The Race for Capital: And Other Out-Of-The Box Economic Arguments

By Tope Fasua

The Race for Capital (And Other Out-of-the-Box Economic Arguments) is my third book and an aggregation of some of my most important economic and financial thoughts in recent times, as distilled from my weekly column and elsewhere. The books title derives from the biggest economic argument of the daythe problem of inequalitywhich has finally been noticed by important economists around the world but to which no solution has yet been found. In this book, that argument is further advanced, and an African perspective is added, because whenever important economic arguments such as this goes on, that most vulnerable continent does not feature in the analysis. But the perspective of this book is not all about complaining about the state of Africa and its position development-wise but also on solutions. Some germane solutions are hereby offered for African economies especially, but these are also for every other economy around the world that seeks to reposition its people and make a dent in the hard-to-solve quagmires facing the world today. There are no simple solutions, apparently.

• Language: English
• Publisher: AuthorHouse UK
• Release date: Aug 7, 2015
• ISBN: 9781504945950

Tope Fasua

Tope Fasua is an economist, ex-Banker, and finance expert. He is also an entrepreneur and presently pilots a number of initiatives in the SME world. The Race for Capital is his third book. He loves to think and write about contemporary economic and social issues and has carved a niche for himself as one of Africa’s ardent social commentators and bloggers. He currently lives in Abuja, Nigeria

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© 2015 Tope Fasua. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 07/02/2015

ISBN: 978-1-5049-4594-3 (sc)

ISBN: 978-1-5049-4565-3 (hc)

ISBN: 978-1-5049-4595-0 (e)

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

CONTENTS

ACKNOWLEDGEMENTS

PREFACE

CHAPTER 1

The Race For Capital

An Economic Agenda For Tough Times.

CHAPTER 2

How school fees killed Nigeria - 1

How school fees killed Nigeria - 2

Nigerians should brace for turbulent times ahead - 1

Nigerians should brace for turbulent times ahead - 2

CHAPTER 3

Before we barrage our banks to death

Loans for school fees, and other vanities?

Africa doesn’t know the meaning of business

What if McDonalds branded our international passport?

The craziest economy in the world!

CHAPTER 4

About starting a business?

The unending search for foreign direct investments

Ripping the soul out of the naira (1)

Ripping the soul out of the naira 2

The auditor as bloodhound – the FRC report and matters arising

The auditor as bloodhound 2

CHAPTER 5

Collapse!

The Cedi needs a miracle; so does the Naira

The Cedi needs a miracle, so does the Naira (2)

CHAPTER 6

It can only be about the economy (1)

It can only be about the economy (2)

Emefiele and the (near) impossibility of governing a Nigerian Central Bank - 1

Emefiele and the (near) impossibility of governing a Nigerian Central Bank (2)

CHAPTER 7

If tourism was our last hope

If tourism was our last hope (2)

An unsustainable economy…

An unsustainable economy… (2)

CHAPTER 8

The very end of Western civilisation

Castles from sand, parachutes from bubbles - 1

Castles from sand, parachutes from bubbles - 2

Castles from sand, parachutes from bubbles - 3

The T. Y. Danjuma monologues

CHAPTER 9

How an economy grows, and why it dies (2)

How an economy grows, and why it dies

Africa – to China, or the West? (2)

CHAPTER 10

Smash-and-Grab Economics

Nigeria: International deception meets local greed

Meltdown economics!

A precarious economy

CHAPTER 11

Cashless!

Non-interest banking (in our best interest)

Unbanning economic Armageddon (1)

Unbanning economic Armageddon (2)

Nigerians are not corrupt (1)

Nigerians are not corrupt (2)

Where are the infrastructure bonds?

Exorcising the banking industry

Sanusi’s unintended consequences

How to resurrect a dead bank (1)

How to resurrect a dead bank (2)

CHAPTER 12

If you dare call me corrupt!

The hurricane arrives!

Who will serve for free? - 1

Who will serve for free? - 2

How to exterminate the masses

Vultures’ picnic

As we dance our way to development

CHAPTER 13

It’s always darkest before daybreak

Nigeria - too many broken windows

We, the prodigal fathers

Needed – Responsibility-based government

Delusions of modernity

CHAPTER 14

Half-a-chance for greatness

Wanted: Intelligence, sincerity, action, not prejudices

Broken Britain

Why we should be worried about Nigeria

Nigeria’s pact with darkness

How to consume our children’s future (2)

BUT FINALLY

A better world is possible

ACKNOWLEDGEMENTS

I will try to make this as short as possible, having ackowledged a number of individuals in my earlier books, notably those who work with me, and who usually play a part in making these books a reality.

This particular book being a collection of my essays, but not by any way unimportant, was long in the making. I had always wanted to put them together for the sake of posterity and history, and in order to broaden the audience of some of these writings, beyond those who read them, usually in Sunday Trust newspapers, an Abuja-based member of the Media Trust Group (a group in whom I’m well pleased, for their professionalism, which is evident in their growth over the years).

So perhaps I should for the first time, officially than the Media Trust Group, and Sunday Trust Newspapers. In particular the Chairman of the Group, Mallam Kabiru Yusuf, for the leadership he has provided over the years, and for giving me an opportunity to contribute my ideas – as a columnist and lately as a member of the Board of Economist. To the former COO, Mallam Isiaq Ayo Ajibola and my editor at Sunday Trust, Mr Theophilus Abbah. To the gentleman who, though an Accountant, initially brought the idea of me being a weekly contributor to the ten newly-formed Sunday Trust, Mallam

Abolade Oyelere has always been by my side on this project, and we had done quite a bit of work on it at some point. Thanks for your suggestions. To my youth corper, Fabia Harry and the rest of the team at the office, notably Gbenga Kuewumi, Stephen Jolayemi, Tope Adeboye, Yinka Daodu, who also contributed in terms of logistics, I say a big thank you.

Ultimately, to Almighty God and my wonderful family, for the strength and understanding.

PREFACE

This is a collection of some of my articles over the years. But in particular, I have extracted those articles with financial/economic themes, perhaps to underlie my background as an economist/financial person, having obtained degrees in that area, and having worked in banks for a stint.

I actually prefer being identified as an economist, indeed because of the exotic nature of that profession and the latitude it offers one for great impact on humanity. The only problem is that economists never agree on anything. Not even on the FACT that the advise of the most prominent amongst us has brought the world to its knees by failing most economies. Not even the economy of the US – the most powerful in the world – is strong. My recent visit there revealed an overtraded economy, with empty malls and shops and very little sales going on.

In the lives of individuals however, the bigegst challenge the world over, is debt. But everytime I think about debts, I also recall that there must be a few people who are exceedingly rich, and who own those banks where all the toxic lending is done from. They have positioned loans/debts for individuals, the same way drug peddlers will stand by street corners with little vials and small wraps. Enough fix to give you a high, this time as an acheiver, and once that wanes, to have you scurrying back for more, promising anything, just anything, to get your next fix.

I have been writing a column for almost 9 years now, and when I looked back at what I have written every week, I find that it has formed a huge volume. I thought I could one day bind them into a book, but even now, it is already more than one book. The smart thing would be to separate the writings by themes, because sometimes they can be all over the place, as I’m allowed by the newspaper to choose whatever I want to write on, week in, week out. In short, I was stunned by how possible it is for one to have out so much together, layer by layer, like a sedimentary rock, that becomes formidable while no one is watching.

This is what I’ve spent my last nine years doing. Writing.

It is not a very easy profession, in that even if you enjoy the very practice of writing and the catharsis of getting your opinions out there into the world, you become unpopular if you are the serious type. The world watches you. If you are an economist, the government begins to see you as a renegade, especially if you aren’t one of theirs. Those who know you before you became a writer start to wonder what is wrong with you, and what gave you this confidence. Some just can’t believe it’s you. You get your best fans from among those who don’t know you.

So, here is a presentation of some of my economic and financial thoughts over the years. Most of them are published but some of them are also very recent. I hope the shock of going through some of them, taking into consideration the historical attributes as well, will be worth your while.

All errors – of any type – are mine and mine alone.

CHAPTER 1

THE RACE FOR CAPITAL

Maybe at the end of the day, the reason why we have the word RACE in the dictionary, especially the one that refers to groups of people, is that there is a constant race for capital. For cash. For money. I’d meant to write a book on this topic, but now, I have an even better idea. It will form part of an upcoming book. Sometimes I think that will be doing injustice to the subject, but also I don’t wish to overflog the issue.

There is a RACE FOR CAPITAL. A race for who gets what. And the discerning are invited to sit back and notice how cash flows in society, and in the world at large. For me, ever since I became aware of the subject matter, all I have done is to take notice. This also informs how and when, and for what reason I part with my hard-earned cash. Sometimes I pity myself for not being born into the race that gets the most, or for not being among those who (most of the time illegally), get access to capital, to cash, in my own country. But then I remind myself that we were probably born for different purposes. Still, I intend to make a decent living, to not be the perennial victim, but not necessarily to be one of those saddled with the custody of capital.

THE CUSTODY OF CAPITAL

Indeed the upshot of my analysis and research, is that some people are saddled with the custody of capital. In places like Nigeria that is largely unclear. Custody for whom? On whose behalf? But when we take a look at what is playing out globally, it seems clearer. It’s about race. The human race. The race for capital.

When we see, as we shall shortly, how money flows from one unit to another, and how much a productive venture attracts as against another, it shall be clear that some are getting much more than others. And that huge amounts of money has been stockpiled like dry gunpowder over the years. The question is ‘with whom’? Imagine that some families, some businesses, some races have had a long run of profit-making – in whatever venture they are involved with – for centuries. And some races have also had just grief and deprivation in that time. These ‘lucky’ races or families have merely been sitting on more and more of liquidity, or assets, or capital. The monies and assets are legitimately theirs, given the extant laws that govern the affairs of men. Nothing can take what they have away from them. This is a once-in-a-lifetime phenomenon. Never in history have some acquired so much while others have been totally deprived, wondering what hit them.

The way our world is arranged today allows this to happen. But the observant will notice that financial arsenal is being concentrated in the hands of a few, chosen people. A smart person who is not among the chosen, will do well to keep head above water. Barely. The rest of the hoi polloi – the world over – wallows in want, in debt, in anger and bitterness.

CAPITAL IN THE 21ST CENTURY

Thomas Pickety, the French Professor, wrote about this recently. His book Capital In The 21st Century seeks to shed light on the increasing disparity of income over the years – the widening gap between the haves and have-nots. He collected a lot of data that showed how this gap has increased with time and that it’s never been this bad.

What are we to do? Pity the poor? Stop those who know how to make money from making some more? Slow down the growth of the global economy?

Not many valid ways out have been offered. Some – like Kenneth Rogoff at Harvard – have even questioned Pickety’s basis of arriving at the conclusion that inequality is increasing. Others have wondered if increasing inequality is a bad thing in the first place. Pickety and a few others have recommended some huge taxes on the rich, which I think is a bit counterproductive. The rich will merely conclude that the rest of us are envious of what they have and just want to wrest money from them. Also, which government will be bold enough to exact these taxes on the rich? The rich, as observed by Pickety, and also by people like Robert Reich, Clinton’s Secretary of Labour (also a professor at UC Berkeley), have been so wise as to start deploying their wealth for the purchase of politicians.

My humble recommendation for slowing down the inequality so that it will not end up ripping off humanity from 90% of the global population, is that the people, who still have the population and therefore – hopefully – the power of the vote, should gradually but rapidly, redefine what government is about. Consistent spending on public goods, reengagement with some hard, out-of-the-box issues, as we shall try to do here, will lead to a situation where very few people feel under pressure to acquire money. It is the pressure to acquire money that creates problems. If people weren’t in debt, if people weren’t facing hunger, disease, joblessness, the prospects and consequences of illiteracy, perhaps the problem will reduce.

The real alarming thing for me, is that in all these analysis and debate, little, if any thought, was given to Africa, the ground zero of inequality, and all the terrible afflictions associated with it.

AFRICA AS GROUND ZERO

Nigeria in particular. Highest population in Africa. Most boisterous of the lot. Loud and intimidating. A people that are quick to rush out in celebration of the most mundane of achievements. This is where it’s at.

How has the race for capital panned out in Africa? In Nigeria?

On one hand, the country has forever been a consumer of processed goods and manufactures. It sells crude oil, gas and agricultural products. As has been noticed in the analyses referred to above, there is a limit you can aspire to when you exchange farm products for others upon which so much intelligence has been deployed. A yam tuber takes like 9 months to germinate and make it to the market. An i-Phone on the other hand, could be manufactured in a day. Thousands of them. One costs 1,000 times of the other. One is needed and used all over the world. The other is restricted. The farmer who produces the Yam needs an i-Phone (or so he thinks), but to get one, he needs 1,000 of his products. And he has other needs. For him it is a losing game.

Yet, more and more sophisticated manufactured goods are dumped on Africa, or fervently sought by Africans themselves. Nigerians are known to be avid consumers of these products, oftentimes led on by the mirage of booming crude oil prices. When that dries up, as it threatens to currently, pandemonium sets in on the land. How come no one sees the trends before now beats the imagination. So Nigerians emerged the highest consumers in the world, of Champagne, SUVs, Private Jets, Yachts, luxury hotels, jewelry etc. Nothing wrong in that, but it is important to ask what are we selling in return?.

For if we aren’t selling anything of substance or sustainable value, then we are merely aiding the transfer back of capital, with interest and profit, to those who own capital and those who understand what it means to have capital under the extant global norms and rules – the custodians of capital.

In Nigeria, because of the big problem with corruption, those who could be regarded as the custodians of capital – those who should hold capital for the eventual deployment for everyone’s benefit are very few. But not only are they few, they owe no one any obligations. Or so they think. Because they don’t see this big picture I’m trying hard to paint. If the powerful banking and manufacturing families of the USA have a reason beyond their immediate families, to keep acquiring capital for strategic reasons – by engaging in global commerce, collecting profit from poor people far and wide, influencing government policies, or creating the rules themselves, those here have no such overarching reasons or ideas. In fact, they would readily transfer the capital creamed off from this land, to banks and properties in the lands of the wise. At the end of the day, we have 65% of our population under water, in serious poverty, at the risk of starvation and illiterate or succumbing to disease, another 34.9% in various stages of vulnerability (don’t be deceived), and less than 0.1%, or 170,000 (which includes father, mother, children, grandfather, grandmother), truly sitting on the resources and being really comfortable in every sense of the world. The custodians of capital.

Recently, the Governor of the Central Bank of Nigeria, lamented that 35% of total bank lending in Nigeria is being held by a mere 50 individuals and their companies. Those are meant to be the custodians of capital. They are the 50 ‘stinkingly rich’ Nigerians whom banks will fall over themselves to lend to, who would hardly pay back, and who would usually be bailed out with tax payers’ money at the end of the day. Needless to mention, that the monies they borrowed also belonged to the common man, the humble depositor.

It must be mentioned though, that a microscopic consideration of capital flows in Nigeria reveals a skew in favour of the enterprising Igbos, who have consistently been business people, making profit in trade, and patronized by all Nigerians. They have also extended their enterprise to other African countries and beyond the continent. I posit that others have a lesson to learn from them, irrespective of the flak they sometimes draw as a result of the overzealousness of a few, driven too hard by the need to show success. When you have something to sell, you are in a good position. Those who buy are dependent on you. They give you profit and you grow bigger. Most of Nigeria’s most successful business people are Igbos. This is a microcosm of what is happening globally. But some may argue that trade is not the same as manufacturing or technology. Though I say it is a step forward in the right direction.

UPWARDS TRANSFER/REDISTRIBUTION OF CAPITAL

Rather than a downward redistribution which is desirable, what we have seen is many upwards transfer/redistribution of income in the last decade. Too many to mention. Check these:

1. The Financial Crisis leading to the Great Recession of 2008/9/10, witnessed money in the trillions of Dollars, being creamed off the poorest people around the world, in favor of superrich kids who ran the financial markets. This was the result of sub-prime loans granted to those who wanted to get up on the financial ladder by investing in properties. These banks, including the world’s largest insurance company, who concocted these toxic assets were bailed out by the US Government – and all other governments around the world. Not even the billions of dollars some of the players had made was recovered from them. Very few minions went to jail. Good job!

2. A country like Libya, invested in Goldman Sachs, about $2billion in the years when Gaddafi wanted to be a good boy to the west. Goldman Sachs claimed they lost 98% of that country’s money in some arcane financial derivative product. In a book written by Greg Smith, ex-VP at Goldman, I also learn that Goldman benefited greatly from the collapse of Barings Bank, precipitated by the Nick Leeson trades. They probably took the opposite position from Leeson, or they knew more than they are letting on. Banks like Goldman have always been too smart for everybody. They cashed out $6billion from the collapse of Lehman and the trauma of AIG. AIG’s former chairman is at the verge of suing the US Government for the undue advantage granted Goldman. Now Goldman is inserting it’s alumni in many government finance departments all over the world - as Ministers.

3. The US as a country has perfected a very easy way of making money from the world by wielding its big stick. As it relates to my country Nigeria, whenever we have a big scandal breaking, like Halliburton, Siemens, Willbros, Julius Berger, involving billions of dollars in bribes to Nigerian – and sometimes foreign – officials, the case is usually investigated by the US, and fines, totaling billions of dollars, paid to the US Government. Why not to Nigeria, the real victim? Recently, the US ‘investigated’ Standard Chartered Bank for dealing with some banned Iranians. They slammed the bank with a fine of $300million and asked them to close all SME accounts in Dubai and elsewhere. They are no longer to open accounts for anyone who does not already have account in SC New York office, and preferably big accounts. Say, who owns the big companies? Certainly not starry-eyed Africans. It’s a case of removing the ladder after you’ve climbed it. The idea is to prevent smart upstarts also getting ideas about acquiring capital.

4. In the sub-prime crisis, many average income earners bought properties they could ill-afford. They wanted to rent them out. They serviced these properties up to some time and couldn’t go on anymore. These properties were repossessed, and they lost whatever they had spent improving them or paying mortgages. Many who collected ‘equity’ on their properties, meaning they collected the differences between what they owe in the bank and what was calculated to be the value of their properties, also spent whatever they collected on consumer goods (too many being shoved in your face these days), or on overpriced education (a better choice no doubt).

5. In a place like Nigeria, corruption is a constant transfer of wealth from the poor to the rich. When government finance is compromised and cornered by those closest to the cash flow, that is what you get. The difference here is that those milking the cash flow are not factory owners or creators of ‘apps’, but mainly civil servants sitting innocuously at the back of their desks, and their business-men acolytes, many of whom may not have delivered anything in terms of services or goods. And of course some ubiquitous top bankers.

6. A particularly bad case was the OIL SUBSIDY SCAM, where anything in the region of N2.5Trillion, or say $150billion, could have been creamed off government coffers – monies meant for the provision of education and health services – by a few well-connected smart Alecs. The cases are presently being slowly handled and most people don’t expect anything to come out of them.

7. Any incidence of misallocation or misappropriation of the commonwealth, is a transfer of capital from the poor to the rich. When a people need education and health and such monies are deployed for the purchase of private jets, yachts and bullet proof SUVs to protect the rich, that is what you get.

8. The Nigeria Stock Exchange crash of 2008 was another classic example of a transfer of wealth from the poor to the rich, instead of the other way round. Over N7trillion was lost in our market. But money is never lost. Someone makes the money and walks away. In the financial markets only a few people make the money. What happened then was called ‘pump and dump’ as a few insiders knew exactly what was in the offing. Many people who had invested for long also lost what they had put in. In short, as they say in financial circles ‘the bottom fell off the market’.

9. During the financial crisis, it was appalling to many that the bailed out banks’ main concern was how to pay yearly bonuses to their ‘high flyers’, with taxpayers’ money. With car manufacturers, who also received bail out funds, their absurdity was borne out when they traveled from Detroit to Washington (to plead for bailouts) in their private jets. They got an excoriation from the Senators. Whereas the Obama government set limits on executive pay in the bailed-out banks, for a while at $500,000, that limit has been relaxed and it is business as usual today.

10. Credit Cards are also a veritable way of taking the cash flow away from the masses. Add to that the myriad of opportunities now available globally, to shop. Nigeria is inundated with that presently. At the click of a button anyone can buy whatever they want from anywhere in the world. People are encouraged to buy now and pay later. No one talks about the interest chargeable. People rejoice when they get these offers. But the same people will struggle, years later to get out of those debts. Debts chain people to the banks like slaves. Many of our people who live abroad can relate with this. When you receive you monthly paycheck and start to make the deductions that leave you with nothing, you know you’re in trouble.

11. The mortgage fraud and stagnating wages. Tied to 10 above. The masses realized a long time ago that slaving at work, working longer hours, or three jobs, deploying their wives to work, will never enable them to break free of a life of stress. They were introduced to the opportunity offered by properties. Many have taken up mortgages that also double as investments. But none can afford to be kicked out of the houses that they also see as home. I have never met anyone who finished paying their mortgage abroad. They just seem to slave away sometimes till death. A generation is presently paying those mortgages who will pass on debts to their children en masse. Mortgage after all, is a fairly recent phenomenon the world over. What happened was that wages stagnated after a while, for the people in the mid to bottom echelon in almost every industry, all over the world. This is as the world bought more and more of the Kool-aid of ‘trickle down economics’. The promise was that the more a few people made, the more they will send down the food chain. But that never happened. It was a trick. The more a few people – namely Caucasians, Jews, Europeans, Chinese, Indians and a few Africans, made, the more they developed abilities to acquire and keep. We now live in an era of primitive acquisition. Monies end up in large foreign banks at best. Those who run the banks and industries, were only eager to LEND money, through mortgages and credit cards, to the hoi polloi, not to increase the wages paid to them. This is modern day slavery. You get paid but you are also terribly dependent. In Nigeria the system of house ownership is still ‘primitive’, but some will say, better.

12. EXECUTIVE PAY. Not only did wages stagnate, but executive pay skyrocketed. It used to be that an executive, say CEO, earned say 5 or 10 times what an average worker earned, but the world saw, in a well-executed coup, how executives continually overrated themselves and their prowess, and on the basis of a good MBA degree, laid off thousands of workers, multiplied their own salaries several folds, awarded ‘stock options’ and redistributed the wealth of nations to themselves. What started as an American phenomenon is now received wisdom worldwide. CEOs and Directors now legally earn sometimes 10,000 multiples of what their average staff earn. Surely they can’t be that much more intelligent, given that we’ve seen some fail spectacularly.

13. The biggest challenge to the world, in my humble opinion, is what to do with arms and ammunition companies. Yearly, they budget sales increases and more profitability. They get the best of consultants to come and help them with strategy, because they can. They are some of the most profitable countries in the world. The only problem is, let us look at who buys the arms and ammo. Africa of course. The Nigerian government has spent tremendous amounts of money this year, monies that is badly needed for essentials in this terribly backward nation, on arms and ammunition. The government still complains about not being allowed to buy some more. They recently embarked on some purchases from the black market, using raw cash. This is a transfer of wealth to arms manufacturers and the countries where they exist. I also read somewhere that over $9.8trillion was expended by developed countries to fight armed insurgency around the world, an amount that is 75 times what was spent globally on aids. This tells where the interest really lies, and where the cash flows are heading.

14. Expensive air flights to Nigeria. Because we have consistently emphasized our ‘greatness’ and ‘monied-ness’, or because of other reasons unknown to me, we here in Nigeria pay the most for many services. The embassies, where they can get away with it, charge us exorbitant amounts of monies which are non-refundable. We have the population, so we are a profit centre for many. Air travel in and out of Nigeria is terribly expensive. One wonders why. A trip from the