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Sunday, November 03, 2019
/ 04:37PM /
By Olufemi Awoyemi / Header Image Credit: newmail-ng.com
Being a commentary on the Trade & Investment focussed October 2019 Edition of The Nigeria-South Africa Chamber of Commerce (NSACC) Breakfast Meeting with business leaders, industrialists, thought leaders, scholars and experts; sponsored by Phillips Consulting (PCL), Nigeria's leading transformation and innovation consulting firm; when it hosted Governors Babajide Sanwo-Olu and Prince (Dr.) Dapo Abiodun, MFR at the Eko Hotels, Victoria Island, on October 31, 2019.
The meeting between the Governors of Lagos & Ogun States, by all accounts, was long overdue and a fruitful one. Whilst the meeting was business like, it could have benefited from some context around economic data and implications; if only to underscore the vital importance of the principle of consanguinity that binds both states.
The need for strategic collaboration, coordination and cooperation is trite. The realities of culture, commerce and community makes it a necessary and natural thought process that should otherwise occupy the thoughts of the leadership and people of both states. To their credit, the Governors of both states gave a reason for optimism, even to those frustrated by the slow grind of governance our current sovereign construct permits
There are serious issues to be addressed.
This article is an attempt to recalibrate the concerns highlighted in the April 2019 Proshare Confidential on Ogun State titled: "Leaning Against The Wind", and place within context the responses provided at the breakfast meeting, with the hope that some guidance consensus around the issues these two sub-nationals have to address during their governance tenure is clearly recognized; and is considered in the Lagos-Ogun joint commission deliverables.
Context
The focus on and around
trade, investments and industry is guided by three anchors: trade facilitation
and agreements, ease of doing business; and the economic growth and well-being
of citizens.
The engagement, in
fulfilling its natural intent, looked at sovereign governance and productivity
around these anchors for these contiguous states. This is a very good prism
with which a fit-for-purpose conversation around sub-national productivity and
economic well-being can be approached.
Within that context there
is a point to be made about the role and place of an overarching national
trade, industry and investment strategy given the nature of and residual
control over such issues in Nigeria. One trite point must be the signaling, in
the trade sector at least, of the need for a proper replacement of the late
Ambassador Chiedu Osakwe, Nigeria's highly esteemed Chief Trade
Negotiator who passed on in September 2019; a man whose work and sacrifice the
Trade Facilitation Office is poised to build on, in his honour and for the
benefit of the country.
There are several fronts
were action is required, viz:
a. Nigeria is currently
involved in many bilateral trade agreement discussions; at both the federal and
state levels;
b. The long interregnum
between reviews of the fiscal and trade agreements with and between sovereigns;
and the initiation of talks around new developments in the geo-political space
- the consequence of which is being felt by companies operating in the export
sector especially, and to a lesser extent the import business. These issues go
to the heart of sovereign competitiveness even where we have quality and price
advantages, easily eroded by tariff structures caught in geo-political
arrangements that require prompt reactions, that mirror the fast changing
foreign policies and alignments and the reducing shelf life of what constitutes
long term competitive advantages.
c. Shortcomings in the
sovereign governance structures that creates(ed) errors of omission, commission
and new realities that need to be synched with our national and sub-national
economic plans;
d. The border operations
required subsequent to matters arising from border closures;
e. The stale review of the
tariff structure of the country and customs union it needs or is considered
important; and
f. The absence of a
state-to-state trade agreement(s) that establishes a quasi-customs union
/tariff sharing agreement that recognizes the shared distribution of taxes,
tariffs and duties for trade within both states or multiples in as far as it
relates to federal regulations or/and state regulations within/without
constitutional provisions.
g. Legislative changes needed
and required to address design and default provisions inimical to trade and
commerce.
General Thoughts
The planned Joint Border Area Development
Commission. a long overdue intervention; is therefore a good starting point for
addressing the issues arising. Yet, the issues related to both sub-nationals go
beyond that, and we will explore in greater detail here.
The idea of a commission was originally mooted in
2005, improved upon as described recently, remains an interesting concept that
should be able to deal with the resolution of boundary delineation, communal
border issues, land management, traffic management, housing projects,
transportation networks, coordinated markets, agricultural projects, tax
management, urban migration, overflow support services and other legal
issues that are related to or arising from the conjoined nature of the states.
It is envisaged that the Deputy Governors of the
respective states will co-chair this initiative, even as this presents its own
challenges given our political and governance history. The governance structure
of the commission thus becomes an issue to be reflected upon in the
finalization of its structure and relationship(s) with inter-state agencies,
preferably as a clearing house for efficiency rather than another contribution
to the bureaucracy.
Suffice to say, the whole idea is to ensure that
both sub-nationals are able to take steps that are complementary and
economically beneficial and sustainable to both entities within a federal
structure hampered, on many fronts with bureaucratic incongruence; focused on
making the two major IGR contributors an economic destination of choice in the
near future.
Ogun State, being the true gateway out of Lagos
State (explained in detail under specific thoughts), is uniquely
positioned, not as a junior partner but an equal partner in the long
run, as an adjunct to the concept known as LAGOS 2.0; an entry-exit strategic
partner for a plural engagement with the Nigerian state; offering comparative
joint advantages economically as well as offering the template for a true
federating states' collaboration where sub-nationals can and do exercise
sovereignty over their futures.
Take the issue of a megacity to be jointly
developed by the two sub-nationals before now and for which no update or
traction has been achieved. This ought to form a critical component of this
commission's agreement/focus, even as both states explore areas around the
viable and fund-available concepts such as 'Green Smart Cities' as a feature of
the new town development schemes being explored; even as it does not lose sight
of the rural housing needs of the poor in our society leveraging on new
programs and schemes for affordable housing.
Frankly, an immediate announcement on the breadth
and width of this joint commission is therefore long overdue, and we expect the
Governors to go beyond the pre-work and current efforts at a resolution to
announcing an agreement in principle to signal to investors and the populace
that action is imminent.
It is our research team's contention that the
report, which was premised largely. on an assessment of Lagos State and Kano
State and it does not necessarily reflect the whole landscape, including
Ogun State; which has done well, but still has the challenge of building a more
effective and efficient system for facilitating business, capturing same,
taxing same and capturing its ecosystem value; as it engages Lagos State (which
allowed Lagos to operate as a senior partner in the economic marriage at this
time).
The issues relating to the ease of business, while
most can be resolved at the sub-national level; they are mostly related to the
national sovereign regulatory regime - an evolutionary problem that we must
recognize and take strides to resolve.
Yet, the point must be made that it is not
something the nation should at this time be beating its chest over as a
landmark achievement. Indeed, all sub-nationals are better served taking an
introspective look at their realities beyond a generic measurement as an
indication of value to the citizenry.
In this regard, the PEBEC collaboration
with the World Bank to produce a country sponsored sub-national analysis and
report throws up some interesting and useful findings which will be a worthwhile
reading for all to fully appreciate how sub-nationals rank, what is needed to
be done and where best practices can be sought locally.
The Lagos and Ogun States government will appear
to recognize this, as they indicated their preference to study the Edo State
Government's strides in the education sector as a learning reference
point. This is a welcome development in benchmarking and best practice
development and recognition amongst sub-nationals.
The ICAN Releases
Inaugural Accountability Index Assessment Report issued in May 2019 is also a complimentary tool and
one of a kind mechanism for assessing public finance management and public
governance practices amongst sub-nationals.
Download Here - ICAN AI Assessment Report
Noteworthy must be the fact
that the entire US GDP is 20% driven by port activities alone even as it does
not reflect its entire blue economy numbers. The danger in not modernizing our
seaports is evident in the consequence on the sovereign's ability to influence
trade and its strategic enablers.
From available evidence, the
current output nationwide is estimated at about 60 million metric tonnes
whereas the demand is about 120 million metric tonnes, thus creating a capacity
crisis and a serious gap bemand and supply. Added to this, is the management
capacity available at the Apapa ports.
This is an opportunity for
Ogun State to step in with a fit-for-purpose and more efficient port, rather
than allowing the port traffic to move to the Republic of Benin which
advertises the benefit of a more efficient cargo management system, capacity
and tariff structure. The comments in Point 6 below expands on this and equally
draws attention to the pitfalls in financing infrastructure by sovereigns we
can benefit from.
These issues may appear
complex but in the main, relate simply to how we can have federating units
become more efficient in managing their resources (not merely mineral
resources) for the equitable development of its sub-federating units more
within and with other foreign sovereigns
independently without the baggage of a structure designed to maintain a
command & control structure of a single federating unit.
This subject may appear
outside the scope of the discourse but remains a key issue as we address the
challenges to state development occasioned by the residual, concurrent and
exclusive list currently in operation.
The Governors appear to echo
the same sentiments expressed here; even as they took time to explain the
practical realities that promote non implementation of time-tested solutions in
our clime.
Specific Thoughts:
The clear fact that both
states have not been able to resolve their border disputes is not entirely left
to both Governors. Yet, the incidences in and around the issue directly impacts
the trade and economic outcomes of the states. Both states are bound to
recognize the protocols of the ECOWAS and the Federal Government of Nigeria.
Let us take the current
border closure as a case study.
Whereas the ECOWAS
protocol permits the free movement of goods and services across member states,
there is no where in the protocol that it allows for one member-state to
sabotage the economy of another. This is at the heart of the current government
action which some of us object to, not on principle but on strategy. The
inefficiency in our ports alluded to in points 3 above, has created a push
factor for Nigerian entrepreneurs to find a cost-efficient means of managing
their business targeted at a disposable-income challenged consumer base.
Facts indicate that the
12m people (approx..) of the Republic of Benin cannot be the beneficiary
of the imports that make their ports the biggest import destination of Rice
and Cars from Asian and Europe respectively. It is also a trite fact
that the ECOWAS protocol provides for nations who desire to become PORTS OF
DESTINATION (a goal for Ogun State) to do so, ONLY if such a nation is
obeying a Customs Union (my words) whereby a portion of the tariffs and
duty earned is shared with the final destination country.
The Republic of Benin does
not declare customs duty nor share same with Nigeria, in clear violation of the
cooperation and collaboration principle contained in the Kampala document 1991
on the four calabashes - now adopted at the 36th Session of the Assembly in
Lomé, Togo in July 2000 under The Conference on Security, Stability Development
and Co-operation in Africa (CSSDCA) policy development process.
In effect, when looked at
constructively, the Republic of Benin is operating like the thirty-seventh (37th)
state of the Federal Republic of Nigeria without all the responsibilities
attached thereto. This was not what the protocols envisaged.
The Border closure, which
is essentially based around this argument appears to be a policy move well
intentioned but does not give cognizance to the ecosystem around the Republic
of Benin-Lagos-Ogun ecosystem. Indeed, if sustained over a long time, can
collapse the entire Republic of Benin economy without necessarily addressing
the fundamentals of the issue nor strengthening the economies of Lagos and Ogun
State as intended, without an end-game strategy.
Checking smuggling is now
about automation, strategic mapping and goods tagging and tracking which also
delivers a linkage to the main economy in Nigeria.
It is the absence of this
thought-led engagement which both governors can articulate at the Federal
Executive Council (FEC) or in direct discussions with the President/CoS that
has created the unintended consequence on food prices which government assumes
will go away after a while, oblivious of the economics around the problem; and
with attendant impact on the IGR of these states.
On Friday, November 1,
2019, the Nigeria Customs Service sent out signals to the Joint Border
Operation Drill that "Exercise Swift Response" will be extended to January
31, 2020 upon approval of same by the President, because despite the 'overwhelming success of the operation, particularly the security and economic
benefits to the nation, a few strategic objectives are yet to be achieved'.
It would be nice to know
what the Governors are thinking on this issue from a strategic position,
strongly enhanced if they were to have a uniform position as the two major
points of contact are in the two states - The Seme border and the Idi-Iroko
border; apart from other nameless routes around our porous borders.
There is no need crying
over spilled milk - The Lagos Port does not need an overhaul or further
dredging (even as the FG may consider this a worthy move eventually) from the
states perspective; we simply need new and modern ports (that can deliver on
efficiency, capacity and alignment with global best practice for economies that
can take large ships that will help drop the cost of goods for the consuming
publics AND is able to ship out goods from Nigeria's focused export sector to
make it worth the while of shippers); and the location is one of the issues
both states will have to agree on to enable issues around rails, cargo holds,
dry ports to be symbiotically resolved in such a way that revenues are shared
and a common front created to capture a foundational aspect of the blue
economy.
Funding for this can be
achieved through a joint-partnership project along the lines of a BOT model or
a direct PPP engagement.
Other thoughtful ideas
possible under the joint commission will cover such issues like tolled trailer
parks designed to ensure proper and efficient access to/from the ports; as well
as the use of Inland terminals to ensure that we do not necessarily have all
containers discharged in Lagos State. Economic linkage or corridors to take as
much transportation stress out of Lagos State will be a worthwhile deliverable.
It is noteworthy
to point out though, that in tackling this inevitable new port projects that we
remain mindful of poor financing arrangements, as the examples given in point
3 above of the Sri
Lankan
and Djibouti ports has shown. Both ports were
seized by the Chinese in 2017/18 respectively due to financing agreements
entered into - they borrowed more money from China than they could pay
back. Djibouti, for example took on public debt worth around 88 percent of the
country's overall $1.72 billion GDP, with China owning the lion's share of it, according
to a report published in March by the Center for Global Development (CGD).
In both countries, the money went to infrastructure projects under the aegis of
China's Belt and Road Initiative. Sri Lanka, on its part, racked
up more than $8 billion worth of debt to Chinese sovereign-backed banks at
interest rates as high as 7 percent, reaching a level too high to service. With
nearly all its revenue going toward debt repayment, in 2017 Sri Lanka resorted
to signing over a 70 percent stake and a 99-year lease to the new Chinese-built
port at Hambantota. See How
China Got Sri Lanka to Cough Up a Port.
The above typifies some of
the lessons we should pay attention to as we take steps to source for finance
to meet our infrastructure development deficit.
The recent history of Ogun
State with the OLOKOLA project can be discussed purely from a learning point as
we now pay attention to new projects being undertaken in the state (though
with lesser outlays and impact).
Illustration 1: The Economic Burden of
Ports/Terminals Inefficiency
Source: Proshare Content,
Research
Illustration 2: SWOT Analysis of
Nigerian Ports
Source: CBi
2019 Port Users Survey Report
The unspoken challenge in
the inter-state diatribe has often been the unresolved issues around the border
communities. I am talking about such communities like:
The above typifies not
only the vast reach of Ogun State into what some had hitherto considered a
Lagos territory but the challenge of recalibrating the issues around the border
communities such as:
Truth be said, these
communities, especially those along the expressway, exist more like a DISPLACED
PERSONS' COMMUNITY that is without a government; and with all the attendant
consequences.
How can we get an Ogun
State Govt to work out a collaboration to SHARE REVENUE & RESPONSIBILITY
for these communities and economy?
The Geo-political
structure of the states lends a veritable case to the linkages that exist and
approximates the value-added to Lagos State in particular. Do we want a
situation where we enter into a winner takes all scenario or one where both
states are able to create a New York - New Jersey type of template (even with
all its defects) to allow entrepreneurship to thrive - driven by co-opetition;
and in some cases, outright competition via lower taxes from Ogun State to
encourage mobility in employment?
Gladly, the Governors
appear well informed about these issues and made useful statements around this,
such as:
The roads linking both
states are all federal roads. Generally, Federal roads are structured thus:
If, as currently stated
via a presidential directive, that the FGN is unable to fund new federal road
projects due to the N1 Trillion owed state governments, (which means the
Federal Governments' hands are tied literally and figuratively); the
diminished, compromised and internationally criticized private sector may not
be able to help the states; just as the Infrastructure Concession Regulatory
Commission (ICRC) agency who through no fault of theirs, have been equally
emasculated.
So how do the state
government(s) build an alternative to bad roads, bridges and inter-state
routes, for example the Lagos - Sagamu - Ibadan expressway or the
Ikorodu-Sagamu road to mention a few. Some are of the opinion that such an
alternative proposition exists and can be funded as tolled roads under a PPP.
There is talk about the possibility of a route through the Ojodu-Abiodun axis
linking a bridge to an inner road that connects the abandoned link-road to Mowe
to Sagamu to link Abeokuta and Sagamu Interchange. This would be an alternative
to the decades-long reconstruction of the Lagos-Sagamu exit out of Lagos, which
continues to be productivity limiting albatross.
Is this something the two
Governors can constructively engage on to the benefit of the people?
Nationally, states have
revenue challenges relative to infrastructure needs; and don't have money
outside FAAC for most, and with the failure of neo-liberal policies as well as
the reluctance of international partners to lend money to entrepreneurs backed
by Federal Government guarantees; we have reached a point where accessing funds
is at a higher risk premium than previous, and the trend will continue unless we
have creatives means of financing infrastructural projects needed to unleash
the stunted potentials of citizens.
What are the Governors
doing to address the key issue of infrastructure (capital) funding outside the
scripted meeting with investors, access to aid and such tokenisms we have been
inundated with for the past seven months, and quite frankly has worn out
stakeholders?
So, what is Lagos and Ogun
State Governments doing to deliver actual serviceable and sustainable
investments into the states?
The Governors fully
empathized on the issue of Federal Government roads and represented that both
the citizens and state government revenues suffer equally from the deplorable
state of infrastructure; and that executable action is being taken to reverse this
unsustainable situation through sustained engagement with the Federal
Government on their proposed solution(s). For context, a case in point was the
Lagos-Sagamu road construction contract that was awarded eighteen (18) years
ago and is yet to be completed. The two States have decided to finish this
project to ensure that people and goods are able to move from one point to the
other with an attendant boost to productivity.
Other steps being undertaken include, but not limited to:
Closing
Thoughts
Lastly, and specifically
about the Ogun State Government - If we are to assume a reasonable basis for an
expectation, we must interrogate why it has been so difficult for the State (Governor)
to settle down seven (7) months after with a cabinet and not a plethora of
consultants which runs awry in the face of the excellent plans and thought
process shared in private and public consistently about the problems of the
state and the needed steps to be taken. This points to an execution capacity
within the political confines of governance.
Upon reflection, the
evidence will however point to or lean towards a somewhat deft move that,
infuriates some; while in the main, provides a strategic context as to why the
Government will continue along this path in view of the political IOUs that
weigh upon its neck. The decision to set a new architecture for governance
under a collaborative relationship with its revenue generating partner has been
argued by some to have better served the state through the absence of the
traditional bureaucracy that would have normally ensued. This argument however
flies against its foundational logic, given that Lagos State has a cabinet in
place and is able to move forward on the partnership.
Whether planned or
fortuitous, the Ogun State Governor has forged a positive relationship with its
direct neighbor as an ally, a co-player in the needs-based reality of two
sub-nationals which will now, after signing this agreement; open these states
for value-based outcomes.
Those who have rightfully
requested that the Governor settles down to the business of focusing on the
growth of the state, can, based on the evidence submitted here offer the
Governor a benefit of doubt and understanding.
Same must apply to the
Governor of Lagos State, who has had to deal with obvious perception challenges
which create the impression he was not sending the right signals that he was in
charge, on top of issues and was managing at best a hand, he was dealt with.
That said and truth be
told, the nation and its sub-nationals are faced with a liquidity crisis that
is manifesting in a number of ways - from increased social deviancy to a
growing lack of faith in traditional institutions of the state; all the way to
trust in the government(s) itself, from the federal to the local government
levels; with people ready to believe and propagate the most vile narratives
about the political and ruling elite. The private sector is not spared in this
carnage of faith.
The people are right. The
promises made often disappear under the cloud of blame game and tales of woe.
People are however convinced and prepared to hold the private sector forged
Governors to account around measurable indices, as a last vista of hope in
rebuilding trust in our governance structures.
This is the context under
which these two states, and indeed most state governors will be assessed.
Performance is now political party-blind and it is all about the common
well-being of citizens; and the task ahead is hard enough as it is; requiring
all of their leadership skills and leverage.
On the face of it,
Governors Babajide Sanwo-Olu and Dapo Abiodun have built a close relationship
and a common affinity; which has enabled them to find a common ground upon
which to tackle such serious issues of which the Joint Border Community
commission forms a crucial part.
We can only wish them the
very best as we look forward to this defining moment for formalized
relationships between federating units.
Related Videos
Sanwo-Olu, Abiodun Engages Private Sector On Proposed Lagos-Ogun Joint
Development Commission
Future of Lagos-Ogun Partnership (1) - Border Related Issues and Taxation
Future of Lagos-Ogun Partnership 2: Ports Utilization and Transportation
Future of Lagos-Ogun Partnership (3): Education
References and Reports
1. Nigeria Moves Up
15 Places To 131 In World Bank Doing Business Ranking For 2020
2.
World Bank Doing
Business 2020 Report: Tackling Burdensome Regulation
3.
ICAN Releases
Inaugural Accountability Index Assessment Report
4.
The ICAN AI
Assessment Report (PDF)
5.
Download Budget
2020 Breakdown - Zainab Shamsuna Ahmed (PDF) Report Here
6.
Nigeria's
Blue Economy: From Thought to
Action - Olufemi Awoyemi, Oct
17, 2019
7. Operations at Nigerian Sea Ports & Terminals: Ports Users Survey
Report - Proshare (PDF)
8.
Operations at Nigerian Sea Ports & Terminals: Ports Users Survey
Report - Cbi (PDF)
9. Towards A
Functional Nigerian Port System - Beyond Ease of Doing Business Executive Order
10.
Port Reforms:
Why Nigerian Ports Lose Money; Understanding The Economics of Inefficiency and
Sleaze
11. Doing Business
2020 Rankings: Nigeria Named One of The Top 20 Improvers
12.
CAC Makes
Changes To Pre And Post-Incorporation Processes On Its Portal
13. PEBEC Engages
Stakeholders on Legislative Reforms, Agribusiness and Apapa Gridlock
14. PEBEC Engages
NBA Section on Business Law On Provisions In CAM Bill 2018
15. Transmit CAM
Bill 2018 For Assent Into Law, Now - Business Community
16. CAM Bill 2018:
Legacy or Laggards
17. Reforming The
Business Climate In Nigeria: Critical Changes Introduced By The CAM Bill, 2018
18. Why Nigeria
Needs to Urgently Pass and Sign The CAM Bill
2018
Related News on Border Closure
2.
The Effects of Nigeria's Closed Borders on Informal Trade
with Benin - Brookings - Oct 30, 2019
3. Thoughts On Nigeria's Rice Bubble - Fasua -
Oct 25, 2019
4. Border Closure Takes Its Toll On The Price Of Rice - FDC, Oct 22, 2019
5. Inflation Succumbs to Border Closure and Money Supply
Growth - Spikes to 11.24% - FDC, Oct 16, 2019
6.
Border Closure
Hitting The Price of Rice - CSL Research, Oct 04,
2019
7.
Border Closures
May Only Offer Temporary Subsidy Reprieve - CardinalStone
Research, October 11, 2019
8.
Effects of
Closing The SEME Border - Coronation Research, Oct 15,
2019
9.
Border Closures
Begin to Take Toll on Prices - CardinalStone
Research, Oct 15, 2019
Related Links - Proshare Economy
Related News
1. Ogun
State: Working Past Economic Headwinds
2.
Sanwoolu,
Abiodun List Benefits Of Proposed Lagos-Ogun Joint Commission
3.
N691.11bn
Generated As IGR in H1 2019
4.
Lagos State
Governor Delegates Powers On Land Use Act To Commissioners
5.
Dapo Abiodun
Announces Ogun State Economic Transition Committee
6.
Lagos State Has
The Highest Debt Profile in 2018 - NBS
7.
Average Price of
1kg of Rice Increased By 4.07% MoM to N371.13 in September 2019 - NBS
8.
Olam Nigeria: We
Need Consistent Policies to Plan NOT Flip Flops
9.
Growth In
Agriculture Remains Weak Despite Multiple Financing Schemes
10. Average Price Of
1kg of Rice Increases By 0.14% MoM To N356.61 In August 2019
11.
How Lagos And
Ondo States Drive Agric-Business Development
12. Financing Scaling
For Nigeria's Smallholder Farmers
13. Global Warming
And The Future Of The Palm Oil Industry
14. Unlocking
Liquidity in Nigeria - Ayo Teriba
15. Economic and
Institutional Restructuring for the Next Nigeria - Soludo - Oct
01, 2019
16. Shared
Responsibility: Building and Sustaining a Strong Economic Future for Nigeria
17.
Resetting
Nigeria On The Path Of Predictable Progress - Tunde Bakare
18. Poverty in
Nigeria: Understanding and Bridging The Divide Between North and South
19. Nigerian
Consumers' Spending Patterns Are Changing - Pilot Report
20. The President's
Economic Men - Understanding The Next Phase of Economic Management
21. President
Buhari's 2020 Budget Speech