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LAND USE: CREATING A HERDING RESERVE AND DOUSING THE TENSION AND HALTING THE KILLINGS BY FULANI HERDSMEN

For the umpteenth time, Fulani herdsmen wandered into village in Ogun State and went on a killing spree. Lately, there have been reports of Fulani herdsmen attacking villages in Delta and Edo States, whereby whole villages were ransacked and many killed.

As far as memory can take us, some of the first reports came from the Benue and Plateau states axis. As at the time of writing, virtually every state south of the Benue and Niger Rivers have experienced the backlash of Fulani herdsmen over being challenged for grazing on farmlands. In Plateau State, the settler/indigene problem became exercabeted because of the selfish and buccaneering attitudes of Fulani herdsmen who see themselves as occupation forces over any town, village or hamlet it is their privilege to encounter as they graze their cattle southwards. Naturally, their attitude has shown that they have every scant regard for human life. And, lately, there have been reports of these herdsmen turned armed robbers waylaying vehicles along the interstate motorways or expressways as we know them in this country) for plunder, such reports indicate that such cattle herdsmen were armed with AK47 automatic weapons.

Working on the assumption that the Federal Government of President Goodluck Ebele Jonathan has a higher regard for human life than the Fulani herdsmen have, I call on his government to urgently, compulsorily acquire hectares of land along the Taraba/Plateau/Niger and Benue axis, around the Niger extensions for cattle grazing.

This development has been long overdue for decades now. Why no one has thought about it simply beats one. A situation where those herdsmen and their cattle struggle for space along our decrepit highways created a lot of cause for concern. Over 2,000 hectares of land could be acquired from the above stated 6 states, and compensation paid by the next Budgetary period, that is Budget 2015 period, the survey, field reports and acquisition could be undertaken within the currency of Budget 2014, while payments could be affected in Budget 2015.

No one should give us the off-touted excuse of lack of funds. Funds must be made available to protect lives and property. The Fulani herdsmen themselves cannot be expected to stand by and watch their cattle die for lack of grazing land in the northernmost areas of the country. At the same time, their brigandage must be stopped, or we might be looking at a potentially extended arm off Boko Haram, given their tendency to wonder whenever they please without hinderance.

The Presidency, as a matter of urgency should mandate the minister of Environment to proceed on this assignment prior to presenting a compulsory Acquisition legislation to the National Assembly.

BUDGET 2014 – ECON DIVERSIFICATION URGENTLY REQUIRED

While waiting for the Legislature to make public the contents of President Jonathan’s Budget 2014 estimates, given the nature of the presentation by the co-ordinating Minister, Dr. Ngozi Okonjo Iweala, we are compelled to make the following remarks on the said Budget based on expose of the contents of same by some informed analysts.

Basically, the Minister of Finance Dr. Okonjo-Iweala, remarked after presenting the budget that the economy underperformed owing to various reasons which include but not restricted to:

1. Many bottlenecks which have remained with respect to power, ports, rail roads, communication technology, aviation, lesser customs revenue and taxes;

2. The economy’s revenue base being and remaining oil driven;

3. Infrastructural deficits;

4. General economic decline;

5. Poor transportation networks;

6. Lack of adequate power;

7. Low Capacity utilization;

8. Corruption;

9. Labour Unrest

10. Oil theft

11. Leakages (in Revenue Collection);

12. Youth Unemployment; and

13. General economic decline

She went on to stake, further that the foreign Reserve had to be depleted within the third and fourth quarters of 2013 by as much as $6 billion (N ).

Hereby effectively reducing the Foreign Reserve to $44 billion from the erstwhile $50 billion.

She further stated that while the overall growth was 5 percent, the third quarter growth rate was 6.81 percent. She went on to say that the economy’s oil expert dwindled from 2.4 bbl per day to less than 2.0bbl per day, owing mainly to oil thefts.

The only positive signal in all of these, is that according to the minister, 1.6 million jobs were created. She ended by stating ?? (that the story of Budget 2013) was that of positive signals turned negative, and negative signals unresolved.

It should be clear to all and sundry that there is simply no manufacturing going on/in this economy. With the oil majors divesting themselves of every investment within the economy-including, oil fields, the only industrial endeavor the nation engages is slowly being whittled away. And, that obviously apparent economic sabotage that went on vide the ASUU strike and the Labour unrests which have into 2013 should not be lost on anyone. What went on in 2013, was enough to topple any government.

We cannot but remark how surprised we are that the Residency is not exploiting every avenue open to it to improve the economy and make positive statements about understanding the problems of the economy and proffering solutions. How long for instance should it take our economic managers that the aging civil service must be rejuvenated by injection of Young blood, by way of graduate entrants. The least ranking civil servants are levels 13 and above. Has levels 1-12 been erased?

Finally, our economic managers must do all they can to diversify the economy by making more capital available to medium and small scale enterprises and start-ups.

CHECKMATING CRUDE OIL THEFT – THE CODING OPTION

Oil has been, and remains the life blood of this nation. However, our lack of commitment towards guarding against the profuse bleeding of this life blood has been rather embarrassing.

As far back as the early 1990s when call of duty at the Nigerian Ports Authority compelled me to spend about three months in Warri, I learnt about how people basically made money from allowing vessels to milk the economy’s life blood, oil unofficially, with the officials on duty at the flow stations basically carting home what they considered tons of money, but which in basic terms, were just a mere pittance compared to the real worth of the oil that was officially stolen. Apparently, the vessels that were used for such operations were mainly barges; and so this form of oil bunkering simply went on with just a few people , benefitting as they imagined. At the period in question, the same thing obtained in the Rivers/Cross River axis.

Those were the beginnings or the onset of the oil theft, which has now ballooned into outright loading of crude oil by vessels under the management of other nations by simply coming into our territorial waters and helping themselves to our Lifeblood, either through the flow stations, or through breaches made anywhere along the pipes with the active connivance and participation of well headed Nigerians.

All through last year, (2013) the nation experienced very serious dwindling in oil revenue in from 2.4 bbl per day to less than 1.8bbl per day. This has resulted in very serious hemorrhage to our oil revenue to the extent that the external reserve was depleted by about $6bn in order to ensure that statutory allocations to the Federal State and Local Government agencies were made. This is a silent testament to the wide gulf between the budgeted estimates under Budgeted 2013, and the actual expenditure recorded.

In letting the digression and getting back to the focus of this article, has the Administration given any thought, serious or not, to holding the oil theft as we currently are experiencing? When one fifth to one quarter of a nation’s source of revenue is blazingly stolen from under the noses of those who have been contracted, and paid very handsomely to prevent such thefts, it either means that such contractors are not doing the job for which they have been paid, or they are some how party to the theft.

Since over ninety percent of this nation’s Annual Revenue come from crude oil, it would seem to us at the Property Gazette online that to spend about 150 million Naira per annum and in safeguarding this life blood would be money well spent. There are ways by which we believe, oil theft could be prevented, at least curtailed.

Firstly, the Federal Government needs to urgently construct steel railings along the pipeline routes; all along the perimeter of the right of way, however distant; Right here in Lagos by Festac Town, there was a case of a fuel service station which received daily supply of products by simply milking fuel from a point of breach along a nearby pipeline. For years, this service station never bothered to buy from the refineries through the trucks which bring products from the refineries; they simply stationed trucks by the pipeline route; sucked the nation’s life blood as much as they wanted, and sold to the public at the normal rates. the construction of such steel railings would ensure that trucks won’t park close to such pipelines and milk oil products any more.

Secondly, similar to what has happened to uuencoded diamonds, which spells “stolen” when such diamonds show up in the international market place, there is a need for Nigerian crude to be coded, and since Nigeria’s oil, ostensibly is the only one stolen on as large a scale as is currently the cased, we need to beg wheedle, coerce, compel anything our OPEC counterparts on one hand, and the rest oil marketing nations to code their products too. Given such coding of crude oil, the details of which should be secretly guarded as fort knox, shows up in the market place could be quickly identified as stolen, and the marketers” arrested and prosecuted.

Thirdly and finally in as many of the flow stations as possible, within the Delta region, platforms should be constructed and erected to serve as guard stations where military personnel (Navy and army) should be stationed to guard against flow stations being manipulated by bunkerers as is currently the case. The goal of the oil thieves mainly is to steal products. If before arrival of the flow stations, they are detected say some five to ten knots from the flow stations by the military personnel, and declared, it would serve as the disincentive to further perpetration of theft of crude oil. Moreover, since any exchange of fire could result in the spilling of crude and loss of lives which is not their main intent, the incentive to continue the stealing of our crude oil would have been defeated.

Our software developers can easily write software with which to effect the coding. At the Property Gazette online, we believe that there is no problem without a solution. Let’s cancel the contracts with the non-performing ex-warlords and implement this coding and other preventive measures and the result would be evident in no time.

THE JURISPRUDENCE OF ANNUITY AND THE LANDASSETS PLAN

ANNUITY is a term Investment Bankers, Financial Consultants, Economists, Accountants, Insurers, and Estate Surveyors can relate to. It is a basic tool of investment and development analysis. It is a term they employ in their daily business activities. It is a key to their work; their life source.

Annuity is something you put by, from year to year towards an anticipated end. It is a Sinking Fund towards replacing an asset as its lifespan dwindles from year to year. Annuity is the result, on an annual basis of a sum, or set of sums ploughed into something in order to command envisaged, potential returns on investment.

Annuity, to the Estate Surveyor, is the consideration paid for a property, or an estate, for a given year. Annuity also, to the Insurance Practitioner is a sum invested on a given asset for a specific year. Annuity could be that rent paid for that property for a specific time period, usually a year. Annuity could also be the premium paid on an asset, say a property for a specific period also, usually a year.

Annuity serves the specific purpose of ensuring that the potentials in an asset are brought to play in an economy within specific times, usually a year, or any other specified period. Annuity ensures that the latent values in any asset are realized within a specific period, usually a year.

When, owing either to ignorance, carelessness, or neglect, annuity is ignored, and is therefore not brought to play, the asset suffers. With continued ignorance, carelessness, and neglect, an asset, say, a property, eventually “dies,” usually a slow but gradual death.

Without accruing annuity or rentals, property enjoys zero maintenance, and with time, falls into ultimate disrepair and obsolescence, or “death.” Without premium, an asset gradually dies or disappears, in the sense of obsolescence, destruction or theft. With premium, on the other hand, assets could be restored, rebuilt, replaced, reinvented or reconstituted.

Without premium on any specific asset or property, the said asset plays no part in an economy. The payment of annual premium, based or anchored on an insurance policy enables a property to “live” and play a role in any economy in which it situates. With so many assets or properties simply standing by, and not playing any part, significant or otherwise in any given economy, the cumulative effect is that the said economy is prevailed on by such ignorance, carelessness or neglect to perform, economically, at less than its full potential.

The total unrealized premium in an under-insured economy represents the extent of the loss to that economy of the economic potentials that would have contributed to the growth and development of that economy. In other words, growth and development potentials can never be fully realized in an under insured economy. Wherever the insurance penetration is low, a proportionate growth and development potential is apparently wasted, or lost.

The Nigerian situation is typical of an economy in which so much potential is sacrificed on the altar of low insurance penetration. For any economy to truly work, everything which takes up some space on the productive earth must generate its own contribution (rental, annuity, etc,) towards the realization of its full growth and development potentials. In the developed economies of the West, everything is covered by insurance against that day of uncertainty. By so doing, when that day dawns, the annuity paid on the insured property or asset ensures that an aggregate of the multiples of the said annuity, which constitute the insured sum, is paid to the one who has or holds the insurance cover.

Given that this system has long been in operation in such economies over time, the relatively high rates of annuity or premium being paid for insurance coverage in such economies could be adjudged justifiable. However, it would amount to shooting one’s-self in the foot for an economy such as Nigeria’s which has a very low insurance penetration to continue to charge the same, or correspondingly close annuity or premium on similar insurance coverage as Western economies. It stands to reason that in an economy ravaged by persistent economic recession and even depression, lower premium would be expected to engender a very high insurance penetration, with economic growth and development as the primary objective. Furthermore, it bears no emphasis that lower premium, would, of necessity, generate a correspondingly higher insurance volume, and hence an equally higher economic growth and development.

I am absolutely convinced that any set of serious managers of an economy such as ours would need to tinker with her insurance premium policy, like the managers of the fiscal policy do. It is foolhardy for our insurance policy managers to insist on charging high premium rates with correspondingly low insurance penetration and volume, while foregoing the available option of lower premium policy with a correspondingly higher penetration, volume and ultimately, a Gross Annual Premium.

The maxim which posits that “insurance is the backbone of the economy,” comes from the fact that “matter,” as elementary chemistry tells us, “can neither be created nor destroyed.” Matter can be transformed from one state to the other, but it simply just doesn’t disappear. It still exists in one form or the other. Insurance plays the role of ensuring that objects, ideas, properties, estates, etc, command a value within any economy, which value is manifested when such objects, ideas, properties, or estates are threatened with liquidation, or are out rightly destroyed. Insurance therefore, in the sense of restoring that which, otherwise, would have been considered as ceasing to exist, serves as the backbone of the economy in the sense that it ensures the continued existence of “matter,” property, means of production, going concerns or business, etc.

In the year 2002, we registered LandAssets Consult Limited, with the primary objective of promoting the universal insurance of landed assets or properties. Shortly after incorporating LandAssets, the Obasanjo administration signed Insurance Act 2003 into law. The object of Insurance Act 2003 is the compulsory insurance of all public buildings and buildings under construction. Given the current rates for insurance of properties, and given a situation in which all such properties envisaged by insurance Act 2003 are insured, the resultant premium would amount to well over one Trillion Naira(N1,000,000,000,000).

That is the truth of the matter. However, the reality which confronts the insurance sector of the economy is 180 degrees removed from the objective envisaged by insurance Act 2003. Nine years after the said Act was enacted, (basing one’s assumptions on 2010 figures), the Annual Premium realized in the Nigerian economy for all classes and types of insurance is still in the neighbourhood of N200 billion (two hundred billion Naira) only. In fairness to Mr. Fola Daniels and the National Insurance Commission (NAICOM), National insurance Association (NIA), the National Commission of Registered Insurance Brokers (NCRIB), and other insurance associations and brokerage firms which have been involved in the process of ensuring that insurance becomes the backbone of the economy, we say, well done. And to Mr. Daniels, for doing such a wonderful job thus far, our sincere congratulations, sir. Furthermore, I just learnt that the National Gross Premium estimate is N500 – N600 billion for 2012.

The truth however, is that insurance practice, within the Nigerian economy, owing to the way its been done over the years, has created the scenario in which people have become averse to taking on insurance policies, except when coerced by law to take on such policies. We could name some of them – Motor Vehicle Insurance, Insurance of Public Buildings, Workmen Compensation Insurance, etc.

Insurance coverage is supposed to wear the garb of a friend, next only to God, in the sense of taking care of the beneficiaries of the insured, when the inevitable occurs. Tales of insurance companies resisting the payment of the assured sum on policies over the years abound, with the result that people merely see the insurance cover on their vehicles, for instance, as a piece of paper which ensures that they can move about in their vehicles without molestation by the Nigeria police, and no more. In truth, how many people ever bother to apply to the insurance companies for repairs to or restoration of their accident vehicles? If the Statistics can be made available, I am certain they can’t exceed ten percent.

The average Nigerian doesn’t want to have anything to do with the insurance sector of the economy, and this accounts for why the economy is in the current state of decay. The annual renewal that insurance coverage would have guaranteed is simply lacking, and this accounts for why infrastructure is in the sorry state in which we find it. In other words, lack of annuity over our infrastructure has attracted decay to the economy.

Economic Realities of Contemporary Nigeria
In 2003 or thereabouts, Senator Ahmed Bola Tinubu, the erstwhile governor of Lagos State made a very profound statement, to the effect that what the economy needs is “an innovative and people-friendly method of generating Revenue” for executing policies towards the capital formation process. However, neither Tinubu nor any other politician or government, federal or state has come up with such a method, other than the Federal Government’s phantom “subsidy removal.” I wish the Federal government good luck, but I do believe that someone in that government, from the Central Bank, to the Ministry of Finance, and on to the Nigerian National Petroleum Corporation is aware that “Petroleum Subsidy” is indeed a phantom phenomenon or concept. An erstwhile petroleum minister, Professor Tam David West had long said so. And the recent revelations regarding the N2.6 trillion subsidy scam evidently proves it.

In the Guardian edition of Wednesday, December 28, 2011 one Dr. Izielen Agbon, a petroleum engineer/economist, in an expose captioned, “The cost of one litre of petrol,” posited that there is no subsidy on petrol; rather, Nigerian petrol is over prized at N65 per litre. Reproduced hereunder are his postulations:
“What is the true cost of a litre of petrol in Nigeria? The Nigerian government has set aside 445,000 barrels per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding/development cost ($3.5 bbl) and a production/storage/transportation cost of $1.50 per barrel. Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 159 litres.

“The price of one barrel of petrol at the depot gate is the sum of the cost of crude oil, the refining cost, and the pipeline transportation cost. Refining costs are $12.6 per barrel, and pipeline distribution costs are $1.50 per barrel. The distribution margins (retailers, transporters, dealers, bridging funds, administrative charges, etc) are N15.49 per litre or $15.69 per barrel. The true cost of one litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6 +$1.5 +$15.7) or $34.8 per barrel. This is equal to N34.36 per litre compared to the official price of N65 per litre.”

In the NEEDS document, one of the best policy and development articulations by the federal government to date, the Economic think tank in the then administration of President Obasanjo, (chaired by professor Soludo) remarked that there was a “Residual Financing Gap” in its envisaged development projections which should be filled by the Federal Government, the States, and the Private Sector of the economy. In the absence of figuring out how to bridge/meet this residual financing gap, the equivalent of Tinubu’s people-friendly method, government finds it convenient to conjure up the phantom petroleum subsidies, which are then endlessly removed at the detriment of the poor in the economy, who constitute over 90 per cent of the populace.

Put in proper perspective, this is being done in an economy which moved into recession way back in the early 1980s during the Shagari Administration. By 1985, when General Babangida introduced his Structural Adjustment Programme, (SAP) the economy was sapped into full blown depression from which it is yet to recover. The fact that majority of Nigerians are merely living sub-normal existence, explains why our young people go through the indignities of emigrating to the West at all costs, or die in the process, if need be, as many have.

In the years 2008 through 2009, the Global Economic Recession which was induced by the United States of America’s sub-prime mortgage burst upon and decimated stock markets the world over. This was worsened, in the Nigeria context, by “Margin Financing” by some bankers and stock market traders, which almost crippled the economy but for the 2004 Banking Consolidation of the Central Bank under Prof. Chukwuma Soludo. (By crediting Prof Soludo, I am not trying to give anyone a bad name. I just love those who can apply themselves to the thinking process. And, believe me, Soludo thinks).

In the immediate aftermath of the Global Economic Recession, which wiped out the wealth of many, especially stock based wealth the world over, some global leaders, ex-President Sarkozy of France notably, remarked that with the failure of the Capitalist System as we know it, the world needs to evolve a new system. Hardly had the voices of well meaning leaders the world over, who had joined in echoing the same sentiment abated than the Arab Spring erupted. Coming on the heels of the Arab Spring, a new development known as the “Occupy” phenomenon emerged. In New York, USA where the phenomenon took off, it was known as the “Occupy Wall Street,” movement, a movement which seeks, primarily, to put an end to the greed of the major players in world economy; the one percent who stole everything in the American economy to the detriment of the 99 per cent who are left unemployed, underemployed and poor by the privileged one per cent.

As the Arab Spring began with the self immolation of the young Tunisian who was frustrated by the system the “Occupy movement” truly commenced in London, when the marginalized in the UK rioted to protest the killing of an immigrant by the police. The ensuing riots, no doubt, encouraged the commencement of the occupy phenomenon.

At last count, Syria, China, and Russia (where Vladimir Putin) has basically constituted himself into a modern day Stalin), are experiencing their own versions of the occupy phenomenon. Protesters are demanding so many things which, I bet, would culminate in the Russian context, in the ouster of Putin, like Egypt’s Mubarak, or Libya’s Gaddafi. As for Syria’s Assad, it is only a matter of time.

It would seem to me that if the occupy phenomenon should be adjudged relevant, Nigeria, which in many ways, is the heart of Black Africa, should be the home of the “Occupy” movement. Interestingly, from the Labour Unions to the Staff Unions of the Universities, from Civil Society groups to the myriad of the unemployed and the poor, no one seems prepared to replicate the occupy phenomenon here, despite the fact that, unlike the situation in Western nations, where politicians condemned the methods of the business executives who allot unheard of bonuses to themselves, our politicians are the core thieves here. With the removal of its phantom subsidy on petroleum on the first day of the year, the Jonathan administration just doubled the misery index of, and showed its contempt for the feelings of the average Nigerian. Surely, there will be dire consequences and repercussions over that insensitive action of government. Seems to me that President, Jonathan has himself courted the occupy phenomenon.

However, one is convinced that President Jonathan has not only gotten away with what would have become our own Egypt, or even Libya, but could well restore his administration’s subsidy removal later in the year without a whimper from anybody. The culture of unselfish, civic minded protest simply doesn’t exist in Nigeria. How else can one account for how every thing seemingly vapourised as soon as labour called off its subsidy strike and the troops took over Lagos?

The Unexplored Potentials in the Insurance Industry
“Thinking out of the box,” is a term people mouth at almost every opportunity. Truth be told, there has never been a time like this in the history, not just of Nigeria, but of the entire world when innovation is called for, in order that nations may survive, or go the way of the Arab Spring.

Let me take a moment here to briefly talk about the potentials in the insurance industry before returning to the Landassets plan. In 2001, I consulted for an organization which had some extensive property holdings. Towards the end of my affiliation with the organization, I traveled to Ibadan and had a brief encounter with an executive of an insurance company. On the way back to Lagos from Ibadan, I spent time thinking about some of the things the man had said, and gradually, my thought processes pointed me to what has become the LandAssets plan.

Whilst the LandAssets plan is anchored on the universal insurance of landed assets, which is to be achieved by having property owners voluntarily take on policies on their properties (and not by coercion), the following insurance portfolios could be developed on a mass basis, with would-be policy takers/holders willingly coming to take such policies (not by coercion):

(i) Employment Insurance: Insurance companies could develop policies that would compensate job holders for loss of jobs over time. Such policies, for a minimal sum, may not attract full (100%) compensation within the first two years, consistent with when a job is considered secured, after which, providing the insured consistently pays his/her annual premium, could receive an insured sum that could be worth his/her three years salary. The reasoning behind this, based on a win-win assumption, is that firstly; there is no way up to 5% of all the insured would/suffer job losses at the same time, and 3 years salary is something one can use to face life after the loss of one’s job.

(ii) Contract Insurance
In the Nigeria context, a number of individuals, companies, corporations, institutions and even governments award contracts which they, after execution, do not pay for. Having such contracts insured would guarantee that the issuing authority would be minded to pay, since the insurance company would be empowered by such policies to go to court on behalf of the insured, not only to wrest payment, but to seek and receive compensation for non payment as, and at when due. Conversely, the party that awards the contract could have itself indemnified by taking on an insurance policy to ensure execution.

(iii) Content Insurance
To a large extent, I know there are pockets of policies here and there for the coverage of contents of residential apartments, houses, business units, offices, factories, warehouses, etc. If the insurance companies could embark on executing policies with very minimal premium payment for the contents of properties in this economy as things are at present, not less than N500 billion would be realized as Annual premium payments by policy holders. Matter of fact, the Landassets plan covers some aspects of Content Insurance.

(iv) Business Insurance
Business owners should be encouraged to under take Going Concern valuations of their businesses, and to subsequently take on polices to cover such businesses from the vagaries of nature and the business environment. Again, at minimal rates, a huge annual premium would be generated from such classes of insurance.

(v) Travel Insurance
In the early 1980’s, I recall that NICON Ltd used to have a Journey or Travel Insurance which attracted something like N1,000 premium for a coverage of about N100,000 per person. Imagine for a moment that the Insurance companies would have representatives all over the airports, railway stations, inter-state motor parks, etc, who cover one-half of all travelers on a daily basis. The premium from that class of insurance would exceed N100 billion per annum, and I am certain that the claims may never exceed N20 billion per annum. And, imagine for a moment also how many jobs would be created in the process.

(vi) Construction Insurance
Under this class of insurance there would be an “Indemnity insurance”, which the contract awardee would take out in the process of the “Awarder” failing to pay the contract sum post-execution. Secondly, a second insurance policy could cover the process of execution of the subject contract and personnel involved in the execution thereof. There is no way this class of insurance would not attract over N200 billion in premium payment per annum for all building/construction contracts, be they government generated or private sector generated.

I believe that if one seriously applies oneself to it, one could rake up other classes of insurance to cover things like Movie production, Schools, Churches, etc. What I am certain about is that the insurance industry is a mine that should be excavated with earth boring equipment. Stretching that metaphor a bit, no insult intended, what we are currently doing is like trying to affect that mining process with bare hands.

Finally, before addressing the core issue here, the Landassets plan, imagine that for once, the insurance companies would decide, in this year of our Lord, (2012) to situate small offices in the 774 Local government council offices, with the sole objective of selling motor vehicle insurance to vehicle owners, instead of expecting them to troop to their offices in Lagos and Victoria Island in the Lagos context, as policy holders are wont to. Imagine what the resultant effect would be: thousands of jobs would be created, and billions in premium payment generated.

For one, all the fake insurance policies that are sold in such licensing offices would be eliminated and the number of comprehensive covers would increase astronomically. From all the types of insurance covers afore listed, there is no way over N1 trillion cannot be realized in annual premium this fiscal year.

The LandAssets Plan
As has been remarked elsewhere in this treatise, the encounter with an insurance executive at Ibadan in 2001, and my fixation with the NEEDS document of the Obasanjo presidency, got me on the trail which has culminated in what has become the Landassets plan. In the said NEEDS Document, it was observed that the implementation of NEEDS “will require a heavy investment programme to jump start the economy in a manner that is pro-poor and poverty reducing.” Moreover, it further observed that, “Aside from the projected investment by the Federal and State Government as well as the private sector, there is still a “Residual Financing Gap” which requires special efforts to mobilize the required finance. Although NEEDS has been long abandoned, the necessity to generate the “Residual Financing Gap” is a fact we can’t still avoid.

Since neither the Federal Government, State Governments nor Senator Bola Ahmed Tinubu could come up with their own aspects of the said projected “Residual Financing Gap” instead of the “pro-poor and poverty reducing” concept of the NEEDS Document, the Federal Government, in tandem with State Governments, have now resorted to wringing the poor absolutely dry to fund the said investments – read, execute the supposed or projected benefits of subsidy removal. Could the LandAssets plan serve the purpose of meeting the Residual Financing Gap?

The Landassets plan is essentially a multi-faceted insurance scheme which seeks to use the dormant wealth of the rich and the wealthy to create more wealth in the economy, and in the process, create millions of enduring jobs. It would involve evolving a UNIVERSAL INSURANCE COVERAGE for all landed properties (Real Estate) situate in the Urban and Semi-urban Areas of the economy.

When we began to examine the probability of establishing such a scheme, we realized immediately, as the NEEDS document had observed, that there has been a long standing “revelation that the growth of the industry has been stunted by poor insurance awareness”, and that the sector was “mired by lingering credibility stigma.” Moreover, insurance practice in Nigeria has been all “sticks” and no “carrots.” The LandAssets plan seeks to provide the missing carrots in insurance practice in the Nigerian economy.

We resolved that the “Lingering Credibility Stigma” could be blotted out in no time if the sector would be made to adopt transparent claims procedures with the insuring public which didn’t take advantage of well meaning policy holders who come to their insurance companies for help in their time of need. Meeting claims transparently and being there for policy holders would reverse greatly, such credibility stigma.

The details of the arguments, reasons and resolutions which added up to the establishment of the LANDASSETS PLAN, have been published on the web, via the “Advertorial” contained in this maiden edition of The Property Gazette online.

Given our view to attract higher insurance volume, penetration and premium, our projections on premiums were considerably lower than what currently obtains in the industry. Based therefore on premium anyone could derisively refer to as “peppercorn,” the sum of N2.7 trillion would be realized as Gross Premium in the first year of implementation of the scheme. Over a ten-year period, with a gradual upward review every 5th year; the projected Gross Premium receivable would be at least N13.5 trillions.

Notably, in the first year of implementation, Estate Surveying and Valuation firms, who would be engaged by LandAssets Corporation, (into which LandAssets Consult would transform) would receive a projected total sum of N45 billions in valuation fees. Other professionals such as Engineering, Architectural, Building, Law, Management and other firms would be paid an estimated N100 billions. Whilst valuation firms would receive a projected N50 billions again in the sixth year after commencement of the scheme, the other firms as scheduled above, would receive the same N100 billions annually for the first five years, until the sixth year, after revaluation, when their fees would increase to N135 billions per annum for the succeeding five years (i.e. from the 6th to the 10th year). Such annuities would be made from construction of water hydrants, execution of “as built” architectural plans of buildings, redevelopment of covered properties, etc.

The Projected Results from the Institution of the LandAssets Plan
(The value we have placed on the properties which are the subject matter of this scheme is N900 trillion, and they command an annuity or rental of N45 trillion)
1. A projected Annual Premium of N2.7 trillions per annum for the first five years and N3.00 trillions per annum for the succeeding five years.

  1. An aggregate premium of N 28.5 trillion over a ten year period, by which time LandAssets Corporation would voluntarily disengage its services to the insurance companies as Broker and Co-coordinator of the LandAssets Plan;
  2. LandAssets would have become a multi-faceted organization with interests in Re-insurance, Insurance, Insurance Brokerage, Property development, Oil and Gas Refining and Marketing, Telecommunications, Manufacturing and industrialization, etc.

  3. LandAssets Corporation, on its part would guarantee and voluntarily provide 10 percent reinsurance coverage for every property covered under this scheme to meet 10 percent of the resulting annual claims under the scheme;

  4. LandAssets Corporation would by the third year become a publicly quoted company with a net worth of N2 trillions to be subscribed to by the general public, with a view to wealth redistribution;

  5. LandAssets Corporation would create:
     A Construction Subsidiary;
     Property Development Subsidiary;
     A Reinsurance Subsidiary;
     A Manufacturing Subsidiary with manufacturing outfits in the six geo-political zones of the economy;
     A Mortgage Company, with branches al over the Federation and,
     An Investment Subsidiary that would invest in other companies via the stock market;

  6. LandAssets Corporation would encourage the participating insurance companies to float an INFRASTRUCTURE DEVELOPMENT AND MANAGEMENT FUND (IDMF) with 10 percent of their Receivable Premium from the subject scheme, which we estimate at N 233.0 billions, and to subscribe a further 10 per cent per annum for a further four years; amounting cumulatively to N932.0 billions.

  7. The insurance companies would be well advised to invest some own funds on property development, industrialization, manufacturing, etc.

The LandAssets Plan and Job Creation
From the foregoing projected results from the implementation of the scheme, we expect the insurance companies to increase their existing man power base, to properly situate the expansion an additional premium income of N 2.7 trillion should add to the present N200 billion premium base, which the present manpower base in turn, would account for. We expect that this, country wide, shouldn’t be less than five hundred thousand new jobs in the insurance industry, consisting of insurance and insurance brokerage firms.

In addition, given the take off requirements of the plan in all the states of the Federation, and the additional requirements by subsidiaries LandAssets Corporation would create, it would be safe to say that we expect to create about one million, five hundred thousand jobs at the end of the second year of implementation. Finally, we would not be expecting too much of our partner firms:
 The Estate Surveying firms;
 The Construction companies;
 The Architectural firms;
 The Engineering firms;
 The Law firms; and,
 The Management firms that would inevitably be hired to assist LandAssets Corporation in capacities in which the company cannot be physically present, to assist in depleting the rank of the unemployed by employing more hands.

Five years from inception of the scheme, I can see the Motor Manufacturing subsidiary of LandAssets Corporation, manufacturing vehicles (saloon cars) for the lower middle class in the Nigerian economy, and taking it further down the class rung as the year’s role by. I see the property development subsidiary developing properties in all the states of the Federation for owner occupants who would only pay their monthly mortgages towards owning their own moderately priced properties, not the exorbitant properties that are being developed for the rich only.

The Boko Haram phenomenon has found fertile ground amongst the rank of the angry and bitter unemployed. Since our governments are not doing anything significant about reducing the rank of the jobless, it would take innovation and effort by some people of integrity to reverse the self destruct focused direction of our governments.

As an ordained Pastor in the service of the Lord, I am in this scheme to make a very noteworthy contribution to the development of the Nigerian nation. Over time too, I have observed some honourable Nigerians whom I believe have the integrity to drive the LANDASSETS dream and bring it to reality. I would therefore be highly gratified if the following highly esteemed Nigerians would consent to be drafted into the Board of LandAssets Consult Ltd; (soon to be LandAssets Corporation Ltd):

  1. Pastor Felix Ohiwerei; (to serve as Chairman);
  2. Prof. Ben Nwabueze;
  3. Colonel Abubakar Umar (Rtd);
  4. Pastor Ayo Adeloye;
  5. Chief (Colonel) M. Morah (Rtd); and,
  6. Mr. Fola Daniel (of NAICOM).

Mr. Fola Daniel’s inclusion would however only be possible if the NAICOM Act would allow such inclusion. Otherwise, any other insurance executive he nominates would serve the required purpose. Well over two years after the Jonathan presidency came into office, we are at a loss as to where we are being led. The imposition of the “petroleum subsidy removal, last January on a citizenry which had been terrorized by the Boko Haram phenomenon, seems to me, highly insensitive.

Most of the above personages have been selected for their leadership qualities, moral direction and the integrity they would bring to the LandAssets project. It would be alright by us if Messrs Nwabueze, and Morah because of their ages, would nominate representatives. In addition to the foregoing, a couple or more technocrats would be added to the board, with Pastor Ohiwerei as chairman.

Over two years after this regime came into power, how many jobs have been created, both by the governments and the private sector? In my considered opinion, the Jonathan presidency has seen more job losses than jobs created, though, one must add, he can’t, in all honesty, be held accountable for all our economic ills.

I challenge the Insurance Commissioner, Mr. Fola Daniels to see this proposal for what it is – a scheme that would propel the Insurance sub-sector under his watch, into a new orbit. I challenge anybody to show me anything else that is workable, implementable, and viable, and at zero cost to the Federal Government. I challenge President Jonathan to lend all the assistance his presidency can to this scheme, as it would be a great arsenal in making his Presidency stand out. I challenge the about 500 plus men and women in the National Assembly to lend their voices to this project that would impact their constituencies in ways their constituency votes have never impacted them; and at no cost to government whatsoever. I equally challenge all property owners in this nation to insure their properties under this scheme under which they would have to pay less than 10 percent of what they currently have to pay to have their properties insured, with the dual guarantee that no fuss would be made before their claims are met, and that the driver and manager of the scheme, LANDASSETS CONSULT, would construct water hydrants, on a continual basis, in every urban and semi-urban area within the economy, at no cost to either themselves or government, in order to ensure that their properties would not go up in flames whenever the public utility decides to misbehave, due to power surges. Finally, I challenge all practicing politicians, the impoverished, the dispossessed, the unemployed, the underemployed, and the poor to force the hands of their representatives to think about them for just this once.

In closing, let me restate that the LandAssets plan is about “thinking out of the box;” it’s about innovation. In his state of the Union address of 2011, President Barack Obama said: “Innovation is not just how we change our lives; it is how we live… We must reinvent ourselves… we must knock down barriers… our destiny remains our choice.”

The LandAssets plan is a very radical and innovative scheme. We
admit that. But, as late Teddy Pendergrass said in the lyrics of the hit song, “Wake up Everybody,” ”The world will get no better, if we just let it be… We must change it, yeah, you and me.”

Finally, the eminent jurist, Lord Denning MR, said, “If we never do anything which has not been done before, we shall never get anywhere. The law will stand still while the rest of the world goes on: and that will be bad for both.”

Management experts talk a great deal about ‘innovation,’ ‘change,’ ‘paradigm shift’ and all that, but most people, especially those at the top neither recognize innovation nor embrace it, even when change is obvious and inevitable.

Let’s innovate. Let’s create jobs. Let’s create wealth. Let’s redistribute wealth. Let the one percent open the door for the rest 99 percent. Let’s avoid violent change. Lets avoid the occupy phenomenon, even though we seem to have courted it.

 

 

BANKING REFORMS, ECONOMIC EMPOWERMENT AND THE REAL ESTATE -THE HOUSING AND PROPERTY DEVELOPMENT SECTOR

PREAMBLE

Over thirty years or so, Nigeria has witnessed very enormous economic growth but with unbelievably very poor rate of economic development. The recent banking reforms have served to stress the near hopelessness of our collective lack of direction in promoting economic development. However, real development in any economy, which is naturally defined by such indices as: access to capital/credit; standard of living; and, availability of credit, are still abysmally poor in our economy.
THE DEPRESSED STATE OF THE ECONOMY
The Nigerian economy is in dire straits. The economy entered into recession in the 1980s during the Second Republic. In my candid opinion, there hasn’t been any effort to reverse this trend by any of the successive governments. Rather, by the time the economy saw the introduction of the Structural Adjustment Programme (SAP) in 1985, the economy got into a tailspin which led to Economic Depression, and has remained in that state ever since. The fact that those who were supposed to know, even posited that the economy was getting out of recession in 2009, makes our dilemma worse.
Professor Biodun Jeyifo examined the concepts of recession and depression in an article in the Guardian, Sunday, January 27, 2008 titled “National and Regional Economic Depression in a period of Global Recession?” He wrote: “If it is a fundamental law of society and history that political and social crises and wars always go with prolonged economic depression, why should it be surprising that violence and crises seem endemic to the Nigerian and African socio-economic order? When shall we begin to call a spade a spade?” In the epigraph to the same treatise under reference, Biodun Jeyifo quoted John Maynard Keynes on Depression. He said “The Depression is not a crisis of poverty but a crisis of abundance”? How apt to the Nigerian condition. The crisis of the modern Nigerian state has been engendered and defined by the abandonment of the states for the Federal Agencies and departments by mainly unqualified people, to secure their states “share of the National cake”3. This transition has always resulted in the abandonment also of agricultural engagements, and so the erasure of the groundnut pyramids, the palm oil depots; and the cocoa bags stores, culminating in what socialist critics refer to as the Rentier phenomenon; which, along with other inconsistent phenomena have reduced the Nigerian economy to a Rentier economy.
But what are Recessions and Depressions actually? The Oxford Advanced Learner’s Dictionary defines Economic Recession in a country, “as a period of reduced trade and industrial activity and many people unemployed”.4 The same Dictionary defines Depression as, “a period when there is little economic activity and many people are poor or without jobs”5. Sounds like where we are now?
As posited earlier, by the time General Babangida, at the behest of the World Bank and the IMF foisted the Structural Adjustment Programme (SAP), on the economy in 1985; Nigeria went into full-blown economic depression and has never recovered since.
Interestingly, some of the Decrees and Enactments of past Military Governments have helped to worsen the economic condition in our economy, and a number of such Decrees were enacted under the General Obasanjo Military Administration. Some of such enactments include the “Land Use Act” and the “Petroleum Act” of 1978. While the Land Use Act forcibly deprived land owners of the rights and accrual over land, and vested them in a transient State Governor who could turn around to make a millionaire of whomsoever he pleases by allocating parcels of land to such persons; the Petroleum Act equally excised the rights and accrual over land and its mineral contents, and domicile them in the Federal Government which could allocate Oil Blocks; make Board Appointments in oil related industries/corporations owned by Government, to the exclusion of the land owners, (which is the font et origo of the Niger Delta militancy).
Given the foregoing, the Nigerian Economy has remained in deep economic depression, with successive governments out doing one another in financial profligacy. The congruence of SAP; Privatization, and Commercialization, the free Market Economy seeking policy which sought to turn the economy over to the private sector; and the subsisting Land Use and Petroleum Acts, which were socialist in outlook, but not in character and execution, birthed such inconsistencies in policy making that has resulted in an economy in which all that matters is whom one knows, or “connection”, and not necessarily “Enterprise and Innovation”.
As far back as 1996, the United Nations Development Programme (UNDP), Human Development Report noted, among other things:
“Lack of development in Nigeria may be due to the presence of some or all five (negative) features of growth in most developing countries. These are:
i. Jobless Growth: The overall economy grows, but fails to expand job opportunities.
ii. Ruthless Growth: The rich get richer, and the poor get nothing;
iii. Voiceless Growth: The economy grows, but democracy/empowerment of the majority of the population fails to keep pace;
iv. Rootless Growth: Cultural identity is submerged or deliberately outlawed by Central Government, as in States of former Yugoslavia or the Kurdish area of Iraq and Turkey; and
v. Futureless Growth: The present generation squanders resources needed by future generations.”

The same UNDP’s HDR noted that generally, “the wealth that was generated during periods of economic recovery and growth was not distributed equitably.”7 That, definitely, is our nation Nigeria.
The Late Prof. Claude Ake, in his critique on our social economy, observed: “with few exceptions, the political class, both civilian and military, has been interested principally in the accumulation of power, which is maintained in ways that are incomparable with development, especially by institutionalizing a Hobbesian regime that turns society into a war of one against all. Power in Nigeria is invariably used for the accumulation of wealth, a perverse mode of accumulation which is dissociated from capitalist activity, and hence unproductive. It has saddled us with the problems of capitalism without its considerable rewards.
With the exception of (iv) above, the Nigerian economy has exhibited, and still exhibits all the said features: Contracts are constantly awarded by the Federal and State Governments but there are hardly any new jobs created; the Nigerian Economy epitomizes the concept of the rich getting richer while the poor gets poorer; the rate of annual economic growth is never in tandem with the majority being economically empowered. The majority, over 80 percent of Nigerians have no access to capital, and the situation gets worse with each passing day; and with over $400 billion (in capital flight) laundered out of the country, the future such Capital would have guaranteed, were it invested in the economy, to all intents and purposes is lost, and guarantees no future prospects to the over 80 percent categorized as poor.
In the over thirty years since the abrupt end to the Second Republic, the economy has truly gone from bad to worse. The pool of the poor has ballooned at a tremendously scandalous rate. Most efforts at poverty reduction end up enhancing the financial status of the ubiquitous agents that government employs in purchasing the machinery/equipment the beneficiaries of government’s poverty reduction strategies need.
In retrospect, most critics of the economy have stated without equivocation that the economy is in a worse state now, than was the case thirty odd years ago. It is equally generally accepted that the problem of the economy, amongst other things are:
i. Its mono-cultural nature – oil is the major exportable product, with virtually no value added;
ii. General lack of industrialization;
iii. Lack of long-term Credit with which to industrialize, enhance the Capital Formation process, and enhance housing provision for mainly the low and middle income groups.

BANKING REFORMS AND THE STATE OF THE ECONOMY TODAY
The Banking Reforms, the one undertaken by the erstwhile Governor of the Central bank, Prof. Chukwuma Soludo, and the ongoing one by Sanusi Lamido Sanusi, have impacted the financial institutions, and the entire economy as no other single event, at any time in the past has done. It would be apposite to review both reforms very briefly:
THE PROFESSOR SOLUDO REFORM
When Chukwuma Soludo became Governor of the Central Bank, he took the banking sector by storm by instituting the reform programme which demanded that all banks recapitalize to a minimum of N25 billion from the about N5 billion or thereabout that had been the maximum requirement. The banks had about six months to meet the new minimum capital requirement, or go into liquidation. Of the about eighty-nine banks or thereabouts, twenty-five made it into the new N25 billion league. While some made it on their own, a few others attained the same feat through mergers and acquisitions.
Commenting on Soludo’s Reforms and its aftermath, Thisday, Sunday, August 30, 2009 stated: “In a speech in 2008, during an interactive session with journalists in Lagos, former Central Bank of Nigeria (CBN) Governor, Professor Chukwuma Soludo, referred to his 2004 banking consolidation as an exercise that saved the country’s banking system from being “wiped away”. He said, “If we did not do what we did four years ago, our banking system would have been wiped away with the current global financial crises. What the rest of the world is doing now is what we did over four years ago and that has made our banking sector to remain strong and robust.
“Soludo’s consolidation did of course salvage the banking sector, chase away dark horses from the system, and shoot up shareholders funds to about N2.7 trillion, from about N293 billion cumulatively held by the eighty-nine existing banks before consolidation. But the evidence has shown that the abuses and dangers of the pre-consolidation era were simply replaced with new forms of recklessness by bank executives.
In hindsight, I believe we, as a nation owe Professor Soludo gratitude for the foresight that saw our banks grow from a capital base of N293 billion to N2.7 trillion. There is no doubt that if Soludo had just continued the way those before him did, the effects of “margin trading” and the global economic recession would not only have wiped out the banking system but the entire economy.
Hardly had this first wave of recapitalization been completed than the recapitalized banks commenced a second spate of increases of their capital bases by frequent trips to the Stock Market. The trips became so frequent that it affected the ability of other organizations to raise capital from the stock market. The Insurance Sector, which had to embark on their own recapitalization exercise, was so badly hit that many insurance firms could not recapitalize. It wasn’t just that investors preferred the banking stocks to the insurance stocks owing to the better performance of banks over time, but given that most of the banks had their own insurance subsidiaries, it wasn’t therefore easy for the insurance companies that were on their own.
Matter of fact, this first Banking Reform signposts that given the at times questionable means by which some of those banks met the new capital requirements – it seemed obvious that the recapitalization exercise had inadvertently provided an avenue for a number of political office holders and appointees to launder funds; the now more buoyant banks gradually transformed into dinosaurs which occupied so much economic space in every conceivable direction, but with very little or no motion at all in terms of capital provision to the ailing economy.
As a matter of fact, most watchers of the economy had believed that with the twenty-five bigger banks, all parading capital bases between N25 – N200 plus billions, that access to capital would become considerably easier. However, in spite of their new increased sizes, and the oft-repeated trips to the stock market to raise more capital, the deposits which the banks had in their vaults were short-term funds, and the banks, which are naturally not only conservative, but in the Nigerian context, miserly in loaning out funds, could not give the needed capital to the Real Sector that needed long-term funds with shorts term deposits.
This obviously accounts for why Real Estate Development funds have not only been hard to come by, but unavailable still, despite how big the banks had become. And of course, ditto for mortgage funding, which is, to all intents and purposes, nonexistent. Matter of fact, the Federal Government, under the Obasanjo Presidency, forbade the banks from providing mortgage facilities to would-be buyers of Federal Government houses.
BANKING REFORM UNDER SANUSI LAMIDO SANUSI
Under the still ongoing Banking Reforms by the current Governor of the Central Bank, Sanusi Lamido Sanusi, emphasis has been placed on being involved in real banking supervision, and risk management. What Governor Sanusi Lamido Sanusi has done, thus far, can be categorized into two. Firstly, he began with that tsunami-like upheaval which led to the shock dismissals of whole boards of five banks which were adjudged “insolvent” at the time of his intervention. The CBN then pumped some N420 billions in intervention funds into the banks and new managers were dispatched to manage the banks. In the view of the CBN, there was almost nothing by way of capital left in those banks as the previous management had done exactly what certain banks’ managements had been accused of doing way back in the 1990s; that is, to virtually use the funds in their vaults to purchase property mostly for themselves and companies owned by them and their cronies, leaving the banks in very “grave situations”, according to the Central Bank.
Commenting also on banks in Nigeria after his initial removal of the Chief Executive Officers and Boards of Intercontinental Bank; Oceanic Bank; Union Bank; Afribank; and Finbank; Lamido Sanusi as quoted by Guardian, Tuesday, August 18, 2009 said, “Nigerian Banks have been living on bubble capital all along, giving false impression about their actual state.” He further told the Cable News Network (CBN) “that CBN decided that now, that the Banks were in a grave situation”.
In another article titled, “Sacked Bank Chiefs were Unprofessional”, the CBN Chief was quoted as having said: “The audit has established that exposure to margin loan is failure of risk management. It is estimated that the exposure to margin loan, the Oil and Gas Sector, as well as in Telecommunications, like credit for investment in Transnational Corporation, is about N800 trillion. And the five affected banks which management we have sacked alone account for about half of the exposure”.
A group which calls itself the “Renaissance Professionals” had a running battle with Sanusi on the pages of newspapers which involved spending millions of Naira on paid editorials aimed at ridiculing what the Apex Bank was doing. At a point in time, it was almost believable, given an expose the Vanguard Newspaper had done, that there was a plan to whittle down the influence of banks owned and controlled by Southerners, and if possible, to have the ownership of those banks transferred to handpicked investors to be determined by the CBN. Ever since, there has been a running battle also between the Central Bank and shareholders of some of those institutions, with the CBN still bent on selling those banks.
Unfortunately, it has been shown, if not proven, that quite a number of the Chief Executives of those banks hadn’t the intent of either the silent shareholders or the depositors in mind when they used their own companies to filter and launder funds from the bank vaults. The sordid details just showed that some of the former bank executives who earned salaries and allowances that were simply out of this world were, for want of better words, not better than common thieves.
It must however be stated that the manner in which Sanusi went about his reform at the initial stage, was suggestive of a vendetta of sort; and if truth be told, the whole exercise, initially, evoked the notion of destroying, rather than improving the economy.
But having said all that, I believe that it would be morally unjustifiable to sell those banks still to “new owners”, whether Nigerians or foreigners, especially since most of those banks have returned to making profits for their shareholders. At worst, let the CBN give the banks time to pay back the funds advanced them during the rescue mission, after the current shareholders would have been given the option of recapitalizing their banks. That, precisely, was what the United States of America did to the rescued financial institutions that were bailed out.
The second aspect of the Sanusi Reform could be categorized as the period when the CBN finally developed a Programme of Reform, detailing what the CBN seeks to achieve. Such details include the categorization of banks into National/International Regional, Communal, etc.
As one had stated earlier, the whole and basic essence of any Banking Reform should be to make banks to truly play their financial intermediation roles, which should be beneficial to the economy. This hasn’t been the case both during the Soludo period and the current era: After Soludo’s Consolidation Programme, with the banks presumably stronger, the economy didn’t benefit a great lot. Perhaps, the economy benefited in the sense that the big and established institutions could source loans from the behemoth banks easily. For the small and medium scale companies however, securing facilities from those banks was as difficult as the proverbial head of the camel getting through the eye of the needle. The banks developed a relationship with their cronies which led to lending multi billions to margin traders who kept making trips between banks and the stock market, and in the process, made millions for themselves and virtually crippled the stock market, with the effect of the Global Economic Recession exacerbating the havoc that margin trading that had gone on for some time before the bubble burst, had done to the economy.
Banks in this economy have hardly helped in the Capital Formation/Infrastructural Development process; which the economy badly needs right now. However, I have argued, and will continue to argue that the banks could accumulate much more than they have in their vaults right now, yet it won’t make them better lenders to the economy because they don’t have long term funds with which to lend for Industrialization, Manufacturing and Housing Development. This brings us to the role the insurance industry ought to be playing in the economy, and how they could get to playing that role, which is what this paper is all about.
THE INSURANCE INDUSTRY AND ITS ROLE IN FINANCIAL INTERMEDIATION IN THE ECONOMY
The insurance industry, in most developed economies, play very expansive roles in financial intermediation. In some of those economies, it is arguable whether the Banks are truly worth more than the insurance companies and the pension funds.
In such economies, one could be thinking about a rate of insurance penetration of over 70 percent. There is hardly any life or asset base which is not backed or supported by an insurance coverage of a sort or the other. Young people are encouraged, as soon as they are out of school and into jobs, to insure their lives, apartments/houses, clothes, and everything else that defines them as individuals.
In taking on term insurance policies whose maturity period coincides with when they start having babies, they readily have some funds to commence the children’s College Funds with. Generally, insurance policies, in the developed Western world, serve the purpose of cushioning the effect of the realities and vicissitudes of life.
The reality in the Nigerian economic firmament is different. As reported in Businessday Friday, February, 2006 in a report titled “Potentials of Insurance yet to be fully harnessed”, the then Commissioner of Insurance, Okechukwu Chukwulozie, while presenting a paper titled, “The Role of Insurance in National Development”, during the 21st Omolayole Annual Management Lecture in Lagos, said: “The insurance operators still have a lot of work to do in order to make insurance realize its full potentials and contribute optimally to the socio-economic development of Africa and Nigeria in particular… If insurance business is well harnessed, it would be a great contributor to the Gross Domestic Product (GDP) of the country. The development of new products by insurance companies, which are relevant to the needs of the populace and which are user friendly, is a sine qua non for deeper business penetration. He added that a conscious and a concerted effort is required to increase insurance penetration in the country, pointing out that it is the only way by which the industry could significantly expand its business volume, grow its premium income levels, and enlarge its sphere of influence in the financial services sector and the economy”9.
In a piece titled, “Insurance brief for Nenadi Usman”, the former minister of Finance, in Businessday, Friday July 21, 2006, one Nduka Osisioma wrote: “it is rather disheartening that having received the ‘revelation’ that the growth of the industry has been stunted by poor insurance awareness, the authorities and insurance operators are yet to come up with a workable blueprint to address the situation. History has shown that insurance has thrived well in climes where the awareness level on the relevance and importance of the sector is high. This same feat must be achieved in Nigeria before we can talk about any meaningful progress in the local insurance market. The Consolidation exercise would end up in a fiasco if nothing were done about taking the insurance message to Nigerians at all levels. For a sector mired by lingering credibility stigma, the need for sustained awareness campaigns and insurance education cannot be over emphasized. The nation needs a critical change in our National insurance culture that can only be spearheaded by the government”10.
This is where I would beg to differ from Osisioma’s view. Government has done what anyone expects of it; that is, provide the legal framework within which the industry could thrive. Government has done all that by enacting Insurance Act 2003. In the same piece, Osisioma posited that Nigeria, as at 2006, had an insurance penetration of only one percent!
Continuing in the same brief, Osisioma said: “A survey of how many Nigerians have any form of life insurance policies reveal why the nation has not been able to mobilize long term funds that can drive economic and infrastructural development. There is a huge disconnect between insurance operators and the public in this aspect of insurance. While the situation can be blamed partly on the nation’s economy and individual’s low disposable income, the fact remains that the sector is yet to develop products that can bring SOLUTIONS and add value to their clients. The minister through NAICOM should encourage insurance companies to begin the development of more personalized and investment linked policies… What’s the use of any piece of legislation if it cannot be enforced? Yes, the insurance Act 2003 has been widely hailed as a good piece of legislation, but since its introduction, the sector is yet to derive much mileage from it”11.
Recently however, NAICOM; the Nigerian Insurers Association (NIA); the Nigerian Council of Registered Insurance Brokers (NCRIB); and insurance companies themselves have decided to take the issue of creating awareness very seriously. Along such lines, the Lagos State Government in 2010 enacted the “Lagos State Building Control Law” which is an attempt to curb the menace of building collapse; adding that it is now compulsory for buildings and developers of buildings beyond two floors in Lagos to obtain insurance certificate that will cover general risk as a condition for granting building permit”12. One hopes that other states will follow suit and emulate the Lagos State Law, as it would, in no small measure increase the Gross Premium Receivable very tremendously.
Finally, given the relatively very low penetration density of insurance in this economy, vis-à-vis what obtains in the developed economies of the world, it doesn’t make much sense to charge premiums that are comparable with what obtains in such economies. The industry must, of necessity, have an eye on economies of scale, with a view to not only increasing insurance penetration, but increasing insurance volume. It makes sense, (to me), to sell say, 1000 units of a given policy at Nx, than to limit the industry to selling just 50 units at Nx+y. Going by the above analogy, what the insurance industry seems to be doing in Nigeria is a preference for selling the lesser number of units of a said policy at the higher premium rate. There is no way the industry would grow that way. If anything, high premiums simply alienate further, the already alienated would-be ensuring public or potential insurance policy investors.
THE CURRENT URGENT PROBLEMS OF THE ECONOMY
The phenomena that have been over flogged over time by socio-economic commentators as being the overwhelming problems of the economy include:
(i) Unemployment: Over two million enduring jobs must of necessity be created;
(ii) Lack of Investment Credit/Capital;
(iii) Lack of a Adequate Infrastructure;
(iv) Undeveloped and lagging Capital Development process;
(v) Lack of a well developed manufacturing/industrial sector;
(vi) Prevalence of high interest/lending rates;
(vii) Lack of Response to the phenomenon of the rich getting richer and the poor getting poorer;
(viii) Evidence of over abundance of non performing wealth (in Real Estate) within the economy;
(ix) Lack of wealth Creation Schemes;
(x) Lack of job Creation Schemes;
(xi) Lack of wealth Redistribution Schemes

In the NEEDS document, (which I believe is the best legacy the Obasanjo Administration bequeathed this nation), the following observation were made in the Document’s Executive Summary.
(a) “Indeed, the general value-orientation of the people need to be reshaped to de-emphasize rent seeking, over dependence on government for literally everything, and expectations of something from nothing – and to promote hard-work, entrepreneurship, discipline, honesty and respect for traditional values;
(b) Growing the Private Sector: NEEDS is a development strategy anchored on the private sector as the engine of growth for wealth creation, employment generation, and poverty reduction;
(c) Other elements of this agenda include the mobilization of long-term capital for investment; appropriate regulatory framework; a coherent and consistent trade policy and regional/global integration regime; and specific intervention to encourage the development of some sectors;
(d) Under NEEDS, reforms are ongoing to promote the emergence of a vibrant mortgage and housing development system that is led by the private sector;
(e) Financing: NEEDS would require a heavy investment programme to jump start the economy in a manner that is pro-poor and poverty-reducing. Aside from the projected investment by the Federal and State Governments as well as the Private Sector, there is still a residual financing gap which requires special efforts to mobilize the required finance”13.

In fairness to the Obasanjo Presidency, efforts were made at growing the private sector: it was during the period that the Dangotes, the Ibrahim Jimohs, the Otedolas and Transcorp emerged. General Obasanjo, at a time during his Presidency, wondered why Nigeria shouldn’t have some of her citizens amongst FORBES world richest billionaires. One only has to look back to realize that he tried his level best to create billionaires (in dollar terms) out of our existing Naira billionaires.
But can the same be said of his efforts at reducing the vast hordes of the unemployed and the poor? I doubt that very much. Matter of fact, the Obansajo regime tacitly encouraged the running of the El-Rufai FCT Administration in such a way that suggested that there was no place for the poor in the Federal Capital Territory.
Did the Obasanjo Government “promote the emergence of a vibrant mortgage and housing development system…”? The answer is a resounding no, since the same administration forbade the banks and other lending institutions from lending credit to civil servants to purchase Federal Government Houses with.
Finally, my area of emphasis, as far as the NEEDS document/objective is concerned, is the observation that the implementation of NEEDS “will require a heavy investment programme to jump start the economy in a manner that is pro-poor and poverty reducing”14, and that, “Aside from the projected investment by the Federal and State Governments as well as the Private Sector, there is still a residual financing gap which requires special efforts to mobilize the required finance”15.
The above, ladies and gentlemen, is the fulcrum on which the LandAssets plan rests.
GENERATING THE REQUIRED FINANCING GAP TO JUMP START THE ECONOMY – THE LANDASSETS PLAN
As an individual, I was so affected by the RESIDUAL FINANCING GAP theory of the NEEDS objective, which requires SPECIAL EFFORTS TO MOBILIZE THE REQUIRED FINANCE that I floated LANDASSETS CONSULT LIMITED in 2002 and got a few key staff/personnel enmeshed in the study and research into the problems of the economy, and how, not only to provide solutions to such elements as job creation; wealth creation; poverty reduction; wealth redistribution; and of course, mobilizing the “Residual Financing gap”.
The product of that effort, which lasted for about two years (2002 and 2003), is the LANDASSETS PLAN, a name coined from our company name, LANDASSETS CONSULT LIMITED.
THE LANDASSETS PLAN
The LandAssets plan is essentially a multi-disciplinary, multi-sectored and multi-faceted scheme which seeks to use the dormant wealth of the rich and wealthy to create more wealth in the economy, and in the process, create millions of enduring jobs.
We began by asking the question, “Where can this finance for meeting the needs of the economy, and bridging this “Residual Financing gap” be found?” We didn’t need to search long and hard. The GSM revolution had just commenced in Nigeria at the time, and being witnesses to how the purchases of N400, N500, N750, N1000 and N1500 credits to meet our talking needs pointed to the direction that little drops of water indeed could culminate in what becomes a mighty ocean.
At the same time, the mass media was continuously inundated with news of fire outbreaks all over the place, with fire victims (Landlords and Tenants) basically walking away from the ruins of their erstwhile means of livelihood with basically nothing but the clothes on their backs and around their loins. Coupled with the incessant news of collapsed buildings and buildings under construction, we decided to focus on the probability of bringing about a UNIVERSAL INSURANCE SCHEME for all properties (Real Estate) situate in the urban and Semi-urban Areas within the economy. When we began to examine the reality of establishing such a scheme, we realized immediately, that there was a long standing “revelation that the growth of the industry has been stunted by poor insurance awareness” and that the sector was “mired by lingering credibility stigma”.
We resolved that the lingering credibility stigma could be wiped out in no time if the insurance sector could be made to adopt transparent claims relationships which didn’t take advantage of well meaning policy holders who come to their insurance companies for help in their time of need, only to meet with disappointment. We resolved that such negative tendencies could be wiped out by transparently meeting claims, and being there for the policy holder.
As mostly Estate Surveyors, who were partners in OGBECHIE and PARTNERS, (my Estate Surveying Firm) and only affiliated to LandAssets Consult Ltd by reason of the coincidence of the Principal partner of Ogbechie and Partners being the Executive Consultant/MD of LandAssets Consult, it was relatively easy for us to work on the probable property values we needed to address. After a 12-month study and simulated valuation, we arrived at a figure which, with constant updating/revaluation on our part, we estimate at N900 trillion.
A WORD ABOUT VALUES
In his book, Land Resources Economics, Barlowe states: “Justice Brandeis once observed that value is a word of many meanings’. The truth of this dictum is demonstrated by the dozens of different meanings we apply to this term in popular usage. In a broad sense, ‘value implies capacity to satisfy wants’ and ‘there are as many kinds of value as there are classes of wants”16. “Economic value has three important components. The property in question must have use value or utility to its owner or user. Otherwise, no one would want it … Regardless of its utility, a product must be scarce if it is to command a price … To have economic value, an object must also be appropriable”17. On their own, every property has an inherent value; to the owner, to the market – tenant and would be user, or buyer alike. The value in question could differ from one interest, to the other. The Capital Value of property is different from its Replacement Cost. So is its Mortgage Value different from its Taxation and/or Rating Value.
All told however, one, by default, could render his property valueless in a given financial year. When a property is not in use; doesn’t attract rent or streams of income; is not employed in productivity of any sort; and is not insured; it has not commanded any value for the accounting period in question. This, unfortunately, is the lot of quite a number of properties in this economy. Some properties simply occupy space, prevent better or other use values, don’t yield any income, and are never covered by insurance. The impact of fire or any other form of disaster often spells the end of such properties. But a property covered under a policy such as is being advocated would be rebuilt within one year, without any resort whatsoever to “small prints” advocacy, etc.
TEN YEAR CASH FLOW ANALYSIS
Given the foregoing arguments and with a view to higher insurance volume, penetration, and premium, our projections on premium requirement were quite lower than what currently obtains in the industry. Based therefore on premiums anyone could derisively refer to as “peppercorn”, the sum of N2.7 trillion could be received as Gross Premium in the first year of implementation of the scheme. Over a period of ten years, with a review at the fifth year, to become effective at the sixth, a total Premium Receivable of N 28.5 trillion is projected.
In the year of implementation, the participating Estate Surveying and Valuation firms would receive a projected total of N45 Billion in valuation fees. Other professionals such as Engineering firms, Architectural firms, Building firms, Law firms, etc, are projected to receive N100 billion per annum in the first year, and for the subsequent four years. By the sixth year, they would receive N135 billion per annum, up to the tenth year.
The fifth year revaluation would command a fee of N50 billion.

PROJECTED RESULTS FROM THE INSTITUTION OF THE LAND-ASSETS PLAN
Within the first two years of implementation, LandAssets Consult could remain a private, limited liability company, but would transform in the third year into a public quoted company, LANDASSET CORPORATION with a net worth PROJECTED RESULTS FROM THE INSTITUTION OF THE LANDASSETS PLAN
1. The properties to be covered under this scheme is worth N900 trillions, (excepting properties under construction within the purview of Insurance Act 2003, under which the Insurance Companies/National Insurance Commission had projected a Premium Income of N500 billion for 2011).
2. The valuation, prior to the coverage of the subject Real Estate would be undertaken by Estate Surveyors and Valuers registered by the NIESV – the projected valuation fee would be worth N45 billion.
3. Creation of jobs for the construction Architectural and Engineering firms, pursuant to the provision revalidation/updating of the “as built” plan of the subject Real Estate.
4. Expansion of existing insurance companies’ capacity to handle this added portfolio which would increase their current annual premium from the current N 200 billion to about N 2.7 trillion.
5. Provision of ample funds that the insurance firms could channel into long-term funds for industrialization/manufacturing and housing development.
6. The crash of the current high lending rates regimes, as the insurance companies would now become the major providers of long-term funds.
7. The preparation/updating of the National Assets Register into which every property covered within the purview of the scheme would be registered.
8. Engagement of law and management firms to represent Land-assets corporation in the six geo-political zones at a projected cost of about N100 billion annually.
9. A projected Annual Premium of N 2.7 trillion per annum for the first five years of implementation, and N 3.00 trillion for the succeeding five years.
10. An aggregate generate able premium of N 28.5 trillion over a ten-year period by which time LandAssets Corporation would voluntarily disengage its services to the insurance companies, which could then run on their own.
11. Given the extent of coverage envisaged, Landassets Corporation and the insurance companies would (be well advised to) float a Re-insurance firm which could handle the Re-insurance needs of this peculiar scheme.
12. Encourage every participating insurance firm to invest in an Asset investment scheme under which the insurance firms could pool 10 percent of their respective premiums from the scheme to form an Infrastructure Development and Management Fund, which can give an average of N 228.5 billion per annum for development of roads, and other infrastructure.
13. Land-assets Corporation, on its part would guarantee and voluntarily offer 10 percent reinsurance coverage for every Real Estate covered under this scheme and meet 10 percent of resultant and valid claims.
14. Within the first two years of implementation, LandAssets Consult could stay a private, limited liability company, but would transform in the third year into a public quoted company, LANDASSET CORPORATION with a net worth (capitalization) of over N1 trillion so that wealth redistribution.
15. Land-assets Corporation would become a multifaceted Corporation with interests in Insurance Brokerage, Re-insurance, Property Development, (for the low and middle income groups), Oil and Gas (Refining and Marketing), Telecommunications, Manufacturing, and Industrialization.

Finally, anyone who appreciates that ten years after the enactment of Insurance Act 2003, the Compulsory Insurance of Public buildings, and Buildings under Construction is yet to take off, the seemingly reasonable reaction to the foregoing proposition should be: “what he’s talking about”. We at LandAssets have approached the scheme for that insurance in Nigeria, except when successfully enforced, has remained a non flier on account of how people perceive the practitioners. We have thought about sweetening the Real Estate insurance scheme by first, employing rates and premiums that would be attractive to every would-be policy holder: the rates which we have used for our projections are therefore considerably lower than current premium rates. The reasoning here, basically, is that it is better to meet 95 – 100% penetration at lower rates, that to stay at the less than three percent penetration level that is the case at optimal premium. Moreover, there is a commitment to not only meet every claim immediately, but to possibly commission the restitution (rebuilding process) of a burnt property within three months.

Finally, contrary to how the mind-boggling increases between the worth of banking institutions in Nigeria; pre and post Soludo Consolidation, resulted in very little difference in the average Nigerian’s perception of the banks, the Land-asset plan would produce very notable differences between how insurance products are perceived now, and how they would be perceived later. On the other hand, if the insurance companies are to just continue and use the instruments of governmental fiat to achieve, say N1 trillion annual premium in 2015, the executives of the insurance companies, like their banking counterparts would be the sole beneficiaries. And, very negligible impact would be felt by the other sectors of the economy. And in terms of job creation and wealth creation and redistribution, the economy would lose out miserably.
CONCLUSION
Any watcher of the economy will readily be apprised of the fact that successive governments have tried to limit deficits in the Budgets by either increasing the fuel pump price, or borrowing from international financial institutions. While the Obasanjo Presidency used the fuel pump price option, the Jonathan administration began with the resort to external borrowing in an election year. But last year, it went back to fuel hike increase. Either way, (raising the fuel pump price or borrowing), government, however it can achieve it, needs a way to mobilize the residual financing gap, and we sincerely think that the LandAssets Plan will go a long way in attaining the sought objective.
Again, we would reiterate that:
i. The insurance industry would make a Gross Premium of N 3.0 trillion; N 2.8 trillion above its current average of N 200 billion;
ii. Estate Surveying firms would make N45 billion in valuation fees;
iii. Other professionals would gross N 100 billion per annum for five successive years;
iv. The insurance companies would be in position to provide the said “Residual Financing Gap” by lending to the economy for industrial, manufacturing and housing provision, with a net N 2.285 trillion per annum for five successive years;
v. The LandAssets Corporation (as it would then become) would guarantee 10 percent of any claims resulting from its plan implementation;
vi. LandAssets Corporation would set up a Re-insurance Corporation and a Property Development Company in the second year of the LandAssets Plan implementation;
vii. From the measures above, a minimum of two million enduring jobs would be created within the economy within two years; and
viii. LandAssets would go public in the third year of implementation the Land-assets plan, with a view to creating and distributing the wealth that would be made from this venture.

Finally, undoubtedly, so many of the top insurance practitioners will be up in arms against what they would consider an imposition by an outsider. Beyond professional sentiments, I would want everyone to appreciate that even the practitioners themselves have always admitted that “insurance remains the backbone of the economy”. But this is on a potential basis. (The Guardian, January 20, 2011 – page 52). In the said report, Dr. Justus Uranta was reported to have said: “I strongly believe that of all the programmes initiated by NAICOM through MDRI, with emphasis on the enforcement of compulsory insurance, the Local Content Law on oil and gas, as well as operators adhering strictly to the market agreement, the industry will perform better in 2011.”
True. And this could increase the gross premium income for the industry to N650 billion from the current N 200 billion. But, we have watched the industry struggle for ten years (2003 – 2013) to get Insurance Act 2003 off the ground to no avail. The economy must be jump started, and a further ten year wait is definitely not an option.
We shall close by stating that what we need right now in this economy is some innovation in the way of doing things. At the height of the 2008/2009 Global Economic Recession, erstwhile President Sarkozy of France remarked that there was a need for the world to evolve a more workable way of doing things since Capitalism as the world knows it has seemingly failed. Adam Smith wasn’t wrong when he proffered the principle of the invisible hand which works for the good of all, when enterprising, profit oriented people go to work, but he never envisaged that for the profit motive, some men would be prepared to deny millions a good life, like is the norm in our economy. Karl Marx wasn’t also wrong when he proposed the Socialist system in which outlawing of private property should provide a better life for the proletariat. However, the practice of the Socialist/Communist State under Stalin showed the horrors that could be unleashed on a nation through that system of government.
The LandAssets Plan is a very radical and innovative scheme. we admit that. But as the late singer, Teddy Pendergrass said in his lyrics in the hit song, “Wake up everybody”, “The world will get no better, if we just let it be”. The eminent Jurist, Lord Denning, MR equally observed, “If we never do anything which has not been done before, we shall never get anywhere. The law will stand still while the rest of the world goes on: and that will be bad for both.” The insurance industries in the developed economies are the backbones of those economics because they developed it. With an insurance penetration aggregate of less than 5 percent, there’s no way we can style the industry “the backbone of the economy.” But it could be, if we let it. I believe that the insurance industry has no business playing second fiddle to the banking industry in the Nigerian economy.
We shall end by quoting President Barack Obama in his 2011 State of the Union address: “Innovation is not just how we change our lives; it is how we live… we must reinvent ourselves… We must knock down barriers … our destiny remains our choice”.
Let’s innovate. Let’s create jobs. Let’s create and distribute wealth. That’s the only way to make the Banking Reforms work for this economy. The alternative is to expect a Tunisia-like implosion.

ON REVIVING OUR DEPRESSED ECONOMY; ENGENDERING GROWTH AND DEVELOPMENT; AND, CREATING MILLIONS OF JOBS: THE LANDASSETS PLAN

PREAMBLE

The Nigerian economy is in dire straits. The plunge into recession began during the Second Republic, when the National Party of Nigeria ruled under the presidency of Shehu Shagari. The descent into full blown depression was enhanced by the tragedy of the coincidence of mismanagement and the then unprecedented plunge of the barrel price of oil in the international marketplace. The rot therefore basically, began during the Shagari years, ably assisted by the adventure into borrowing from the IMF / World Bank by the then outgoing military regime.

It was and still is a crying shame that the succeeding civilian governors just went borrowing all off-shore funds they possibly could, without necessarily putting on ground the projects they had borrowed for. Consequently, every man, woman, and child in Nigeria today is still paying for the irresponsibility of those governors by way of repayment of loans which yielded nothing, and the payment of which has translated into a depletion of the per capita income, and huge losses for the economy. Coupled with the non performing offshore loans, was the import licensing scandal of the early eighties. The economy made millionaires of politicians and ignorant, “businessmen” whose only achievement was that they knew the thieving officials who issued the said import licenses. As a result, Capital was transferred to people who either wouldn’t, for obvious reasons, invest their “killings” in this economy, or didn’t know anything about investments. So, the funds that would have been invested in this economy to create more wealth and more employment, invariably ended up in economies in which the derivable benefits simply did not accrue to this economy.

THE BARTER ECONOMICS OF THE BUHARI YEARS

In fairness to the succeeding Buhari / Idiagbon regime, it became acquainted with the fact that the economy was in a mess and therefore tried to apply a brand of economics which favoured the barter system; which system could have well worked in the interim, but for the Western economies which tightened the credit noose against the barter and any other conceivable economic arrangement or option.

THE BABANGIDA / IMF YEARS OF RESTRUCTURING

As people were wondering how the economy would proceed beyond what seemed like a dead-end, Gen. Babangida struck, pushing out a regime that, to all intents and purposes, had brought some level of sanity to the polity, only to commence the wholesale kow-towing to the IMF / World Bank’s Restructuring Programme, without taking advantage of the once and for all´ devaluation of the Naira, which the financial institutions demanded, instead of embarking on a fruitless talk-shop on whether or not to take the IMF loan, in order to aid the restructuring process.

 

More than any other thing, the ill advised economic policies of the Babangida years commenced the onslaught on Nigerians; the middle class was wiped out, and glaring poverty began to stare people in the face. Consequently, the poor within the economy increased in quadruples. On the plus (?) side anyway, people started to learn the art of survival by going into new ventures/areas they were not trained for; wholesale drug trafficking and the 419 syndrome, inclusive.

 THE STATE OF THE ECONOMY TODAY

In the over thirty odd years since the abrupt end to the second republic, the economy has gone from bad to worse. The pool of the poor has increased at a tremendously scandalous rate. Most efforts at poverty reduction have ended up enhancing the financial status of the same ubiquitous agents that government employs in purchasing the machinery/equipment the beneficiaries of government’s poverty reduction strategies need.

In retrospect, most commentators on the state of the economy have stated without equivocation that the economy is in a worse state now, than was the case thirty odd years ago. It has equally been generally accepted that the problem with the economy, amongst other factors are:

  1. Its mono-cultural nature – oil being the major exportable product, with virtually no value added;
  2. Lack of industrialization;
  3. Lack of long term credit with which to industrialize, enhance the capital formation process, and enhance housing provision for the middle and low income groups.

 ‘NEEDS’ AND THE RESTRUCTURING PROCESS

The key to revamping the economy lies in restructuring in such a way such that wastages in every facet of the economy would be, if not entirely eliminated, reduced to the barest minimum. The on-going privatization exercise of the Federal government; the personnel reduction within the Civil Service; and the restructuring of the methods affecting contractual obligations by the Federal Government, evidence the foregoing assertion. But, at what cost to the economy, especially with regards to the burgeoning army of the unemployed?

However, irrespective of the method found expedient, the object of former President Obasanjo’s NEEDS is to evolve an economy which is restructured to the extent that individuals, small and medium scale enterprises are empowered, through the provision of economic leveraging, by way of venture capital provision and long term credit, to become part of, and play effective roles in evolving a healthy and vibrant economy

Given the foregoing objectives, the problems of the economy at present, can be summed up as being that of finding creative, ingenious, innovative, and constitution – and – people – friendly methods of raising funds for the effective pursuit of government’s Economic Reform (Transformation) Agenda. So far, the Federal Government, several times since 1999 has come up with increases in the pump price of petrol and petroleum products, and other taxes on each liter of petrol and associated petroleum products which are seen as anti people, and have therefore been resisted by the people under the aegis of the Nigerian Labour Congress (NLC). The increase of the Pump price of a liter of petrol to N97.00 at the beginning of 2012 was one of the worst episodes of pump price increases in recent years. The subsequent disclosure of the unprecedented fraud that partnered the N2.6 trillion subsidies on imported fuel and other petroleum products was something else. In any of the North African and Middle-eastern countries, what happened in January 2012 would have, undoubtedly led to a regime change.

To date, no one has succinctly put his hand on how the hundreds of billions of Naira required for the aforesaid industrialization, infrastructural provision and maintenance, etc., would be realized. So, what is the way to generating the funds necessary to kick start the reawakening of the economy from its long drawn slumber?

 

JOB CREATION / REDUCING THE POVERTY LEVEL

As far back as 1996, the United Nations Development Programme (UNDP), in its Human Development Report observed: amongst other things, that lack of development in Nigeria may be due to the presence of some or all five (negative) features of growth in most developing countries. These are:

1   Jobless Growth – the overall economy grows, but fails to expand job    opportunities;

2   Ruthless Growth – the rich get richer, and the poor get nothing;

3 Voiceless Growth – the economy grows, but democracy/empowerment of the majority of the majority of the population fails to keep pace;

4   Rootless Growth – Cultural identity is submerged or deliberately outlawed by Central government , as in states of former Yugoslavia or the Kurdish area of Iraq and Turkey; and

5   Futureless Growth – the present generation squanders resources needed by future generations.

The same UNDP Human Development Report noted that generally, the wealth that was generated during periods of economic recovery and growth was not distributed equitably. The late Prof Claude Ake, in his critique of our social economy observed:

 ‘With few exceptions, the political class, both civilian and military, has been interested principally in the accumulation of power, which is maintained in ways that are incompatible with development, especially by institutionalizing a Hobbessian regime that turns society into a war of one against all.

 Power in Nigeria is invariably used for the accumulation of wealth, a perverse mode of accumulation which is dissociated from capitalist activity, and hence unproductive. It has saddled us with the problems of capitalism without its considerable rewards.’’

To prove the point Prof. Ake made, all you need do is take a look at the out of this world houses in Maitama, Asokoro, Ikoyi,  Victoria Island, Victoria Garden City, Lekki, etc., and the exotic cars that dot our peculiarly very bad roads.

A reasoned study of the aforementioned UNDP report and Prof. Claude Ake’s comments, as they relate to the Nigerian economy, would always reveal a lot more than we may individually imagine. However, owing to space restraint, one would just surmise that we need to address the issue of wealth creation and distribution in such a way that we can stand convinced that a semblance of wealth redistribution has indeed taken place, enough to create the impression that the Federal Government is democratizing wealth, is institutionalized and sustained. We must foreclose policies which, rightly or wrongly, paint the picture that government is deliberately squeezing the poor absolutely dry, for the betterment of the already rich and flourishing.

LACK OF LONG TERM CREDIT – THE BANE OF THE ECONOMY

Part of the reason the Nigerian Economy is yet to industrialize, apart from the lack of foresight which characterized the ‘oil boom’ years, and the inability of the rich to invest in productive and wealth creating ventures, is the fact that for as long as anyone can recall, our economy has been consistently run without the long term credit which powers an economy by providing the long term loans for investments, and which are repayable over a long period of time – say, fifteen to twenty years. The investments generated through such loans create manufacturing concerns; provide or create jobs; and create wealth; both for the entrepreneurs and their employees, and generally aid the national industrialization process, and improve the Gross Domestic Product and standard of living of the citizenry.

Invariably also, one finds that in the developed economies, such long term funds come from the Insurance arm of the Finance sector of the economy; the Pension Funds; and such other funds as that for providing seed capital, and for empowering Small and Medium Scale Enterprises.

However, it remains crystal clear that the Insurance sector of the Finance industry is grossly underdeveloped, and that such gross underdevelopment has largely accounted for why the economy has remained in its present state of non industrialization. The core of this treatise is to show how the insurance industry could, not only become a major player in the Nigerian economy, but could become the major source of the much sought for, long term funding this economy is pining for.

THE SHOULD-BE ROLE OF THE INSURANCE SECTOR IN THE FINANCE INDUSTRY

Let us reiterate that we have remained unindustrialized because the capital formation process is low and slow; infrastructural capacity even lower; loan able funds for industrial, manufacturing and housing development non-existent; and the economy basically characterized by the mercantilist or cash and carry phenomena. The banks lend short; charge excessive interest rates; offer low interest rates on deposits; make super profits; but generally cannot either point to any significant contribution to the capital formation process, or to any meaningful contribution to reducing the horde of the unemployed.

By their own admission, the insurance companies are worth less than the two top banks in asset worth and annual turnover. With over fourty years of independence and their relationship with the insuring public, the insurance industry in Nigeria boasts just an Annual Premium Receivable of merely N200 Billion (2011 figures). 

It has occurred to our minds that the major source of funding for industrialization and housing programmes in developed economies come from the insurance sector, which alone can afford to provide to the economy the long term investible funds it requires to lend long; since most insurance policies have an average term of twenty years. The key therefore to Nigeria’s industrialization lies in the improvement of the insurance sector in such a way that the Annual Premium Receivable would experience a quantum leap, with a view to having the insurance sector make available the very important long term investment fund to the economy. We have tried to figure out the way such an expansion could be provoked, and this we have captured in the LANDASSETS PLAN, named after our firm LandAssets Consult Limited.

THE LANDASSETS PLAN

The LandAssets plan, essentially, is a multi-disciplinary, multi-sectored, and multi-facetted plan which seeks to use the dormant wealth of the rich and wealthy (in Real Estate) to create more wealth in the economy, and in the process, create millions of jobs. The potentials of this plan are mind-bogglingly huge. It seeks to introduce a universal insurance coverage for all Real Estate situate within the economy; in the urban and semi-urban environments, especially.

A little explanation is necessary here: For the purposes of this analysis, the ‘wealth’ in question, simply refers to the value invested by Nigerians in Real Estate (Residential, Commercial and Industrial) all over the country. ’Dormancy,’ in the sense used above, refers to the fact that unlike Real Estate in the developed nations of the West, where ‘dormant’ real estate assumes an aura of kinetics and activity owing to the role such immovable properties take on, through investment by their owners in insurance coverage, most Real Estate in this economy only have a limited form of financial life because:

          They are not covered by insurance;

          They lack any form of amortization

          Any form of fire hazard often spells doom to such properties as they can neither be rebuilt, if completely destroyed, or repaired or renovated, when the destruction is not total: The story of the NITEL property on the Marina, Lagos is instructive. The only thing seemingly going for real estate in the Nigerian context is the annual rent receivable, which translates into nothing when such properties become severely stressed.                                                                                                                                                                             

                        

The LandAssets plan, as posited in an earlier letter to the President would, amongst other things:

Grow the economy by adding trillions of Naira to the GDP during its first year of implementation;

Add trillions of Naira to the GDP over a ten-year period;

Improve and standardize the Capital Formation process by providing annually or infrastructural development and maintenance;

Provide long term loan able funds for Industrial, Manufacturing and Housing development;

Create wealth with the concomitant creation of millions of jobs, traversing the financial {insurance and banking institution}, construction, housing, manufacturing, industrial and service sectors of the economy;

Raise the funds for giving the economy the required head-start by attracting insurance premium on our national Real Estate, the value of which we have estimated at N 900 trillion;

Evolve a private sector driven economy which is neither dependent on government nor oil, given that an estimated N13.35 trillion would be realized as Annual Premium during the first five years of implementation;

Impact the GDP by cumulatively adding over N28.5 Trillion to the economy over a ten-year period.

The question naturally, is how is it possible?

We began our enquiry by taking a good look at our economy and its attendant problems, which are typical of most developing African and third world countries. Such problems are as follows: 

                                      i.            Lack of fully developed capital formation process;

  1. Lack of a well developed manufacturing /industrial sector;                                                                                                                                                 
  2. Prevalence of high interest (lending) and exchange rates;
  3. An external debt overhang, which basically, enslaves third world nations;
  4. Lack of long term loans for meaningful manufacturing/industrial investments;
  5. Lack of response to the phenomenon of the rich getting richer while the poor get poorer;
  6. Evidence of non performing wealth all over the economy;
  7. Lack of wealth creation schemes;
  8. Lack of job creation schemes;

             X        Lack of any wealth redistribution scheme or policy.

Going through the above set of economic scenario, the resolution of which threw-up quite a maze of probabilities, we opted for the very simplistic approach of seeking to have all Real Estate covered by insurance at premiums most property owners would well afford. For the payment of the above stated premiums, any property country-wide would qualify to be rebuilt from scratch to finish, if completely destroyed by fire or any other natural disaster. If the property is only partially damaged, then such property would be repaired / renovated to the extent of the damage by a concert of the specific insurance company which had underwritten the subject coverage, and this firm, LANDASSETS CONSULT LTD, in its capacity as the coordinating organ between the insurance companies, and the property owners. The primary, financial responsibility for replacing the property rests with the insurance company while LandAssets Consult stands as the guarantor/implementer of the obligation to the insured. Under the LandAssets plan, with an annual premium injection of N1.25 Trillion, the redevelopment of all the properties gutted by fire nation-wide, and in our current circumstances, all properties damaged by flood would be no object at all.

Under the envisaged economy-wide insurance scheme, the following benefits would accrue to the individual property owners, the insurance companies, and the economy:

    the property owner would not suffer any personal loss through fire or any other natural disaster without commensurate remedy, in the form of restoration of same at no extra cost to him;

    valuation of the subject Real Estate prior to insurance coverage by Estate Surveyors and Valuers;

    provision of jobs to the construction, architectural, and engineering firms, pursuant to the provision /revalidation/updating of the ‘as built’ plan of the properties;  

    the insurance companies, with the huge premium that would annually accrue to them, would be empowered to settle claims easily and speedily;

    the existing insurance companies would easily see the need to expand their capacity and services, and there would be ample room for the establishment of new ones, since the present capacity would be highly inadequate to handle an expansion that would be more than 1,000 per cent their current capacity;

    provision of funds that the federal and state governments could channel towards rehabilitation of dilapidated infrastructural facilities, and the provision of new ones;

    ample funds that the insurance companies would make available for long term loans for industrialization/manufacturing and housing development;

    channeling of such funds through the banking industry would enhance the resultant crash of the current high lending rates regime;

    the consequent creation of employment opportunities in the insurance and banking sectors of the economy, owing to the resultant expansion which the annual injection of N2.7 billion would guarantee;

    the preparation / updating of the National Assets Register into which every property covered within the purview of the LandAssets plan would be integrated;

     provision of jobs to the construction, architectural, and engineering firms, pursuant to the provision/revalidation/updating of the ‘as built ‘plan of buildings for the Land and Asset Registers;

    engagement of law firms for the drawing up and execution of contractual obligations;

    construction/development of specific infrastructural facilities such as fire hydrants;

    creation of jobs in the construction/building industry, and the professional services industry; and,

    engagement of management firms to act for LandAssets Consult in the six main geopolitical zones of the country

 

TEN – YEAR CASH FLOW PROJECTION OF THE LANDASSETS PLAN

From the projections, deductions and computations we have made, in consonance with our projections above under the subject scheme, we shall be dealing with a net worth of N 900 trillion in Real Estate, country-wide. Our analyses of this net worth show the following computations/figures for the first five years of implementation of the LandAssets plan:

          Capital and Insurable Value ………      N 900 trillion

          Rental Value                        ………       N 45 trillion

          Annual Premium                  ……….      N 2.7 trillion

          Valuation Fee                        ………      N 45 billion

          Coordination/Management Fee …….  N 270 billion  

S/No

Year

 

CapitalValue

N Trillio

RentalValueN Trillion PremiumBuildings      N

Trillion

PremiumContent

trillion

Valuation FeeNtrillion OtherProfessionalsNtrillion RetentionIns. CoysNtrillion    Coordination/mngmtFeeNtrillion
1 900 45 2.025 0.675 0.045 0.01 2.33 0.270
2 900 45 2.025 0.675 0.01 2.33 0.270
3 900 45 2.025 0.675 0.01 2.33 0.270
4 900 45 2.025 0.675       0.01 2.33 0.270
5 900 45 2.025 0.675 0.01 2.33 0.270
6 1000 50 2.250 0.750 0.050 0.135 2.515 0.300
7 1000 50 2.250 0.750 0.135 2.565 0.300
8 1000 50      2.250 0.750        0.135 2.565 0.300
9 1000 50 2.250 0.750 0.135 2.565 0.300
10 1000 50 2.250 0.750 0.135 2.565 0.300

 

          Other Professionals              ………..      N 100 billion

          Retention by Insurance Companies…  N2.28 trillion (first year)

          Retention by Insurance Companies … N2.33 billion (2nd – 5th years)

 

Note: We project an annual expenditure of 10% of the insurance companies’ retention [i.e. N23.3 billion] as out-going for Loss Adjustments or claims. This would have the effect of creating more jobs.

CRITICAL PATH ANALYSIS

The above income streams assume maximum returns from year one to the tenth year. However, in walking the critical path, we have assumed income streams of 30% in the first year; 50% in the second; 60% in the third; 90% in the fourth and fifth years; and maximun returns from the sixth.

Given the foregoing assumptions, the Critical Path income stream would be as follows:

Year                       % Income                   Annual Premium

                                                                       N Trillion

1st                                    30                                             0. 810

2nd                                    50                                             1.350                             

3rd                                    60                                              1.620   

4th                                     90                                              2.430

5th                                     90                                               2.430

6th                                      90                                              2.700

7th-10th                            100                                            3.000

 

 

           

 THE IMPACT OF THE LANDASSETS PLAN ON THE INADEQUACIES IN THE ECONOMY

If allowed to function as outlined above, the LandAssets Plan has the capacity to impact the entire economy in such a way that the following would result:

  1. the problem of mobilization of long-term capital for investment would be finally and adequately addressed, with the Insurance Companies becoming the major players, as should be;
  2. the problem of funding infrastructural provision and maintenance would also be over, vide the establishment of the Infrastructure Development and Management Fund (IDMF), to which the participating insurance companies would subscribe, and particular effort would be made to construct fire hydrants and such other provisions for fighting fire, with a view to blotting out our national shame of always knowing that properties worth billions are always destroyed by fire, because of lack of water and other firefighting equipment;
  3. investments in the solid minerals exploitation area by insurance companies vide long term loans and direct investment with their surplus funds from the envisaged Annual premium;
  4. Investments by the insurance companies in other aspects of the industrialization / manufacturing processes;
  5. Investments by the insurance companies by granting of loans and direct investments in housing provisions;
  6. elimination of individual losses sustainable by property owners who, prior to the introduction of this scheme, often found it impossible to restore burnt/ destroyed properties;
  7. prompt settlement of claims without recourse to time and finance wasting on court actions and the attendant declining from assumed insurable risks, which itself has the effect of destroying the insuring company’s reputation;
  8. reversing the perceived ignoble trend of foisting the cost of running the economy on the poor;
  9. using the wealth of the rich to administer the needs of the economy in a way that further enhances the benefits to such property owners, thereby fostering a win-win situation between the  insuring companies and property owners;
  10. fostering a new economic scenario whereby the poor and their champion, the Nigeria Labour Congress(NLC) would accept that government policy is not making further financial demands on the poor;
  11. creation of employment opportunities in every sector of the economy, thereby generating employment opportunities of at least two million jobs in its first year of implementation;
  12. provision of a  conducive economic climate for the implementation of Transformation Agenda of the Federal Government;
  13. enhancement of the GDP of the economy and the per capita income;
  14. reduction of the lending rate, thereby reducing the misery index of the economy;
  15. effectively evolving a private sector driven economy;
  16. increasing the exportation quotient of the solid mineral sector, thereby increasing the economy’s external / offshore income;
  17. effectively beginning the process of wealth creation and redistribution;
  18. effectively increasing by several folds, the size and capacity of the overall finance sector of the economy; and
  19. Effectively transforming the economy for good.        

 

THE WAY TOWARDS IMPLEMENTATION

The way to implementing the LandAssets plan, which from the foregoing, looks reasonably sufficiently clear-cut, is for the Presidency as the executive arm of government, to prevail on NAICOM to examine the entire concept and to, therefore evolve the inevitable public / private sector collaboration it has always advocated.

 On our part, we shall be readily available whenever required. We are equally set for, and would commence a series of seminars/workshops aimed at explaining the scheme to representatives of the property owners, the insurance companies, and all professionals relevant to implementing the scheme.

We have long come to the inevitable conclusion that opportunities, huge ones at that, truly abound in Nigeria. The NEEDS document bears testimony to that fact. Please, let’s get to work by integrating and implementing the LandAssets Plan and giving the economy the necessary head start by providing the funds relevant to meeting the  ‘residual financial gap’, as observed in the NEEDS document.

Finally, like the President, we see Nigeria in the hands of the LORD, like Samaria after the Assyrian siege, as prophesied by Pastor E. A. Adeboye; a totally different country, from the economic perspective,