Heart and sole

Ethiopia’s footwear marches on

Bethlehem Alemu is making great strides in creating employment and developing artisanal skills

The flagship soleRebels store in downtown Addis Ababa, Ethiopia’s capital, is a hipster shoe haven. A lilting reggae soundtrack pervades the air. The wooden décor is splashed with Ethiopia’s warm national colours: green, red and yellow. Hundreds of funky shoe designs, their price tags ranging from $40 to $100, festoon the shelves.

In its midst sits Bethlehem Alemu, 34, the company’s founder and owner, sipping Ethiopian black coffee and boasting breathlessly about the fast rise of her foot- wear empire. “Our business model centres on eco-sensibility and community empower- ment,” she explains with self-confidence. “Our model maximises local development by creating a vibrant local supply chain while creating world-class footwear.”

Ms Bethlehem launched soleRebels with only five employees in 2005. She now employs more than 200 people who make shoes from Abyssinian hemp, organic cotton and recycled car tyres. These shoes, a combination of Ethiopian heritage crafts and modern design, are exported to 55 countries and sold in more than 65 stores. Ethiopia’s 20th century anti-colonial fighters, who wore sandals with rubber-tyre soles, inspired the shoes’ design and name.

Today, in addition to the flagship store in Ethiopia, 13 stand-alone soleRebels stores are selling shoes in five countries: Canada, Italy, Japan, Spain and Taiwan. Last year’s company sales reached $2m. Ms Bethlehem says she is expecting $5m in store sales this year as well as more than $6m in online sales over the next 18-36 months. Ms Bethlehem was born and raised in Addis Ababa, the daughter of a cook and an electrician. After gaining a degree in accounting from Unity University in 2001, she worked for three years in the apparel and leather sectors, gaining experience in production, design, marketing and sales. It was during these years, she says, that she developed a strong desire to focus her business skills on helping people from her community to escape poverty.

Footwear became her platform to harness the local artisanal workforce. With a $5,000 loan from her family, she opened a workshop in 2005 with five employees on her grandmother’s plot of land on the leafy edge of Addis Ababa.

For the first six years soleRebels produced shoes for large online fashion retailers such as Amazon, Endless, Whole Foods and Urban Outfitters. In 2011 Ms Bethlehem opened her first store in Addis Ababa. The next year, the company launched an outlet in Kaohsiung, Taiwan, followed by a shop in Vienna, Austria.

Ethiopia is today one of the fastest-growing economies in the world. Since 2004, its GDP has grown at an average of more than 10% a year, according to government figures. Conversely, its per capita income remains one of the world’s lowest and it is also one of the largest recipients of development aid, according to the OECD, an international think-tank.

Despite Ethiopia’s impressive economic growth, investors are grappling with a less impressive business environment. In the World Bank’s 2014 “Doing Business” survey, Ethiopia slipped one place to a lowly 125 out of 189 countries. In the bank’s “Ease of Starting a Business” index it fell four places to 166.

Graft, corruption, cronyism and a byzantine regulatory environment explain the country’s low ranking. Corruption permeates many of Ethiopia’s major institutions, with energy, tax, financial and transport sectors identified as having the highest levels of sleaze, according to a draft report released last January by the World Bank.

“Ethiopia suffers from high corruption risks because of the private sector’s dependence on the government,” says Ed Hobey, east Africa analyst for Africa Risk Consulting, a pan-African consultancy based in London and Nairobi. “Under Ethiopia’s state-led business and fiscal model, close contact with government officials is necessary for big businesses to operate successfully,” Mr Hobey explains. Local investors complain that the government continues to offer favourable treatment to certain ethnic groups. Ms Bethlehem is uncharacteristically silent when asked if the government was a help or a hindrance in starting and maintaining her business.

Ethiopia’s textile sector is the nation’s third-largest manufacturing industry after the food and beverage and leather industries, according to Bantihun Gessesse, spokes- man for the Ethiopian Textile Industry Development Institute. Over the last five years the government has offered many incentives to promote textile businesses, he adds.

“Ethiopia offers textile investors free factory rent, cheap electricity, duty free import of machinery and goods, favourable rules and regulations and cheap air freight,” Mr Bantihun says.

By adding value to raw materials and localising production, soleRebels is challenging the overwhelming propensity of African countries to export raw commodities that are manufactured into products overseas. This business ethos is in line with the Ethiopian government’s goal to transform the country to middle-income status by 2025 by boosting private investment, increasing trade and industrialising the agriculture-based economy.

As a successful retail chain from a developing country, soleRebels is an example of “how grassroots African companies can build successful global powerhouses literally from the ground up”, Ms Bethlehem boasts. For her efforts, CNN named her one of the “female entrepreneurs who changed the way we do business” in 2013 and Forbesmag- azine named her a woman to watch as part of its World’s 100 Most Powerful Women. The Schwab Foundation for Social Entrepreneurship named her as one of Africa’s five leading innovators at the 2012 World Economic Forum on Africa.

Matthew Newsome, a journalist based in Ethiopia, freelances for the BBC World Service and Radio France International. He has also written for the Guardian, the Observer and New Internationalist magazine.

Tough love

South Africa: drive into Africa

Many assume that South African businesses are a natural fit for other markets on the continent, but experience is showing otherwise

By Peter De Ionno

For South African business, driven in part by a stagnating domestic economy likely to return growth of 0.8% at best in 2016, a bigger future lies north of the Limpopo, where growth in sub-Saharan economies is expected to average 4.5%. The World Bank’s latest South African GDP growth prediction is the lowest since 2009. That too could tumble over the precipice if predicted downgrades by international ratings agencies come to pass, turning the country’s investment paper into junk and prompting the slump into a recession. No wonder then that South African business is spending billions looking for new markets. But Africa is not a single, unitary investment destination. It includes 55 countries, 1.2 billion people speaking 2,000 languages and dialects, and a jigsaw of markets and jurisdictions, each shaped by different histories and cultures with economies regulated by myriad regulations and customs.

South African businesses trekking north must learn to deal with business systems, mainly informal, and legal codes that are not only unfamiliar, but part of countries where the economic landscape can be destabilised by terrorism and ethnic conflict. Analysts have observed that the barriers and obstacles to trade between African countries, particularly at border crossings where ever-longer queues of trucks can be delayed for days on end, are markedly more difficult to surmount than connections to markets in developed countries. Overlaying these new markets with templates based on high-level models such as South Africa’s King Codes on governance, as well as strategies that have historically proven profitable in South Africa— with its unique demographics, wealth and high levels of development concentrated in the top 20%—just won’t work.

While all agree that best practice corporate governance is the only path to ensuring that Africa’s economy grows sustainably and meets the needs of its people, it is honoured more in the breach than in the observance in many parts of the continent. The big South African formal retailers have had varying levels of success with their frontier forays, which have seen them open some 1,500 stores. Shoprite is the frontrunner, having started beyond South Africa in 1995. It now operates more than 320 stores in 14 countries, which last year generated R19 billion ($1.21 billion) in sales, or 16.4% of the group’s turnover. Shoprite founder, Whitey Basson, declined to be interviewed for this article, but his online profile says he was motivated by a desire to win the approval of African leaders by enhancing food security in major African cities. The firm’s first store in Lusaka, Zambia, at first imported all merchandise including fresh produce, arousing local anger. Shoprite had to develop local suppliers of fresh goods where possible.

Now, some 80% of goods on Shoprite’s African shelves come from non-South African sources—another indication of the ease of external connections over intra- African trade, which the Industrial Development Corporation (IDC) says averaged only 10% between 2007 and 2012. An early venture into Egypt failed because of red tape and restrictive legislation, but the greatest impediment to African expansion—as experienced by other retailers too—was the lack of suitable sites for its stores. Shoprite’s solution has been to build its own shopping centres, with its supermarkets as the anchor. Shoprite Holdings is Africa’s largest retailer and is listed on both the Namibian and Zambian stock exchanges in addition to its main listing on the Johannesburg Stock Exchange (JSE). In the 12 months to June last year, Shoprite said it had invested R1.5 billion ($95.9 million) in its African expansion, opening another 30 supermarkets, mostly in Angola and Nigeria. That was more than double its R697 million ($44.57 million) South African expansion budget.

Another South African company, Woolworths, an upmarket retailer, operates more than 65 stores in 11 African countries. It took a knock in 2013, when it pulled out of Nigeria after its stores failed to connect with local customers. The lack of suitable shopping malls also crimped its expansion plans. Later, its R20 billion ($1.28 billion) acquisition of the David Jones department stores in Australia signalled a turn away from Africa. Sales on the continent account for about 5% of its business. Mr Price, a value fashion retailer, has done better, with about 9% of its business coming from its African expansion, notably in Ghana. Much of its success is attributed to its cash-based model in countries where credit financing is relatively undeveloped. Martyn Davies, managing director of Emerging Markets & Africa at Deloitte Frontier Advisory, offers a warning to businesses moving operations into Africa.

Although adherence to the highest standards of corporate governance remains best practice, there are many markets where that ideal may be impossible to achieve and pragmatism trumps all else, he says. Mr Davies, who has advised more than 30 of the JSE’s top 100 listed firms, says the fall of some African countries into states of “ungovernment” means that principles of good governance remain simply that: good ideas that cannot be applied in the face of lawlessness. In Nigeria, the local arm of South African-based telecommunications multinational, MTN Group, is facing the imposition of a record $15.6 billion (R245 billion) fine for failing to disconnect 5.1 million unregistered and improperly-registered SIM cards as required by the regulating Nigerian Communications Commission (NCC).

MTN, Africa’s biggest mobile operator, announced that its 2015 results had taken a 51% hit on its full-year profit, with its headline earnings per share (HEPS) falling to 746 cents as the company set aside R9.29 billion (about $590 million) towards its fine obligations. It would be easy to see this as a spectacular corporate governance failure and an own goal by MTN Nigeria. After all, MTN cannot claim ignorance that its failure to properly register SIM cards would render it liable for a penalty of Naira 200,000 (about $1,000) per unregistered subscriber. In March, two weeks before the Nigerian House of Representatives trebled the original fine imposed after MTN missed a mid-2015 deadline, President Muhammadu Buhari said MTN had cost people their lives, and fuelled the Boko Haram insurgency in north-eastern Nigeria by failing to disconnect the unregistered users.

MTN did not respond to requests for comment. Mr Davies says that MTN had no choice but to accept being penalised for breaching the regulations, although the size of the fine makes the case unique. “In…Nigeria there are a lot of arbitrary impositions on business. Companies like MTN are simply seen as cash cows to be milked.” With the economy in decline, this kind of pressure on business will only increase. He also questions whether anybody can run a business in Nigeria or Angola and maintain the highest standards of corporate governance, while navigating the day-to-day demands of rampant corruption. “Standards of governance must be set by the government of a particular country, but unless they are enforced by strong internal independent institutions they won’t mean very much,” says Mr Davies. The kinds of challenges facing businesses in such countries range from impositions on logistics that can hold to ransom imports of equipment and stock deliveries, to the more personal and visceral, where executives or even their families are caught up in roadblocks and the payment of a bribe means the difference between safe passage and detention, or worse.

Every business should aim to adhere to the highest ethical standards, he says, while upholding the laws in all the jurisdictions in which they operate and maintaining responsible and transparent relations with their customers, suppliers, workers and communities. In some countries, however, this remains impossible. “Most foreign business operators will find that pragmatism is the best policy to deal with difficult local conditions if it becomes a matter of survival”, he suggests. Mr Davies adds that South Africa’s reputation as a beacon of corporate governance based on the adoption of the King Codes—which outline principles of leadership, sustainability and corporate citizenship—as well as high international regard for the JSE and the country’s well-regulated, technically advanced banking sector, is fading. “Issues of state capture point to cracks in our government’s commitment to good governance.

As in other countries, difficult economic times go together with standards slipping,” he says. Pressed to identify the best and worst countries for across-the-board adherence to corporate governance principles, Mr Davies says South Africa still leads the continent, with Botswana, Mauritius, Rwanda and Kenya following. On the downside, he lists Nigeria, Chad, Niger, Sudan, Angola and Congo as countries where the challenges and failures in the application of best practice corporate governance, all too frequently, outweigh the wins.

Peter de Ionno is a Johannesburg-based journalist. He was the deputy editor of Business Report, and has written for The Star, Sunday Times, City Press and contributed to numerous magazines.

Twisty tales

Africa: the data

The Africa Rising narrative is an example of how a number or a small set of statistics can be both informative and misleading

By Alfred Mthimkhulu

What does the data tell us? This can be a very encouraging question in a business meeting. It can mean that in principle, whatever was being discussed is worth further investigation: “Great, let’s just make sure we’re right!” On the other hand, it can be an understated expression of doubt: “This thing won’t work!” In essence, both interpretations wish that the data will confirm expectations. But it is also possible that the question is asked with a genuine desire to gain more knowledge so as to make an informed decision based on the results from data analysis. So the question, “What does the data tell us?” is, in most instances, a loaded one, and must therefore be addressed with care. This article reviews how some data analyses and interpretations have influenced the socioeconomic development narratives on Africa within the past decade.

Since analyses on economic development usually cover many variables—such as the quality of health and education, economic growth and political stability, among many others—the article will focus only on population demographics and quality of infrastructure. Africa’s demographics, especially its youthful population, are often cited as the foremost reasons for why the continent is an attractive investment destination. On the other hand, Africa’s infrastructure is mentioned as one of the main reasons why the continent struggles to attract investment and why it is difficult to do business in the continent. The Africa Rising narrative which has dominated media in recent years deeply engages both the population demographic and infrastructure issues, thus making the narrative a useful reference to anchor this article’s discussion.

Remarks by Christine Lagarde, the managing director of the IMF, in Maputo in May 2014 capture the essence of the Africa Rising narrative: “Sub-Saharan Africa is clearly taking off—growing strongly and steadily for nearly two decades and showing a remarkable resilience in the face of the global financial crisis.” However, it was perhaps Vijay Mahajan’s book, “How 900m African Consumers Offer More Than You Might Think” (2009), which heralded the dawn of the Africa Rising narrative in the media. In the preface to the book Mahajan wrote, “I have to admit that until a few years ago, I was guilty of overlooking Africa…Like most scholars in the developed world…I saw Africa more as a charity case than a market opportunity. I was wrong, and this book is here to set the record straight.”

In a recent report in the Financial Times, Vijay Mahajan reveals that inasmuch as he still stands by his bullish outlook on Africa, the title of his book was a “concoction” by the publisher. The catchy part of the title is arguably the number: 900 million; in 2015 this had grown to just over a billion. What business would let such a huge market go untapped? And so the Africa Rising narrative caught on. But the figure of 900 million people can be as misleading as it is attractive to investors. A business exploring new markets is not interested in just the total population of a territory but the population’s capacity to pay for goods and services. In 2009, when Vijay Mahajan’s book was published, closer to zero than 1% of the approximately one million Mauritians were living on less than the then-poverty line of $1.25 per day.

In the Democratic Republic of Congo, with a population of 62 million and the second largest country by land area in the continent, about nine in ten people, or 88% of the population, lived below the poverty line. Such realities of poverty could have motivated economists at the African Development Bank (AfDB) to estimate the proportion of the middle class in the then 900 million Africans. Unlike those living below the poverty line, the middle class, by definition, has money to spend. Loosely defining the middle class as people living on between $2 and $20 per day, the AfDB economists arrived at 355 million people or a third of the total population as being middle class. These 355 million people could be considered a viable consumer market to target. The rest would require support from governments and other humanitarian efforts. But then other researchers countered the AfDB economists’ rather loose definition of the middle class.

They tightened it up a bit and came up with figures ranging from 15 to 18 million Africans qualifying as middle class. These numbers are a far cry from the ideal consumer market being the same as the total population. Nevertheless, these lower figures are gaining some credibility as some multinational businesses scale-down operations in some African markets because of thinner-than-expected trading volumes. Estimates of the size of Africa’s middle class are not only useful for gauging the purchasing power of the African consumers. The size of the middle class is also indicative of the social and political stability of a country, since historical evidence from other parts of the world suggest that the middle class is the backbone of civil society and that civil society is a necessary constituent for an enduring democracy. The larger the civil society, the better for democracy and good governance.

In sum, although equating total population to the overall consumer market in Africa may have been inherently misleading, subsequent analyses have generated very informative debates and increased our understanding of Africa’s growth trajectories. An example is Morten Jerven’s book “Africa: Why Economists Get it Wrong”—a critique of how economists have assessed Africa’s economic growth over the decades. He argues that Africa has experienced growth spurts before, and that the recently-observed high growth rates referred to by the Africa Rising narrative are “to some extent old news” driven quite significantly by the commodities boom. Another important aspect that has been raised by some economists is the need to be more curious about economic productivity of each country than whether or not Africa is rising.

Economists such as Robert Kappel, in a paper titled “Africa: neither hopeless nor rising”, seek to determine and understand attributes of countries that seem to explain higher productivity, as well as whether countries lacking such attributes can be assisted. This approach was echoed by Christine Lagarde at the Maputo Africa Rising Conference, where she noted that the “tide of growth” had not lifted all countries. This makes it important to understand why some countries are lagging. Infrastructure is one of the main areas of concern when discussing investing in Africa and is often cited as an explanation for performance differentials between countries. Let us suppose that the total population of a country is the only useful variable for attracting investment, as in the 900 million consumer market conception. In that case, countries listed in the table below would be of particular interest, given that they have some of the largest populations in Africa.

The table lists scores on the quality of electricity supply and the overall infrastructure, where the best possible score is seven. Nigeria, which is the most populous country in the continent, has a score of 1.4 out of a possible 7 on electricity and 2.4 for the overall infrastructure. Morocco has some of the best ratings on infrastructure in the continent but even then, its scores well below 7.

Source: World Economic Forum; Africa Survey, GGA

These infrastructure deficits present significant investment opportunities in the sector. As a study by the consulting firm McKinsey & Company estimates, Africa must spend about $35 billion per annum on electricity infrastructure to meet demand by 2040. But how we understand this information, and in what context, can shape the way we use it. As we have seen, the continent’s youthful population is often highlighted as a potential strength, but it is also true that Africa’s high levels of youth unemployment are worrying. Taken together, the continent’s demographics and the infrastructure deficits make a strong case for large and labour intensive infrastructure projects that can offer opportunities and impart skills to the youth. Such projects can unlock Africa’s next growth phase in and at the same time, counter the continent’s potentially explosive issue of youth unemployment.

Alfred MthimkHulu leads the quantitative analysis function at GGA. A former investment banker, Alfred received his PhD from the University of Stellenbosch Business School.

Winning Nigeria’s corruption war requires unconventional steps

  • Nigeria needs to focus attention on procedural anti-corruption, embedded in the impersonal application of the law, institution-building, and matching of appropriate expertise to functions across the public oversight agencies.
  • The statutory anti-graft bodies require a root and branch overhaul to strengthen their mandates and capacity. These include the Auditor-General and Ombudsman, and the Revenue Mobilisation Allocation and Fiscal Commission among others.
  • Also, revamping the judiciary is key to set correct incentives and combat impunity through exemplary, regionally-balanced prosecution of high-level corrupt officials, past and present.
  • Nigeria’s leader should emulate African best practices such as the Ghanaian president’s choice of a respected opposition figure to head Ghana’s anti-graft agency.
  • Sustained citizen engagement and pressure is the bedrock of effective anti-corruption, with constant vigilance over functionaries untainted by the ethnic and other divisive distractions.

Nigeria is grappling with both historic and recently self-inflicted difficulties in its anti-corruption war. Stumbling blocks have proliferated to thwart the effectiveness of government’s efforts to revamp institutions, tackle mismanagement and wilful theft from the treasury. The operational challenges span institutional weakness, defective personnel, disregard for due-process and a proclivity to create media spectacle to the neglect of serious anti-graft investigations. There exist legion political failings too, such as the government’s lack of political will, questionable sincerity and the naked politicisation which has created sacred cows whilst damaging President Buhari’s credibility. Analysts will likely look back in a decade from now and adjudge his floundering anti-corruption drive as a case-study in how not to combat graft.

Slippery slope

The immediate spur for this article is the N1.4tn, which according to Nigeria’s junior oil minister, is now being spent annually on oil subsidy outside the regular budget. Essentially, the difference between the N171 cost of importing petrol per litre and the regulated N145 pump price is being funded from the accounts of the Nigerian National Petroleum Company (NNPC) as “under recovery”. It is a regrettable moved away from a not very transparent subsidy system towards one that is even more opaque in the extreme. The NNPC spends what is effectively billions of dollars on petrol subsidy, without any detailed account being rendered publicly or the underlying mechanisms transparently explained.

Little wonder that the NNPC has retraced its steps from its widely commended move in 2016 to publish monthly accounts of its financial position. With much of the earmarked subsidy disappearing into private pockets in years past, Nigeria now has even less of a chance at ensuring accountability with the present arrangement. The extant NNPC subsidy programme and the obfuscation over how it is financed away from legislative oversight is the biggest economic corruption scandal that Nigeria has seen in the past three years. And that is leaving aside the currency subsidy in the form of the N285 concessional rate at which the NNPC accesses dollars from the central bank for fuel importation.

Widespread apathy on the part of citizens has not helped to create effective pressure on public functionaries. Nigerians must be more willing to transcend the ethnic and other distractions better to maintain effective vigilance over politicians and bureaucrats. One example is the March 2018 revelation by Senator Shehu Sanni of the unappropriated N13.5m paid to each Nigerian senator monthly and a slightly lesser sum given to those in the lower legislative house as “running expenses”. This was just one in a series of scandals that should normally cause outrage. Nigerians though have failed consistently to leverage such opportunities for mass action to drive change. The bar for anti-corruption is set so low in Nigeria that citizens willingly credit Buhari’s mediocre achievement on graft.

Lacking substance

The logical and procedural flaws bedevilling Nigeria’s battle against graft are legion and threaten to drown the nation. The Buhari government’s lack of consistent attention to strengthening procedural accountability remains all-too-central to the difficulty dogging fiscal administration and reform. Changing this will be vital to improve our perception in the Transparency International ranking. For a government that prides itself on its anticorruption stance, the “invisible” subsidy represents a regrettable step backwards in terms of embedding transparency in the workings of government. Efforts to recover loots or to name and shame perpetrators are necessary. More important though is the reshaping of institutions and fine-tuning of processes throughout government to make it difficult to divert or intentionally mismanage public funds in the first place.

Nigeria’s government recently mandated the anti-corruption agencies to investigate violations of the Public Procurement Act of 2007. Many observers doubt the sincerity or even the political neutrality of this sudden show of interest in regularising procurement. It normally should be a routine process overseen by statutory bodies such as the Auditor-General’s office. The latter, however, has been of marginal relevance even as Nigerians agitate unsuccessfully for the public disclosure of the emolument package of national lawmakers. Neither the demand side petitions using Nigeria’s Freedom of Information Act of 2011 nor the supply side relying on the discretion of the Auditor-General’s office have led to this information being published. The Public Complaints Commission (the Ombudsman) remains moribund, which arguably suits errant functionaries. Similarly, the limitations of the Revenue Mobilisation Allocation and Fiscal Commission Board have been evident through episodes such as the Senator Shehu Sanni revelation on compensations not earmarked but illegally taken by Nigerian lawmakers.

The dominant incentive pattern determines the morality of a society.  Alleged mismanagement of Nigeria’s treasury is left unpunished. From the outgone president, Goodluck Jonathan, to his predecessors, all remain immune. It is inconceivable that Nigeria could deter would-be offenders when current and past misdeeds are papered over. A bold anti-corruption leader would take risks in seeking exemplary prosecutions that touch errant public office holders from all of Nigeria’s geopolitical zones. That surely would give the lie to politicians who have always exploited our dysfunctionality and ethnic and religious fractiousness to allege that anti-corruption prosecutions are sectional or biased. Brazil’s former president Lula recently began a twelve year jail term for corruption. Jacob Zuma, South Africa’s immediate past president, is being swiftly brought to justice. In Nigeria, those who pocketed multiples of Zuma’s corruption proceeds still walk free.

False starts

Weaknesses, especially procedural ones, have been evident in Buhari’s anti-corruption style from the start. He began brightly by implementing the treasury single account initiative introduced by his predecessor. His government then controversially created multiple windows for foreign exchange. This remains one of the biggest lure to unearned income and large-scale arbitrage ever seen in Nigeria. The damage is only being partly mitigated by the recently introduced and more transparent investors and exporters segment. In legislative terms, the idea of a special anti-corruption court has been mooted but its lethargic consideration by our lawmakers contrasts sharply with their enthusiastic pursuit of the death sentence for kidnapping and hate speech crimes leading to the loss of victims’ lives.

The duplicity in Buhari’s anti-graft fight are littered all around for objective observers to see. This covers cases such as that of Babachir Lawal, former scribe to the government, and his alleged diversion of N220 million intended for those displaced by Boko Haram in the northeast. Ambassador Ayo Oke, former head of the National Intelligence Agency, allegedly hid $43million of government’s fund in a Lagos apartment. The National Health Insurance Scheme’s boss, Professor Usman Yusuf, was reinstated despite being under investigation for fraud involving N919 million. Abdulrasheed Maina, who escaped being arrested for a N2.7 billion pension scam, was brazenly reinstated into the civil service with a promotion. Although directives have been given by President Buhari that all personalities involved in the cases should be investigated, the delayed action from the top came mostly after public pressure.

For those seeking serious examples in prosecuting graft, the recent announcement of a partial and politicised list of so called treasury looters by Nigeria’s information minister is unlikely to inspire much confidence. By contrast, Ghana’s president set a good example in his surprising appointment of Martin Amidu, a respected and uncompromising anti-corruption crusader from the rank of the country’s opposition, to head his new anti-graft agency. With this appointment, Ghana’s president won the public over, sending out an unequivocal message about the genuineness of his effort. A few public figures once considered untouchable from both side of Ghana’s great political divide have since been hauled before the special courts for corruption.

Ghana’s achievement here is not a one-off. The revelation in 2015 by a brave investigator, Anas Aremeyaw Anas, who secretly filmed justices receiving bribes, led to the jailing and the premature termination of the career of several judicial functionaries. Nigeria, by contrast, was lethargic in dealing with revelation of justices stashing away corruptly obtained funds, including in a bathroom in one of the cases. The best that Nigerians got was obfuscation and a rare guard action of the sort that has effectively left disciplinary procedures for errant justices in the hand of the National Judicial Council. The body itself is perceived by many to be far from neutral and it can, in any case, only dismiss judicial officers. Its power does not extend to meting out sentences for wrong doers. What incentive patterns are being created when incidents of corruption involving judges cannot be prosecuted in normal courts presided over by one of their own peers but hushed away within disciplinary procedures?

Accepting the obvious

After clashing over the EFCC head, Ibrahim Magu, Nigeria’s president and lawmakers began an economically damaging standoff, which prevented the Central Bank’s monetary policy committee from meeting for months as lawmakers refused to conduct confirmation hearings for nominees to a slew of public offices. In the national interest, why didn’t the squabbling political actors save face by requesting the secondment of a top anti-corruption technocrats from the UK to replace Magu?

The UK’s Serious Fraud Office has been almost exclusively in charge of the corruption cases successfully pursued against Nigerian functionaries in the past two decades. British prosecutors helped to nail Nigerian politicians from Alameseigha to Dariye, through Ibori to Deizani Alison-Madueke. The latter’s case is still ongoing in London. A top level international hire to lead the EFCC will inspire younger Nigerian prosecutors to high professionalism. Exposure to a different managerial culture may also encourage them to prioritise professional investigation over the useless media trials.

Defects in the EFCC’s operational culture reflects the background of its heads to date. From Nuhu Ribadu to Farida Waziri all the way to Ibrahim Lamorde and Ibrahim Magu, each has been a career police officer. Leading the EFCC effectively requires skillsets beyond the core policing functions. Serious damages have been incurred as government unwisely side-steps the rule of law. Examples include the continuing detention of Sambo Dasuki, former National Security Advisor, in disregard of court orders. Nothing is more injurious to Nigeria’s bid to instil discipline, probity and accountability than a government which undermines the law in its ill-conceived and incompetent pursuit of justice.

A foreign EFCC head will operate in the full glare of the international community, likely enhancing their immunity from political pressure, manipulation or even blackmail. This is not to suggest that Nigeria lacks suitably qualified citizens who can do the job or that a foreign recruit will approximate a saint. Rather, it is a call for the closing of the circle, to welcome direct and constructive inputs from better-equipped partners that have given Nigeria copious anti-corruption support in recent years. UK prosecutors are especially well-positioned with the unrivalled wealth of financial intelligence they possess on corrupt Nigerian individuals. If Buhari dared, he might find in a foreign anti-corruption czar an invaluable counsel that could boost his ostensible bid to save Nigeria from corruption. That might also strike fear into a few corrupt figures in high places. In the meantime, Nigeria’s future success is increasingly less certain as its self-serving elites pay lip-service to anti-corruption whilst immune from popular pressure.

* Dr. Ola Oladiran Ola Bello, holds MPhil and PhD degrees from Cambridge University and is the Executive Director of Good Governance Africa Nigeria (GGA). @drolabello. Copyright©2018 GGA Nigeria. All rights reserved. Click here to download


Revitalising the Local Government System for Development in Nigeria

  • State governments should be deprived of the constitutional powers to unilaterally dissolve elected council officials, divert council revenues and/or illegally deduct funds meant for local councils.
  • Implement a 3-tier governance model that is properly backed with unambiguous laws to ensure non-interference but cooperation and collaboration between the various levels.
  • Explore the earlier practiced regional system, perhaps with a little tweak in its structure and operations, and make it relevant to the current context.
  • Frame local government actions in terms of the public choice theory to stimulate more experimentation, true competition, innovation and better citizens’ participation and inclusion.
  • Make the conditions of service for local councils employees more attractive and at par with those at the state level so that councils can attract top professionals and not be seen as mere administrative out-posts of the state civil service.
  • Replicate the anti-corruption bodies that exist at the federal and state levels within local governments to entrench accountability and strengthen anti-graft efforts at the local levels.

Nigeria has six geopolitical zones with a total of 774 local government areas (LGAs). Contrary to what obtains in most federal system, Nigeria’s 774 LGAs are listed in the Nigerian 1999 constitution. This renders the state governments powerless to abolish or create new ones without recourse to the National Assembly. The local government in a majority of contexts exists as the lowest tier of governments that act within powers delegated to it constitutionally or by directives of a higher level of government. It is meant to set the agenda and direction for growth and development in its municipality through the long-term planning and effective use of resources to benefit citizens. The LGAs are constitutionally responsible for deciding the needs of the community and providing services such as primary health care, waste disposal, creation and maintenance of markets, park lands and other recreational sites, etc.
Whereas the lines of authority and roles for the three tiers of government are clear, in practice, the local government has over the years been dominated by the state government. This has rendered it ineffective in discharging its constitutional roles. As far back as 1966, following the first military coup, all local government councils were abolished and sole administrators were appointed. This laid the foundation for the perennial interference in the affairs of local government by higher levels of government. The autocratic position of sole administratorship, which was introduced to local governance by the military, did not allow for participation by the people. Consultations and the building of consensus were jettisoned and local autonomy was systematically eroded.igeria has six geopolitical zones with a total of 774 local government areas (LGAs). Contrary to what obtains in most federal system, Nigeria’s 774 LGAs are listed in the Nigerian 1999 constitution. This renders the state governments powerless to abolish or create new ones without recourse to the National Assembly. The local government in a majority of contexts exists as the lowest tier of governments that act within powers delegated to it constitutionally or by directives of a higher level of government. It is meant to set the agenda and direction for growth and development in its municipality through the long-term planning and effective use of resources to benefit citizens. The LGAs are constitutionally responsible for deciding the needs of the community and providing services such as primary health care, waste disposal, creation and maintenance of markets, park lands and other recreational sites, etc.

Protracted Reform

The local government system has witnessed various “reforms” under the four civilian republics: First republic (1960-66), Second Republic (1979-83), Third Republic (1990-92) and the Fourth republic (1999 till date). After the Nigerian civil war (1967-70), major reforms of the local government system in Nigeria were carried out and mostly in an undemocratic fashion. For example, according to one of the military-imposed guidelines, 25 percent of members of the council were to be nominated by the state military governor. In addition, the election of the chairman of the council was subject to ratification by the state military governor. In spite of the aforesaid, the 1976 reforms remained arguably the most impactful in the history of local government reforms. The federal military government saw the need to stabilize and rationalize local governance and developed a uniform local government model for the whole country.

Decentralization was inevitable in the wake of the reforms as some significant functions of state governments were devolved to local councils to harness local resources for development. As the third tier of government, the local administrations received statutory grants from federal and state governments, and is expected to serve as development agent especially in rural areas. The federal and state governments made efforts at other reforms targeted at making development planning and service delivery more responsive to local needs. Such reforms improved participation of citizens at the grass-roots and the cultivation of local leadership. This also enabled a two-way channel of communication between local communities and government at both state and federal levels.

Constitutional albatross

With the passage of time, successive governments have continued to introduce other reforms with wide-reaching impact on the local government system. Some of the tweaks served to weaken the system. For example, section 7 of the 1979 constitution provided for a democratically elected local government councils, but this constitutional provision was neglected by the Shehu Shagari regime (1979-1983). Elections were not held, with sole administrators instead being appointed.

Likewise, between 1983 and 1984, the Muhammadu Buhari military regime continued with the system of appointing sole administrators. For the Ibrahim Babangida regime (1985-1993), enhancing the autonomy of the local government took centre-stage. The Ministry of Local Government was abolished and the executive and legislative arms were established in local councils. Federal allocations were also paid directly to local government without passing through the state governments. The regime also increased local government statutory allocation from 15 percent to 20 percent.

The 1999 constitution limited the tenure of political office holders at federal and state levels to four years. It did not make provisions for the tenure of local government office holders. The constitution’s concurrent legislative list gave the National Assembly the power to make laws “with respect to the registration of voters and the procedure regulating elections to a local government council.” The same constitution empowered the State Houses of Assembly to make “laws with respect to election to a local government council”. These contradictions are often exploited at will to circumscribe the local government system.

The 1999 Constitution of the Federal Republic of Nigeria does not in any section provide for reform procedures in the local government structure. The implication of this is that any move toward reform must proceed in the form of a National Assembly bill. In his book, Politics and Administration in Nigeria, Prof Ladipo Adamolekun, observed that “the intergovernmental relations between the Federal, state and local government has been characterized by both co-operation and conflict; but it is conflict that has predominated State-local Government relation”. He averred further that: “some state governments have been known to hijack and divert Federal government’s allocation to local governments. This conflictual relationship often put (sic) a seal on development at the local level as the councils become a battle ground for political gladiators”.

The States vs LGAs

In 2003, the forum of the 36 state governors in order to gain total control of the local councils in their respective states sought a constitutional amendment empowering governors to appoint council chairmen and councillors. This desire later led to the setting up of a technical committee on the review of the structure of local government councils in Nigeria. A traditional ruler, Alhaji Umaru Sanda Ndayako (the Etsu of Nupe), was appointed chairman of the committee. Other members of the committee were drawn from the six geopolitical zones, the Senate, the House of Representatives and women and youth groups. The committee was mandated to examine the problem of inefficiency and high cost of governance with a view to reducing the costs and waste at the three tiers of government. It also reviewed the performance of local governments between the year 1999 and 2002 and considered the desirability or otherwise of retaining the local government as the third tier of government. It was also mandated to consider, among other options, the adoption of a modified version of the pre-1976 local government system; examine the high cost of electioneering campaign in the country and consider among other options, whether political parties, rather than individual office seekers, should canvass for votes in elections. It was to consider also other matters which in the opinion of the technical committee are germane to the goal of efficient governance structure in Nigeria.

Reform was undoubtedly needed in the areas identified. However, it was not the big issue at the local level. In the analysis of the terms of reference given to the committee, the problems were not unique to local government. In simple terms, the conquering of the third tier of government by the governors was the ultimate aim. Curiously, a traditional ruler headed the committee which was deemed a potential conflict of interest. Unrestrained exercise of powers by traditional rulers and the appointment of officials were the main features of the pre-1976 model being canvassed for by the governors. This runs contrary to the promotion of participation of ordinary citizens in local governance.

The challenges of poor financing and limited revenue, limited autonomy, poor political leadership, lack of basic social amenities such as electricity, transport and telecommunication facilities have hobbled governance at the grassroots. In addition to these is the inexperienced and unqualified personnel, corruption and misappropriation of funds, lack of accountability and transparency, lack of local plans and weak programming capacity. Also, political instability and deficient good governance models have all compounded the effective running of local governments. These are challenges holding down the system, which need to be resolved in order to revitalize it for effective service delivery.


Respite on the way?

The most recent attempt at local government reform was made by the 8th National Assembly. The Fourth Alteration Bill, No. 6, 2017, aimed at strengthening local government administration in Nigeria by guaranteeing its democratic existence, funding, and tenure of local councils. The reform moves by the 8th assembly is not unconnected with the failure to observe the principle of separation of powers between the state and the local government. The role of the National Assembly in this matter is clearly stated in section 7 (6) (a) of the constitution which urges the National Assembly to “make provisions for statutory allocation of public revenue to local councils of the federation”. This perhaps is the most audacious attempt to revive and make relevant the local governments. The bill, once passed into law and effectively implemented, will allow the local government to live up to its roles as enshrined in the amended 1999 constitution. It becomes mandatory that the federal and state governments abide by the constitutional provision for the political and economic autonomy of the local government.

The debate on the functionality of our federal system should be on the front burners in the context of which tier of government is closest to the masses to ensure maximum efficiency. Constitutionally, Nigeria has 3 tiers of government but in practise, two – the federal and the state have domineering powers. Working in collaboration, the federal and state governments increasingly take more power and roles in the concurrent list in addition to the federal government’s own exclusive list. The two thereby leave little or no breathing space for the local government. At present, many local governments are merely provided funds with which to pay salaries with very little substantive governance at that level.

Revitalising the local government system

The challenges above are cogs in the wheels of the efficient running of local government in Nigeria. Experts have lent their voices to the fact that the local government as a third tier of government should not be scrapped or reduced to a mere state appendage. Rather, it should be strengthened and democratized as envisioned in the constitution. It is pertinent to ensure that its officials are always elected and not appointed or selected. It must be seen as the bedrock of citizens’ participation in governance.

While interference from the federal government has been very minimal, the state governments have consistently encroached on the exclusive powers of the local government council. This interference and overbearing attitude of the state government is condoned within the sphere of contradictory rules, financial oversight and supervisory powers granted by the constitution. The lopsided intergovernmental relationships that exist between the states and local government councils is rarely seen in the federal-state relationship except in extreme conflict situations like the stand-off between Lagos State and the Federal government in 2003 over the creation of additional local councils in the state. In order to revitalize the local government system, it is imperative that state governments be deprived of the powers to unilaterally dissolve elected councils, divert their revenues and/or illegally deduct local council funds. This will boost stability and professionalism in the administration of the councils and enhance service delivery. As with the other levels of government, there is a need to put in place mechanism to promote transparency and accountability at the local level too. Pursuant to this, it will be crucial to strengthen the existing institutions of accountability within the councils and localize other anti-graft bodies that exit at the federal and state levels.

Time to act

The time may be ripe to try out a modified models that will impact at the local level with more devolution of powers. It may be worthwhile to explore the earlier practiced regional system, perhaps with a little tweak to make it relevant to the current context. This will drastically reduce the clamour to grab power at the centre. If more resources corresponding to the devolved powers are made available to the local councils, it will hopefully attract credible individuals with the right skills to the local level. It is also a way of ensuring that those who go to the centre as representatives have been locally tested, especially with regards to trust and accountability in the management of funds.

The local councils should not be seen as a dumping ground for unqualified and unskilled individuals nor be used as ‘reward’ to party and political allies. Rather, the training and equipping of the manpower should be taken serious.

There should be a deliberate attempt to introduce fresh and dynamic experts into local administration by providing the enabling environment that will attract such individuals. The conditions of service for local government council employees should be made attractive and at par with those at the state level. This will raise the stakes for the councils as a political institution and service provider at the local level. Being seen heretofore as administrative out-posts or appendages of the state civil service has not helped. The bold path to putting life back into the local government system is to follow the public choice theory. This advocates placing governmental actions and expenditures at the lowest possible levels of government. The idea is that the local government would provide more experimentation, true competition and innovation. Citizens at the local level could have better access to appropriate information with which they could process. For example, they can readily compare the levels of taxation to the quality of services they received. Thus, they could then reject inefficient or unresponsive governments by exercising their voting rights on budgets, voting out wasteful spenders or even moving elsewhere or not moving into the local area at all. In essence this encourages better participation and inclusion of the citizens. Likewise, the citizens must be organized at the local level through civil society actions where they can be empowered to hold elected officials accountable.


Implementing a new three-tier model properly backed up with unambiguous laws to ensure non-interference but cooperation and collaboration will put governance at the local level back on its feet. With adequate access to resources, local governments can also speed up development across the nation. The various laws from which the federal government draws its powers to control the finances of local governments would need to be reviewed and all the clauses that have hampered local government administrators removed. This will create a breathing space for local councils to function and drive rapid and meaningful development at the grassroots. It must be understood that ineffectiveness and inefficiency at the local level will eventually lead to pressure, economic and political, on the state and federal levels.

*’Fisayo Alo is a Senior Researcher at Good Governance Africa Nigeria Centre. Copyright©2018 NGI Vol 3, No 4. GGA Nigeria. All rights reserved. Click here to download