You leave Lagos, you could not get diesel enroute Ibadan. Then it was deregulated and, lo and behold, diesel became available. It's not rocket science! The government does not run business as well as the private sector. What the government should do is to regulate, ensure there is a fair playing ground, ensure competition, that there are no monopolies, that the rules are clear, everyone has a chance and the rules are being followed. During the fuel crisis some weeks back, diesel prices were actually dropping in the same country. The same issue arose for the upstream sector. It should as much as possible be privatised and government-regulated. It's obvious in the past that some people in Government did not want to regulate because of corruption and other issues, but in my opinion, I think the present government wants to get involved in the petroleum sector genuinely because of the masses. But I think the government is actually going to be hurting the masses because people are not getting fuel everywhere at the official price. Some people are buying fuel at 120 naira, 140 naira, 150 naira, 160 naira and some localities are paying 200 naira per litre of fuel. I think the government probably means well, but it is applying misplaced solutions. At the end of the day, you look at the country and developments around the world. You can see that development is best achieved when government allows the market to do its magic.

Apart from investment issues, the Nigerian oil industry is now experiencing another round of pipeline vandalizations. Recently, a group called 'Niger-Delta Avengers' claimed responsibility for the pipeline bombing at Chevron Abiteye pipeline in Delta. During the Jonathan era, the general feeling was that the amnesty programme had curbed militancy in the Delta region and now the militants are back to work. What do you suggest should be the solution to this militancy problem?

I think in my opinion, the issue is about ownership. A sense of ownership. Do the communities where these pipelines are laid really feel that they have ownership or do they really believe that they are part of this value chain of oil production in Nigeria? I think that if they see these pipelines as  assets that produce returns, then we will have less of these issues. I know there is a company in Nigeria that has tried that model, I think it is Seplat. Seplat has been able to actually partner with communities as a model and it has yielded some results. It is common sense. If you work with the communities and make sure that they are part of that value chain in terms of returns, then they are going to protect those pipelines. The other possibility is the Dangote model where there are plans to lay pipelines in inaccessible areas, in the deep ocean. The pipelines are going to be run on the sea bed, offshore from Niger-Delta to Lagos. This is much more difficult to vandalise. Some of these pipelines are not deep enough. So there are things that can be done. I think if the government can get the communities to feel a sense of ownership in terms of real returns and maybe give them equity. These ideas are not new, I am aware that some of these things are supposed to be in the PIB that hasn't been passed for years. We have been on that Bill for years now. It would have been better we hadn't mentioned it, like the Minister said. The market doesn't like uncertainty and what have we done? The Bill has been lingering for years. It is part of the ''disinvestment'' problem I mentioned earlier. Even when there are leaks, the oil damages their communities, so there is need for equity participation on the part of communities.

There have been concerns and reports about the integrity of some of these pipelines. Why hasn't the government really made efforts or done much to replace/change these pipelines?

There are various pipelines and some of these pipelines belong to the companies. I would want to believe that a lot of the IOCs have standards in terms of checking integrity and all of that. But again this goes back to the issue of investing. Money needs to be budgeted for running these pipelines.  I am aware that some companies have had challenges with degrading equipment and they go to government that they need to change this pipeline or platform, or there is an integrity issue and they agree on a budget and the budget doesn't come. The government even takes a long time in awarding contracts. That's another issue I haven't talked about - Procurement. The contracting cycle in the oil and gas business in Nigeria is abysmal. Contracts take 2, 3, 4 years to put in place. Imagine that! Even if IOCs have money to spend and the government does not approve those contracts, how does the work get done? So it all fits into this inefficiency I am talking about. So, on the issue of pipeline, a lot of it has to do with contracting and funding. None of the oil producers want to see oil spills form integrity issues but if the FG is not putting forth the money to get the work done, it's taking forever, and most contracts that are awarded have to be approved by the NNPC board. In the past administration, the board wasn't meeting regularly, so you find out again that you are back to the inefficiencies. It is not excusable at all. Under the IJV model I earlier mentioned for instance, the contracting processes won't take three years because the contracting decision will be taken within that entity. This model is being used in Qatar and all over the world; it works. Within 2, 3 months, you can actually get a contract in place. It's done all over the world. The reason it takes years in the NNPC is because of all sorts of interests, change in NNPC personnel, and so on. Budgeting and contracting are big issues in the industry.

Finally, is there hope that the Nigerian oil industry will be truly revamped?

There is always hope...(laughter). I personally wish that some things are done better, for instance the downstream sector. The way the subsidy is being run now in that sector is not a good thing. You cannot tell a bread seller how much he should sell his bread. That's why people are not building refineries. There has to be that profit motive for businesses to run. The government should not be telling the marketers how much they should be selling their petrol. Just like the GSM example. The 1st SIM card I bought was about 20,000 naira in 2002. Now the same SIM card is now selling for minus 200 naira (-200 naira) with the telecoms company paying one to buy a SIM card by loading it with 200 naira credit. If the downstream sector is deregulated, maybe in the short term, prices may go up (they are already up anyway). But if you allow a free market, allow competition, you are going to see prices come down. I just wish the government will do much more and much better. I believe there is hope.


The above interview has highlighted various issues which are negatively affecting productivity in the Nigerian oil industry to wit - poor planning, lack of re-investment, transparency and accountability issues, disconnect between the government and the inhabitants of the Niger-Delta region, governance issues and so on. The contributor has also proffered some solutions. CRLE hopes that the present Nigerian government and all stakeholders in the oil industry will work assiduously to eliminate these nagging governance and ethical problems that are affecting productivity in the oil industry using the best possible solutions that will bring prosperity to the Nigerian citizens and propel the Nigerian oil industry to greater heights.

Feb 15
Regulatory Framework Must Adapt To Changing Circumstances

Dr. Bongo Adi is a senior lecturer at the Lagos Business School, where he leads infrastructure analytics and megacity competitiveness project. In this interview with DAVID OGAH, he harps on the imperative of investing pension fund on the nation’s infrastructure, saying it is a mismatch for Pension Fund Administrators to invest the fund in government bonds.

How do you think government can borrow from pension fund to fund social infrastructure?
ONE way that governments traditionally borrow or ‘raise’ money is by issuing bonds. Such government bonds are among the safest instruments, and therefore, attract the risk-averse investors, who are interested in earning a fair and predictable return on their investment.

Basically, this has been the practice with the nation’s pension fund administrators, who cautiously avoid risk and mainly patronise government bonds. So, we can say that government has been borrowing from pension funds as a standard practice. Perhaps, we should be asking more critical questions regarding the role of pension funds in infrastructure provision in a cash-strapped economy. Rather than taking the easy way out by lending to government in the form of investing in bonds, pension funds should be more creative and innovative in diversifying their portfolio. Infrastructure offers such opportunity.

Should pension fund finance infrastructure?
As someone recently put it, pension fund administration in Nigeria appears to be no more than “putting your money under the pillow.” It seems too that pension fund administrators have little else to do with the funds under their management, other than ensuring that they don’t lose them. Granted that the regulation on investment of pension fund assets does not give much room for innovation and discretionary investing on the part of the administrators, it still seems they do even less than required, just to be on the safer side or maybe for lack of better ideas regarding how the funds could be better optimised. This inertia, however, is not peculiar to Nigeria’s PFAs.

Pension funds globally have displayed a general lack of appetite for risk, as they tend to invest largely in core assets — government bonds, money market instruments with short-term maturities and large-cap equity. Their exposure in alternative assets like real estate, private equity and hedge funds have been very limited. Infrastructure on the other hand, represents just about a percent of their total managed assets. However, as governments all over the world, prompted by the 2008 – 2012 recession, are now forced to walk away from cost intensive, long-term financial commitments such as required by large infrastructure projects, some pension funds are beginning to experiment with longer tenured investments in infrastructure.One could say that the infrastructure asset class perfectly matches the long term maturities of the liabilities assumed by Pension Funds. In Nigeria, for example, we have a demographic distribution having a significant number of pension fund contributors below 40 years and given the demographic structure we currently have, this number is expected to more than double in the future.

Under 40 means that there is at least a 25-year maturity for the liabilities of Pension Funds. It is, therefore, a clear mis-match when pension funds are invested in short term securities when their obligations or liabilities are very long term.

Infrastructure presents a veritable asset class for pension funds, yielding combined benefits of cash-flow matching with their long-term liabilities, protection against inflation and statistical diversification given that there is low correlation between this asset class and traditional assets such as equity and fixed income securities. In fact, this is the new development in pension economics pioneered by Canadian and European experts and the World Pensions Council (WPC).

Do you think that the funds should risk depositors’ money in funding infrastructure?
This is the standard line you get to hear from Pension Fund managers and regulators. The fact is that the risk imposed by having 5.5 trillion naira funds lying idle in a capital-poor economy like ours is far greater than the risk of investing in infrastructure. By the way, infrastructure investments are not all risky.

One of the core objectives of using project financing techniques in infrastructure projects is to de-risk projects to an appreciable level.Different infrastructure projects have different risk profiles and investors usually assess their capacity to shoulder different kinds of risks before embarking on any project. New developments in project finance are also been deployed by investors to mitigate various risks in projects. If risks were a major hindrance, we probably wouldn’t have seen South African Pension Funds investing in several Nigerian projects to the tune of almost a billion dollars over the past few years.

Are there sufficient bankable projects in Nigeria to attract pension funds?
Some people have the opinion that infrastructure is risky. As I argued above, this is argument is totally without merit if not completely flawed. We are witnessing a gradual upscaling of investment diversification by some PFAs owing chiefly to changing attitudes towards risks and a bit more proactive opportunity exploration.

There is clearly greater refinement in the process, the diversity of assets, the competence of the personnel and the risk appetite. There has been the emergence of real estate investments from Pension Funds, and a naira-denominated private equity funds raised from PFAs.

These are nonetheless, excellent initiatives in the direction we are proposing but however, the efforts really need to be intensified. Bankable projects don’t come ready made. If we need a pipeline of bankable projects, then someone should be interested in early-stage project development. This is what is critically missing in the Nigerian infrastructure market. Infrastructure Concession and Regulatory Commission is supposed to play some role in project origination and development, but we haven’t really felt their impact in the market.

The problem of lack of bankable projects manifests not only in the pension funds, but even among banks who often claim they can’t find enough firms that meet their lending criteria. So, the solution to not having sufficient bankable projects is simply to invest in project origination. Some have suggested that Pension Funds allocate about five per cent of their funds to origination. They should also incentivise product innovation as well as invest in infrastructure developers. In other words, the attitude needs to change to accommodate enlarged risk tolerance. Investing in people and institutions that originate and de-risk projects at an early stage should ensure that there is a pipeline of investable assets to generate the expected returns to make the pension reforms worth the while.

Do you think the regulatory framework supports the type of experimentation you have advocated here for pension funds?
Clearly, the regulatory framework must adapt to changing circumstances if our pension funds are not to be anything more than a piggy bank. Not just in Nigeria, all over Africa, institutional investors face specific barriers to long-term investment, such as the lack of appropriate financial vehicles, as well as, a dearth of data on this sector and related opportunities in low income countries.  This situation is particularly stark in Africa, where equity market capitalisation is low, and stock markets – which exist in only a third of Sub-Saharan African countries – are often shallow and illiquid.

I think rather than stick with rigid policies, we should adopt the approach of problem-driven iterative adaptation to ensure that policies respond to contexts and felt needs. In the case of pension funds, it is important to evolve policies to drive a more proactive, innovative and creative pension fund that adds value to the economy.

There is nothing new here as well. The G20/OECD High-Level Principles on Long Term Investment Financing by Institutional Investors set out policy recommendation aiming to mobilise institutional investors assets for long-term investment without diluting prudential safeguards.

Since the Pension Funds reforms championed by Fola Adeola we seem to have emerged from an era of theft to one where we are now seeing the largest pool of investable capital this country has ever seen.

Beside pension funds, which other sources do you recommend to fund infrastructure?
Institutional investors like pension funds mainly serve as suppliers of investible funds in infrastructure projects. However, given the situation we are in at moment, we propose an expanded portfolio of activities to include origination and financial innovation. The ideal scenario to bring in institutional investors in infrastructure funding is PPP.

Although, PPPs come at a higher cost over time, the theory suggests that it presents a way out for government facing severe budgetary constraints. We have heard so much talk about PPPs over the past decade, however not much has happened. I think that the present situation calls for a more concerted effort towards using PPPs to address our large infrastructure deficit.

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About this blog
No, this isn't actually my picture. I just haven't gotten around to updating this section. It's good to know that someone is reading every last word though. Thanks!