Zimbabwe Crisis: Fuel Price Hike, Currency Crisis and the Violent Protests

 

Angry Zimbabwe protesters barricaded roads with burning tyres and rocks on Monday, 14th January 2019, after the government increased the price of fuel in a bid to improve supplies as the country battles its worst gasoline shortages in a decade.

It was reported that Protesters turned back drivers and blocked buses from carrying passengers in Zimbabwe’s two main cities of Harare and Bulawayo as the main labour federation called for three-day nationwide strike.

Soldiers, Security Operatives deployed

Soldiers were deployed at a shopping centre in Bulawayo’s township of Entumbane where protesters looted shops.

Demonstrators in the second city had attacked minibuses heading to the city centre and used burning tyres and stones to block the main routes into town while some schools were turning away pupils fearing for their safety.

Shops closed in downtown Harare as riot police patrolled the streets and a military helicopter flew over the capital.

According to video footage from the Centre for Innovation & Technology, police fired teargas to disperse youths protesting outside the high court in Zimbabwe’s second city of Bulawayo.

In the southern city of Bulawayo, commuter bus drivers and touts blocked thoroughfares with burning tyres, tree branches, and blocks of stone.

Riot police tried to quell demonstrations in the western suburbs of Emakhandeni and Luveve, firing warning shots and tear gas but the protesters remained defiant.

Demonstrator Glen Ncube, 25, expressed anger at the president’s announcement on Saturday of a 150 per cent fuel price increase and the police actions.

“What kind of a man does this? Can Mnangagwa even be called a president? He’s making life hard for us and these police are trying to stop us as if they don’t know our pain,’’ Ncube said.

Emmerson Mnangagwa’s Dilemma

President Emmerson Mnangagwa last week announced more than 100-per cent rise in the price of petrol and diesel in a move he said would end fuel shortages.

The last time things were this bad was in 2008, when the country was contending with hyperinflation that saw prices doubling every day, left shop shelves empty and forced people to buy groceries from neighbouring countries or on the black market.

The following year, the government abolished the Zimbabwean dollar in favour of the use of other currencies, primarily the US dollar.

Read Also: Attempted Gabon Military Coup: Ali Bongo’s Health and Other Controversies

Mnangagwa has said his government will not let businesses raise prices but they have been doing so anyway, arguing that they have no choice but to buy dollars at a premium on the black market.

Inflation is already at a 10-year high of 31 percent and, in the past two weeks, public transport firms have tripled fares citing a shortage of fuel, which some have been buying on the black market.

Fuel price hike

In a televised address last week, Mnangagwa said prices of petrol and diesel would more than double to tackle a shortfall caused by increased demand and “rampant” illegal trading.

Petrol prices have been raised from $1.24 a litre to $3.31 (2.89 euros) and diesel from $1.36 a litre to $3.11.

The president’s announcement came after fuel shortages which began in October last year worsened in recent weeks with motorists sometimes spending nights in fuel pump queues that stretch for kilometres.

Most service stations still had no fuel to sell to motorists who have been sleeping in their vehicles to queue. Some said they were awaiting an official notice from the regulatory authority (ZERA).

Deputy Information Minister of Energy, Mutodi tweeted that commodity price volatility “will be temporary before goods prices normalize”.

Currency crisis

The acute shortage of U.S. dollars has made it hard for President Emmerson Mnangagwa’s government to import fuel.

Zimbabwe abandoned its own currency in 2009 after it was wrecked by hyperinflation, and adopted the greenback and other hard currencies such as sterling and the South African rand.

There’s not enough hard currency to back up more than $10 billion in electronic funds trapped in local bank accounts, prompting demands from businesses and civil servants for cash that can be deposited and used to make payments.

Finance Minister Mthuli Ncube told a townhall meeting on Friday a new local currency would be introduced in less than 12 months.

“On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years,” he said.

Mnangagwa is under pressure to revive the economy but dollar shortages are undermining efforts to win back foreign investors sidelined under his predecessor Robert Mugabe.

People killed, Injured in the fuel hike protest

A human rights group in Zimbabwe says five people were killed in clashes between demonstrators protesting fuel hikes and security forces who opened fire on some crowds.

The Zimbabwe Association of Doctors for Human Rights on Tuesday reported the death toll as many businesses in the capital, Harare, and other cities were closed following Monday’s violence. This is Zimbabwe’s biggest unrest since deadly post-election violence in August.

Another human rights group says 26 people suffered gunshot wounds and that some were afraid to go to hospitals for fear of arrest.

State security minister Owen Ncube says lives were lost, police officers were injured and property was damaged. He says more than 200 people were arrested and blames the main opposition MDC party and some civil society groups for the violence

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Attempted Gabon Military Coup: Ali Bongo’s Health and Other Controversies

On Monday morning, 7th of January 2019, at about 4.30am, a small group of junior military soldiers seized the national radio station in Gabon, an oil-rich country in central Africa, and declared a coup.

It was reported that a nationwide internet disruption was detected by global internet observatory (NetBlocks) starting at approximately 7:00am UTC among other things, Lieutenant Kelly Obiang delivered the attempted coup message (in French) on national radio.

Who led the Coup? – Lieutenant Kelly Ondo Obiang

The military spokesman and leader of Patriotic Movement of the Defence and Security Forces of Gabon, Lieutenant Kelly Ondo Obiang, stated on national radio and state television on early Monday morning that he and his supporters were disappointed by President Ali Bongo’s message to the nation on New Year’s Eve, calling it a “relentless attempt to cling onto power”.

Kelly Obiang also claimed they were setting up a “National Restoration Council for restoring democracy” in Gabon.

He said “The eagerly awaited day has arrived when the army has decided to put itself on the side of the people in order to save Gabon from chaos”.

“If you are eating, stop; if you are having a drink, stop; if you are sleeping, wake up. Wake up your neighbours … rise up as one and take control of the street,” he added, calling on Gabonese to occupy the country’s airports, public buildings and media organisations.

Gabonese Government

The Gabonese government was quick to have thwarted the attempted military coup on Monday, retaining control of the oil-rich West African nation after two plotters were killed and other army officers including Lieutenant Kelly Ondo Obiang, got arrested.

Five army officers who took over state radio in the coup attempt have been arrested, government spokesman Guy-Betrand Mapangou, told Radio France International.

Read Also: Malabu Oil Scandal – The Trial of Shell and Eni Corruption Case in Nigeria

Authorities have regained control of the state broadcasting offices and a major thoroughfare in the capital, Libreville, which were the only areas taken over by the officers, according to the spokesman.

Ali Bongo’s Health

Ali Bongo, in power since 2009, has been out of the country since October amid reports that he had a stroke. He recently addressed the country in a New Year’s message that was filmed in Morocco, where he has been receiving medical treatment.

In his brief New Year’s speech, the 59-year-old Bongo declared that the country was “indivisible” and acknowledged his health problems without giving details. “A difficult period,” he called it, and a challenge that he surmounted “thanks to God.” He promised to put all of his efforts into improving the daily quality of life for Gabon’s people.

The French-educated Bongo, who was the country’s defense minister before becoming president, narrowly won re-election in 2016 while opposition rival Jean Ping claimed irregularities and continues to call himself the country’s real president

Oil-rich Gabon has been ruled for more than half a century by Bongo and his father, Omar, who died in 2009. Critics have accused the family of profiting from the country’s natural resources while not investing enough in basic services for the population of more than 2 million.

Africa’s Historic Coups

Of the 40 African countries that have seen coups, Morocco, Kenya, Cameroon are the three countries where none have been successful. In 12 of those 40 countries, coups occurred within five years of gaining independence. In total, 23 African countries have seen at least three coups. Indeed, only 14 around a quarter of Africa’s 54 countries are yet to experience a military coup.

Burkina Faso, land of Thomas Sankara, is the coup capital of Africa after witnessing 10 attempts—the most on the continent.

Togo was the first country in West Africa to experience a military coup on the 13th, January 1963, Togolese soldiers, demobilised from the French colonial armies and facing unemployment as a result of refusal of their applications to join ‘the miniscule Togolese army, staged an armed coup that led to the assassination of President Sylvanus Olympio.

However, In many ways, a lot of African countries possess a cocktail of ingredients that stir coups with long-term leaders who invest power in themselves at the expense of weakened institutions.

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Malabu Oil Scandal – The Trial of Shell and Eni Corruption Case in Nigeria

On December 17th 2018, An Italian judge revealed that the oil majors Eni and Royal Dutch Shell were fully aware their 2011 purchase of a Nigerian oilfield would result in corrupt payments to Nigerian politicians and officials.

The Milan judge made the comment in her written reasons for the September conviction of Nigerian Emeka Obi and Italian Gianluca Di Nardo, both middlemen in the OPL 245 deal, for corruption. The pair were jailed for four years.

It should be recalled that Shell and Eni in 2011 jointly acquired the license to the area known as OPL 245 in the waters off Nigeria’s coast, but so far development has been fluctuating amidst the investigations.

This account of the deal is based on interviews with more than a dozen people with knowledge of the case, internal company emails and documents, and hundreds of pages of court documents from cases in Britain, Italy and Nigeria reviewed by the Journal.

Global Witness last year released emails that they claim show that Shell knew much of the money initially paid for the oil block would be passed to Dan Etete, a convicted money launderer and former Nigerian oil minister, and would be used to bribe Nigerian officials.

The Malabu Deal

The Malabu deal, struck in 2011 under former President Goodluck Jonathan, saw the Nigerian government as a negotiator in the sale of OPL 245 oil block in offshore Nigerian waters.

Two international oil and gas giants, Royal Dutch Shell and Italian Agip-Eni, paid out about $1.1 billion to Dan Etete, a former Nigerian petroleum minister who had previously been convicted of money laundering in France. The payout would later become a subject of cross-border investigation spanning over six countries.

Eni CEO Claudio Descalzi and four ex-Shell managers, including former Shell Foundation Chairman, Malcolm Brinded, are on trial in one of the largest cases in the history of the oil and gas industry. All the accused have denied wrongdoing.

Two men named in the case – Emeka Obi, a Nigerian consultant in England, and Gianluca Di Nardo, an Italian – stood as middlemen in connecting parties and ensured the transfer of the funds through international bank accounts in the oil deal, prosecutors alleged. They were convicted last month in Italy.

OPL 245 Deal

OPL 245, one of Africa’s most valuable oil fields, contains an estimated nine billion barrels of untapped oil, worth nearly $500billion even with today’s bargain bin oil prices. Its eventual purchase boosted the world’s fifth-largest company’s proven reserves by a third (proven reserves are a key statistic for shareholders).

The field has been at the center of legal battles since 1998, when Etete first acquired rights to it through his front company. Months before it finally sealed the deal in 2011, Shell had to pay $30 million in a separate settlement on bribery charges in Nigeria.

The controversial oil deal — the OPL 245 oilfield — was said to have been signed off to Shell and ENI after both companies allegedly paid bribes to Nigerian officials to the tune of $1.1 billion.

The struggle over OPL 245 dates back to 1998, when the Abacha government awarded the oil rights to a newly minted Nigerian firm called Malabu Oil and Gas. According to court documents, the company was ultimately owned by figures close to Mr. Abacha’s regime, including his son and Mr. Etete, then the country’s oil minister.

The company was meant to pay the government $20 million for the license, but paid only a little over $2 million, according to the court documents.

In 2001, Shell agreed to acquire a 40% interest from Malabu in the oil field. Shell, already a dominant producer in Nigeria, hoped the move would expand its footprint in the oil-rich waters off the coast. But within months, Malabu’s ownership was revoked by the new, democratically elected president, Olusegun Obasanjo.

The Corruption Allegations

The corruption case against Shell and Italy’s Eni filed by prosecutors in Milan is centered on the shady $1.3bn deal for a vast African oil field. A former Nigerian president got indicted in the allegations of hundreds of millions of dollars paid as bribes including Giant oil companies, offshore accounts, ex-MI6 agents.

The Allegations of corruption and bribery had been mounted over the years, forcing Shell and Eni to repeatedly maintain that they acquired the rights to the lucrative block in line with Nigerian law.

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But email exchanges between Shell management cited in a report by corruption watchdog Global Witness, suggested that Shell was aware the money was likely to be funnelled to individuals, including Etete and Jonathan.

Several Nigerian government officials were believed to have received several million dollars in bribes for the enabling roles they played. Ex-president Goodluck Jonathan, under whose watch the deal was struck, has also denied wrongdoing. However, the former president is not on trial over the long-running case.

In 2017, APRECON embarked on an investigative quest down to the Niger Delta axis which is Nigeria’s concentration of oil companies and saw first hand environmental devastation, It was quite visible that there was lack of Environment Impact Assessment & Environment & social impact assessment.

APRECON in series of detailed articles got the authorities to pay attention to the effects of the industrial activities on the people and the ecosystem, as well as improving the lives of those inhabiting the area. This is the simplest of demands, and rightly so, that has ironically kept the region a battle ground for three unequal gladiators: the government, the oil companies and the people who decide to speak out in whichever way they chose to.

Everything has turned sour, so long as the people are concerned as, since then, the region has instead harvested a basket of multi-faceted problems: environmental degradation, high rise in violence, boundary disagreements and readjustments; oil thefts and fatal accidents, loss of the ecosystem and dangerous depletion of food/water resources, underdevelopment.

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Globalisation and Unemployment: Two Coins of Different Sides

Among the most significant issues affecting the well-being of most countries are the implications of economic globalisation for employment policies. Globalisation can have both negative and positive impacts on a country. Globalisation and unemployment are two phenomena which are amongst the most widely discussed issue in economics world today. Globalisation is the process of interface and integration between people, companies and government worldwide. It can also be viewed as the involvement of goods, services and the economic resource of capital, technology and data. It has grown due to advances in transportation and communication technology. The wide spread of globalisation comes with development in international trade, ides and culture.

In 2000, the International Monetary Fund (IMF) acknowledged four basic aspects of globalisation: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge. Most times, globalisation is perceived as the factor responsible for increase in unemployment. More so, it is widely believed that globalisation could lead to unemployment and injustice, as well as to imposing cuts on social programmes and leaving unprotected an increasing number of people.

Overtime, globalisation has helped developing countries deal with the increasing economic developed in the rest of the world. It has led to more developed countries investing in developing countries, however, it has had a negative impact in Africa. In 2004, World Bank disclosed that globalisation has led to more than 85% of the World’s population to live for at least 60years. With such report, it shows the improvement in human capital but this same ‘philanthropist’ in a way leads to unemployment, increase in inequality etc.

Unemployment and poverty in most African countries have been on the increase despite the foreign aids. United Nation attributed the economic woes to: deterioration of trade, foreign debt, declining official development assistance levels and the negative effects of globalisation. Globalisation ought to be the vehicle of prosperity, help decrease the rate of poverty and unemployment in several economies. Globalisation is seen as a way to overcome the limitations that come from religions, political parties and cultures that are locked in their own mentality. However, despite these promising positive effects on globalisation on countries, it has increased impoverishment and call has been made to international community to adopt measures to counter backlashes.

Read Also: The Interface between Youth Unemployment and Labour Productivity

Globalisation of the economy is certainly very profitable for some privileged groups. But the interests of these groups cannot be identified with those of the whole of humanity. Hasty and anarchic globalisation can only cause unemployment, injustice, disorder, instability everywhere and in the end will inevitably be disadvantage for the whole of mankind. It is not inevitable, necessary or desirable. It would be conceivable only if it were preceded by world political unity, comparable development of different economies and the establishment of an appropriate world institutional and ethnical framework, conditions that obviously are not and cannot be currently met (Allais, 1999).

According to recent researches, unemployment in most economies is as a result of real salaries that are too high and insufficiently flexible, of the speed of technological progress in the information and transport sectors and of monetary policy that is restrictive. Allais (1999) opined that developing countries opening up to the outside world was a necessary condition for progress and the proof of this was the extremely rapid progress of emerging countries in Southeast Asia.

The emergence of globalisation led to a change in the structure of labour demand towards higher skills requirements of firms and not an overall reduction of labour demand at a given real wage. The inter-trade industry and the faster dissemination of knowledge have got the appealing property of linking the process of globalisation to unemployment issue in the continent.

Finally, opinions have seen globalisation as the woe of economies, stating it affected unemployment by moving the job patterns, wages disparities, immigration of labour from developing to developed countries. On the flip side, globalisation enhances the growth of international market, financial flows across countries, so, how could a promising experience translate to unemployment and underemployment? Globalisation has been thought as a tool, depending on how a country uses the tool or how often or even the ways it is used.

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The Interface between Youth Unemployment and Labour Productivity

If a census is taken in any postgraduate class and they are asked the reasons for coming back to pursue academic, many youths will reveal it is the inability to secure a good and accommodating job in the country. Ask the youths that risked everything to cross the Mediterranean Sea in the bid to get to Italy; they will tearfully explain that the labour market has no placement for them. This is no justification for the actions taken by the youths; however, youth unemployment in the country is prevalent and alarming leading to numerous consequences. Lot consequences have been attached to youth unemployment: the crimes rates, migration, brain drain, human capacity under-utilisation, and increase in poverty, weak purchasing power and obviously a negative change in labour productivity in the country.

According to International Labour Organisation (ILO), unemployment can be defined as the number of the economically active population who are without work but are available for and seeking work, including people who have lost their jobs and those who have voluntarily left work. The youth unemployment rate can be expressed as percentage of the total numbers of persons available for employment at any time but cannot get job. This menace has been seen as one of the obstacles to social and economic progress.

Youth unemployment is one of the cancan worms eating deep into the sustainable growth of Nigeria today; it has maintained an upward trend over the years. A high unemployment is one of the critical socio-economic problems battling Nigeria. Despite the increase in the working population, the employment level is inadequate to absorb the increasing youth in the economy entrants. It is sad to note that the term unemployment has graduated to underemployment in the country, in recent years; youths are more likely to work in low quality job, working long hours for low wages, engaged in hazardous work. The end of this menace seems not to be at sight yet. Generally, unemployment has been a headache to the government, policy makers and even individuals in the country.

Unemployment is a sensitive indicator of the conditions of the labour market. When unemployment rate is low, jobs are secured and relatively easier to find, low rate is often associated with improving wages and working conditions as well as employers competing to attract and retain workers. In recent years, Nigeria has witnessed low labour demand and productivity. Labour productivity is very important in any nation, it determines the prices and wages in the economy. Increase in labour productivity has largely be associated with an increase in wages, low productivity leads to instability in prices, reduction in wages. Whenever the issue of youth unemployment is mentioned, labour productivity theories play-out.

Nigeria is the most populous country in Africa and according to the United Nation; it would be the third most populous country come 2050. Large human capacity is seen as strength of any country because it implies large economically active population. However, despite these promising factors, the country high level of youth unemployment has plunged it into low productivity over the years. The low productivity has not only affected the growth of the economy, it has also affected the standard of living of the people living in the country, leading to more people falling below the poverty line.

The world is at its 4th industrial revolution, unfortunately, Nigeria is yet to explore the 2nd industrial revolution needless to talk about the 4th revolution. Empirical investigations have found out that there is a positive relationship between youth unemployment and labour productivity in Nigeria. For any country to improve its productivity and probable drive into industrialisation, the youths have to be economically involved in the building process of the economy. Even the agriculture suffers set back because the youth are not finding their place in the sector, the manufacturing is not left in underdevelopment as a result of the increasing youth unemployment.

In conclusion, after all the programs and policies enacted by the government, the rate of youth unemployment has refused to decline. More youths graduate yearly with no placement for them. It is a crying change that the mandatory service year observed by youths is also suffering from this malady. Youth corps members are rejected in various organisation that are being posted to because no space to accommodate them. Why are all policies and programmes geared towards solving this menace falling flat? When will there be space in the labour market to accommodate the youths? These and more are the puzzling questions that led to one’s lack of sleep not as a result of being a nocturnal but because one just wonder.

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Ethiopia-Eritrea Peace Deal: A New Dawn for Sustainability?

This year is one full of hopes and happiness for the Ethiopians and Eritreans, what a time of relief and rejoicing for them when the border was open. Many families reunited and their joy knew no bounds, for 20 years some many were trapped by war on the other side. For two decades, the border was closed and no one dare moves across, however, 2018 gave them a new joy. The Ethiopia-Eritrea border is bustling once again, revitalising frontiers.

Eritrea gained its independence from Ethiopia in the early 1990s, and a dispute over the border plunged the twin country into war in 1998, locking the two nations in unyielding hostilities that left more than 80,000 people dead. The conflict continued as a cold war after Ethiopia refused to honour an UN-backed commission verdict demarcating the border. Eritrea is the most diplomatically isolated state in Africa, the UN imposed sanctions including an arms embargo in 2009; accusing the government of aiding Islamist militants in neighbouring Somalia which the government denies.

The country was put on hold for 20 years and everything revolved around the border dispute. Prior to the peace deal, Eritrea’s president, Isaias Afwerki has used Ethiopia’s rejection of the subsequent boundary ruling to justify a host of repressive domestic policies. These include jailing journalists and dissidents, refusing to implement the constitution and running an indefinite military conscription program the UN likens to slavery. According to the United Nations figures, hundreds of thousands of young Eritreans have fled across the Sahara and the Mediterranean Sea to Europe in recent years (before the peace deal) to escape compulsory and indefinite conscription once justified by the state of war with Ethiopia.

ALSO READ: Nigeria’s Investment Attractiveness: A Lost Race?

This cold war continued and an end seems impossible not until 2018; a year of breakthrough for the Ethiopians and Eritreans. The turning point came in June when the Ethiopian Prime Minister (PM), Abiy Ahmed announced that his country would fully accept and implement a peace agreement that was signed in 2000 but never honoured. After weeks of meeting and deliberations, the formal deal was signed by both parties.

Weeks after the two nations formally ended 20 years of conflict, President Afwerki and PM Abiy met to open crossings in border towns dotted with debris from a war that killed thousands. Many danced and waved flags while families reunited after two decades. Family reunification is the immediate result of the peace deal. But in the long term, what will it translates for both countries economically? Is this a new dawn for sustainability?

Ethiopia has a population of more than 100 million people; it is the second most populous country in Africa. The country has consistent economic growth, however, it is also one of the poorest countries in the region. Eritrea is home to more than 5 million people, the country has reported consistent growth deficits and poverty. The peace deal could also spur foreign investors to consider Eritrea as a business hub and likewise solidify the country relationship on the international scene.

Analysts stipulated that both countries will benefit from the normalisation. Ethiopia is a land-locked country; negotiating access to Eritrea’s seaports could boost sustainable economic growth and development. Since the conflict, Ethiopia has been forced to use the Djibouti’s seaports; the former sends its 90 per cent foreign trade through the latter. The normalisation opened a new dawn out of isolation for Eritrea, PM Abiy made propositions to the UN secretary to lift the sanctions against Eritrea. Today, the UN lifts the ban, lifting the sanctions could help to unlock new paths for investments and sustainable economic growth in the Eritrea.

Both countries are back to business. After the border was opened, business women and men were glad to be back to economic activities. A merchant in the Eritrean town of Senafe gladly said: we have everything we didn’t have before, from the smallest to the biggest products. The report released by EY attractiveness survey revealed that in 2018, Ethiopia’s investment attractiveness is seven times better than previous years. The EY’s attractiveness program focuses on insights derived from understanding growth from Foreign Direct Investment (FDI) perspective into countries and regions across globe.

Furthermore, the peace agreement will creates space to prioritise economic development over security. More resources were diverted to national security than sustainability. Eritrea has a mandatory national service program which is throat cutting but the government saw the program has a necessity to protect against the continued threat of fighting with Ethiopia. Eritrean migrants have reported that they were fleeing the mandatory program.

Eritrea will be the new sweetheart of investors because it has a lot of untapped resources, including vast potash; an important element in modern fertilizers. The country is a producer of Bisha, gold and copper. Bisha is ‘hot cake’ in the industry, whoever owns this resource will have a head start in future mineral licence; so potential investors will see this as a rat race. According to World Bank, Bisha currently consists of 10 per cent of Eritrea’s GDP.

Although, these indicators are in the favour of both countries, it is however impediments for the governments to set the ball of proper and sound policies rolling for the betterment of the economies. All these may not be enough to drive sustainable economic growth, the future economic and humanitarian conditions will be determined by the direction of their home policies. The governments need to employ policies and sound governance reforms that would restore trust between the citizens and the government for a stable economic growth.

The Eritrean government should adopt trade policies that would strengthen the unregulated and unstable exchange rate. Owing to the fact that the Eritrean nafka has an unstable value compare to the Ethiopian birr, the trade scenario has to be guided by some strategies. The economies have to adopt broader economic and regulatory reforms, work dutifully on the cost of doing business, the ease of doing business and also provide basic social amenities to make the economies more business friendly.

Beyond signing the deal, there are more for both governments to embark upon to benefit the economy. Ethiopia-Eritrea peace deal will remain mere deal if proper reforms are not enacted.

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Nigeria’s Investment Attractiveness: A Lost Race?

The reality of economic growth is that business and investment spending are the true indicators of the economy. To understand where the economy is headed, forget about the populace’s spending and look into the interest rates, the productivity level of that country, economic attractiveness and readiness. I would borrow a leaf from the quote of Robert Trout, a successful society is characterised by a rising living standard of its population, increasing investment in factories and basic infrastructure and the generation of additional surplus, which is invested in generating new discoveries in science and technology. Simply put, no economy can succeed without any form of investment.

The EY report revealed that Nigeria’s economic attractiveness has been overtaken by other African countries; the country has lost the race of the investment destination in the continent. Can Nigeria equalize? The EY’s attractiveness program focuses on insights derived from understanding growth from Foreign Direct Investment (FDI) perspective into countries and regions across globe. The survey use custom-designed methodology and explores both developed and emerging markets. The program helps public sector and business leaders to make economically sound strategy and policy decisions.

According to Investopedia, FDI can be defined as an investment made by a firm or individual in one country into business interests located in another country. Generally, the macroeconomic variable takes place when an investor establishes foreign business operations or foreign business assets, including establishing ownership or controlling interest in a foreign company. It is the term that describes investment from one country into another country that involves establishing operations or acquiring tangible assets, including stakeholders in other businesses.

In recent years, Nigeria’s FDI has been struggling. In 2017, it was $981 million, a drastic fall from its previous peak of $5 billion in 2008. Truly, there are many factors militating against the growth of the FDI ranging from, prolonged insecurity, poor infrastructure and the likes. This macroeconomic indicator is highly quintessential because is it assumed to benefit a developing country by supplementing domestic investment, creating employment opportunities, transfer of technology, increase domestic competition and improve the trade openness of the economy.

The report released revealed that despite the drag in economic growth in the country, Africa investment attractiveness has improved. However, Nigeria experienced a decline while South Africa, Morocco, and Kenya showed a stronger FDI gains ahead with more projects coming their way. Nigeria is losing the race to investment attractiveness and hope to improve is dashed with the recent closure of business offices of HSBC and USB; two major global lenders that attract investors.

Here from the horse’s mouth:

We have tracked FDI for a number of years, and while we can easily assess trends in terms of shifts by sectors and geography, there is little analysis that contributes to understanding whether individual countries are under-or over-achieving in attracting FDI. To build that analysis, FDI projects have been tracked against the size of the economy, and its score on the annual World Bank Ease of Doing Business ranking. Through this analysis, it appears that countries with strong growth rates and that adopt more business-friendly policies tend to perform better in attracting FDI. Rwanda is, by far, Africa’s most successful country in terms of attracting FDI. This is evidenced by the fact that Rwanda ranks as one of Africa’s most business-friendly destinations. It is also one of the continent’s most consistent rapid growth economies. Rwanda receives 1.5 FDI projects for every US$1 billion of GDP. Measured on the same criteria, South Africa receives only 0.32 projects, attracting only 20% of what Rwanda does, given its relative size. Major economies, such as Nigeria and Angola trail by an even larger margin, receiving only 0.16 and 0.02 projects respectively. Both countries also rank very low on the Ease of Doing Business rankings compared with their counterparts in the continent. That, coupled with their recent low growth after plunging oil prices in 2016 and the same scenario persisting in 2017, would explain their low score according to this methodology.

The report hinged the falling FDI on the volatility of oil prices which the economy over depended on. The country’s reliance on crude oil for revenue and foreign exchange remains a weak link for sustainable economic growth and development. The lack of diversification puts the economy at the mercy of the dictates of the oil sector which is vulnerable to boom and doom cycles. When oil price is high, FDI inflows increase and when there is a fall, the latter follows suit. According to National Bureau of Statistics, in 2014, during the increase in oil price, the country recorded its highest FDI inflow at nearly $2.7 billion. Shamefully, as the oil price fell, the FDI follows like a lover. The over reliance on the oil sector serves as a dictate to the level of FDI inflows in the economy, Nigeria can no longer continue like this on this race else we lose out.

ALSO READ: Nigeria and Industrial Revolution: Matters Arising

More so, the prolonged insecurity in the country is one factor militating against the increase in FDI inflow, the issue of insecurity in the country has become a war of giants. Insecurity put off foreign investors; safety first. Another, hindrance to the nation’s successful race to investment attractiveness is the poor infrastructure. The lack of stable power supply serves as a deterrent to major investments in the country. The cost of running a company in the country is high as a result of the reliance on expensive alternative energy source and the throat-cutting cost of petrol or diesel. With all these foxes that spoil the vine, it is not surprising to see Morocco, Kenya and South Africa overtook Nigeria.

However, the game is not yet over; all hope is not lost. The federal government has to get down to business and correct these incongruities. There should be efforts to expand the revenue base of the economy through diversification and expansion of tax base. Implement plans to strengthen the regulatory framework for investment. Wonderfully, Nigeria jumped 24 places to 145 out of 190 countries surveyed in the 2017 World Bank Doing Business Index. This is a sign that the business environment of the economy is friendly and ready for business. Nonetheless, is there any hope soon for the country? Owing to the coming 2019 election with all the burahrah of political uncertainty, no wise investor would pitch his/her tent of investment in Nigeria for the time being. The economy is fragile at this stage, so, the FDI will be kept below its peak in the next months or years unless the country experiences a ‘growth miracle’.

The race towards investment attractiveness is within reach, all depends on the strength of the athlete. Can the country race well?

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Nigeria and Industrial Revolution: Matters Arising

For any economy to drive to maturity and industrial revolution, structural transformation must occur. Structural transformation accompanies development; they are interrelated. According to Clark-Fisher model of development, structural change must occur for any economic progress to occur. Structural transformation can be referred to as how an economy transit from agriculture to industry and from industry to services. The initial stage of any economy is the agriculture phase, then gradually moves to industry and then to services. So, it is impossible to transit to industry if the agricultural stage is not well managed. To achieve a structural transformation, the mother sector (agriculture) must be well managed, monitored and explored, hence, no development can be achieved by any country. However, some countries transit from agriculture phase to service phase; this is a faulty transition that will drag the development process of the country. Any country that desire development must experience each phase duly before any transformation can be achieved.

Industrial revolution began in 18th century when agricultural societies became more industrialised and urban. Prior to industrial revolution, which began in Britain in late 1700s, manufacturing was subsistent with the use of crude tools. Britain is seen as the birthplace of industrial revolution and number of factors contributed to revolution in the country. Apart from the fact that it had great deposits of coal and iron ore, which was important for industrialisation, Britain was the leading colonial masters, implying that colonies can serve as a source of raw materials as well as the market place for the sale of the manufactured goods.

During the industrial revolution, other sectors benefited a great deal from the transformation. Industrialisation brought about an increased volume and variety of manufactured goods and an improved standard of living for some; it also resulted in employment and improved living conditions for the poor and working class. The transportation industry also underwent significant transformation during the revolution. Also, the communication industry was not left out in the transformation process during the revolution.

ALSO READ: Zimbabwe: Almost Forty, But Unfortified!

However, the revolution would not have occurred without the mother sector; the agricultural sector, increasing agricultural productivity facilitates industrialisation. The notion is hinged on Engle law which states that as income increases, food consumption reduces. When agricultural productivity increases, the farmers have more income and they demand for manufactured good, leading to more productivity in the industry sector. Also, increasing the agricultural productivity will lead to an increase in the supply of Agric raw materials. To experience industrial revolution, the raw materials have to be supplied in a sustainable manner. Most of the raw materials needed by the manufacturing companies are sourced from the agriculture sector, in a situation whereby the agricultural sector is not sustainable then industrial revolution is impossible and will remain a myth.

In Nigeria, the agriculture sector has remained undeveloped despite the numerous policies and programmes that has been enacted in the sector. Prior to the struggle the sector is experiencing, it had rich history and played a progressive role in the economy, playing a crucial role in the economic growth of the country. This success was achieved through investment in agriculture both at the federal and the regional level, various research institutes were established across the country. These research institutes include; Cocoa Research Institute of Nigeria (CRIN), Ibadan; National Institute for Horticultural Research and Training (NIHORT), Ibadan; Institute for Agricultural Research and Training  (IAR&T), Moor Plantation, Ibadan; National Institute for Oil Palm Research (NIFOR), Benin; Rubber Research Institute of Nigeria (RRIN), Benin; National Cereal Research Institute (NCRI), Badeji; Forestry Research Institute of Nigeria (FRIN), Ibadan; National Veterinary Research Institute (NVRI), Vom, Jos; National Root Crops Research Institute (NRCI), Umudike; National Institute for Fisheries and Fresh Water Research, Kanji; National Institute for Oceanography and Marine Research, Lagos; National Institute for Animal Production, Zaria; International Institute for Tropical Agriculture (IITA), Ibadan; National Institute for Trypanosomiasis Research (NITR), Kaduna; and Universities of Agriculture across the region. This was geared towards boosting the agricultural productivity, however, those are past glory.

Agricultural produce serving as raw materials accelerated the industrial revolution in Europe pioneered by the British. Nigeria which is a former British colony was a source of raw materials for Europe and it aided the industrial revolution experienced in Britain especially. If the country indirectly fast-tracked the revolution experienced in Britain, what is happening now? Owing to the oil boom in the country, 1970s, agriculture experienced a decline. According to statistics, the contribution of agriculture to the GDP in 1960 was about 60%, however, this decline overtime to only about 25% between 1975 and 1979. This sharp decline shouldn’t have been a headache if the productivity level didn’t decline simultaneously with the decline in the sector’s share to the GDP. At the early stage, the share of agriculture sector to GDP would increase but will experience a decline to usher in structural changes; however, this does not imply that the level of productivity will reduce. The sector share to the GDP can only decline, but the productivity level must increase. In Nigeria when the share of agriculture to GDP decline, the productivity level was also stagnated which led to the large importation bill of food.

The above chart shows the contribution of the three sectors (agriculture, industry and service) to the nation’s GDP from 2007-2016. The three sectors represent the transition an economy needs to move from primitive stage to development, which as earlier stated must be gradually to avoid faulty transition. The graph above shows that as the agriculture sector’s share declines, the industry and the service sectors’ share increase which anyone can hastily translates it to mean that the economy is experiencing a structural transition.

The country did not duly explore the industry sector because the agriculture sector productivity level has declines. Rice, which is a common food consumed by larger percentage of the population in the country is yet to be fully produced in the country because of fall in researches and technology. It is difficult for any country to industrialise without technology and quality education, the value system of the economy can affect the pace of industrialisation.

According to economists, for any country to experience industrialisation revolution, labour in the agriculture sector must be moved to the modern sector, however, the sector’s productivity must not decline as a result of the labour migration. The productivity level of the agriculture sector can be maintained through technology, training of labour, investing in factors of production, investing in agriculture researches. The Lewis model presented in 1955 known as the two-sector model and the surplus labour model focused on the need for countries to transform their structures away from agriculture towards industrial activities. The model posited that transferring workers out of the agriculture does not reduce productivity in the whole economy, this gives the industry more workers and there are more profits for manufacturers to re-invest, thereby leading to capital accumulation and economic sustainability.

Every country that has experienced industrial revolution and developed has experienced a movement of labour from the agriculture sector to the industry. During the industrial revolution in England, almost 75% of the population was dependence on agriculture in 1700. By the census in 1841, only 22% of the people worked in agriculture; there was a drastic decline for the revolution to be a blast and it was. In 1830, citizens of United States working in the agriculture sector was roughly 90% but by 1870, the figure declined to 50% and by 2008, less than 2% are employed in agriculture. Also, in 1970 China has over 80% of its populations working in the agriculture sector, however, in 2015; it reduced to about 25%. Puzzling, in Nigeria the percentage of total employment in agriculture has declined from 58.1% in 1970 to 30% in 2017, according to International Labour Organisation (ILO). Nigeria has successfully become a country where lawful law becomes lawless.

The matters arising in Nigeria’s industrial revolution are that the country has not explored its comparative advantage. Agricultural produces have to move beyond the raw and be more value added. To improve and drive industrial revolution, the country needs technology and outstanding researches on how to improve agriculture. To achieve industrial revolution, structural and institutional changes are needed, without which no country shall see INDUSTRIAL REVOLUTION.

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Minimum Wage Agitations: A Search for Gold in a Desert

It is no longer news that the labour market in the Nigeria and the Federal government are at loggerhead on the issue of minimum wage rate. The Nigeria labour congress (NLC) and the government have been on the minimum wage saga for months, unfortunately, a Nash equilibrium is yet to be reached by the two players. The saga has been a back and forth scenario with the government offering to increase the wage to NGN25,000 from NGN18, 000 but the other party is not ready to dance to the tune; it is either NGN30,000 or no party. Okay, the story continues with meetings upon meetings and we can only sit and watch the end of the action film. State

To make our journey through this piece easier, minimum wage is the lowest remuneration that employers can legally pay their workers. In the field of economics there is no clear cut on the effect of minimum wage on the welfare and the economy at large, however, increase minimum wage has been perceived as a means to improve the standard of workers in the country. In the bid to improve Nigerian workers’ livelihood, the NLC sought to fight for an increment in the wage rate. Can this struggle make a difference?

The current minimum wage received by workers in the country is NGN18, 000 which was an adjustment made in 2010. Since 2010, the economic situation has changed and inflation has reduced the purchasing power of workers over time. Think about it, can you value NGN100 this day as you would a decade ago? I guess the answer in NO. Obviously, the current wage rate is not a living wage for workers, the agitation is necessary but is it timing?

The macroeconomic indicators are not showing any sign of a good state, the inflation rate is leapfrogging, and the exchange rate of the country is highly volatile. According to the Central Bank of Nigeria earlier this month, the economy is at the verge of slipping into recession come 2019 if the necessary athourities are not getting their hands ‘dirty’ to drag the nation beyond the mud. The economy is fragile growing by only 1.5 percent in Q2 2018, a fall from 1.95 percent in Q1 after the shock of recession. Also, the foreign reserves have been dwindling and the Debt Management Office (DMO) reports that the debt profile of the country is rising. The former minister of finance, Okonjo Iwela made an illustration about the economy of Nigeria with a cake, she brought cakes of different sizes and demonstrated how the economy will continue to shrink if the revenue base is not grown. She nailed the point really good; how can any economy live on debts without improving on it revenue base? That is a sign of irresponsibility. With all these realities staring at the country, is it safe to increase minimum wage?

The ‘Yeas’ for Minimum Wage

It is saddling to note that if some arithmetic is to be carried out, the current NGN18, 000 received is 6, 00 per day for 30 days. How can an individual with family and huge bills survive on 600 per day? That is the puzzling question. The increase in minimum wage will improve the standard of the living of workers in Nigeria, reduces poverty, reduces inequality and boosts the morale of workers to be more productivity. In the economics world, it is belief that paying high wages to workers boost their morale to exert more effort to work, so, increasing the minimum wage rate is like an ignition.

Over the years, the inflation rate has experienced nothing but a rise. This has reduced the real wage rate of workers in the country; the real wage rate is the nominal wage (the wage individuals take home) divided by the prices. So, increasing prices which is inflation translates to decrease in the wage rate. The increase in minimum wage is more likely to deliver income gains to low-skilled workers, it may also stimulates macroeconomic growth if productivity is shifted toward more highly-skilled sectors, possibly by inducing additional training for low-skilled workers. Some economists likewise opined that when the government increase the minimum wage, it serves as an engine growth.

The ‘Nays’ for Minimum Wage

Who doesn’t want a raise in his/her income? Just as my people will say ‘small work, big money’, but this cannot always be the case, because there are economic repercussions. Increase in national wage rate is not a ‘silver spoon’, there are consequences to pay. The theories of economics suggest that the macroeconomic effect of increase in minimum wage on the gross domestic product is ambiguous. The increase in minimum wage will reduce the level of employment in the country, creating more level of unemployment. When wage increases, the labour cost increases leading to a decrease in firm’s profit and job hours and cause adverse effect on the employment and the working hours.

More so, the increase in minimum wage will lead to inflation as a result of increase in the overall production cost of firms. To offset the increase in labour cost, the firms have to pass some costs burden to the consumers (and sometimes the consumers bear the entire burden, depending on the necessity of the goods). Consequently, the real wage rate of the workers didn’t improve; it is just like a journey in a circle.

Another disturbing factor to consider is the dual nature of the Nigerian economy. The economy has two sectors of labour market; the formal and informal sector. The formal sector has smaller labour force when compared to the informal sector. Minimum wage can only be binding in the formal sector but not in an informal sector, the latter is highly unregulated. Minimum wage cannot be binding in a sector that is not regulated. In Nigeria, the informal sector absorbs more labour force than the formal sector, so, where is the improvement of standard of living?

The Gist beyond the Economics Fundamentals

All the ‘yeas’ and ‘nays’ for the increase in minimum wage will set the ball of decision rolling and anyone can be in a dilemma of where to pitch his/her tent. Honestly, Nigerians need a raise in income owing to the fact that other countries have gone ahead when it comes to minimum wage. South Africa has approved the increase in minimum wage, other Africa countries except war-ravaged countries have a higher minimum wage than that of Nigeria; we shouldn’t be left out.

Presently, the Nigerian economy is unsteady, demanding for an increase in minimum wage now is like building a castle in the sand; what a great fall it would be. The economy is just recovering from recession and there are warnings of sliding into the economic crisis again, increasing the wage at this critical stage will lead to loss of jobs for low-skilled labour. Isn’t it hilarious to note that the country is yet to pay the salaries of its workers and agitations for an increase are made? The labour association confirmed it that at least, 33 of 36 states of the Federation owe workers and yet a raise is requested for. The government is not faithful to NGN18, 000 pledge would they be to NGN25, 000 or NGN30, 000?

How can the government pay NGN30, 000 in an economy where recurrent spending including personnel costs and overhead cost takes the lion share of the national budget? The government has overtime disbursed more funds to recurrent expenditure than capital expenditure, increasing the wage bills will only reduce the funds meant for education, health, infrastructure etc.

The NLC has better challenges to worry about which will serve as a means to an end. The labour should demand for increased investment in major sectors and the social amenities that take a larger percentage of the salary. Another issue of concern the NLC should address is the workers’ protection in terms of working hours, working conditions and job satisfactions. There are many companies in the country that the working environment is not conducive for the workers, neither are the working hours comfortable; but what can they do? Man pikin must chop.

When one weighs the pros and cons of the demand for increase in minimum wage rate, it is obvious that one outweighs the other. In an economy (like Nigeria) where the informal sector is larger than the formal sector, agitating for minimum wage rate is a wasteful journey. The employment laws of the country need reforming for workers to be more protected. More agitation for minimum wage will never satisfy the welfare of the people, stop looking for gold in a desert.

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The Key Factors of Economic Competitiveness

The Global Competitiveness Index is a yearly report published by the World Economic Forum. It measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. The index is organised into 12 mainstays; institutions; infrastructure; ICT adoption; macroeconomic stability; health; skills; product market; labour market; financial system; market size; business dynamism; and innovation capability.

Competitiveness is achievable for all countries, provided the necessities are carried out. For countries that intend to set their path into competitiveness, these factors must be notable.

  1. Human capital development is ‘bae’:Physical capital was seen as a driver of growth, policy makers had always believed in accumulating capital through savings and investment. However, over the years accumulation of human capital was later seen as an engine of growth. According to World Bank, investing in a healthy, educated and resilient population is important to competing effectively in the global economy. Education, health and skills of a population are among the key drivers of productivity, mainly in the context of economic and technological transformations.
  2. Economic competitiveness goes beyond trade. Any economy open to trade, calls for more innovation. However, the concept of trade should move beyond just trade to the era of exchange of innovative ideas and expertise. There should be more alliance across borders.
  3. Technology offers a path to economic advancing: Technology is an important tool for growth and prosperity. In African countries, the benefits of technology as a means to economic advancing remain largely untapped. It is quintessential for African economies to provide greater knowledge on and access to ICTs to the majority of the populace
  4. Weak Institution is a cancan worm:Weak institutions continue to be the cancan worm hindering competitiveness, development and well-being in many countries. Any government concerned about economic competitiveness must pay serious attention to the institutions as a major source of efficiency.
  5. The soundness of infrastructure and the financial system. The quality of infrastructure and financial system is paramount to competitiveness. Basic elements of such infrastructure are still missing in many African economies, hampering their competitiveness. The financial system is also still an area of relative weakness for several economies; any economy that lacks sound financial system is vulnerable to unproductivity and retard growth.
  6. The need for a proactive and far-sighted leader. All above, economic competitiveness will remain a tale without a far-sighted and an intelligent leader. Setting longer-term priorities and enacting proactive efforts to create sustainable growth are hinged on the leaders. So, no economy improvement with a short-sighted individual or tyrant as a leader.

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Zimbabwe: Almost Forty, But Unfortified!

A popular notions says; “life begins at forty”, however, a life that would begin well at forty need to start preparing and planning to begin well. The United Kingdom ceremonially granted Zimbabwe independence on 18 April, 1980. The independence ceremony was held in a stadium in Salisbury, the former capital, many dignitaries (foreign and domestic) attended the great ceremony of freedom from the colonial master. What a happy day it was for Zimbabweans to be a free and control her political and economic institutions, unknown to them, the ship is heading towards an iceberg not at sight at the take-off stage.

Many Africa countries fought for freedom from their colonial masters. They fought with all zeal, hoping for a better economic structure, however, some of the countries headed into economic crisis and disasters. Zimbabwe is also falling apart as hope of surviving is nowhere at sight. Zimbabweans are lamenting on the critical state of the economy daily and helps are not surfacing. This economic crisis is not unfamiliar to the people of the country because economic crisis has become identical to the nation.

Things had begun to fall apart as far back as 1998, in the year there was economic crisis accompanied by riots and strikes in the country. The economic crisis persists in 1990 and in 2001 the Finance Minister, Simba Makoni publicly announced that the nation is in an economic crisis, stating foreign reserves have run out and warning of serious food shortages. In 2002, there was a state of disaster declared as worsening food shortages threaten famine. Also, in 2006, the year-on-year inflation exceeds 1,000 % which led many Zimbabweans to be miserable billionaires in 2008. Have you ever seen the pictures of people using wheel barrows to carry cash to make a purchase? The situation was pathetic. One can just hope the economy doesn’t deteriorate again to that state.

Fast track to 2016, a new national currency called bond notes is introduced as a means of payment which led to what economists call Gresham’s Law. This law is about bad money driving out the good money, the bad money here is the bond notes while the good is the US dollar used as a means of payment before the crisis. As the bond notes were introduced the US dollars became scarcer. So soon, the bond notes became scarce too and the government turned to the printing machine to get more bond notes; the beginning of the disaster. In economics, printing more money might translates to inflation which can be bad for the economy.

The campaign slogan of the new president, Emmerson Mnangagwa was “Zimbabwe is ready for business” but reverse has been the case so far. Almost immediately he was sworn in as president the country begins the struggle to gain grounds in the economic world. In the midst of the campaign, the president visited China and we all hoped for a mutual agreement and a favourably take-home from the visit. China has been the ‘saviour’ of Africa, so, why should Zimbabwe be left out? I asked myself, why would China leave the country to such economic degradation and found out that China is unwillingly to provide the immediate funds needed by Zimbabwe, mentioning concerns over the country’s inability to repay existing debts. If China will not help Zimbabwe, who will?

The economic crisis in the country is alarming and something objective must be carried out, what can it be? Prices of food are increasing incessantly and some are in short supply. It is also very expensive to be sick in the country because prices of medical products are also increasing rapidly.  Many apportioned the cause of the immediate crisis to the introduction of a news tax on electronic transactions, however, the foundation has been shaken.  The new levy was introduced to raise revenue from the large informal sector, but it met the economy unprepared and the ship is at the verge to shipwreck. Zimbabweans live in fear, still haunted by the memories of the 2008 crisis, no one want to go down the lane again; it was miserable.

In 2018, the Permanent Secretary in the office of the president and cabinet, Ambassador Stuart Comberbach said the government is working on a new short-term economic blueprint expected to help stabilise the economy. Zimbabwe is targeting to be a middle-income economy and targets a GDP of over $65 billion. The Ambassador said: “there is a short-term plan the government has been working on for economic stabilisation. This is a two-year plan which is now ready in draft form and will obviously go through consideration by the new cabinet and see to what extent it meets expectations”.

Will the short-term plan take the economy from this struggling stage to a phase of maturity? There are a lot of functions that need to be carried out by the government and the newly elected minister finance, Mthuli Ncube, a former chief economist at the African development bank and a lecturer in finance at the London school of economics. The long-standing problem the government should address in the short-term plan is the debts profile of the country which affects it credits rating and hinders aids from international agencies; at least we know why China withdrew its immediate funds. According to the Zim Bollar index, the debt profile of the country is increasing; domestic debt rose by 72% between June 2017 and June 2018. The country still owes World Bank, AfDB and the Paris Club; who else will the nation borrow from?

Another problem the short-term has to solve is level of productivity, the major sectors in the country before the great fall was mining, agriculture and manufacturing. The country once known as the breadbasket of the continent has become the shadow of itself. All hands should be on deck to revive the productivity level of the country, there must be strategies to make sure the importation bill is reduced to the barest minimum and the economy starts participating in economic activities. Also, the plan has to involve how to woo investors into the country, no one will invest in a country awaiting a great disaster.

More so, it is high time, the country had its. Although, this a long time targets but plans can be made towards achieving this goal. Using other countries’ currency for a longer period of time is like losing one’s identity and above all, Zimbabwe’s economy is expose  to any crisis.  The nation has to work towards its own currency in order to curtail imported economy crisis.

The country is yet to be revived from this disaster if the cost of governance is not reduced, a country involved in more non-economic activities than economic activities is going nowhere to happen. If the cost of governance can be halved, from research it has been found that the economy thrives better provided the amount got is disbursed to more economic activities like human capital development, infrastructure etc. Let’s pause and think, is the ruling government ready for the cut in governance cost? Are the government officials ready to pay the price to have a great nation? Hope they are ready to forfeit the large allowances?

Hope the country is preparing to be ‘fortified’ at forty because 2020 is just around the corner?

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Ten Strongest Currencies in Africa

A currency is a system of money in general use in a particular country for trading, according to Oxford dictionary. Money has its own history of evolution, in no particular order, metal coins, cowries, gold, paper money, commodity money, fiat money, bank notes and digital money are the various form of currency used and are currently in used.

A currency is strong when its value is improving when compared to other currencies, when it’s worth more relative to other currencies. When a currency is strong, travellers can go other countries and live like a king and queens, however, when it comes to trading zone, it is an advantage and also a disadvantage -this is a talk for another day.

Globally, one of the strongest currencies is Dollar because of its general acceptability, so, the ten strongest currencies in Africa are compared to the United State Dollar (USD). Find the list below:

  1. Libyan Dinar (1 USD: 1.38 LYD): Dinar is the currency of Libya, a country in North Africa bordered by the Mediterranean Sea to the North, Egypt to the East, Sudan to the Southeast, Chad and Niger to the south and Algeria and Tunisia to the West. The country is popularly known for the vast oil reserves, which constitutes 95% of the nation’s total exports earnings and about 60% of its gross domestic products. The nation is also known for its insecurity, nonetheless, it standard of living is still a top notch.                                
  2. Tunisian Dinar (1 USD: 2.84TND ): This is also a North Africa country, bordering the Mediterranean Sea and Sahara Desert to the North and East, Algeria to the West and Southwest, Libya to the Southeast. The nation has a diversified economy depending on phosphate oil, car parts manufacturing, tourism and agro-food products The standard of living in the country is relatively on average with a high minimum wage rate.
  3. Ghanaian Cedi (1 USD: 4.80 Cedi): This nation has the third strongest currency in the continent and first in West Africa. The nation is known for diverse wildlife, old forts and secluded beaches. It is bordered by the Ivory Cost in the West, Burkina Faso in the North, Togo in the East and the Gulf of Guinea and Atlantic Ocean in the South. The country has a stable diversified economy based on rich hydrocarbon, tourism, solid minerals, and auto-mobiles among others.
  4. Moroccan Dirham (1 USD: 9.44 MAD): This North Africa country has a relatively liberal economy. The country has followed the principle of privatization of certain economic sectors. The nation is the fifth largest economy in Africa by GDP (PPP), it is also a major player of economic affairs in the continent.
  5. Botswana Pula (1 USD: 10.65 Pula): A Landlocked country located in Southern Africa has maintained a strong tradition of stable representative democracy, with a consistent record of uninterrupted democratic elections. The nation is one of the fastest growing economies since independence, averaging about 5% growth per annum over the past decade. The country was praised by the African Development Bank for sustaining one of the world’s longest economic booms. Diamonds, copper, nickel, soda ash, meat and textiles constitute the nation’s total export earnings.
  6. Zambian Kwacha (1 USD: 12.09 ZMW): This is a Southern Africa country, bordered by Democratic Republic of Congo to the North, Tanzania to the Northeast, Malawi to the East, Mozambique to the Southeast, Zimbabwe and Botswana to the South, Namibia to the Southwest and Angola to the West. The nation is one of the fastest growing economies in Africa and depends majorly on copper/cobalt, electricity, tobacco, flowers and cotton as its source of export earnings.
  7. South Africa Rand (1USD: 14.25 Rand): This is the second largest in Africa after Nigeria; it is one of the most industrialised countries in Africa. Gold, diamonds, platinum, other metals and minerals, machinery and equipment constitutes the nation’s total export earnings.The nation is the only African member of the G-20 economic group.
  8. Namibia Dollar (1 USD: 14.58 NAD): It is a country in Southern Africa, the nation gained independence from South Africa in 1990. The economy has a modern market sector which produces most of the country’s wealth and a traditional subsistence sector. Diamonds, copper, gold, zinc, lead, uranium, cattle, processed fish, karakul skins constitutes the nation’s total export earnings. The government of the economy has pursued free-market economic principles designed to promote commercial development.
  9. Eritrean Nakfa (1USD: 15.0 ERN): This horn of Africa, it is relatively small, however, has a stable currency. The nation is bordered by Sudan in the West, Ethiopia in the South and Djibouti in the Southeast. Eritrea has an extensive amount of resources such as copper, gold, granite, marble and potash. The total export earnings of the nation constitutes; food, livestock, small manufactures, sorghum and textiles.
  10. Egyptian Pound (1USD: 17.95 EGP): A Mediterranean country bordered by the Gaza Strip and Israel to the Northeast, the Gulf of Aqaba to the East, the Red Sea to the East and South, Sudan to the South and Libya to the West. The nation is highly centralised planned economy; it is the third largest economy in Africa by GDP (PPP) and one of the most developed in the continent. Crude oil and petroleum products, cotton, textiles, metals products, chemicals, agricultural products are the nation’s total export earnings.

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Ways to Raise Capital for Your Business Idea

To gather the business ideas could require some days of brainstorming and sometimes, those ideas just drop into your heart like a storm and you are sure it’s the idea you need to be the great entrepreneur you have always dreamt to be. However, after getting those ideas, what happen next? Where do I get the funds to get started? How do I raise the capital? Those are the questions that would arise next, except you are ‘OBO’ – you are from a wealthy background.

The stumbling block to every beautiful business idea is capital and the dilemma of how to source for it. So, I got your back here, let dutifully go through the possible options you can explore.

  1. Personal Savings: Many business experts will advise any willingly entrepreneur to raise his/her capital through personal savings. Yes, I know you will want to ask; how can I save? The first thing to ask you is; Am I ready to be my own boss? If yes, then be ready to save even from that seemingly small salary you are getting now. You can start planning on how to start and grow your business, write out plans and during that period, save up to get it started. The size of capital should depend on the type of business you intend to venture into, small size business would require small capital, and so, you do not need to break the bank to get started. Also, most businesses start small but expand as times goes by.
  2. Grants from Family and Friends: In case, your personal savings couldn’t do much, the next available option to explore is your inner circle; your family and friends. They are set of people that trust in you, so, you need to make them see the ‘sense’ in your business idea. You should be able to get grants from them, or loans with zero-interest rate to start your business.
  3. Loans from MicroFinance Banks: Micro finance banks are friends to budding entrepreneurs. They provide micro loans to poor entrepreneurs or small entrepreneurs lacking capital and access to larger banking institutions. In Nigeria, there are different banks like; Accion Micro finance bank, AB Micro finance bank, Lapo Micro finance bank and many more that give small loans to entrepreneurs. The requirements are not throat cutting, some of the process you will go through are; get a guarantor, submission of passports and filling of forms. After all these within days, you can get your funds and your business is alive! But, you must find a way to back the money, be credible.
  4. Partnership: Another option that could be considered by any budding entrepreneur is partnership. Although, this requires a legal process to ensure that the rights of all partners are legally backed to avoid ‘stories that touched the heart’. If you can find someone that has idle cash balances, approach such person with your business idea and form a partnership form of business. Some of the advantages of partnership business organisation that is a disadvantage to sole proprietors are the existences of continuity and more innovation. However, ensure there is a legal protection and backing before starting the partnership business.
  5. Search for Investors: Another available option is to search for investors, I must confess, this is not easy, neither is it a quick way to source funds, however, it can be the biggest means to source for funds. You need to look for that one business-minded individual that thinks your idea is awesome and would take the market by a storm. To raise funds via this means you need to get a good business plan to represent your business idea perfectly.

The headaches most entrepreneurs have are how to bring the business idea into reality and how to raise funds for the business. No business idea can become a reality without the capital, after drafting the plans; it is the next important resource. So, with the above options, you should get that idea started and make sure you thank me whenever I cross your path; I hope to get a discount when I need your service and/or products. Enjoy the business ride!

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Proper Templates for Business Plan

Last week, we discussed tips of a catchy business plan and also the ‘do not’ of a sound business plan. Now that we have a full grasp of the tips to make a business plan scale through, it is time to understand the patterns in which the document has to follow.

Business plan templates are planning tools for start-ups and budding entrepreneurs. Without a proper lay down pattern, the document might be thrown into the trash can which might mark the end of that beautiful business idea. So, here are the proper business plan templates to follow to the latter.

Create a Cover Page

This is obviously the first page that would be seen, it entails the plan name, company name, address, phone numbers and email address. Ensure the details on this page are input correctly and with proper theme font and font size. Do not make it too busy; keep it formal and no unnecessary design.

Create a Legal Page

This is not totally compulsory for all business plans, however, it is necessary.  Write a legal page for confidential agreement. This page contains the guide for the reader or investors on how to keep the content of the document confidential. Ensure concerned parties sign the page. I am sure, you want to protect that wonderful business idea from predators.

Table of Contents

This is a table properly labelled, showing the contents of the document. Outline the chapters, the subtopics and referencing the exact pages where the chapters are in the document.

Executive Summary Page

This is a page that more resource is needed. It summarises the key components of our business plan, description of the company, who the company is and the location of the company. This is just like an abstract page in your project work, it comes first in the document but it is written last. It is like an extract of all other sections.

Summary of Start-up Requirements

On this page, summarise your start-up requirements, expenditures and assets required on the commencement of the business. This can be incorporated into a table format to explicitly show the start-up requirements. Of course, you should not be surprised when the balance sheet reads loss because no profit yet, the business is just starting. In a situation where you seek to expand an existing business, your balance sheet might still read loss. The table should include expenses for starting the business or expanding and also the assets need to start/expand as he case maybe.

Product and Services

This is where your business idea is discussed fully. This segment includes detailed description of the product and/or services being delivered. In this segment explain the benefits of the products and/or services to the consumers convincingly. Go into details on how the products and/or services are produced and tell about the future plan for the product and/or services.

Summary of Market Analysis

This segment is the summary of the market survey you must have carried out. In this segment, describe the various groups of target customers for your product and/or services. Explain in details what qualifies the mentioned target customers to fall into the market analysis. After which you can go ahead to state the nature of the product and/or services in line with the chosen target customers. Identify the location of the target customers and how to get to them. You must carry out a deep research on the product in the market before you can successfully complete this segment. Check the buying pattern of that product and/or service in the market and state the growth pattern you expect your product to follow in years to come.

Strategy and Implementation

In this segment describe and summarise the corporate strategy for target marketing sales and marketing activities and how to develop the product and/or service. Look for a grand style strategic that is very convincing to show how you plan to take over the market with our business idea, however, maintain a consistent sales and marketing strategy; you do not want to be an ‘Oliver twist’.

Sale Forecast

This is the real deal in the document; it is very essential and difficult. It is a forecast into the unit of sales, the rate of sales and also the prices. This also requires in-depth research and strong assumptions to create the sales forecast of any desired number of years (which should be a short term plan). The factors to be concerned are: the market size of the product, the market share, the competition in the market and many others that can pose a great threat to sales.

Management Summary

This will describe the management team and structure for the business. This includes positions and job description and position that need to be filled.

Financial Plan

This is the financial aspect of the document, to be on the safer side if you cannot effectively carry out this segment, it is better to give this aspect to a financial analyst. This segment includes: funding source, financial projection.

  • Start-up Funding

This explains how the business would be funded and sourced (equity, loans, investment).

  • Financial Projection: This include tables showing the projected profit and loss; showing the income generated from sales, key budget items, the percentage increase in sales and profits. This also includes the projected balance sheet showing the current asset and liabilities.

The above segments should be careful included in the business plan. Remember the don’ts of a business plan; keep it formal and do not try your comedian talents in the document. It is for business, make it so.

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The Don’ts of a ‘Catchy’ Business Plan

If you are in to get tips on how to have a great business plan, then you need to see the previous article. It was wonderful to have a lead on how to make your business plan outstanding, however, it is wisdom to know the ‘no go area’ for a good business plan.

Every entrepreneur seeks to impress and to bring out a unique business plan forgetting some common errors that must be avoided. Trust me; you do not want to fall into such category of entrepreneurs. Therefore, here are the don’ts of a great business plan:

  1. Avoid empty claims: Truly, some statements might sounds confusing and intriguing but if you cannot  establish those statements with facts; statistics, charts, diagram or quotes leave the statement out of your business plan. Yes, take it out, irrespective of how sugar coated it might be.
  2. Rumours about competitors: Avoid gathering facts about your competitors based on rumours, dig deep into the real story. If you are certain a competitor is liquidating, you can allude to it but stay away from listing the competitors weakness based on hears-says.
  3. Usage of superlative and strong adjectives: Avoid words like; major, incredible, amazing, outstanding, unbelievable, terrific, great, most, fabulous, best. These strong adjectives do not have a place in a business plan.
  4. Unprofessional financial projections: You do not want to show amateurism in presenting your financial plan which  might mean incredibility on your part. So, if you cannot do the financial aspect of your plan, safe yourself the stress and distress. Get a credible accountant.
  5. Overly optimistic time frame: In no account should you day dream of getting your business running in few months after launching. Starting a venture is never Nollywood neither is it a Bollywood. Do your assignments properly, carry out research about numerous ventures. If it takes the ventures 12 months to get started and running then do not see yours as a super business create allowance for any unforeseen circumstances beyond control. Be conservative in your time predictions.
  6. Overestimation of financial projections: Do not join the clique of happy-go-lucky entrepreneurs; be realistic in your financial projections. It is better to underestimate than set expectations that are not fulfilled.
  7. Long Documents: Some entrepreneurs love to express themselves fully in their business plan. Avoid long documents, do not choke the readers. It is appropriate to keep your business plan short and simple; only relevant information should be included.

The success of a business plan is the beginning of a successful business. A business idea that lacks a great and well outlined business plan is a waste of time and resources. Avoid the listed blunders and get ready to be your own boss!

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Tips for a ‘Catchy’ Business Plan

Do you intend to start a business; small or large? Or you intend to expand your existing business? Guess what, all these will just be a dream yet to be explored without a strong business plan. As the old adage says: “he who fails to plan, plans to fail”, you need a business plan to succeed in business. However, who starts a venture knowing it head towards failure? I guess no one will.

A business planning is the art of crafting strategies and tactics necessary to achieve certain milestones and also to make certain forecasts in line with the corporate. To have your business plan fly some tips are necessary to be known and digested.

  1. Know your competitors: Prepare to name and know your competitors, search for what makes them different and how well to beat them in the market. However, do not belittle your competitors to avoid being taken by surprises.
  2. Know your audience: As an entrepreneur, you can have different business plan for different business purposes. One can be for seeking funds, another for wooing investors and the likes. However, knowing and understanding your audience will give you a step ahead in your business planning.
  3. Be Factual about your claims: While writing your business plan, if you claim that the business idea will take the market by storm then be prepared to provide facts. Mere words will not go a long way.
  4. Be conservative about financial estimates and projections: Make sure your financial projections are more conservative, if you think your business idea can capture 20 percent of the market in the first year indicates the reasons for the thoughts.
  5. Be realistic with time and resources: Do not be like the happy-go-lucky entrepreneurs who are overly optimistic with time and resources. Being realistic means credibility which is a good trait for a sound business minded individual.
  6. Engage a strong management team: The builders determine how the structure of the building will look. Make sure your team has good credentials and expertise. Ensure they have the needed skills to push the venture into prosperity.
  7. Discuss Pay-out options for the investors: Investors are not charity giver; they want to know when they can get their money back and at what rate of returns. Therefore, provide a brief description of options for investors or at least mention you are ready to discuss options with any serious prospect.

With all these, your business idea is ready to take the great fly to success! Executing a great business idea comes with a price and planning is the first price that needs to be paid. The above are all about tips to have a great business plan, how about tips that make a great business idea fall down flat? Next we will go through ‘the don’ts of a business plan’. Stay tuned!

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GSM Clocks 17years, More Emphasis on Data

Seventeen years on, Nigeria’s mobile telephony (GSM) sector has put up an impressive performance, raising telephone subscriber base from just over 400,000 in August 2001 to 162 million in June 2018, generating thousands of direct jobs and several thousands of indirect ones, raising internet penetration, giving verve to online and electronic transactions, making significant contribution to GDP, improving the way we live and lifting investor confidence in the country, despite hiccups here and there.

The Nigerian Communications Commission (NCC) which is the telecommunications industry regulator, remitted N1333.4 billion to the consolidated revenue fund of the Federal Government in 2017.

The National Bureau of Statistics report confirmed that the Nigerian telecommunications sector, during the second quarter of 2017, contributed 9.5 percent to the GDP in contrast to 9.1 per cent contribution in the first quarter of the year.

“Sub-Saharan Africa’s mobile industry is showing strong progress in achieving the targets of the SDGs, predominantly through increased connectivity and access to information, but also through the delivery of services, such as mobile money, that increase productivity, improve well-being and reduce poverty,” says John Giusti.

GSM  debuted in 1982 as a pan-European communication technology and had since spread beyond the frontiers of Europe to other jurisdictions including Africa. Nigeria, therefore, came late to the party. The good news, however, is that though a late entrant into the GSM market, Nigeria has outpaced many countries across the globe in terms of market size and telephone penetration.

The first GSM service rolled out in August 2001 following a successful Digital Mobile Licence, DML, auction conducted in January of the same year by the nation’s telecom regulator, the Nigerian Communications Commission, NCC. That auction, the first in Africa, was adjudged transparent and world-class by both the World Bank and the International Telecommunications Union (ITU). The NCC had placed the asking price for each licence at a conservative $100 million. But at the end of the auction, each licensee paid as high as $285 million.

As revenues from voice services dwindle over the years, Nigeria’s four mobile networks, MTN, Glo, Airtel and 9mobile are paying more attention to data services. The emphasis is on LTE technology.

LTE (Long-Term Evolution) is a standard for high-speed wireless communication for mobile phones and data terminals, based on the GSM/EDGE and UMTS/HSPA technologies. It increases the capacity and speed using a different radio interface together with core network improvements.

In a major push for data revenues, MTN which is the market leader signed a N200 billion seven- year Medium term loan agreement with a consortium of local banks, with FBN Quest acting as a facility agent.

The largest operating telecommunications company in Nigeria, declared that the loan raised from 12 Nigerian banks will be used for expansion and improvement of data services where it sees a major part of its revenue growth coming from in the future.

Speaking at the signing, Chief Executive Officer, MTN Nigeria, Ferdi Moolman, expressed enthusiasm at the completion of the agreement, saying it signposts MTN’s commitment to and confidence in Nigeria, and the strength of the strategic collaboration between MTN Nigeria and local financial institutions, that will help deepen and broaden the provision of ICT services in Nigeria.

“The signing of this loan facility is a major landmark in our expansion programme in which we are making significant investments. The facility will enable us evolve the network to deliver convergent and superior quality, drive voice capacity expansion and data service penetration, maintain optimal capital structure and funding level that support growth and expansion,” Moolman said.

“Making it possible for people to connect to each other and the world, find and share information and ideas, create and access new digital services and reimagine old services. This partnership puts in place infrastructure that empowers commerce, industry and the provision of public services,” Moolman said.

MTN’s debt increased to 69.8 billion rand as of the end of June, compared with 57.1 billion rand six months earlier.

Kunle Awobodu, MTN Nigeria’s Chief Financial Officer, told BusinessDay that; “although MTN has the most expansive fibre network in the country, there is an issue with fibre cuts and attack. Therefore, we need to protect our network in a way that even when we get attacks, our network doesn’t go down. We are going to invest in ring-fencing our coverage all over Nigeria and also invest in fibre infrastructure so that high speed data can reach the rural parts of the country.”

Industry watchers say that MTN’s continuous investment in growth and expansion of services shows extreme confidence in the Nigerian market. They also say that the N200 billion loan syndication is a marker as to the strength of Nigerian banks to service telecommunication businesses which are capital intensive investment areas.

“Our revenue base is still largely dominated by voice which contributes about two third of our total revenue, but what we are beginning to see is that people are not making calls as much as they used to, and are more interested in data based applications, so, as we transition into this movement, we need to invest in our network. Our view is that we must prepare for the future. If a big portion of our revenue is going to come from data and from digital services in the future, we have to start that investment now, and that is why we have taken the medium term loan,” Awobodu said.

The loan facility is structured with a two-year moratorium and a repayment plan of five years and is denominated in Naira.

MTN had in 2013, raised a total of N239 billion in loans for expansion which is said to wind down in 2019.

“We raised the loan locally and that loan is winding down next year. We have kept to the loan servicing agreement and all the repayments have been made as at when due. Final payment will be done in 2019,” Ishmael Nwokocha, MTN’s General Manager, Corporate Treasury Finance.

According to Awobodu, MTN already has Long Term Evolution (LTE) frequency in some parts of the country.

“We actually have LTE frequency, but the more frequency you have, the better services you can provide and it also helps us in terms of the coverage that we can give to the populace. So we keep looking for opportunities in the market to give us services to the outer part of Nigeria with better network quality.

“What we are doing with our LTE services is that we plan to expand. We started with three cities; Lagos, Abuja, Port-Harcourt and we expanded to reach about nine or 10 cities in total, but we have cities that are still not on 4G and we would like to expand into those cities, and this is part of why we are doing this CAPEX expansion,” he said.

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Uber to Push Further into East Africa

Uber, the global ride-hailing company, is considering expanding into two other East African countries before the end of 2018, focusing on low cost services like Chap Chap in Kenya, the company said on Friday.

In Kenya, East Africa’s richest economy per capita, Uber competes with Estonian ride-hailing firm Taxify, Nairobi-based Mondo Ride and Little, which has a partnership with telecoms operator Safaricom.

Nairobi was the first city in Africa in which Uber piloted a low-cost, quick-trip option Chap Chap, using 300 small brand-new Suzuki Altos as a less expensive alternative to regular cars on the Uber app.

There are now more than 400 Chap Chaps, which means “faster” in Kiswahili, on the roads in the capital of Kenya, Uber’s second-largest market in sub-Saharan Africa.

“We are focusing hard on Chap Chaps,” Uber’s East Africa general manager Loic Amado said in an interview, calling the service “a tremendous success so far”.

The lower price is possible because the Alto is more fuel-efficient than the average car an Uber driver uses.

Amado said that the popularity of its low cost services has led Uber to consider expanding into two other countries in the region before the end of 2018. He declined to give details.

In March Uber extended its low-cost options to include a motorcycle service in Uganda’s capital and rickshaws in Tanzania’s capital.

“You are able to get a much bigger piece of the population in touch with your technology and then it’s easy to afterwards add the additional products like uberX or more premium (products),” Amado said.

The company said that it has 311,000 active monthly riders in the region with 9,000 active drivers. It operates in four cities in Kenya and neighboring Tanzania and Uganda.

To address rider’s safety concerns, Uber has introduced rider insurance for uberBoda in Kampala and Nairobi, Amado said.

It is also differentiating itself by offering services like UberEats, which launched in May in Kenya’s capital and has 100 partner restaurants, Amado said.

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Threats to Shut the Nigerian Border: The Facts Beyond Mere Words

The Nigerian Minister of Agriculture and Rural Development, Audu Ogbeh, announced that the government will shut the border with an unnamed neighbouring state which he accused of illegally importing rice to Nigeria. Nigeria consumes rice in quantity; even as one of the largest producers, it is also one of the largest importers of rice in the world. In 2016, the United Nations Food and Agriculture Organisation stated that Nigeria imported 2.3 million metric tonnes of rice which was about half of the country’s estimated requirement in that period. In 2018, the minister of Agriculture announced that the total demand for the staple in the country is at about 5.5 million metric tonnes (MT) per year of which 3.3 million MT is produced locally leaving 2.3 million MT to be imported.

Rice is classified as either Asian or African with the botanical names of Oryza sativa and Oryza glaberrima respectively. The staple is a cereal grain that grows in swampy areas, in regions with high rainfall but can still be grown in areas with little rainfall through the use of water-controlling terrace system. The grain is sensitive and requires a lot of care and attention to grow well. The cultivation can be done by transplanting or direct seeding, the seeds are sprayed onto the soil after which it is ploughed into the soil by using plough. Prior to cultivation the rice seeds in soaked in water for 34 hours (1 day 10 hours) and allow to dry for 24 hours then it is ready for planting, what a process! It takes about 4 months or 6 months for the grains planted to be ready for harvest, depending on the soil type and other climatic factors. The rice is harvested by cutting the stalk directly beneath the heads and the grains separated from the stalk by a mechanised thresher.

Shutting down the Nigerian border to hinder the importation of rice will encourage more smuggling of it. The country is clamouring for self-sufficiency in rice production, the federal government hopes to reduce the importation bill of rice to 95% and likewise rice farmers by an appreciable amount. To achieve self-sufficiency is applaudable but like they say, Rome is not built in a day, a process is required.

The Central Bank of Nigeria gave small scale farmers grants and soft loans to ensure there is increase in productivity but there are many other factors that need to be considered apart from the funds being disbursed. Some farmers do not even have access to the funds and had to get loans with high interest rates from commercial banks and those that were lucky experienced a great bottleneck in administrations and protocols.

In the words of the Managing Director of AgroNigeria, Richard Mbaram: achieving self-sufficiency in the next couple of years is merely a pipe dream. Rice production is not willed into existence, it is cultivated and systematically sown. There is research, there is mechanisation, there is warehousing and storage. There is market opening and market access. You cannot drive industrialisation or agro-industrialisation without connecting the farm gate where the production is happening. Do we have that? We are far back in terms of achieving that.

Of a truth, the threats will only lead to more smuggling if the country can not achieve self-sufficiency as and when due. The country has achieved progress in rice processing so far, there has been increase in the local production of rice and the importation of rice has been reduced. The number of rice mills (both integrated and cottage) have increased by more than 50% as the government and the private sector continue to make more investment in processing. Such success is worth applauding, but the government has more to achieve to reduce rice importation and drive into self-sufficiency. Whatever way anyone views the progress so far, what to note is that the journey is still far, there needs to be more strategic plans to be injected into the rice processing industry to improve the value. The industry needs more human resource, technology (irrigation, biotechnology etc) and financing.

The challenges disrupting the industry range from sub-optimal processing capacities, insufficient storage facilities, unavailability of quality inputs to other production enhancing infrastructure. The rice processing sector can also be more valued beyond mere raw rice being processed and packaged. There are numerous chain values that can be judiciously added to the staple, like rice flour which is made from ground raw rice.

Just like Thailand and US, the country can make rice milk and this can serve lactose intolerant people in the country. What about rice bran oil? It is an oil extracted from the rice bran and rice germ; it is highly rich in vitamin E, other antioxidants and various plant sterols. The oil can be used for cooking and also to dress salad.

It is high time the government added more value to agricultural produces and move from rudiments to high technological implements. It is time to bring out the quality in our farm produce, no more ‘unleavened’ produces. Nigeria can achieve self-sufficiency in food production, we have the lands, we have the resources, the people are available; they just need incentives, advanced technologies, trainings and also the after harvest period need to be put into consideration. It is not yet uhuru for the closure of borders to prevent illegal rice importation in Nigeria if the strategics plans are not rolled out.

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How to Write a Good Business Plan

Like the popular adage which says “he who fails to plan, plans to fail”, this is also related to business. Without a plan, a business is essentially without guidance and the day-to-day activities are likely to be haphazard. A business plan gives your business direction, defines your objectives, maps out strategies to achieve your goals and helps you manage possible bumps in the road.

There are so many people out there with brilliant business ideas but no capital to finance the business ideas; putting your business ideas on paper, in form of a plan, helps to attract investors to finance your business idea. For example, if you want to apply  for a loan in a bank to finance your business, the first thing the bank will need to see is your business plan.

A business plan is not just required to secure funding at the start-up phase, but is a vital aid to help you manage your business more effectively. By committing your thoughts to paper, you can understand your business better and also chart specific courses of action that need to be taken to improve your business.

Writing a business plan is easy and doesn’t always require the services of an expert, as long as you know what your business is all about. A business plan is like a roadmap for business success. In this article, I’m going to make writing a business plan as easy and simple as possible.

Before going into writing that wonderful business plan, let’s take a look at the seven important components you must include in your business plan.

  1. Executive Summary
  2. Business/Company Description
  3. Market Analysis
  4. Organization Management
  5. Service or Product Line
  6. Marketing & Sales
  7. Financial Projection

Having known these components, let’s go into details on how to integrate them into your business plan.

  1. Executive Summary

This is considered the most important section of every business plan. This is so because it’s usually the first thing the reader or investor will see when reading your business plan and its content can either make or mar you. This component briefly discloses to your reader where your company is situated, where you want to take it and why your business idea will be successful. This section exposes your overall strength and if you’re seeking for financial support, the executive summary is the place to grab a potential investor’s interest.

For an established business, be sure to include the following information;

  • The mission statement
  • Company information
  • Growth highlight
  • Your product/service
  • Financial information
  • Summarize future plans

For a startup or new business, you won’t have much information as an established enterprise. All you need to do is focus on your experiences and the decision that lead to the establishment of that business venture.

  1. Business/Company Description

This is easy to handle provided you know the goals and objectives of your business and its unique proposition. When writing in this section, be wise to make the investor understand what the company is all about, and its goals.

What to include in your Company Description

  • Describe the nature of your business and list down your targeted audience or the marketplace that you aim to satisfy.
  • Give a detailed explanation on how your products and services meet these needs.
  • Which consumers, organisation or business does your business serve or will serve? Don’t forget to include them.
  • Make known an advantage you have which you think will be an edge in making the business a success.
  1. Market Analysis

The market analysis section is where you illustrate your enterprise and market knowledge. It should contain your industry description and outlook, information about your target market, distinguishing characteristics, size of the primary target, pricing and gross margin target, competitive analysis etc. This section should be well detailed as possible for the reader to really understand your vision about the business.

  1. Organisation & Management

This section is what exposes the overall structure of your enterprise. It includes your company’s organisational structure, details of company owners, profiles of your management team and the qualifications of your directors.

This section also delves deeper into making known all the chains of authority, functions and backgrounds of those in the board of directors or employees. You will have to convince your reader that your staffs are more than just names on a letterhead.

  1. Service or Product Line

This is usually the main purpose why businesses exist. What are your services and products like? This is the section where you explain the benefits of such products or services to potential customers.

What to include in your service or product line section

  • A description of your product/service
  • Details about your product life cycle
  • Intellectual property
  • Research and development (R&D) Activities

With all these settled, you can then move over to the marketing & sales section.

  1. Marketing & Sale

This section deals hugely on your marketing strategy. How do you drive sales? What strategy do you or will you use to compel customers into buying your products? This strategy should be part of an ongoing business evaluation process and unique to your company.

An overall marketing strategy should include four different strategies

  • A market penetration strategy
  • A growth strategy
  • Channels of distribution strategy
  • Communication strategy

After you’ve defined your marketing strategy, the next job will be your sales strategy.

Your overall sales strategy should include two primary elements:

  • A sales force strategy – What kind of people are you going to recruit in your sales unit? How would they be trained? How would their compensation be? These are the questions that will be contained in this element.
  • Your sales activities – It’s important you break down your sales strategy to activities. For example, you need to identify your prospects and make a detailed list of them. Analyse intensively all the various needs and the leads with the highest potential to buy first.
  1. Financial Projection

For an established enterprise, you’ll be requested to supply historical data, at least; for the past three to four years in other to evaluate the company’s performance.

ALSO READ: Dear EFCC: How Much Have You Recovered?

For a new enterprise, you ought to have analysed the market and set clear objectives. If perhaps, funds are needed, you will then need to include another component to your business plan, FUNDING REQUEST and in details, seek for financial help with a detailed outline on what they will be used for.

Most business plans usually contain an APPENDIX, which provides the reader with such information as credit history, resumes, product pictures etc.. It is totally up to you, whether to include it or not.

Your business plan should be more than one copy for future uses and updates. You don’t need to pass through the stress of writing another business plan in the future, all you need is to update it, unless it’s an entirely different business.

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Questions on Abacha’s Loot

Did you ever wonder why the recoveries of the so-called Abacha loot no longer excite many Nigerians? Did you ever wonder why Nigerians have lost the enthusiasm about the recovery of the much-talked about Abacha loot? The simple reason for this widespread public apathy is the fact that Nigerians cannot find evidence where these recovered funds were put into in the promotion of the welfare of the citizens. Accountability in the management of recovered funds is no less significant than fighting corruption. Can Nigerians, in all sincerity, fight corruption with lip service or half-hearted commitment? The billions recovered from the Abachas could have brought significant improvements in the social service sector and our decayed public infrastructure.

The recovery of the Abacha loot has dominated the headlines almost always; what is missing in the headlines, however, is how these recovered funds are being used for the welfare of Nigerians.

The former Obasanjo administration had recovered billions of dollars from the Abachas, but until he ended his term in 2007, the recovered funds ended up on newspaper pages.

The Abacha loot recovery process began in 1999 after former president, Olusegun Obasanjo, got into power. In July of that year, Nigeria began civil proceedings in London against Mohammed Abacha, Abubakar Bagudu and companies owned by them, which led to about $420 million in assets being identified and frozen. In May 2002, Obasanjo struck a deal with Abacha’s family so Nigeria could recover about $1.2 billion; while the Abachas would keep $100 million and bonds worth $300 million. Following that deal, in November 2003, the Nigerian government recovered $149 million from the Island of Jersey.

On August 19, 2004, the Swiss Federal Office of Justice transmitted to Nigeria, all the assets in Switzerland owned by the Abacha family, about $500 million and one year later, the then Minister of Finance, Okonjo-Iweala announced in a Switzerland press conference that Nigeria has recovered $500 million from the Abachas, and “about $2 billion total of assets with 40% interests in West African Refinery in Sierra Leone. In 2014 Okonjo-Iweala said, only $500 million was recovered  during the time she first served as Finance Minister, under Obasanjo government and they used the fund for projects.

Under the Goodluck Jonathan era, the recovery efforts continued and over $1 billion was recovered. In June 2014 Liechtenstein returned $227 million to Nigeria; on 7 August, 2014, the United States Department of Justice (DOJ) announced the return of $480 million back to Nigeria government. In 2016, Switzerland confirmed they have so far returned $723 million of Abacha loot back to the Nigerian government.

The civil society groups and the media have not shown the enthusiasm to follow up how these recovered funds are being applied to the welfare of Nigerians. It is not enough to be announcing huge recoveries of stolen funds without accountability about the use of such funds.

ALSO READ: Dear EFCC: How Much Have You Recovered?

These actually raise questions of transparency in the management of recovered funds. Can we fight corruption when Nigerians appear unenthusiastic about the management of recovered funds? Can democracy thrive when the citizens are not keen to hold government accountable about how it manages recovered funds? How effective is the Freedom of Information Act in practice to guarantee Nigerians access to the records of the recovered Abacha loot and how the monies were applied to the welfare of Nigerians?

Unless we are ready to confront these questions honestly, loot recovery efforts will end up creating a cynical and skeptical public attitude towards the country’s anti-corruption crusade. It is impossible to separate the anti-corruption war from accountability in the management of recovered funds. Any attempt to sidestep this issue will kill public enthusiasm about the war against corruption. Lest one is misunderstood, there is no attempt whatsoever to defend corruption by anybody. In fighting corruption, however, we must do so with sincerity to avoid creating a skeptical public attitude towards the anti-corruption crusade.

APRECON
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Dear EFCC: How Much Have You Recovered?

In the last few months,  Ibrahim Magu, the Acting Chairman of Nigeria’s Economic and Financial Crimes Commission (EFCC) and his team have struggled to give exact figures of recoveries from alleged treasury looters.

In November 2017, Magu disclosed that the commission had so far recovered N739 billion. In yet another instance in February this year, he claimed that the EFCC had recovered about N500 billion. These inconsistencies have aroused suspicions that the EFCC has no proper records of its recoveries and thus sparking claims of abuse of assets and funds recovered from its multiple investigations.

Curiously, the Minister of Finance, Mrs. Kemi Adeosun, who should by virtue of her office know the status of the recoveries, sparked further controversy in February when she disclosed conflicting figures. Following the controversy that ensued, the Minister in a leaked memo to the EFCC boss asked the agency’s head to brief her on the exact position of the recoveries.

According to her, the Office of the Accountant-General of the Federation had only received N91.4 billion from the EFCC, meaning that hundreds of billions are yet to be accounted for by the anti-graft agency.

This article therefore highlights worries over the inconsistencies in the figures of recoveries and the inability of these government agencies in that value chain to work closely and share information. The demand for full transparency and accountability from the anti-graft agency in their operations is what the agency itself stands for, interestingly and this is a reminder. This is important, coming against the backdrop of the corruption allegations against Magu culminating in his yet-to-be confirmed appointment by the Senate as the substantive chairman of the EFCC.

There are unconfirmed reports that the EFCC claims it expended monies from the recoveries to cover some of its operational costs. If this is correct then there is a problem with that. On whose authority or statutory law did the agency do this, when they are not supposed to be in possession of the money they recover?

I believe when transparency is absent in the government ministries and agencies, it gives rise to discrepancies and corruption; in this case, the EFCC and the Ministry of Finance are not been transparent with each other, and this gives a good example of what happens between the government ministries and agencies in Nigeria: each of them operates separately without transparency, accountability and synergy. This gives rise to corrupt practices that looks undefeatable.

ALSO READ: Nigeria’s Economy: Buhari vs Jonathan

If a system in which the transparency of data and accountability is the order of the day, such disgrace would not have happened, the data would have been there for everyone to see how much the EFCC recovered from the treasury looters, and the Finance Minister would not say this is the amount recovered and EFCC comes up with another figure as the amount recovered.

All these national disgrace can be stopped through transparent database, whereby the amount recovered is recorded and made public for other ministries, agencies and even the public to see. And I’m sure this will also help fight discrepancies and corruption in the government ministries and agencies. There are computers and internet in these offices. What are they used for?

I would like to suggest that all monetary recoveries and proceeds from disposed assets should be placed in a dedicated account at the central bank and records shared with the office of the Minister of Finance and the office of the Accountant General of the federation and the public as well.

APRECON
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Oil In Kenya: A Blessing or a Curse?

In the recent past, Kenya has been hit by both negative and positive news. On the downside, several corruption scandals have hit the country from various sectors of the economy. Given that most of these scandals have been happening within public institutions, it is no surprise that citizens have lost confidence in public institutions due to this misuse of entrusted authority for personal gain. On the upside, there’s also been great news as Kenya’s ambition to become one of the global oil producers was boosted, following the flagging off of the first barrels of the resource destined for Mombasa from Turkana fields. The question begs: shall the discovery of oil in Kenya be a blessing or a curse?

For most Kenyans, the long-term expectations are that the exploration of this resource will lead to economic growth, consequently assisting in poverty eradication in the country. However, studies show that many oil-producing countries do not receive the economic and social benefits expected from the wealth generated by the hydrocarbon industry either directly, through the stimulation of the local and national economy, or indirectly, through increased tax revenues, a phenomenon referred to as the resource curse.

Resource curse is a form of economic decline that can arise from conditions such as weak controls on public expenditures; increased corruption; and increased political and economic dependence on the income provided by the production and exporting of the natural resource. Africa has provided many instances where natural resource greed such as that of minerals or crude oil has led to political instability, corruption and even civil war. Instead of serving as development agent, natural resources have served as propellants of internal conflicts in Africa as it is seen in the prolonged internal conflicts in Sierra Leone, Liberia, and the Democratic Republic of Congo who are all endowed with natural resources.

Natural resources and other windfall gains lead to an increase in fighting activities if there are multiple rivaling groups. Conflict could arise in cases where certain groups are seen to prosper from these gains at the expense of others. In the case of Kenya, Turkana County – where the oil was discovered – is one of the poorest regions in Kenya with 88% of the people living below poverty levels. Illiteracy levels are also high. The national & county governments should ensure that proceeds from the oil bring tangible benefits to the locals, to avoid a situation such as the one in Nigeria’s Niger Delta.

ALSO READ: World Investment Report of 2018: Analyses of Africa’s Foreign Direct Investment (FDI)

Otherwise, with the current trend of high levels of corruption, wrangles between the national government and county governments, lack of accountability from the leaders, constant politicking that destabilises the country and decreased quality of institutions in Kenya, oil exploration is destined to be a resource curse for the country.

Unless these negative indices are sorted out, Kenya will be another example of a country blessed with resource curse like Nigeria and Angola. But if the negative indices can be checked, it will translate to greater economic development for the country. I believe the president has a lot to do in this case by providing strong and corrupt free institutions for the country.

According to the 2018 World Investment ranking, the Kenyan economy witnessed a huge boost due to high investment in technology as the government provides tax incentives to encourage investors. As African countries are trying to move to a  technology based economy, in which Kenya is showing a good example, will this discovery of oil not distract the Kenyan government from other sectors of the Kenyan economy like what was experienced in Nigeria? Even if the discovery of oil in the land is a blessing, how prepared is the kenyan government to deal with the environmental issue that will arise from the exploration?

APRECON
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World Investment Report of 2018: Analyses of Africa’s Foreign Direct Investment (FDI)

Africa endured a turbulent 2016/2017 as global commodity prices crumbled. This significantly exposed the fragility of many commodity-reliant economies in Africa and crippled the growth that had been accrued in the past few years. But majorly, foreign investors have now become sceptical of the African economies.

The latest World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) showed that FDI [Foreign Direct Investment] flows to Africa slumped to $42 billion in 2017, a 21% decline from 2016. Weak oil prices and harmful lingering effects from the commodity bust saw flows contract, especially in the larger commodity-exporting economies. FDI inflows to diversified exporters, including Ethiopia and Morocco, were relatively more resilient,” according to the report that was released on Thursday.

Foreign Direct Investment Inflows to North Africa

Morocco

Strong, diversified investment into Morocco contrasted with declines in FDI to the rest of North Africa –the only sub-region yet to surpass its 2007 peak. FDI flows to North Africa were down 4% to $13 billion. FDI into Morocco was up 23% to $2.7 billion, thanks to considerable investment into new car technologies (electrical, battery, cameras). By the end of 2017, the Government had confirmed 26 auto industry investments worth $1.45 billion, including a deal with Renault (France) to increase local sourcing of components to 55%. FDI into the country’s financial sector also expanded, as banking relations with China deepened. In addition, Uber (United States) expanded operations in both Morocco and Egypt.

Egypt

Despite a decline in FDI of 9%, Egypt continued to be the largest recipient in Africa with $7.4 billion. Inflows were supported by a large increase in Chinese investments across light manufacturing industries and wide ranging economic reforms beginning to pay off. Financial liberalisation, for instance, fostered more reinvestment of domestic earnings.

Tunisia

FDI flows to Tunisia remained flat at $0.9 billion, a 1% decline from 2016. Nonetheless, improved investment incentives following the promulgation of the recent investment law, as well as new legislation on public-private partnerships, supported inflows from Belgium’s Windvision into the country’s renewable energy industry, as well as FDI in the electronics, software and IT industries from French and regional investors.

Algeria

FDI into Algeria, which depends heavily on investment in oil and gas, fell 26% to $1.2 billion, despite the bundle of incentives offered by the country’s new investment law. Diversification was supported by FDI from Huawei (China) to help with Houari Boumediene Airport in Algiers and from Samsung (Republic of Korea), which opened its first smartphone assembly plant in the country. Proposed amendments to the energy law could increase foreign participation in the country’s oil sector considerably in the future, if successfully implemented.

Sudan

FDI flows in the Sudan remained stable at $1.1 billion. The country is largely reliant on Chinese investments into its oil sector and the reaching of an agreement with South Sudan to access its once-productive oil fields. The lifting of United States sanctions on the Sudan in 2017 is expected to increase FDI.

Foreign Direct Investment Inflows to Sub-Sahara Africa

Harmful lingering macroeconomic effects from the commodity bust weighed on FDI to sub-Saharan Africa – even though debt levels, foreign currency shortages and inflation rates appear to be improving.

Nigeria

FDI to West Africa fell by 11% to $11.3 billion, due to Nigeria’s economy remaining largely depressed. FDI to that Nigeria fell 21% to $3.5 billion. With domestic demand well below investor expectations, several consumer-facing companies from South Africa exited Nigeria in 2016. A modest recovery in oil production and the general economy in 2017, as well as the introduction of an investor and export window to bid for foreign exchange, could help entice companies to return to Nigeria in the future. At the same time, new technology start-ups in Nigeria, backed by venture capitalists from South Africa and elsewhere, are helping to diversify FDI inflows. Nigeria has attracted strong market-seeking technology inflows from United States firms, including Uber, Facebook, Emergent Payments and Meltwater Group. Chinese investments in the country consisted of efficiency-seeking manufacturing FDI into the textile, automotive and aerospace industries.

Ghana

Ghana attracted $3.3 billion in FDI flows (down 7%), on the back of fiscal consolidation and self-imposed reductions in government investment spending. Until this past year, Ghana’s diversified economy had facilitated a continuous increase in its FDI flows since the 2000s. A firm price for gold and ongoing investment from Italy’s Eni to develop the large Sankofa gas field could further encourage FDI in 2018. Sankofa produced its first oil in 2017, with Eni having contributed the largest amount of FDI in Ghana’s history through its 44% stake in the company.

Côte d’Ivoire

FDI into Côte d’Ivoire, was up 17% to $675 million, reflecting supportive public investments by the government and economic diversification. As one of the two fastest-growing economies in Africa (along with Ethiopia), the country has attracted FDI into consumer goods. Heineken (Netherlands) invested $35 million in 2017 to double beer production and compete with Castel (France). Hershey (United States) is set to help the country process more of its cocoa locally, boding well for future investment prospects.

Senegal

FDI into Senegal was up 13% to $532 million. Russian producer KAMAZ will invest approximately $60.5 million in the first phase of truck assembly production in the country.

Foreign Direct Investment Inflows to Central Africa

FDI flows to Central Africa decreased by 22% to $5.7 billion.

DR Congo

FDI flows to the DR Congo fell by 67% to $1.2 billion from $3.6 billion in 2016. The deepening economic crisis in the country, volatility in oil FDI and weak FDI in non-oil sectors contributed to the decline. In contrast, the global race for cobalt used in electric car batteries supported an 11% rise of FDI flows into the Democratic Republic of Congo, reaching $1.3 billion. Glencore (Switzerland) bought two mining assets for nearly $1 billion, increasing its stake in cobalt and copper mines.

Equatorial Guinea

FDI flows rose also in Equatorial Guinea (to $304 million from $54 million in 2016) and in Gabon, a major oil producer (up 21% to $1.5 billion).

Foreign Direct Investment Inflows to East Africa

East Africa, the fastest-growing region in Africa, received $7.6 billion in FDI in 2017, a 3% decline from 2016.

Ethiopia

Ethiopia absorbed nearly half of this amount, with $3.6 billion (down 10%), and is now the second largest recipient of FDI in Africa after Egypt, despite its smaller economy (the eighth largest in Africa). Chinese and Turkish firms announced investments in light manufacturing and automotive after Ethiopia lifted the state of emergency in the second half of 2017. United States fashion supplier PVH (Calvin Klein and Tommy Hilfiger); Dubai-based Velocity Apparelz Companies (Levi’s, Zara and Under Armour); and China’s Jiangsu Sunshine Group (Giorgio Armani and Hugo Boss) all set up their own factories in Ethiopia in 2017. Several of these firms are located in Ethiopia’s flagship: Chinese-built Hawassa Industrial Park.

Kenya

Kenya saw FDI increase to $672 million, up 71%, due to buoyant domestic demand and inflows into ICT industries. The Kenyan Government provided additional tax incentives to foreign investors. South African ICT investors Naspers, MTN and Intact Software continued to expand into Kenya. United States companies were also prominent tech-oriented investors, with Boeing, Microsoft and Oracle all investing in the country. Significant consumer-facing investments by Diageo (United Kingdom) in beer and Johnson and Johnson (United States) in pharmaceuticals also bolstered FDI into the country.

Tanzania

The strong gold price and a diversified productive structure contributed to FDI inflows worth $1.2 billion into the United Republic of Tanzania. Facebook and Uber (both United States) expanded into that country while India’s Bharti Airtel continued to invest. The country’s inflows nonetheless recorded a 14% decline compared with 2016. Foreign telecommunication companies now must list, at least, a quarter of their equity on the local stock exchange, an effort by the Tanzanian Government to increase domestic ownership. In addition, a ban on exports of unprocessed minerals may adversely affect the country’s foreign mining assets.

Foreign Direct Investment Inflows to Southern Africa

In Southern Africa, FDI declined by 66% to $3.8 billion.

Angola

FDI into Angola, Africa’s third largest economy, turned negative once again (–$2.3 billion from $4.1 billion in 2016) as foreign affiliates in the country transferred funds abroad through intra-company loans. In addition, oil production declined and macroeconomic fundamentals deteriorated. Tenders for onshore oil blocks were suspended in 2017 but are to be re-launched in 2018 after a new government is appointed. A tender for oil blocks off southern Angola may also be opened in 2018 to offset declines in older fields.

ALSO READ: TOP FASTEST GROWING AFRICAN ECONOMIES IN 2018

South Africa

FDI to South Africa declined by 41% to $1.3 billion, as the country was beset by an under-performing commodity sector and political uncertainty. Investors from the United States, which remain the largest source of FDI into the country, focused on services industries. The standout project was the investment by DuPont (United States) into a regional drought crop research centre. Automotive FDI also remained significant. General Motors sold its South African plant to Japan’s Isuzu, and Beijing Automotive Group Co. announced an $88 million investment in a vehicle manufacturing plant in a joint venture with South Africa’s Industrial Development Corporation. European investors, led by Germany and the United Kingdom, remained very active in South Africa, through initiatives such as BMW’s retooling of factories. Automotive FDI into South Africa is increasingly developing regional value chains: Lesotho now produces car seats, and Botswana ignition wiring sets, for auto manufacturers in South Africa.

Mozambique

FDI into Mozambique also contracted severely, down 26% to $2.3 billion, amid austerity and debt defaults. Long-term prospects rely on the country’s liquefied natural gas potential being exploited and profits reinvested to advance domestic development. Mozambique’s coal sector attracted investor interest from a consortium of Chinese, British and South African firms, but the project is in its early stages.

Zambia

FDI into Zambia increased by 65%, to $1.1 billion, supported by more investment in copper. The government, keen to diversify the economy away from copper, announced the building of a $548 million cement plant in a joint venture between the country’s mining investment arm and China’s Sino Const., Israeli Green 2000, already active in seven other African countries, also invested in food production, further contributing to economic diversification.

Geographical sources of FDI to Africa are becoming more diversified. Investors from the United States, the United Kingdom and France still hold the largest direct investment stakes in Africa. Italy has also emerged as a major source of investment, particularly in the energy sector. At the same time, developing-economy investors from China and South Africa, followed by Singapore, India and Hong Kong (China), are among the top 10 investors in Africa. China’s FDI stock in the continent reached $40 billion in 2016, as compared with $16 billion in 2011, according to the report.

Africa’s Foreign Direct Investment (FDI) Outflows

FDI outflows from Africa increased by 8 per cent to $12.1 billion. This largely reflected a significant increase in outward FDI by South African firms (up 64% to$7.4 billion) and Moroccan firms (up 66% to $960 million). Outward FDI by Nigerian firms, in contrast, remained flat at $1.3 billion, focused almost exclusively on Africa. Major African MNEs other than South African firms have, in the last few years, expanded their international footprints both within the region and elsewhere, with extra regional FDI heading to both developed and developing economies.

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South Africa First Quarter Economic Report 2018: A Disadvantage to Ramaphosa

The coming of President Ramaphosa brought with it renewed optimism for South Africans after years of stunted economic growth and instability under the former president, Jacob Zuma. Financial markets rallied initially after Ramaphosa took over, as investors were attracted to his promises to woo overseas investments to the country. But that euphoria seems to have cleared off as investors expect execution of those promises.

So far, since his ascension to power, he has removed his predecessor’s compromised ministers, appointed a new ones, notably, the Finance Minister; he also restructured state-owned companies and galvanised state agencies like the Hawks, the National Prosecution Authority and South African Revenue Service into action.

South Africa’s economy wobbled in the first quarter of 2018 after enjoying successive expansion in 2017. The country’s real Gross Domestic Product dipped by an annualised 2.2% in the first quarter 2018 after expanding by 3.1% in the fourth quarter of 2017, Statistics South Africa said in a report released Tuesday: the biggest decline since the first-quarter of 2009. The country also recorded the largest contraction in Agriculture at 24.2% —the largest quarter-on-quarter fall since the second-quarter of 2006.

Agriculture’s relatively strong performance in 2017 is one of the positive factors that helped keep the South African economy afloat in 2017. This momentum failed to carry through to 2018, with decreased production in field crops and horticultural products contributing to the decline in the first quarter.

The only sectors of the South African economy that witnessed improvement in the First Quarter of 2018  include: transportation sector, finance sector, personnel and government service sector.

A survey compiled by Markit also showed that business activities contracted in May. Respondents to the survey cited product shortages and weaker market conditions as the causes. Standard Bank’s Purchasing Managers’ Index (PMI) slipped to 50.0 in May from 50.4 in April.

Other sectors that declined include: mining, production (lower production in gold, platinum group metals and iron ore were the main contributors to poor performance), manufacturing (due to decline in the production of petroleum and chemical products, as well as basic iron and steel).

ALSO READ: The Economy of Uganda: Expectations, Opportunities

Trade activities contracted by 3.1%, construction industry continued to contract, experiencing its fifth consecutive quarter of decline. The industry has lost R1.7 billion in value since the fourth quarter of 2016, falling from R110 billion to R108 billion in the first quarter of 2018.  Electricity industries also recorded negative growth in the first quarter of trade.

As the country prepares for elections slated for next year, the president’s economic performance will go a long way to define the party’s chances. The African National Congress (ANC) should be conscious of the new African phenomenon of voting out political parties or persons that have held onto power for a long time.

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Nigeria’s Economy: Buhari vs Jonathan

As Nigeria’s 2019 General Elections draw nigh, President Muhammadu Buhari and his team have insisted that economic growth under his presidency “is better than it has been in many decades,” it has equally stood by the old lines like a Trump that “the Economy is raging at an all-time high, and is set to get even better,” and “It has been many years that we have seen this kind of (economic) numbers.”…If not for the last reckless administration we would have been better off.

Let us consider the graphs below:


Figure 1: Jonathan and Buhari’s Administration Economic Growth Rate

The claims by the President’s henchmen, like Kemi Adesoun, that his stewardship of the economy puts his predecessors to shame can be checked by public information that is readily available to all.

In fact, the chart above on the economic growth of Nigeria both under Buhari and Jonathan administration shows that Buhari’s record so far falls somewhere between unremarkable and substandard. Moreover, other economic data suggest that the current expansion will likely wind down before his term ends, and his boasting will ring hollow once the economy slips from recession to depression.

It is commonly said that a president deserves some credit or blame for the economy’s performance only after he’s been in office about six months. On those terms, let’s measure Buhari’s words against the record for Nigeria per capita income, which measures the standard of living of an average Nigeria and also one of the indicators of economic development of a country, over the last three years (2015-2017), and those of the last three years before taking over the mantle of leadership.


Figure 2: Per Capita Income under Jonathan and Buhari’s Administration

It can be seen clearly from the chart above that, the per capita income for the last three years keep decreasing from $2,763(it is usually measured in US dollars) in 2015 to $1,994 in 2017 compared to the increasing rate experienced before taking over power from the Jonathan administration. This means that the standard of living of an average Nigerian is lower under the Buhari administration compared to that of his predecessor.

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Like all of Buahri’s predecessors, the President promised to reform regulation and boost business investment, because such measures can stimulate faster growth. Moreover, if the new investments focus on productivity-boosting equipment, they also can help raise employment and incomes. Let’s take a look at the rate of unemployment under Buhari’s administration compared to that of his predecessor.


Figure 5: Unemployment Rate under Jonathan and Buhari’s Administration

From the chart above, the rate of unemployment under the Jonathan administration was at a decreasing rate from 10.6 in 2012 to 7.8 in 2014, which means unemployment was under check during Jonathan’s administration but the same cannot be said for the Buhari administration which has seen the rate of unemployment increasing from 9 in 2015 to 16.5 in 2017, which means many Nigerians have lost their jobs under the present administration.

The economic data has said it all, the economic situation of the country is far worse than what is been portrayed by the presidency. The highly sung economic achievements do not reflect on the lives of the people of the country. Job loss is on the increase, commodity prices are on the increase, inflation is still in double digit. It’s time to stop the talks and focus on a strategy that will foster economic development rather than focusing on the 2019 election: the people are the economy and the development of the economy means the development of the people.

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Ghana’s Food Sufficiency Project: Obstacles

According to Bethenny Frankel, a television personality, author and entrepreneur, your diet is your bank account, good food choices are good investment. Food has become the only common thing that brings people together. Knowing these facts the president of Ghana, Nana Akufo Addo said that plans are underway to make the country food self-sufficient and reduce the huge food import bills. This statement sounds wahoo and intriguing but one should ask what are the possibilities of the plans? what are the prospects involved?

The agricultural sector in Ghana consists of a variety of produces and is an established sector that provides employment on a formal and informal bases. The agricultural produces are a variety of crops in various climatic zones which range from dry savanna to wet forests, running in eastwest bands across Ghana. The produces include: yams, grains, cocoa (which computes the largest exports), oil palms, kola nuts and timber.

However, in the past years, the Ghana witnessed short falls in profit from  produce exports due to illegal sellers sieving into the makeup, selling unofficially and illegitimately. Agriculture is a major contributor to the country’s export earnings and source of inputs for the manufacturing sector. It is likewise a major source of income for a majority of the population. In 2013, the sector employed 53.6% of the total labour force in the country but overtime the progress of the sector is retarding and needs restrengthening.

The sector has experienced its lowest growth (0.8%) in more than two decades in 2011, the same year Ghana started its oil production in commercial quantities. Another oil craze! If they are not careful, they will forget the sector just as the governments of their African giant-brother forgot theirs -you can guess the country.

Diversifying the economy is wonderful but the mother sectors should not suffer in a bid to diversify. If the agricultural sector is weak, manufacturing will fall, leading to more importation bills for the country. The country is blessed with vast arable lands yet, every year, millions of dollars are spent to import food into the country, this is what an economy that neglects agriculture gets as a reward. It is never too late to make amends!

Ghana is a net importer of basic foods (raw and processed) including rice, poultry, sugar and vegetable oils while its top exports are crude petroleum, gold, cocoa beans, cocoa paste and cocoa butter. The country has grown to be a larger importer of finished products, after exporting the raw produce. This will hamper the growth of the manufacturing sector overtime. The president and his team have to involve measures to add value to the produce, the cocoa butter can be produced into chocolate, ointments, toiletries and pharmaceuticals. They also import medication, which can be done away with if the agricultural sector is revamped and utilised.

The new programme to make Ghana food self-sufficient is ‘Planting for food and jobs’. The flagship programme is to help address the declining growth of the country’s agricultural sector, it is a clarion call on every single citizen to take farming as a full time or part time activity. It gears towards improving food productivity and ensuring food security, as well as reducing food import bills to the barest minimum. How does the programme seeks to achieve all?

The programme employed: Supply of improved seeds to farmers at subsidized prices (50% subsidy), free extension services to farmers (1200 extension officers from the five main agric colleges already enrolled onto the programme; an additional 4,000 extension assistants to be mobilised), marketing opportunities for produce after harvest (arrangements have been made to offer ready markets for farmers who will be participating in the campaign) and e-Agriculture (a technological platform to monitor and track activities and progress of farmers through a database system).

The condition to be selected for the programme is quite tight: a farmer will require a minimum of 2 to 3 acres to be part of the campaign. With this condition, the fate of small scale farmers that cannot afford 2 to 3 acres is anything but positive and this has an effect on the programme.

ALSO READ: Rethinking Buhari’s ‘Success’

Despite all the incentives the programme provides such as market opportunities for produce and others, a poor farmer might not be able to enjoy them. Of what use is a programme that does not reflect in the live of the peasants who make up huge part of the farming? The government of Ghana has to review this part of the programme, it should be extended to the smallest farmer in the country; after all, it is sufficience, enough food for all that they want. Provided the government seeks to achieve the UN Sustainable Development Goal 2, zero hunger, by 2030 (for everyone, everywhere should have enough good quality food to lead a healthy life) they should improve the productivity and income of small scale farmers. This improvement can mainly be achieved by promoting equal access to land, technology and markets, sustainable food production systems and resilient agricultural practices.

Another failure the programme did not address is the storage facilities of agricultural produce. According to the World Food Programme Regional Director in charge of West and Central Africa, Adbou Deing, the agriculture production of the country has increased overtime but the losses after the production is huge. About 40% of food being produced is lost and this is the average in Africa. The major problem of Ghana being food self-sufficient is wastage after production; there is little issue with production because of the increase that has being experienced so far. So, what are the plans to stop the losses of agricultural produce? The wastage experienced in Ghana can only be reduced by investing in food processing and storage facilities across the country.

The world bank also suggested that instead of devoting a large chunk of agricultural sector to cocoa production through investing in diversified productivity, beyond a single crop. The bank also called for more investments in research to increase farmer technology uptake as well as irrigation infrastructure to increase productivity and mitigate the impacts of climate change. There has to be an improvement on the public expenditure allocation and management as well as budget coordination in the sector; it needs more funding to be revived. The Ministry of Food and Agriculture has to improve on the method of collecting data for proper analysis in order to improve the planning process, thereby enacting contextual policy in the sector.

Ghana cannot be food self-sufficient if oil still gets topmost priority to the neglect of the others. There should be value addition to the sector in such a way that raw produces are not the exports but processed products. Mr President, talk, they say, is cheap but action speaks louder!

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Rethinking Buhari’s ‘Success’

As Nigerians celebrated their Democracy Day on the 29th of May 2018, the presidency released a document on what the administration has achieved since 2015. Nigerians voted in President Buhari under the platform of All Peoples Congress (APC) as a result of loss of trust in the former President, Goodluck Jonathan.

In the document, the presidency highlighted the achievements on the economy, infrastructure and others, concluding that there has been a huge success, with more progress to be made. The presidency has given their report, the scorecard of the president, which shows a lot of success with no misfortunate, of course, they ought to blow their trumpets if no one cares to blow it for them. Let’s critically look into the report.

According to the report, the Nigerian economy is back and is on the path of growth after the recession of 2016-2017. It said the Muhammadu Buhari administration’s priority sectors of agriculture and solid mineral maintained consistent growth throughout the recession. This administration can laud themselves for getting the country out of recession, but the country went out of recession the same way it dabbled into it. The economy healed itself, there was no magic or special principles enacted by the government to take the country out of recession.

The root cause of recession turned out to be the messiah of the country, the recession came in abruptly, unplanned for, as a result of the sudden fall in crude oil prices in 2015, likewise, the growth experienced in 2017 was as a result of the appreciation in the price of crude oil. This is to say, the economy is on a table with uncomplete legs, the moment oil prices fall again, the nation might go down the drain, if we are yet to really diversify beyond just talks.

ALSO READ: TOP FASTEST GROWING AFRICAN ECONOMIES IN 2018

Although, the scorecard report indicates agriculture and solid minerals as its priority, yet it failed to talk about billions the president spent in search of oil in the north-eastern part of the country. No one is criticising the efforts of looking for oil but it would be more rational to observe what each region has and explore them instead of searching for what is not there at the detriment of the nation’s development. The funds wasted to search for the oil in the region could have been channeled properly. It is laughable: Nigeria survives on oil; a leadership comes and says we’ll diversify, then turns around to spend so much in search of the same oil! This is not how to prioritise agriculture. The sector is still as vague as it is, providing 48% jobs for the people compared to the over 70% jobs it created before the craze for oil exploration.

In the aspect of inflation, this administration is getting closer to the desirable rate of inflation. The inflation has fallen the fifteenth consecutive month while the nation’s external reserves are at their highest levels in five years, currently double the size of October 2016. This is an achievement that is obvious and achievable as a result of the strict principles of the monetary authorities. I think the government deserves some accolades for that, yet, the nation is not at the state of desirable inflation rate. The recent rate of inflation is yet to meet with the budgeted rate of inflation, the economy needs to strategise the more.

In the power sector, the report states that there was transmission expansion and rehabilitation programme which has resulted in a 50% expansion in grid capacity since 2015, from 5,000MW to 7125MW as at December 2017. It also launched the distribution expansion programme (DEP) which has approved by the Federal Executive Council in February 2018 to deliver 2,000 MW of unused power capacity to consumers in need. The presidency has failed to address the issue of the high rate of exploitation faced by consumers. The electricity is being claimed to have been generated, yet, Nigerians still run on generators. There are still shady dealings that make reluctant to come into Nigeria to invest in this area. The bills for electricity in the country is throat cutting; the exploitation experienced by consumers is high. These are the issues needed to be addressed in the power sector, hence, no achievement can be said to be earned. Electricity is a social welfare affair, so, if consumers cannot enjoy the service, it can’t be termed successful. Yet, I would say the progress is appreciable but we can do better.

ALSO READ: The Effect of Wage Increase on Inflation

The presidency also went ahead to list their achievements in investing in people. Any form of achievement engaged in should be result oriented and specific returns should be expected. Under the Social Investment Programme (SIP), government said 200,000 N-Power beneficiaries are currently participating and receiving NGN30,000 in monthly stipends. The report also said another 300,000 new enrollment are being processed, to take the number to 500,000 this year.

The N-Power has absolved many youths in the country, but not all those absolved are working, especially those ‘teaching’ in schools; they just receive payment. Of a truth, the government pay the seemingly unemployed youths but at the long run, no impact on the economic growth. What is the usefulness of a programme if there is no impact on the economy.


They talk about school feeding with such sense of satisfaction. But feeding few children in the large country
once in a day, with some teachers unpaid is an improper arrangement. Such programmes should be done in a balanced economy as it is merely an avenue for expenses. The chefs are ‘employed’ but they are still sucking from the same exhausted purse. This is not the kind of employment that drives an economy; it is like placing the cart before the horse. Meanwhile, some of these children have parents who are not being paid; what will they eat after school?

The questions the presidency should look into before counting their unhatched chicks are: what have the programmes and plans translated into the economy? What are the feedback from such programmes? Are they worth spending millions on? If the answers to these questions are not on the positive, it is sad to note that the country is recording a cyclical success; a success that is aimed at ‘proving they are working’. Success should be upward, something projected into the future and bringing returns into the economy.

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TOP FASTEST GROWING AFRICAN ECONOMIES IN 2018

The year 2018 has been forecasted to be a promising one for the African countries with an economic growth outlook in the region projected to continue to rise to 3.2 percent. The growth is likewise forecasted to increase to 3.5 percent in 2019, on the back of firming commodity prices and gradually strengthening domestic demand, according to World Bank Reports. The Brookings Institution points out in its Foresight Africa 2018 report that half of Sub-Saharan African economies will grow at a rate similar or higher than the years of the ‘Africa rising’, which was the run-up to the commodity price cash of 2004.

GHANA

Ghana, a West African country that shares borders with Togo, Cote d’Ivoire and Burkina Faso, sits on the Atlantic Ocean and has a population of about 29.6 million (2018). According to a World Bank report, the Ghana macroeconomic performance improved in 2017 after a turbulent 2016. The country’s economy expanded in September 2017, at a rate almost double that of 2016. The Ghana Economic Update reported that the service sector bounced back and the fiscal consolidation is paying off. The inflation rate has declined to 10 percent. The report also predicts a continuous fall in inflation within or close to the Bank of Ghana’s medium term target range of 6-10 percent in 2018.

The fiscal deficit dropped to 6 percent of gross domestic product (GDP) in 2017 from 9.3 percent in 2016, this was achieved because of serious fiscal consolidation efforts. It was predicted that the fiscal deficit could fall within the government’s target of below 5 percent of GDP from 2018 onwards. The West African country is expected to see a 8.3 percent growth rate in 2018.

 

Despite the promising outlook, the country still has some challenges it has to solve to sustain. Restrengthening the falling Agriculture sector which provides 750 jobs for every additional $1 million outputs. However, the progress of the sector is retarding overtime. The country has to improve the financial sector to control the expenditure incurred in the country and like get involved in domestic resource mobilisation.

ETHIOPIA

The country is one the second fastest growing economies in Africa and likewise the second most populous country in the continent. It’s economy is a mixed and transition economy with a large public sector. However, Ethiopia is gradually moving towards market economy because it is in the process of privatising many of the state-owned businesses. The landlocked country shares borders with Eritrea, Somalia, Kenya, South Sudan and Sudan. Its main port is in neighbouring Djibouti.

According to an official statistics, the country’s gross domestic product (GDP) was estimated to be 10.86 percent in 2017. The expansion in the economic growth was as a result of the expansion in some sectors which include: agriculture, construction and services. The manufacturing sector likewise experienced growth, with the private and public consumption also playing an important role.

Ethiopia’’s main challenges are sustaining its positive economic growth and accelerating poverty reduction which requires progress in job creation and improved governance.

COTE D’IVOIRE

The economy is stable and currently growing, in the aftermath of political instability in recent decades. The economy is majorly market based and relies on agriculture for its economic growth. Although, the country experienced a severe political unrest that hampered the growth of the economy, the stability has been restored in 2015. From 2016 and the early months of 2017, the country’s economic growth ranked among the most robust in the continent.

Despite the growth however, the economy still wallows a in high rate of inequality. The government must ensure redistribution of income to the most vulnerable sections of the country. The government also needs to diversify the economy from mainly cocoa to adding value to the cocoa produce.

SENEGAL

Senegal is a West African country bordered by Mauritania in the north, Mali to the east, Guinea to the southeast and Guinea-Bissau to the southwest. The population is over 15.4 million (2016). About a quarter of the population is concentrated around the capital of Dakar and up to half in urban areas. The country is one of West Africa’s key economic hubs. The primary sector of the economy is the most dynamic, growing over 7 percent, yet, the secondary sector is also picking up and expected to take the lead in a few years’ time. The budget deficit is expected to drop from 3.7 percent in 2017 to 3 percent in 2018, the current account balance is projected to drop to 5.2 percent in 2018. The improvements are achieved because of large exports, especially of phosphate, peanuts and zircon.

The public debt acquired by the country has increased though, at a slower pace. It increased to 60.8 percent of the GDP in 2017, while debt servicing also increased from 24 to 30 percent of government revenues between 2014 and 2017. According to the Debt Sustainability Analysis carried out by International Monetary Funds (IMF) and World Bank, the public debt of the country remains at low risk of distress, although, this may be problematic if debt indicators worsen.

TANZANIA

An East African country known for its vast wilderness, Tanzania has a population of about 55.57 (2016). It borders Kenya and Uganda to the North, Rwanda, Burundi and the Democratic Republic of Congo to the West, Zambia, Malawi and Mozambique to the South and the Indian Ocean to the East. The Africa’s highest mountain, Mount Kilimanjaro is in the northern-eastern part of Tanzania. The economic growth of the country has declined since the last quarter of 2016; the estimated growth of 2017 was 6.5 percent. Construction, mining, transport and communications were key growth drivers in 2017.

Tanzania has largely completed its transition to a market economy, though the government retains a presence in sectors such as telecommunications, banking, energy, and mining. The economy depends on agriculture, which accounts for more than one-quarter of GDP, provides 85% of exports, and employs about 65% of the workforce.

The fiscal deficit is forecasted to expand slightly in 2018 to 4.4 percent of GDP. The public debt of the country is sustainable, the debt servicing has increased in recent years, reducing the fiscal space. In 2017, inflation rate was 5.3 percent and it is projected to remain around 5 percent through 2019.

The countries listed above are the fastest growing economies in Africa, though not fully developed, they are progressing and emerging. So, investors can consider these countries for business.

The graph representation above is the 2018 forecast of these economies according to World Bank Reports.

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The Economy of Uganda: Expectations, Opportunities

Uganda, or the Republic of Uganda, is an Eastern Africa country. The landlocked economy has 42.82 million population. The economy is majorly an agricultural economy, coffee being its most export. Nonetheless, it has untapped reserves of both crude and natural gas. The country has been experiencing a consistent economic growth until 2014 when the country recorded a real GDP growth of 4.6%. In 2013, prior to the fall the country recorded a growth of 4.7%, in 2015, 5.7% growth was recorded but in 2016 there was another drastic fall, 2.3% was recorded and in 2017 there was an appreciable increase, the growth was 4.5%. Although, the recent growth rate did not attain the level it was before the drastic fall, yet, the economy was reported to have reduced their poverty rate. Nonetheless, the economy still have some woes to deal with, like access to electricity, improved sanitation, education, child malnutrition, etc.


Other endowments possessed by the country include; gold, copper, cobalt, fertile soil, regular rainfall and the recent discovery of oil. Since the economy is predominantly an agricultural one, agriculture is the biggest employer of labour in Uganda as, the sector absolves over 80% of the work force in the country. Prior to 2017, the sector had been a larger contributor to the country’s GDP. The GDP from Agriculture in Uganda however decreased to 3110.66 UGX billion in the fourth quarter of 2017, from 3257.83 UGX billion in the third quarter of 2017. The success was hampered as a result of underinvestment and the over reliance on crude farm tools. This reduction in the agricultural sector led to an overall decline in productivity because agriculture is the main source of raw materials for other sectors in the economy.

Uganda also has an industrial sector that contributes over 20% of the GDP and employs only 5% of the country’s population. This sector also has its own woes; the growth of the sector is impeded by high costs due to poor infrastructure, low levels of private investment, and the depreciation of the Ugandan shilling.

Uganda is a mixed economy of both private and government institutions combining to determine how it works. Both decision makers partake in the ownership, allocation and distribution of resources in the economy which is an open economy, thereby allowing imports and exports of products/services. The major exports of the nation are agricultural products while manufactured products and petroleum products are imported. There are services sectors like banking, transport, communication but they are still growing and striving to achieve maturity. The government of Uganda depends on indirect taxes as a major source of revenue.

The country faces many economic challenges. The political unrest in South Sudan has led to more refugees in the country, thereby disrupting the its major export market. The currency of the country (Uganda Shilling) has depreciated 50% against the dollar from 2015-2017. The insufficient budgetary discipline and corruption hinder economic development and reduced investors’ confidence.

The economy is yet to evolve agricultural diversification; it is still predominantly coffee and cotton, resulting to small production composition. The economy is yet to employ the methodology of adding value to their agricultural products, it still exports raw products, importing the processed ones. This is one reason the agricultural sector began to lose its stance after several decades of prosperity. The global market has moved from rudiment to value adding.

The economic structure of Uganda reveals the unhealthy reliance on majorly agriculture and its imports is more than the exports, making the balance of trade unfavourable for the economy. The imports are largely dominated by consumer goods, this indicates that Uganda is a consuming nation and not a contributing nation. The government have to employ measures that will make the economy more industrialised, there should be training of local men to carry out industrial activities. There should be economy diversification, the government should also establish import substitution industries to reduce the importation bills. The agricultural products should be promoted from raw products to high stages to add more value to the exports. The real GDP is of course an appreciable one for the economy, yet, more needs to be carried out for the it to drive into maturity.

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Is Inflation Totally Undesirable?

The term inflation has been seen by many as an incessant increase in prices of goods in a country, yes, it is an increase in price, but the word continuous increase is needed for it to be an inflation. The word ‘inflation’ is coined from a latin term inflare which means ‘to blow up or to inflate’. Therefore, inflation can properly be defined as a continuous increase in price over a specific period of time while the value of money declines.

Inflation has been one of the major factors considered by monetary authorities to change interest rate in any given economy. The control of inflation is a ‘crucial responsibility’ of the monetary authorities, hence, it must be properly monitored to avoid an economic disaster. Nonetheless, inflation is not totally an undesirable economic factor, a relatively low or no inflation will likewise harm the economy. So, no matter how horrible inflation has been preached to a lay man, it is necessary to understand that when it comes to inflation, there is a silver lining in the dark cloud. What any economy should target is a stable and a low (2%) rate of inflation.

ALSO READ: The Effect of Wage Increase on Inflation

Many an individual dislikes inflation, wants to get things at a very cheap price. It is beautiful to note that when a country do not have inflation at all, there exist a fall in prices, this will lead to a bad period for the economy. Businesses might collapse, thereby leading to unemployment, low productivity,  it also causes macroeconomic variables to be unstable. Negative inflation also causes shortage in revenue thereby leading to a decrease in government spendings.

The idea or desire of not wanting inflation in an economy should not be the bone of contention, What should concern an individual is that the nominal income should be higher than the nominal prices purchased by such individual. Wishing for a zero inflation economy will  only lead to more fall in incomes even as prices fall drastically.

So, next time you hear about inflation, do not be quick to see it as something totally undesirable, check for the percentage. The rate determines the effect in any given economy. A low inflation is the real deal but never wish for an inflation free economy, trust me it is a devil on its own.

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The Effect of Wage Increase on Inflation

According to News24, on the 19th of May, Deputy General Manager Tahir Maepa an official of the Public Servants Association of South Africa, which represent about 238,000 workers, “revealed they want an above inflation increase of 12% which all unions initially demanded and furthered revealed the association would not sign the deal”. While the Central Bank governor of South Africa, Lesetja Kganyago has warned that “the inflation rate will start rising due to tax increases and high salary demands, inflation will stay close to 5% until at least at the end of 2020, according to the regulator”.

In the debate over minimum wage, people often become distracted by their inner altruism and ignore the logic behind the economic laws that govern labour markets and the macro-economies of a country.

Is the perennial agitation for minimum wage increase justifiable? This is the question many people have been asking. From an economic point of view, continuous wage increase is not justifiable. In fact it is detrimental to the economy. There are two main consequences of continuous wage increase, general and persistence rise in the price of good and service, and reductions in the number of jobs available. Frequent increases in wage have the tendency to become an inflationary shock that is associated with sudden increase in the general price of good and services. This is what has been happening since the agitation for wage increase becomes an annual event. At one hand, the demand for wage increase force producers to increase the price of good and services in order to cover the cost of wage increase, what economist called wage-cost push inflation. On the other hand, the mere expectation of increase in wage makes traders’ mouth to salivate on the coming prospect of increase purchasing power on the part of workers. Therefore, makes traders to move the prices of good and service up.

Advocates argue that raising the minimum wage would help poorer citizens provide for their families and lift them out of poverty. It is true that minimum wage regulations typically apply only to poorer, lower-skilled workers. It is not true that raising the minimum wage will help them. The money that companies use to pay higher wages would reduce profit margins of the companies.

Maintaining profit margins is a serious pursuit for firms because profits allow firms to innovate, expand and stay alive in a competitive market. When confronted with a mandatory minimum wage, companies must often increase the price of their goods or services to preserve profit margins and so ensure their continued existence. Therefore, broadly raising the minimum wage would increase consumer prices, that is, inflation.

Inflation, unfortunately, hurts the poor far worse than it hurts anyone else. The poor are more likely to live from salary to salary, and inflation means that prices would rise. Prices would certainly rise much faster than wages will adjust — especially a minimum wage set by the government. This means that the poor are able to buy less of what they need to survive as inflation rises. What good are higher wages if purchasing power falls?

Consequently, the very people who were supposed to benefit from an increase in the minimum wage are the ones who are most hurt by the ripple effects of this policy. This seemingly progressive price floor set by the government then turns into a very real regressive consequence for the poor.

Second, let me say that raising the national minimum wage does not increase Gross Domestic Product (GDP). If it did, you would no longer be able to see a “minimum” wage at all, because every country in the world would be continuously raising this minimum in an effort to stimulate economic growth.

We have all heard the claims that a higher minimum wage would benefit the economy by giving workers more money to spend, thereby increasing aggregate demand and GDP. Raising the minimum wage does not increase aggregate demand at all, because any extra money paid to workers would have merely come from the firms or consumers in the form of higher prices.

Finally, raising the minimum wage would put a strain on South Africa’s already thin labour market. By the laws of supply and demand in the labour market, settling a wage above the current inflation rate will cause some people to be forced to work fewer hours or lose their jobs.

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Simply put, as labour becomes more expensive, companies are more likely to substitute technology for workers, more likely to hire fewer workers for longer hours, more likely to offer fewer benefits, and/or limit training in an effort to control other costs associated with labour. It is also worth noting that the workers most at risk of being let go or having their hours reduced are lower-skilled workers.

Truly workers deserve something better than what they are getting under the present circumstance. But should that be only through increase in money wage? Why should workers not demand for improve working condition so as to boost workers’ productivity? Continuous issuing of threat of strike on wage increase without commiserate demands for government to do things that will help people that are not on government pay will undermine unions causes in the long run. South Africa’s labour needs to work harder to represent themselves as champions of public services rather than simply as defenders of their pockets.

Instead of focusing on raising the minimum wage, government should focus on improving the structural problems in South Africa that have caused the market equilibrium wage to be so low: poor education and training, low population mobility and regulations on investment and innovation. As the economy grows, so too will wages.

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2018 Budget: Matters arising

Nigeria’s Assembly has accented to the proposed 2018 bill of appropriation, it was finally passed on Wednesday, 16 May 2018 after six months! The 2018 budget was presented to the house by the president, Muhammadu Buhari on 7 November, 2017. The budget was dubbed “Budget of Consolidation”. According to the President: ‘The 2018 Budget Proposals are for a Budget of Consolidation. Our principal objective will be to reinforce and build on our recent accomplishments. Specifically, we will sustain the reflationary policies of our past two budgets. In this regard, the key parameters and assumptions for the 2018 Budget are as set out in the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).’

After several criticisms and analyses carried out by the lawmakers of the country, the house saw the need to pass the budget, raising the proposed budget by N500 billion. But there had to be a special meeting of the president and two leaders of the both chambers. One will be quick to ask if the country can accommodate such raise without much effect. Nonetheless the Senate President saw it as a bid for Nigerians to benefit from the objective of the budget and opportunities it opens. Despite the increment in the budget, it is yet to meet up with standard; the recurrent expenditure is still higher than the capital expenditure. The economy budgetary woes have become recurrent expenditures, and we are not learning from the past, yet more is being budgeted to that effect. Although, this time, the budget met the threshold of reserving at least, 1% of total budget to health, thereby fulfilling the mandate of the National Health Act.

A budget that took such a long time and strict scrutiny should have been more painstakingly drafted to enhance institutional capacities, provide an enabling environment for both domestic & foreign investment, industrialise the economy, strengthen corporate governance and increase strategic infrastructure project investment with adequate provisioning for strong monitoring of these projects. Without all these in view, the budget might fail just as the previous ones.

ALSO READ: Questions on Nigeria’s 2017 Budget

Some sectors’ allocations were increased: health, education, security, power, works and housing. The questions that one need to know is that what efforts will be made to ensure that this increment don’t end on paper work alone. What are the measures put in place for proper implementation of projects? What are the procurement methodology? Hope the funds won’t be swept away by corrupt officials? What are the measures to block all loopholes? These are many more are matters arising in my mind. The 2016 and 2017 budgets have gone without much being achieved, one can only hope this budget will not end the same way?

Unfortunately still, oil has the highest percentage of the projected revenue source at 37%; Value Added Tax (VAT): 3.1%; Tax Amnesty: 1.3%; Independent revenue: 12.8%; Grants and Donor Funding: 3%; Others: 5.5%. From this, the government still bases the budget on oil revenue, hanging the economy in a balance if the oil price experiences a fall once again. Without a well diversified economy, the country can not achieve the set objectives of the budget. The government must give the economy diversification the attention it requires. How are they focusing on helping the Agricultural sector become competitive in an era of GM foods and mechanised farming? What measures have been put in place to industrialised the economy to drive her to maturity? What are the methodologies employed to revitalise the art and make the sector attractive? How ready is the government to take advantage of technology in improving the country?

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Investing in Africa Agricultural Sector: the Solution to Importation

The crazy level at which African countries import things was reiterated by the president of Zimbabwe, President Emmerson Mnangagwa, while addressing the delegates at the Southern African Confederation of Agricultural Unions (SACAU) annual meeting in Victoria Falls. Hear him: ‘it is regrettable that African countries spend between $30 billion and $50billion annually on imports of agricultural products, instead of developing the productive capacities necessary for trade’.

According to the United Nations’ 2015 World Population Prospect Report, 2.4 billion people are projected to be added to the global population between 2015 and 2050, with 1.3 billion in Africa alone. Which means by 2050, Africa will house more than half of the world’s population and as at now no preparation is being made on how it will feed its 1.3 billion population by 2050. What about the now? 2050 is still some years ahead; what are the African leaders doing to stop, or at least, reduce the importation of finished agricultural products. Currently, Africa is still unable to feed itself and depends on importation of products to feed its people. What will happen by 2050, if a stop is not put to this trend?

The potential for growth in Sustainable Agriculture in Africa is well understood, but has not been realised. Currently, the agro-allied industry (in primary processing) accounts for nearly half of all economic the activity in sub-Saharan Africa. At the same time, the continent spends $30bn to $50bn each year importing food and still has significant food risk and nutritional deficiencies in many parts of the region.  This is despite the fact that the continent holds much of the world’s potential agricultural land (Africa has 65% of the world arable land).

According to the United Nations Food and Agriculture Organisation (UN FAO), Africa spends $35 billion in importing food, and it is projected that the number will grow to $110 billion by 2025. Africa is importing what it should be producing, creating poverty within the region and consequently creating jobs for the people in other continents while its people lack opportunities.

It is interesting to note that African countries import numerous agricultural products which are also, ironically, produced locally. The rise of imports for these Agricultural products has been attributed to the inability to produce enough to satisfy growing local demand, due to low yields and relatively low levels of productivity.  Furthermore, over 80% of Africa’s agricultural products are being produced by smallholder farmers who produce 70% of the continent’s food supply, according to FAO.

Taking a look at Agricultural exports, one discovers that African countries mainly export cocoa, edible fruit and nuts, coffee and tea and vegetables to the rest of the world. The main agricultural importing countries of the African export are the United States, China, Germany, Netherlands and the United Kingdom.

African countries do not feature under the top supplying countries for any of these markets. If Africa is serious about changing from agricultural product importers, then addressing the following issues are of paramount importance: innovation in production technology, the cost of inputs (energy and fertilisers), management of changes in climatic conditions (e.g. access to water through irrigation), knowledge transfer and capacity building, investment in agriculture and agriculture-related infrastructure (credit facilities, transportation networks, cold-storage facilities and communication networks) and access to information.

ALSO READ: Questions on Nigeria’s 2017 Budget

Governments and leaders in Africa (past and present) should (have) know(n) that if there is one thing the continent should not be found lacking in, it is food. It is shameful that, with the large arable fertile land, expansive body of waters and other enviable endowments, Africa cannot feed itself. That such a humongous amount of foreign exchange is being expended in importing food is a serious minus for the leadership of the component countries in Africa.

Agriculture is also a major component for Africa becoming an industrialised continent, in the sense that its raw materials are needed in production of other commodities. Africa has come of age and its agricultural practices should be driven by research, mechanisation and modern technology to steer it away from remaining rudimentary.

Becoming a net-exporter of agricultural products should be the worthy vision of African governments and leaders. Of course, diligent planning, development of appropriate strategies, deployment of sufficient resources and unflinching commitment by the governments and the citizenry will be the game-changers for the realisation of multiple objectives of food security, industrialisation and foreign exchange earnings. Thus, African leaders should henceforth stop using agriculture as a mere propaganda tool. They should put their hands on the plough and never look back. All those foreign long sleeved shirts, locally made agbadas and tunics need to be rolled up for work; the continent cannot remain hungry when there are seeds, lands and technology around.

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Questions on Nigeria’s 2017 Budget

Nigeria’s Minister of Finance, Kemi Adeosun, was so overjoyed on Sunday that she took to her twitter account to say the Nigerian Federal Government will be closing the 2017 budget with an excess of N1.5 trillion on capital expenditure.

The 2017 budget was the second budget to be presented by the President Muhammadu Buhari administration, tagged budget of recovery and growth. It was based on  crude oil benchmark price of US$42.5 per barrel; an oil production estimate of 2.2 million barrels per day and an average exchange rate of N305 to the US dollar; a target Gross Domestic Product (GDP) growth rate of over 2 per cent and a target inflation rate of single digit. Additionally, there was a deficit of N2.36 trillion (about 2.18 percent of GDP. A total of N2.24 trillion was budgeted for capital expenditure.

Having said that, I would like to state that Nigeria’s problem is not the budgets; the problem is in the implementation. It is one thing to roll out a budget, it is another thing to implement it and achieve positive results. National development is predicated on effective implementation of national budgets.

It might be necessary, at this juncture, to ask how far the 2017 budget went in alleviating some of the endemic problems in Nigeria. When I say the 2017 budget, I don’t just mean the federal budget but all the state budgets put together. As a matter of fact, every year, 38 budgets are rolled out including the Federal Government’s, the 36 states’ and the Federal Capital Territory’ (FCT).

To what extent did the budgets alleviate the problem of poor electricity, water supply, healthcare, education, dilapidated roads, unemployment, insecurity, etc? Are Nigerians faring better now compared with last year before the 2017 budget was passed? What systematic changes have occurred? What systematic solutions have been provided or are ongoing? What difference has occurred in the life of the Nigerian in the street?

The chronic failures of budgets across the country is heart-breaking. That is why pessimists call budgeting in the country an ‘annual ritual’. That has been the case since 1999, when the present democratic dispensation began and it was thought that the era of military impunity was over. Indeed, our rogue budgets are merely rituals; they seem not to be made to change anything, but to simply recycle a government to-do.

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And really, how can there be any improved change when on an annual average, 70% of these budgets go for recurrent expenditure while only 30% is for capital expenditure? How can a developing country like Nigeria develop when only a fraction of the annual budgets is put for capital projects? Faced with corruption, neither the recurrent budget nor the capital spending achieves its target. The inability of many state governments to pay salaries, pension benefits and other entitlements to workers underscores the failure of recurrent expenditure.

Every year, budgets are rolled out by the federal and 36 states governments, including the FCT. Each level prepares budgets based on what suites its purpose. There is no common ground for integrated national development. Nigerians hear about the trillions of naira earmarked for expenditure but hear nothing again about how the money was spent. The same governments that announced the budgets with fanfare at the beginning won’t utter a word at the end about what happened to the money. So where is the accountability on the part of the president with the highest level of integrity?

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Somalia’s Charcoal Industry: Economic and Environmental Implication

The UN Security Council has noted on several occasions that ‘charcoal exports from Somalia are a significant revenue source for Al Shabaab and also exacerbate the humanitarian crisis’. Recent estimates by the Monitoring Group on Somalia and Eritrea show that upwards of 40% of Al Shabaab’s funding comes from various forms of involvement with the illegal Somali charcoal trade. There are indications that this has not substantially changed.

Charcoal is made by burning wood in an enclosed area at high temperatures. In Somalia, this is usually done in small space dug out of the earth and enclosed with concrete blocks and brush piled on to seal in the air. This is either done by local Somalis who have no other economic options, or sometimes by local militias with chainsaws. They then sell the charcoal in bags usually weighing about 25kg each to militias to transport to a port.

However, considering the charcoal industry has been behind deforestation in other parts of Africa, one can assume that, with the lack of any oversight or restrictions, the charcoal trade will have a devastating effect on Somalia’s forests. This is also likely to increase the occurrence of desertification in Somalia, depriving pastoralists of grazing land and farmers of cultivatable areas. Income from the charcoal trade also provides important financing for some warlords and faction leaders, enabling them to maintain their strength and continue their predatory regimes. While predatory militias profit from the charcoal industries, it is the more powerful businessmen that are the real power behind the industry. This section of society is powerful enough to hold a veto over any political arrangement that threatens their interests. Thus, any attempts to halt the charcoal industry must court the very businessmen that profit the most from it.

Unfortunately, as forests become sparser but demand in the Gulf States continues or even rises with other fuel costs, intense competition may ensue over controlling the remnants of Somalia’s charcoal industry. There has already been conflict between clans over the charcoal trade, and this will only become more likely as competition intensifies. As deforestation and desertification limit the availability of other natural resources, conflict around these is likely to rise, as well. Somalis who rely on the acacia forests for their livelihood will see their opportunities for supplementing their income decrease, as game dies out, desertification hurts farming, and the eventual destruction of the acacia groves will also end their ability to supplement their income by participating in the charcoal trade. With charcoal supplies shrinking, the cost of fuel for domestic use will also continue to rise, raising the cost of living for Somali families.

The charcoal trade in Somalia takes a heavy toll on the acacia forests of southern Somalia, as traders’ clear-cut entire swaths of forest for shipment to Gulf States. The process of turning cut wood into charcoal is also a rough, dirty process that pollutes the air, although in a very local fashion. While the impact on the global environment and global warming is negligible at best, the ramifications of the charcoal trade on the local environment and the livelihoods of Somalis are drastic.

The Gulf States consumption of charcoal affects Somalia because of its unique political situation, it is unable to handle the increased demand for charcoal in an environmentally sound way. This situation has risen because of the confluence of several factors. First, the Gulf States banned the destruction of their local forests in the late 1980s and early 1990s, creating demand for charcoal imports. Additionally, they also banned Somalia’s primary export at the time, cattle. This dealt Somalia’s economy a tough blow, and pushed many into the charcoal trade. Second, Somali descended into a situation of statelessness where, after 1996, it was possible to export charcoal without concern for the environmental impact. Finally, systems for conducting business without a state have emerged in Somalia that makes their role in international commerce possible.

ALSO READ: Nigeria’s Currency Swap with China: Prospects and Implications

While the deforestation occurs in Somalia and Somalis feel the environmental impact exclusively, this situation would not be present without the demand for charcoal from Gulf States. Somalis have relied on charcoal as a source of energy for centuries, but have been able to balance domestic consumption with environmental preservation. This increased demand, combined with the lack of a central authority in southern Somalia, has led to the recent environmental crisis.

The conflict over Somalia’s coal is indirect as it deals with the issue of the increasing scarcity of sources of charcoal. As climate change increase rates of desertification in arid and semi-arid areas like Somalia, and populations grow, they will continue to put pressure on the forested areas in southern Somalia. However, the charcoal industry, obviously, has an even more rapid and devastating effect. What contributes to how much charcoal is produced is a complex interaction between several factors. First, without the demand from Gulf States, the opportunities for such huge profits would not drive actors in the charcoal industry. Compounding this is the lack of other economic opportunities, making participating in the charcoal industry an even more attractive option. Finally, what has the power to control the charcoal industry are governments and regional authorities that have power and legitimacy. Only an effective ban encompassing all of Somalia’s important ports and charcoal producing areas will be able to counter the destructive short-term logic of exploiting Somalia’s acacia groves for charcoal exports.

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Nigeria’s Currency Swap with China: Prospects and Implications

For diverse stakeholders in the Nigerian economy, the Federal Government’s recent currency swap deal with China holds both bright prospects and grave implications for Nigeria, even as the naira inched up against the dollar at the weekend parallel market.

President Muhammadu Buhari, during his official trip to the world’s second largest economy, struck a naira and yuan swap deal, scripted to ease trade transactions between both countries and devoid of current exchange challenges with the United States dollar.

The currency swap deal consists of an agreement between two central banks, at least one of which must be an international currency issuer, to swap their currencies. The central banks party to the swap transaction can lend the proceeds of the swap, against collaterals they deem adequate, to the commercial banks within their jurisdiction, to provide them with temporary liquidity in a foreign currency.

The news of the currency swap agreement between Nigeria and China seems to have, immediately, captivated the public attention. Basically, the swap implies that China would set aside billions of dollars equivalent of its currency (the Renminbi) from which Nigerian importers could directly exchange their naira at pre-determined exchange rates, without first procuring dollars to complete the transaction. Regrettably, Nigeria has not published the amount, nor tenor and applicable exchange rates for transactions and settlements under the swap arrangement.

Nonetheless, while briefing State House correspondents on the gains of the China trip, Foreign Affairs Minister, Geoffrey Onyeama, suggested that the celebrated agreement was not a ‘currency swap’ as widely reported, but a recruitment of Nigeria into a partnership ‘that would facilitate China’s drive to internationalise its currency’. So, for Nigerians, according to Onyeama, it has given them (their economy) greater opportunities so that those wannabes who cannot readily access dollars can now also import, notwithstanding the shortage of dollars.

However, Lin Songtian, a senior official of the Chinese Foreign Ministry, also noted that the deal on Yuan transactions ‘means that the Renminbi is free to flow among different banks in Nigeria, and the Renminbi has been included in the foreign exchange reserves of Nigeria’.

In order to facilitate rapid Yuan acceptance in our sub-region, Nigeria as hub, will invariably host a clearing house with affiliation to the People’s Bank of China to allow the Renminbi to become a common settlement currency which can be used for bilateral loans or aid. Ultimately, a new bank with affiliation to the China bank will be established and dedicated to intermediate Yuan transactions in the sub-region, as a product of the currency swap.

Furthermore, China’s official news agency reported that President Xi Jinping had expressed interest in economic co-operation with the Nigerian delegation, particularly in areas like oil refining and mining. However, it is not yet clear if the currency swap deal also implies that China will pay for Nigeria’s crude oil in naira or Yuan.”

Ultimately, this currency deal will bolster our Renminbi reserves, but this may lead to a corresponding drop in our dollar reserves; ironically however, China may readily depreciate its Yuan to promote the export price competitiveness of its products in the United States and other dollar denominated markets. Unfortunately, therefore, Nigeria’s increasing Renminbi reserves would also become devalued and would buy less and less dollars than before. It is instructive that China is already in similar bilateral currency swap agreements totalling RMB 3.137tn (about $500bn) with 31 Central Banks, including the UK and South Africa, and the trade volume with these countries has since exceeded RMB 11tn after the swap agreements.

Nonetheless, according to the CBN Governor’s observation, ‘‘we are working to encourage our exports of raw materials to China in order to reduce the trade imbalance’ which is presently, clearly, heavily skewed against Nigeria with an annual import bill of about $15bn payable to China. However, it is not yet clear how Nigeria’s industrial production and output will ever become internationally competitive enough to reduce this trade imbalance, particularly when domestic inflation rate is trending at over 12 per cent while cost of funds to industries and other businesses presently exceeds 20 per cent”.

Expectedly, this arrangement would increase the value of Chinese exports to Nigeria well beyond the present $15bn, but will unfortunately, also challenge Nigeria’s desire to diversify its economy by adding value to its local agricultural and raw materials output.

ALSO READ: Ten Worst Countries to Start a Business in Africa

The downside is that the Chinese buying agencies with surplus naira liquidity in Nigeria will outbid local industries to monopolise supply sources of the local agricultural and raw materials and subsequently cart these away to China as exports for processing into a multitude of finished products which will be ultimately re-exported to Nigeria at much higher cost. In contrast, this may be counterproductive to Nigeria’s abiding desire to become a robust industrial economy by adding value to our agricultural and raw material products before export.

The Central Bank of Nigeria should put some measures in place to guide the naira against the yuan because in the short run, the deal is beneficial to Nigeria but on the long run, if certain measures are not put in the place, the economy might see the negative impact of the deal.

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Ten Worst Countries to Start a Business in Africa

There are many business moguls or small scale business entrepreneurs who love to go to different places to pitch their business tents in countries across the African continent. Such one need to know the economies that are a ‘no-no’ for businesses, based on certain realities.

Economies are ranked on their ease of doing business from 1-190. A high rank (low numerical value) indicates the better, usually simpler, regulations for businesses and stronger protections of property rights. This shows that the regulatory environment is more conducive to the establishment and operation of a local firm.

Despite the vast opportunities in Africa, it remains a daunting place to start and run a business. Credit facilities are limited, electricity costs a fortune, overhead costs are throat cutting. The continent is blessed with numerous natural resources; yet, and so far, little have been achieved with such blessedness. The overall success of any country can be linked to the ability of the country to provide an enabling environment and ample opportunities for its citizenry. Majorities of the countries with least opportunities are suffering from political unrest, war, poverty e.t.c.

So, here comes the dreaded list…

  1. Somalia

Somalia, a country with a population of 14.3 million, has a land mass of 637,657sq km completes the list of the worst countries to start a business in the world, ranking the least with a large numerical value of 190. The Horn of Africa, which was known as an important commercial centre, has recently become a shadow of itself. After several political unrest and a prolonged civil war, the country has been inching towards stability, but the new authorities still face a challenge from Al-Qaeda-aligned Al-Shabab insurgents. The country is popularly known for it various natural disasters ranging from, tsunami and flood to drought and others. It takes 187 days to start a business in the country, including getting electricity and 150 days to register for property. The US and Western nations have warned individuals to avoid travelling to Somalia because of the high level of unrest and attacks in the country; currently, the country is not an ideal place to start a business despite the land being viable and virgin.

  1. Eritrea

Eritrea won independence from Ethiopia in 1993 after a 30-year war. Bordered by Sudan, Ethiopia and Djibouti, it occupies a strategic area in the Horn of Africa but remains one of the most secretive states in the world.The Horn of Africa is disturbed by prolonged periods of conflict and severe drought which have adversely affected the economy and it remains one of the poorest countries in Africa. Eritrea has a numerical value of 189 in ease of doing business in the world rank, it takes 184 days to start a business with 187 days to get electricity and 178 days to register a property before any business can kick-off in the country.The economy with a population of 5.6 million has seen hundreds of thousands of citizens fleeing the country because of human right abuse. Eritrea has faced many economic problems, including lack of financial resources and chronic drought, worsened by restrictive economic policies. For any business to thrive in any environment there must be an enabling environment in terms of amenities and security, unfortunately Eritrea has failed in such perspectives.

  1. South Sudan

A  country of more than 13 million people, Sudan also makes up the list of the worst economies to start a business. South Sudan is known for their prolonged civil war in the country which  is disrupting what remains of the economy. The country has a high numerical value of 187 in doing business world rank; days needed to start business is 181, with 187 days needed to get electricity and 181 days to register for property in the country. The  market structure of the economy is not well-organised, therefore, property rights are insecure and price signals are weak. The country has little infrastructure, about 10,000 kilometers of roads, but just 2% of them are paved. Electricity is produced mostly by diesel generators which costs a fortune. Without the needed amenities business will be a struggle in that part of the world, so, for now South Sudan is a no go area for business minded individuals.

  1. Libya

Libya is mostly desert and known to be an oil-rich country but did not make the list of best countries to start a business despite its richness, call that a resource curse? The country has a value of 185 in ease of doing business world rank: 167 days to start a business, 130 days to get electricity and 187 days to register a property in the country. The country which started well after the discovery of oil has experienced a stalling in development as a result of political chaos and insecurity. The leaders have hindered economic development by failing to use its financial resources to invest in national infrastructure. Libya suffers from widespread power outages in its largest cities, caused by shortages of fuel for power generation. Many governments advise against traveling to Libya due to its serious state of political and social instability. So, safety first before business.

  1. Central African Republic

Central African republic which is predominantly a subsistence agriculture, forestry and mining based economy, has been prone to conflict since independent from France. The country is rich in diamonds, gold, oil and uranium but enlisted among the worst countries to start a business in Africa, with a numerical value of 184. It takes 188 days to start a business, 183 days to get electricity and 169 days to register for property. The high rate of abuse of human rights and conflict put the economy among the list of worst places to start a business venture.

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  1. Congo DR

Despite being a vast country with numerous resources the country is clouded with civil war and corruption. The country sees itself placed among the worst countries in the Africa to start a business with a numerical value of 182 ease of doing business world rank. 62 days are needed to start a business with 175 days to get electricity and 158 days to register for property in the country. Recently, the economic conditions slowly began to improve as the government reopened relations with international financial institutions, international donors and implementing reforms. However, the progress of the economy remains slow because of political instability, bureaucratic inefficiency, corruption, and patronage. These menaces have dampened international investment prospects in the country.

  1. Chad

The Central African nation also made the list of worst economies to start a business in Africa. The landlocked nation appears on the list due to some economic disadvantages: taxes, freedom (personal and trade), technological readiness and red tape. The ease of doing business world rank is 180, the days needed to start a business is 185 with 177 days to get electricity and 159 days to register a property in the country. The rapid falling prices of energy have further hindered Chad, which relies on oil for more than half of its exports. The country has been marked by instability, inadequate infrastructure, and internal conflict.

  1. Congo Republic

The  sub-Saharan Africa country which is sometimes referred to as Congo-Brazzaville has been plagued with civil wars and militia conflicts, little wonder the country couldn’t escape being tagged as one of the worst countries in Africa to do business in. The country is 179 in ease of doing business world rank, has 177 days to start a business, 181 days to electricity and 177 days to register property in the country. There is a serious bottle-neck in administration when a business venture is to be established in the country. The social and political unrest also contributed to the difficulty in having a conducive environment in the economy.

  1. Guinea Bissau

The country has rich natural reserves in gold, diamonds, bauxite and iron ore, but GDP per capita is one of the lowest in the world at $1,300 and the trade deficit is 24% of GDP. The economy ranks poorly on taxes, monetary freedom, investor protection and innovation. The country has a value of 176 in doing business world rank, 178 days to start a business with 180 days to get electricity and 120 days to register for property in the country. The economy is disadvantaged by limited economic prospects, weak institutions which results in low investments prospects.

  1. Angola

Angola is one of Africa’s major oil producers, yet it was not left out in the horrid list of worst economies to start businesses in. The ease of doing business world rank is a huge numerical value of 175 with 134 days needed to start a business, 165 days to get electricity and 172 days to register a property in the country. With a population of about 29 million people, Angola is striving to tackle the physical, social and political legacy after being ravaged with 27-year civil war. The continuous fall in oil prices has slowed down the improvement in the economy, thereby, making investment and business struggle to thrive in the country.

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Oando Plc Records Full Year after Tax Profit of N20bn

Oando Plc has consolidated on its 2016 gains by recording a higher profit for the year ended December 31, 2017. The indigenous integrated energy company, on Friday, announced its audited results for 2017, showing revenue of N497.422 billion, compared with N455.746 billion in 2016.

The company reduced cost of sales from N426.99 billion to N409.341 billion in 2017. Also, administrative expenses declined from N109 billion to N77.89 billion, while net finance cost reduced from N51 billion in 2016 to N33.78 billion in 2017.

Consequently, profit after tax soared from N3.913 billion to N19.77 billion in 2017, showing an increase of 405 per cent. Oando Plc’s net debt reduced to N217.1 billion from N230.6 in the comparative period of 2016.

This comes in the wake of oil prices on an upward trajectory, an improved operating environment, the exit of a 13 month long recession and most importantly the continued strengthening of their business model through the effective implementation of the company’s strategic initiatives of growth through their dollar earning upstream portfolio; deleverage through asset divestments and the expansion of in-house oil export trading business.

OER (Oando Energy Resources) recorded an average production of 39,556 boe/day in the 3 months ended March 31, 2018 compared to 38,125 boe/day in the comparative period of 2017. Improved production was primarily due to increased production at Ebendo as a result of the Trans Forcados pipeline, which was down in the same period in 2017; therecwas also an increased production at OMLs 60 to 63 as a result of reduced sabotage and crude theft activities, which necessitated a shut-in on production lines in the comparative period of 2017.

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This was primarily due to significant reductions in gas production and delivery caused by the rupturing of Gas Transmission System (GTS-4) gas line and pipeline and terminal constraints at its OMLs 60 to 63. The upstream business recorded a net profit of N26.33 billion ($86.1 million) compared with N91.83million ($0.3 million) in the comparative period of 2016.

Oando’s affiliate, Axxela, recorded an 11 per cent increase in natural gas deliveries in 2017. This achievement, according to the company, was in spite of restricted gas supply in H1 2017 due to the sabotage of upstream gas supply facilities by militants.

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Ethiopia to Host Ministerial Conference on African Free Trade

The capital of Ethiopia, Addis Ababa, will host a ministerial conference on African Continental Free Trade Area (AfCFTA).

The conference which will consist African Ministers of Finance, Planning and Economic Development is to kick start May 11-15, 2018.

The conference will center on the theme: “African Continental Free Trade Area; creating fiscal space for jobs and economic diversification.”

ALSO READ: Rwanda, Netherlands Pledge to Bolster Economic Ties

Key topics like: agriculture and Africa’s transformation, financing and an integrated strategy for the Sahel priorities for tackling Illicit Financial Flows in Africa will be deliberated on during the conference.

There are hopes that the ministerial conference will enact a workable road-map to set the deal rolling and implementable beyond paper works.

Recall that the African Continental Free Trade Area (AfCFTA) was signed by 44 countries in Kigali, Rwanda, March 21.

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World Bank Supports Djibouti to Improve Public Service Through Tech

World Bank has announced support for the ongoing efforts of Djibouti to leverage digital technology to bring government closer to citizens and improve the impact, transparency and efficiency of its public administration.

With a $15 million credit from IDA, the fund of World Bank for the poorest countries, the new project will help the roll out of digital systems to make it easier for citizens to access services, and for more efficient tax and customs administration to boost government revenues.

The four-year Public Administration Modernization Project will help the government implement the reforms, establish the legal framework and adopt the technologies necessary for digital transformation.

A principal goal will be to unify the current variety of social registries into a single, integrated national identity system (e-ID) which citizens can use to access all public services.

By the end of the project, the aim is to enroll half the population in the e-ID system, with women, who are significantly underrepresented in current identity systems, representing half of the enrolled.

The Minister of Economy and Finance of Djibouti, Ilyas Moussa said: “Djibouti has heard the call for improved services, and is committed to using the tools of e-government to respond to it.”

“Working in partnership with the World Bank, we have developed a strategy for modernising our public administration and reaping the benefits of greater transparency, inclusion and efficiency offered by digital technology,” he stated.

Along with supporting the publication of and access to available services through the government’s portal, the project will fund the piloting of a Citizen Service Center (CSC).

The CSC will offer broadband connections and function as a one-stop-shop for knowledge of and how to access services. Citizens will be consulted on the design of the CSC, to ensure they are accessible to vulnerable populations such as women, the disabled and those in rural areas.

The World bank Country Director for Egypt, Yemen and Djibouti, Dr. Asad Alam stated: “Djibouti is putting its citizens at the heart of its digital transformation. Giving citizens access to information, and the tools for holding government accountable are critical steps toward improving public services, and are central goals of the public administration modernization project.”

The project will also support the use of digital technology to increase the efficiency of tax and customs administration. The development of e-Tax and e-Customs will promote fairness and predictability, while mobilizing domestic revenues.

Digital systems remove the need for physical interactions between citizens and officials, which can often be an opportunity for corruption.

The World Bank’s portfolio in Djibouti consists of nine IDA-funded projects totaling US$105 million. The portfolio is focused on social safety nets, energy, rural community development, urban poverty reduction, health, education, governance and private sector development, with particular emphasis on women and youth.

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Trump Secures First Major Trade Deal with South Korea

President Donald Trump of the United State of America has secured his first major trade deal with South Korea ahead of planned nuclear talks with North Korea.

The Trump administration said on Tuesday that the United States and South Korea had agreed to revise their six-year-old trade pact.

Officials said the revised deal widened US access to South Korea’s car market while providing American manufacturers protection from South Korean imports.

Trump had previously called the original South Korea pact a job killer.

The new deal doubles -to 50,000- the cars each US automaker can export annually to South Korea, reduces bureaucratic barriers to American products and extends a 25 percent US tariff on South Korean pickup trucks until 2041.

South Korea escapes the new 25 percent tariff on imported steel but must accept quotas on steel shipments to the United States.

The agreement, cobbled together quickly with only a few rounds of negotiations under Trump’s threat of withdrawal, will include a side-letter that requires South Korea to provide increased transparency of its foreign exchange interventions, with commitments to avoid won devaluations for competitive purposes.

The currency deal, final details of which are still being negotiated between the U.S. Treasury and South Korea’s Ministry of Strategy and Finance, is considered a ‘side letter’ that will not be enforceable with trade sanctions.

ALSO READ: China to Retaliate Against US with $3bn Tariffs

Many US lawmakers, particularly Democrats, had opposed the 2015 Trans-Pacific Partnership trade deal because it had a similar currency manipulation side-agreement that could not be enforced.

Nonetheless, the revised US-South Korean Free Trade Agreement, known as KORUS, would be the first US trade deal in force with a currency side-deal, and would not need congressional approval, the officials said.

The officials confirmed that South Korea agreed to cut its steel exports to the United States by about 30 percent in exchange for the rest being excluded from steel tariffs. Korean aluminum producers would still be subject to Trump’s 10 percent tariff on aluminum.

Other countries also must agree to similar quotas to escape tariffs, but the size of the limits would vary. The United States is negotiating with Canada, Mexico, Brazil, the European Union, Australia and Argentina.

One official said it was ‘not a one-size fits all kind of thing’ and added that the South Korean quota was agreed due to its ‘unique’ position in steel exports. South Korea imports and processes significant amounts of Chinese-made steel, much of which is under anti-dumping and anti-subsidy tariffs.

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