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Wednesday, 27 January 2016


  There was a time in the biblical Israel when money was said to have failed . At that time, I believe there was famine for about three years because there was no rain. People had money but there was nothing to buy. It got so bad that women were eating their Children in turns and it was actually when the King reigning at that time was called to settle a quarrel between two women, because one of them reneged on the agreement of surrendering her own Child for cooking, after she had participated in eating the other woman's son that he really became acutely aware of how things were. Thereafter he went in search of the prophet who had shut down Heaven, prohibiting it from sending rain .
  Since after the Nigeria-Biafra which was fought partly because of oil, Nigeria has lived on Crude oil and it's associated gas. In the 70s following the Middle East crisis, prices of oil jumped and Nigeria got high on Petrodollar. That was when as alleged Gowon made the famous declaration that Nigeria had no problem with money, that the only problem we had was how to spend it. After the first oil bubble burst in the 80's, Nigeria reeling from the shock of a collapsing economy, introduced the austerity measures and the tightening of belts. Every Development plan and every budget( rolling or strolling) since then has talked about diversifying the economy. Mostly it was talk because, no sooner had the oil prices rebounded than we abandoned every effort to deliberately diversify our economy from total dependence on oil.
    In 2008-2009 we had the last global economic crisis which also led to the crash of price of commodities. Oil prices crashed from over 140 dollars per barrel to a low of 40 dollars per barrel in a matter of days. Luckily for Nigeria, Olusegun Obasanjo, Ngozi Okonjo-Iweala and Chukwuma Soludo had accumulated foreign reserves in excess of 53 Bilion dollars and had plenty of money in the excess crude account, despite the resistance by the State governors. Thus while revenue dropped significantly, Nigeria was able to go through the period without the economy going into spin. All kinds of measures were suggested and some were adopted to help Nigeria reduce this regular boom and burst cycle. When prices rebounded, we again relaxed and went back to business as usual. By June 2014 oil was selling for 112 dollars per barrel. But few days after, the prices began to decline and as we write, nearly one and half years after, the decline has not stopped. Last week, oil went down to 28 dollars and people are projecting it could go further down to below 20 dollars which is said to be below the cost of production in Nigeria. Will the price rise again?
 Right now the world is floating on oil. The USA has overtaken both Saudi Arabia and Russia to become the world's largest producer of crude oil, now producing about 12.5 million barrels per day. Saudi Arabia produces 11.6 million barrels per day whereas Russia is producing 10.8 million barrels daily. America is turning its import terminals into export terminals. And Iran is about to begin pumping oil into the international market and the consequences will be disastrous for Nigeria particularly. It is likely that Iran will displace Nigeria from the Indian market. So who will buy our oil,with 20 other African Countries now in the league of oil producers and exporters.
   Today Nigeria has lost about all the income from oil and has to fund the 2016 budget mainly from borrowed funds and perhaps from recovered loot if we are that lucky. All the talk about increasing taxation will not go too far because the businesses are in dire straits and many people are losing  their jobs. That is why I supported the plan of the government to find a way to stimulate the economy by bullish public expenditure. But given the continued slide in the price of oil, the 38 dollar benchmark is no longer realistic. OPEC is virtually dead and the possibility of a significant rebound looks very uncertain. 
 I think Oil has failed Nigeria and the focus right now must be on how Nigeria can survive without oil. That should be the focus of all but more by the Nigerian economic leaders. I believe the only viable option is to look onto the private sector. But right now the sector is emasculated with the wrong policies. The Government must change its paradigm and help set the private sector free. That is the only hope.
Mazi Sam Ohuabunwa OFR 

Monday, 18 January 2016


  Last week, I was surprised that many Nigerians were shocked that the US dollar exchanged for over 300 Naira. Our Senators seemed to be in greater shock than many, no wonder they have summoned the CBN Governor to appear in their chamber this week to explain why the Naira is being pummeled in the parallel market which as I said last week is the true foreign exchange market. 
  O-level Economics taught me that the price of every product or commodity is fixed at the point where supply intersects with demand. If supply remains constant while demand increases, price goes up and when supply dips in the presence of high demand, the price goes further up. And that's why I am surprised that any body is asking why the Naira is losing value rapidly, competing to join the league of Italian Lira, the Greek Drachma, the old Ghanaian Cedi, the  Gambian Dalasi or the old Panya money. For a while now, I believe it started when Prof Chukwuma Soludo was CBN governor and intensified when Sanusi Lamido Sanusi (SLS) took over, the Bureau De Change businessmen have been high on CBN Petrodollar. It seemed a good strategy then to fund the BDCs by CBN. It quickly narrowed the difference between the official  and the parallel market rates and brought stability to the value of the Naira against other major international currencies.
   Infact, at a time the rates merged and because the protocols were shorter and charges cheaper, many small businessmen and travelers completely depended on the BDCs for their forex supply. For example, I have not been to the Bank in the last five years or so for my Basic Travel allowance( BTA). Why go through the rigor of filling forms and waiting on the line, when I could stop by at the Mallam's corner and buy what ever dollars that I needed without protocols and often without limit, even if it is with some small premium.As I referred to earlier on, the reign of SLS was the golden era of the BDCs and their array of foot sales men who are all over the public space soliciting for forex business. With the full deregulation of the forex trade and the regular supply of foreign currencies to all sectors of the parallel market, the Naira became a convertible currency. With it the BDCs assumed more roles including the opening of LCs and funds transfer, of any size. Then all of a sudden, the CBN cuts off the supply and people express shock that the depreciation of the Naira was rapid and unprecedented breaking a 43 year old record. The moment the  supply of dollar began to fall, the value of the Naira began to depreciate and every effort to curb demand by CBN has not helped as demand seems very inelastic, given our over Dependance on importation. 
  I guess that it was in a sincere effort by CBN to curb the depreciation of the Naira and also stop the growing practice of Nigerians holding the dollar instead of the Naira, that it decided to interfere with the domiciliary account transactions. It asked commercial banks to stop accepting dollar deposits and also not to allow any body use the foreign currency  left  in the account to order or pay for any products abroad. This was a very frustrating development for domiciliary account holders. I personally could not understand how that was going to benefit the value of the Naira or any body. As it turned out, while banks could not transfer money abroad from the domiciliary accounts or other non official sources, the BDCs had their way. Domiciliary account owners then withdrew their money from their accounts which they were allowed to do and went to the BDCs who transferred such monies at a premium. So what ever objective the CBN wanted to achieve could not be realized to any  significant degree. Instead the economy suffered because of  this policy. Supply decreased and price continued to go high.
  Common sense in a globalized economy should dictate, that if a product is in short supply, all efforts should be made to attract such product and increase its supply. If Nigeria is in short supply of dollars, as it certainly and critically is, it would have made more sense if we took steps to promote supply, rather than restrict supply. In my opinion, the domiciliary account mechanism is a potent method of bringing foreign exchange into the Country. If I were to suggest I would rather have persuaded domiciliary account owners to sell their dollars to the CBN so that they can fund other users, rather than ask them to stop paying dollars into their accounts. As has been proven times again and again,bans and restrictions in a globalized economy are often futile exercises. The recent ban on domiciliary account deposits achieved very little but caused plenty of damage.
  It is therefore good that last week, the CBN lifted the ban on the deposit of foreign currencies into domiciliary accounts. To me and to many others who had hitherto criticized this policy, this is a good step in the right direction. We urge the CBN to therefore go ahead and quickly take other similar steps that will help to stabilize the Forex market and bring certainty to the value of the Naira. The next urgent step which must be taken is to allow free utilization of the money in the domiciliary account. There should be free deposit and free withdrawl, including transfer to service legitimate obligations abroad. IF that necessary next step is not urgently taken, then there may not be any incentive for any body to go and deposit more money into domiciliary accounts. As I was concluding this article, there was some indication that this may have been done.
  Secondly, the CBN must address the root cause of the forex crisis. Their focus should be on how to attract more foreign exchange into the country. To do so, they must open the doors. Nothing can come in, when the doors are shut.  Yes when you open the doors, certain things may go out and some will come in. The challenge is to design strategies and incentives that will attract more incoming than outgoing. There are a couple of Nigerians who can advise CBN and the Nigerian Government on how to get more dollars flow into Nigeria than go out, even in the face of the dwindled oil price .And in doing this, they must align with the Trade and Investment policies of the Ministry of Industry, Trade and Investment.
 Thirdly, this labour to artificially prop up the value of the Naira in a so called official market will be hard labour that may achieve very little. We need to take a holistic view of how to manage the forex market. Rather than maintain artificial official price which does not satisfy critical needs- pay for matured obligations, import refined petroleum products and pay for imported raw materials and production machinery( according to CBN's stated priorities) , but rather provides incentive for round tripping and other corruption laden practices, we may have to just let the Naira find its level. Many 'smart dudes' in the forex business are making a kill, obtaining dollar at the official market at 197 Naira and selling at the parallel market at 305 Naira. And the gap may still widen . But If we had let the Naira find its level when the Naira was exchanging at 150 against the dollar, it may not have depreciated to over 300 at this time.
  One of the stated cardinal objectives of the new administration at the federal level is to promote local production. This can not readily happen with an artificially propped up Naira. Artificial Naira pricing will continue to encourage importation. A market determined pricing of the Naira will discourage importation and force us all to look inwards. Watching the CBN governor announce the lifting of one ban and the introduction of another ban on television last week, my heart went out to him. He sounded tired and stressed. I wished I could help to reduce the stress. But I believe that the simplest way to moderate this stress is to return to the liberalization of the forex market and allow the market determine the price of the Naira. The Federal government can decide what it wants to do with its dollars while other economic agents will decide what to with theirs. Experience has shown that the market forces remain the most efficient determinant of price for every commodity- tangible and intangible. Some may disagree but there is overwhelming evidence, globally and even from our recent economic history. 
Mazi Sam Ohuabunwa OFR

Monday, 11 January 2016


In this column in the last two weeks, I have looked at the Economy and concluded that 2016 will be a tough year. I will not deserve any awards for saying so because many other commentators and analysts have come to  similar conclusions. But if an award must be given, then President Muhammadu Buhari( PMB) is the undisputed winner. First, since he assumed office , he has been consistent in telling Nigerians that our economy was in bad shape and that difficulties lay ahead. This call has intensified by the day rather than abate. In his recent media chat he again harped on the subject of the difficult economy that lies ahead.
  The only award that has no obvious winner is that which will go to whoever tells us exactly what must be done to heal the economy and restore it to sanity as quickly as possible. All kinds of ideas are floating in the air and some tentative and experimental measures are being taken, but so far nothing has changed. Or rather nothing has changed for the better. When I started to hear of figures of money stolen and kept abroad by some past political leaders and officials of government and the present government's determination to bring back all the money, I thought perhaps we could make up the oil revenue shortfalls. My hope was buoyed up some months ago, when Comrade governor Adams Oshiomhole announced that a former minister had six billion dollars in his or her account and that it was the Americans that gave him the figures. At that time, I had suggested to a friend that we could hire America's special force, the guys that took out Osama Bin Laden to help us retrieve this large sum in one person's account. Even if we had to pay them one billion dollars to carry out this certainly less dangerous task, it would be worth the while. But it does not look like we are in any real hurry to repatriate these funds. And listening to PMB and watching his mien, we would never try anything extra judicial like trying to cargo Umaru Dikko as we did in 1984. So any hope for quick fixes are forlorn. And yet our businesses have to survive in 2016, especially those who operate in the SME sector. Hence this attempt to proffer a few suggestions
  At the close of 2015, many businesses were gasping for breath. And if we must prevent sudden death, the first thing to do in the new year is to rethink the business. What is this business about in the first place? The assumptions on which the business was planned or started, are they still relevant? With the current happenings in the Economy, are those assumptions still justified?What Business results am I expecting this year? Can my current structure- ownership, management and funding deliver the results? Can I deal with the new regulatory regime? Must I really remain in this business? Is this sector growing or declining and why? These questions are relevant, because experience has shown that at times, people act as if they were sentenced to a particular business. Many fail to confront and interrogate the unfolding realities in their line of businesses and feel obliged to keep " suffering and smiling". No way! In the recent past for example, with the subsidy bazaar, many people went into the oil and gas business. But with recent development in both the international and domestic oil markets, the new regulatory frame work from PPRC/DPR/ NNPC and the development in the Forex market, Many players in this business need to rethink their business models and options and take bold steps to align to new trends, if practicable or take a jump to safety when the shore is still visible.
  Any business that depends on the importation of anything will face challenges this year, that is if they are not already in distress. In the closing months of 2015, it was difficult to access foreign exchange for import and I am not talking about the 41 products that had been on the restriction list. It is becoming difficult to open letters of credit and harrowing to get those letters confirmed. Businessmen are now queuing up in banks and bank treasurers are now in hot demand, if you understand what I mean. Soon, if things do not change, then consumers of imported products may also be on the queues. Manufacturers are having challenges sourcing imported raw materials and other industrial inputs and stocks are depleting fast.
  So it may be helpful to take a close look at the source of your inputs. Can you develop a locally available source? Is it possible to deliberately reduce the import component of your value chain? Can you think of completely running with local inputs only? May be not. But my instinct is that the the businesses with minimum import component will fare better this year
I believe one of the greatest risks any businessman will take this year is to borrow in foreign currency. The Naira is on the downward slope in the parallel market, which actually is the real market today. Since nobody is getting sufficient dollars at the official market, many businessmen are compelled to go to the parallel market to keep their businesses going or to meet maturing obligations. That adds pressure to the price of the dollar. Though the CBN has resisted to date all the pressures to further devalue the Naira officially, the recent visit of the IMF President Madame Largade may have have finally broken the resolve and I predict that an official devaluation will happen soon and that will naturally escalate the depreciation at the parallel market. With the price of crude oil still on the decline, there seems to be no reprieve in sight for the Naira. Therefore any borrowing or commitment made in foreign currency must be speedily extinguished to minimize the present risk of devaluations. Luckily there seems to be plenty of Naira in our banks, perhaps due to the the combined effects of the foreign exchange controls, the inactivation of the domiciliary accounts and the scarcity of foreign exchange in the banks. And this seems to have crashed the interest rates in banks. Thus those who need to borrow should look to the Naira.
The Federal Government plans to spend 6.08 Trillion Naira in 2016. That is huge. We have never spent this kind of money in our Economy in one year before. Against the expectation that with declining National income, expenditure will also decline, the Federal government wants to stimulate the economy to arrest the frightening decline of the GDP that occurred in 2015. So I can see opportunities here for Businessmen to take positions.Are you in construction, services or product supply, there is an opportunity to do business with the Public sector in 2016. You will therefore need to take a close look at the Budget Proposals that PMB has sent to the National Assembly and see where you can play. Dust up your papers and ensure they are current. There seems to be opportunity for many including those who will supply the food to feed the school Children, the books to support the educational renaissance and the medicines to support healthcare. Luckily, it may not be business as usual as the ANTICORRUPTION war may help keep the procurement process better sanctified. Just may be, because in our Country, the more things seem to change the more they remain the same.
Ordinarily, it makes sense to always stay on the right side of the law but in Nigeria, many people find ways to stay either above or below the law. But as can be seen, Nigeria is working hard to hold everyone accountable. It looks to me that we are entering the era where it may become increasingly costly to disobey the rules. One area every businessman must watch out for this year is in the area of taxes and VAT. The government has acute revenue shortfalls from oil and is desperate to find resources to fund the ambitious budget of 6.08 Trillion Naira. It will naturally look towards the Private sector to meet the shortfall and it has become evident that they will adopt aggressive methods. Businesses will be shut down this year because of defaults in paying appropriate taxes or timely remittance of VAT. So take measures to avoid  disruption and embarrassment. Secondly, all businesses owners must seek wisdom to enable them comply with regulatory requirements. And should we be dissatisfied with any overbearing regulator, then we may seek legal protection or redress early. The experiences of MTN, Stanbic IBTC, Guinness and others in 2015 give credence to my advice.
   Finally should you desire further discussion on this subject you may reach me on my email :samohuabunwa@gmail.comand you may also prepare to attend the forthcoming Business Seminar being arranged by the Sam Ohuabunwa Foundation for Economic Empowerment (SOFEE) on this subject. This will be a testy year for Nigerian Businesses and it will be helpful to seek all the wisdom and understanding to overcome,God helping us.
Mazi Sam Ohuabunwa OFR

Monday, 4 January 2016


 We are thankful to God, that we survived 2015. It was indeed a monumental year for our Country. It was largely a year of mixed blessings. As I opined last week, we had a positive political outcome with the unexpectedly peaceful transfer of power from PDP to APC at the Federal level but we ended the year with miserable economic outcomes, fueled by the precipitous decline in oil prices and the restrictive measures taken by the government to contain the fall out. Every body that I met and every Industry that I reviewed closed the year hoping for a better 2016. I therefore wish to join all these people to express my wish for Nigeria in 2016.


First, I wish that the 2016 Federal budget is approved speedily. Though the 2015 budget has been extended to the 31st of March, 2016, it is clear that 2015 budget has no answer to the prevailing economic challenges. Perhaps the only thing left in the 2015 budget is the supplementary budget aimed at ensuring payment of Salaries and petroleum subsidy arrears.  I believe that the economy needs a stimulus to return to growth. The 2016 budget proposals sent by President Muhammadu Buhari ( PMB) to the National Assembly late December had some seeds that could stimulate the economy. The tripling of the capital budget to 1.8 trillion Naira is a good sign. The focus on infrastructure as shown by the enhanced allocation to Works and Transportation is indicative of this. Even the extraordinary allocation to social welfare will help in stimulating economic activities. Though many of us worry about the huge deficit implied in the 6.08 T. Naira  budget, I think it is a bold attempt to reinvigorate the economy. Given the anticipated more disciplined and effective utilization of the resources, Nigeria must be a better place with the expenditure of this huge sum.  Second, I wish that PMB will listen to his economic team to implement fiscal and monetary policies that will attract investment. We need bold private sector investments that will complement the bold public sector budget. In designing these policies, we must bear in mind that we can no longer depend on oil money to develop the Nation. To diversify the economy as has become most urgent and expedient,we urgently need inflow of private sector investment into Infrastructure ( through PPP), Agriculture, Mining and Manufactring. Tax revenues can only grow if companies are making money. So government must motivate enterprise development by systematically  dismantling every obstacle currently inhibiting growth. For example, the current foreign exchange controls that have hindered manufacturers must be adjusted to allow them access to needed raw materials and other industrial inputs.  POLITICSIt is a pity that the polity, especially in the Southern States of Nigeria will be politically charged this year following the election reruns mandated by the Courts especially the Appeal Courts in the closing months of 2015. Nevertheless my wish is that we will get done quickly with these reruns and the fresh cycle of judicial adjudications and settle down to good governance and good representation. For the greater part of the last two years, we seem to have done more politics than anything else. And we all know that Nigerian politics can be quite divisive and disconcerting. We have been subjected to political rhetorics for too long and the time has come to calm down and live our normal lives. The Party in power must now assume the role of the guardian of the Nation and must deliberately tone down the Political rhetorics and propaganda.While we welcome a virile opposition, we advise the opposition Parties to avoid the temptation to make political issue of every matter. Let's give the party in power some space to govern and let Nigerians see the difference. Nigerians are not that daft and nobody can fool them for too long. Without these judicial reverses and mandated reruns, some of which baffled even the Chief Justice of Nigeria, perhaps, we could have said that we are done with 2015 elections.


  Any one who truly loves our Country should be pleased that finally, the war against corruption which Obasanjo started but which he seemed to have later suspended and which remained largely suspended since then, has resumed with fury. It is refreshing that past political office holders are being called to account. For once, impunity is being punished and discouraged.  But my wish is that the fight will become holistic. The current feelings in some quarters that it is selective and targeted at the opposition must be addressed so that all Nigerians will unite behind the fight. Also we need to take the fight to other arms of government. The saying that the judiciary is the last hope of the common Man no longer has universal relevance in Nigeria. Again the Chief Justice had spoken about the corruption in the judiciary. But nothing is happening and it seems to be business as usual. I can not believe what I hear that is happening in some of the Election Tribunals and Appeal courts in these Buhari Times. And this seems to be common knowledge. My wish is that PMB should beam the searchlight on the judiciary, the Legislature, the civil Service and the Private sector and let the battle rage across the Nation and all sectors and let us cleanse our Nation for once!.


Yes, we may have won the war against Boko Haram technically as the Minister of Communications announced recently. This must be good news to all Nigerians irrespective of our political and ideological leanings. We need to defeat the Boko haram technically and in reality. But Nigeria remains largely unsecure. Crimes are committed with ease all over the Nation and the criminals get away with ease. The other day, I was stunned to read the story of how armed robbers were robbing car owners, smashing their car windows between the 3rd and 4th roundabout on the Lekki Expressway( or Unexpressway according to the writer) in Lagos, while some Policemen with their beautiful patrol vans sat pretty at the 4th roundabout and when citizens contacted them, they said, the robbery was happening outside their jurisdiction, and so they could not help. What kind of Police is this and what kind of security can they provide. We used to hear of these kind of stories in the past and I was hoping that there would be change in these Buhari times. But Alas. My true wish for Nigeria is that we will have a Nation where lives and property of all Nigerians are secured and were every criminal is pursued into hell. GOD please give us this type of security arrangement in Nigeria in 2016.


Above all, my greatest wish is that all Nigerians will have better quality of lives in 2016 than they had last year. I wish that we all have portable  water to drink and more hours of electricity supply.I pray for better trained and motivated Teachers who will produce better educated students. I wish that many unemployed graduates will be employed or encouraged to start their own businesses in 2016. I pray that no woman will die in child birth this year,  by government at levels making maternity services available to all and I truly wish that no healthcare worker or  university Lecturer would go on strike this year. I wish that in 2016 Many More Nigerians will feel proud to belong to this Nation as our leaders take deliberate actions to unite Nigeria. Happy New Year Nigerians.

Mazi Sam Ohuabunwa OFR