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Nigeria’s Curious Case of Fuel Scarcity

Over the last few weeks, Nigerians have again been faced with an age old occurrence, commonly dubbed fuel scarcity. This is a national phenomenon that has recurred over and again. There are numerous and quite memorable accounts of people taking turns to spend days and nights at petrol stations, on endless queues, in the attempt to buy fuel for use. Many have honed additional driving skills learning to maneuver their cars into the smallest available spaces, outsmarting sleeping drivers, all in a bid to buy tens of liters of premium motor spirit, petrol. It is appalling, having this particular problem persist over the years, same manner, similar process, typical triggers, without a true solution. Daily national demand for PMS continues to be an educated guess and has consistently ranged between 35 – 40 million liters in the recent past. In basic economics, scarcity arises from a limited availability or supply of resources compared with the attendant demand for the same. So what suddenly truncated national PMS supply?  For a country whose citizens depend squarely on petrol (Premium Motor Spirit) as fuel to power their vehicles and household generators, why is the supply chain periodically challenged?

It will be odd to hear a crop farmer complain of hunger when his harvest is obviously full, except his produce is being constantly pilfered under his very eyes, or the infrastructure required to process the crops into valuable food is unavailable, dilapidated or out dated. However, this is a clear picture of the national situation. Sitting on such massive hydrocarbon reserves, we have been unable to effectively operate and manage the infrastructure to harness value accordingly. The four refineries with a total refining capacity of 445,000bpd operated at an average capacity utilization of approx. 28% YTD Oct 2013 – processing 124,600bpd of crude able to yield approx. 10 million liters PMS/day.

YTD

Source: http://www.nnpcgroup.com/PublicRelations/OilandGasStatistics/MPIFigures/MonthlyPetroleum/tabid/130/FolderID/148/Default.aspx

Comparing this local supply to the anticipated demand of 40m liters, there is a significant volume left to supply. Where an organic solution to production fails, an inorganic intervention may suffice. As such, the nation constantly needs to import the shortfall of products to satisfy demand. When importation is impaired, delayed or truncated for the slightest reason, scarcity results. According to the head of NUPENG’s tanker drivers, importers got their permits for the first quarter only last week and this has created a shortfall in supply. Why should import permits for 1Q14 be issued at the end of February, when two-thirds of the quarter is already gone? Consequently, fuel depots across the country have been emptying on the go, and most ran out of product supplies by mid-February, according to the union head. As at January, the Petroleum Products Pricing Regulatory Agency (PPPRA) had shortlisted 32 marketing companies for importing petroleum products including NNPC (with the highest import allocation) and other major marketers. Yet, there is a shortfall supply spanning February to March.

What kind of planning results in this? Who is responsible to issue import permits? Were import permits really delayed? Why were they delayed? What happened to the principles of demand forecasting and fulfillment?  Is there some unseen angle to the story? The solution to this scarcity is not seen in the reactive measure of inspecting petrol stations to apprehend those selling above the stipulated pump price. Such opportunistic behavior is only typical of the market, where price goes up in the face of rising demand and dwindling supply, with businesses attempting to maximize an economic rent while they can. The root cause is a supply side issue. Cause and effect – Eliminate the cause, eradicate the effect. Supply! Supply! Supply!

Again, one of the core concepts of change management within any industry is communication and involvement. In the execution of projects and/or daily operations, changes are bound to occur to typical routine processes, whether anticipated or not. What makes the difference for the manager or leader is the ability, skill and will to proactively communicate change effectively to the workforce and affected stakeholders, keeping them abreast of the what, the why, the how and when of changes. Sometimes, our government agencies need to take a cue from this. Be upfront about situations irrespective of causes. Is it such an arduous task to make an unambiguous statement on national news, clearly keeping the nation abreast of when and why there is fuel scarcity, what exactly the mitigation interventions are in the short term, and what the long term solutions to prevent its further recurrence are? Unfortunately, this is a country where information asymmetry is pretty much the norm.

Is the leadership of the nation pleased to have its workforce wake up early Monday morning, with worries of how to get fuel to drive to work instead of applying same ‘gray matter’ to develop breakthrough ideas that can foster economic growth? Will we grow our GDP (leave rebasing aside for a bit) when majority of the labor force spends most of their productive time running up and about town searching for petrol stations selling fuel? Or commuters stranded at bus stops for hours because even the commercial transport system is paralyzed due to the same situation? Or researchers and technocrats spending their time at fuel queues when they should be churning out solutions and formulating policies?

Someone, somewhere, needs to fix this recurring issue once and for all! Yet, given the foregoing, one wonders when import permits for the second quarter will be granted! Scarcity continua?

2013 YTD Refinery Capacity Utilization

An overview of national refineries performance through 2013. Available data is limited to Jan – Jun 2013

2013 chart

2013 table

Source:http://www.nnpcgroup.com

2012 YTD Refinery Capacity Utilization

An overview of national refineries performance through 2012.

2012 chart

2012 table

Source:http://www.nnpcgroup.com

THE FEDERAL LEGISLATIVE – OF MONEY, OF VALUE

This post was first published via The Scoop. See link here: The ScoopNg

Nigeria’s nascent democracy, as commonly though inappropriately described, has been laden with several opacities and ambiguities through its 14 years of existence. Apart from the deep mysteries of how fuel subsidy is estimated and paid, how much the Federal Government is worth and whether the country is actually ‘broke’ or not, one major uncertainty has been around remuneration for Federal Legislators. Simply put, how much are Nigerian Senators and Representatives paid?

The economic concept of money provides the understanding that it is what buyers/sellers give in exchange for goods and services. As such, money is exchanged for value! Where value is perceived to be of high levels, a commensurate measure of money is expected to be exchanged for same. So, prior to debating the issue of transparency around legislative remuneration, it must be ascertained that the office of a federal senator and/or representative provides value to the extent that money may be given in exchange for it at the end of a fiscal month/year. There are 109 senators and 360 representatives duly elected/selected to serve the people of Nigeria. These legislators were elected or re-elected in 2011 and have served for at least 2 years to date. What has been their value to the people they represent? What has each senator and/or rep done to make life better for the citizens and areas they represent? What they say in response to this is one thing, and what the people confirm to be true is another. How much value have they added to the Nigerian experience? This concept of value is paramount and must be deciphered before proceeding to question the level of remuneration being given. There are quite a number of exquisite recreation facilities in the country where fun lovers go to spend weekends and holidays. These places and facilities may cost a fortune but more often than not, a common phrase is used to justify the cost incurred – “it was value for money”. Perhaps if we are able to qualitatively and quantitatively describe the value added by our legislators, the issue of money paid will take a back seat?

In 2009, the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) concluded a decent effort to review, define and ultimately educate the public on exactly how much is due/had been paid to federal legislators. The report titled “Remuneration Package for Political, Public & Judiciary Office Holders: Feb 2007 – Jun 2009”, was a follow-up to the initial 2007 review, determination and recommendation of remuneration due to the legislative, judiciary and executive. Their recommendations were signed into law and adopted in 2008.

“The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) in pursuance of its constitutional role of determining the remuneration appropriate for Political, Public and Judicial Office Holders as enshrined in Sections 70, 84, 111 and 124, as well as 32(d) of Part One of the Third Schedule of the 1999 Constitution of the Federal Republic of Nigeria had, in the year 2007, reviewed the remuneration package for the Office Holders in the Executive, Legislature and Judiciary at the Federal, State and Local Government levels. However, the Commission received a letter from Mr. President dated 10th February, 2009 on the need to review the 2008 Amendment Act, in view of the impact of the current global economic crisis and financial meltdown on the Nigerian economy particularly, the dwindling Government revenue

The2009 report was widely published and lauded, throwing light on a previously opaque aspect of government. The report findings and recommendations are summarized below:

Image

According to the Table II (D) of the 2009 report, the annual basic salary (ABS) for a Federal Senator was/is expected to be about N2.03 million (approx.). This figure applies to the Senate Majority and Minority leaders, Chief Whip and Committee Chairmen. ABS for the Senate President and Deputy is a bit higher valued at N2.48 and N2.30 million respectively. ABS of N1.98 million was valued and recommended for House Representatives, their Majority and Minority leaders, Chief Whip and Committee Chairman. The Speaker and Deputy have their ABS pegged at N2.47 and N2.28 million respectively. Computing an estimate of the total remuneration burden for 109 senators and 360 reps (assuming N2.03m for all senators, N1.98m for all reps), including regular and non-regular allowances specified in the report, yields a figure of N5 billion/year. Including the cost of ‘Optional Allowances’ (Vehicle Loan) for all legislators yields N7 billion/year. Adding on the burden of paying Gratuity at the end of service, an additional N2.8 billion is included (300% ABS for 4 years, approx. N0.7 billion/year), yielding a total annual burden of N7.7 billion. This total excludes the cost of Duty Tours and Estacode/Per Diem which are paid as applicable. Also, the much touted Security allowance was conveniently stated as ‘TBP’ – To Be Provided. No value was assigned to it in the report. These are the 2009 remuneration recommendations. Now, the whole country probably wonders, what is the 2013 remuneration reality?

Is there a clear distinction between how much is due/recommended/was being paid (2009), and how much is actually paid currently (2013)? From the 2009 report, a Senator earns N17 million/year while a Rep earns N15 million/year (including Vehicle Loan). However, in 2013, there is a general perception that Federal Legislators earn far more than recommended. It is believed that a Senator takes home anything between N180 – N400 million/year while the Rep goes with about N130 – N300 million/year. These 2013 perceptions are said to be inclusive of basic salary and allowances. With 109 senators and 360 reps, the burden per these figures comes to about N66 – 150 billion/year. It is unfortunate that no effort has been made to clarify and validate these 2013 figures. As such, barely 4 years after a little light shone on our path via the 2009 remuneration review, the opacity in governance has reinstated itself. Darkness, indeed, gross darkness covers the face of such matters. The RMAFC website still holds only the 2009 report. Will they wait for another letter from Mr. President before conducting another review? Is this remuneration review conducted periodically or at random based on executive fiat? Will President Jonathan follow the steps of his predecessor Umaru Musa Yar’Adua to demystify this ambiguity? One easy clarification –there are a couple of legislators’ special assistants and personal assistants who are prominent and respected on social media today. We should find out if their annual remuneration is N506,600 (N42,000/month approx.) for those working with Senators or N496,303 (N41k/month approx..) for those working with Reps according to the 2009 report. Doubtful? Unbelievable?

Many more questions therefore remain: How much remuneration is really being paid to our Federal Senators and Representatives? What does it cost the average tax payer to keep 109 Senators and 360 Reps in the National Assembly? What value is being felt at the grassroots owing to their Senator/Rep? Is there value for money?

So much opacity… let the light shine!

The Strategic Opposition

This post was first published via The Scoop. See link here: The ScoopNg

Newton’s third law of motion – “for every action, there is an equal and opposite reaction”. Indeed, history is replete with evidence to this, even in governance and politics. There exists an ‘Opposition’ (or some form of such) to every party/government in power.

First of all, let’s get operational definitions out of the way. The opposition in Nigeria has so far loosely referenced any persons or group with public demonstration of antagonism towards the incumbent government. Every major political party that loses at the ballot box automatically assumes the ‘Opposition’ status. At the federal level, the Nigerian ‘Opposition’ is predominantly the Action Congress of Nigeria (ACN), Congress for Progressive Change (CPC) and All Nigeria People’s Party (ANPP), now merged into the All Progressives Congress (APC). On the regional front, the PDP (yes, the People’s Democratic Party) has also assumed the ‘Opposition’ title primarily in the South West. Is this all there is to what the Opposition should be? A bunch of losers and antagonistic entities? Certainly not.

Merriam-Webster defines the Opposition simply as “a political party opposing (fighting back) and prepared to replace the party in power”. Asides formal definitions, the typical expectation is that the Opposition keeps the serving government ‘in check’ consistently, in terms of policy formulation and implementation, rendering themselves as auditors of governance, critiquing failures, applauding successes.

The Opposition is not a passive inheritance or title, rather a proactive stance, a positive offensive. It should be a body of people with an ideology, common principles of governance and politics, who are willing and determined to bring these to the fore, demonstrating a leadership example to the serving government.

Yet, more often than not, what we see is a resultant, reactive Opposition that emerges just because they lost elections. This is not rocket science. In business, rivals exist because there is a market to rule, a prize to win. Similarly, a resultant, reactive Opposition arises primarily because there are resources to fight for – human, natural and financial resources! The scramble for these resources creates a winner (the serving government) and the jostlers (the emergent, reactive Opposition).

As long as the Opposition remains in this reactive mode, limiting itself to the mode of continuous criticism becoming a bother to the electorate, the chances of wresting power from the incumbent remain slim. Any business seeking to dominate the market must think and play ahead of the rival/competition. Similarly, the strategic Opposition must proactively get ahead of the incumbent.

The strategic Opposition must move beyond reacting to policies and political decisions, to developing, implementing and publicizing progressive ideologies and initiatives – gradually instigating a paradigm shift in national politics by centralizing public sentiment around issues… the politics of ideology and principle.

Likewise, the strategic Opposition must advance from identifying and flogging issues to proffering ground breaking solutions. These solutions must be intrinsic to the Opposition’s manifesto and sold to the public as their competitive edge. They must strategically demonstrate that where the rival has met a brick wall, they have identified a breakthrough point. Previously implemented projects and successful initiatives should be leveraged as pilots for nationwide development. There is no reason why the ‘Opon Imo’ educational tablet concept should not be aggressively leveraged as a nationwide developmental program, void of corruption and typical public procurement shenanigans. The strategic Opposition will fully conceptualize this initiative, presenting it as an educational enhancement bill to the National Assembly via their representatives and senators.

The strategic Opposition must go where its rival will not. Embrace leapfrog technological innovations, create mobile tools to empower the common man, use technology to restore true governance to the people. For example, a simple mobile platform that allows ordinary people report common everyday issues from power failure, to bad roads, security breaches, illegal roadblocks, water shortage, fuel price hikes, pipeline vandalism etc. should be developed, incubated and implemented with periodic analytical reports generated and published in national dailies, including resolution recommendations. Initially, these periodic reports will serve as an Opposition driven counter- scorecard but subsequently will add value through suggested resolutions to identified issues. Such initiatives also strategically position the Opposition closer to the people, their needs, desires and behaviour. Where a business draws closer to its customers, understanding their behavioural patterns, what remains is the creation of appropriate products to meet these needs.

Comparative advantage. The strategic Opposition should not battle the rival in its area of strength.  The incumbent is a multi-regime veteran in money politics, with deep pockets and numerous treasure chests. Take the battle to the weak points, the Achilles heel….accountability in governance, budget implementation, project execution and controls, communication and involvement.

While there remains no guarantee of winning elections where the recurrent  practice of rigging is predominant, a need still exists for a true and credible Opposition, not a label or resultant, rather the strategic Opposition, a positively offensive force, gradually restoring hope to an expectant populace.

 

The Presidential Pardon – A Goodluck Signal?

Signalling is basically an indirect means of transferring information between two or more parties via available communication channels. The ‘agent’ transfers the message, while the ‘principal’ receives, analyzes and acts on it. A most common example in economics involves an individual seeking employment. The individual signals to the employer by constructing a resume replete with skills, expertise, competence and experience that will command attention and intrigue, influencing the employer to schedule an interview subsequently. Every day, individuals engage in varied forms of spoken and unspoken signals to pass across messages to others. Husbands signal to wives and vice-versa, subordinates to bosses, and leaders to followers.

On the 12th of March, 2013, there were reports that the President and Commander-in-Chief of the Federal Republic of Nigeria, Goodluck Ebele Jonathan, requested approval from the Council of State to grant presidential pardon to a list of individuals, including former Governor of Bayelsa State, Diepreye Alamieyeseigha. Now, history has it alamsthat Mr. Alamieyeseigha was sworn-in as Governor on May 29, 1999, re-elected in 2003 for a second term, and impeached for corruption related charges on December 9, 2005. According to the BBC, he was initially apprehended in September 2005 as he travelled through London, and subsequently charged to a UK court for money laundering. London Metropolitan police actually found £1m in cash at his London home. He was granted bail in the UK having surrendered his passport. Nonetheless, Governor Alameiyeseigha surfaced quite mysteriously in Bayelsa in December 2005. He unfortunately could not recall details of his miraculous transit from London to Nigeria. Eventually, in 2007, he pleaded guilty to charges of money laundering and false declaration of assets at a Nigerian High Court, and was sentenced to 12 years in prison; 2 years each for the 6 charges, running concurrently, backdated to his first arrest 2 years earlier. Because of the backdating he ended up spending less than a day in prison.

Such is the profile of one of the major purported recipients of the March 2013 presidential pardon. This development really shouldn’t surprise anyone as the president once referred to Alameiyeseigha as his political benefactor. Again, this is rational and understandable because Mr Jonathan served as Deputy Governor to Alameiyeseigha from 1999 to 2005, emerging as Governor after the latter’s impeachment. A benefactor is one who helps develop and bring up another, and as such, there is permissible reason to Jonathan’s description of the ex-governor. No surprise there.

The real issue however is the message emanating from the Jonathan-led government. The agent has signalled the principal. The leader has acted, leaving the followers to hear, see and receive. The masquerade has danced, the village ponders. The gong has been beaten, the subjects mull over the sound.  What exactly is this government saying to the people?

A number of possibilities exist – one, it could be a simple gospel type message starting with “He who is without sin should cast the first stone”, and ending with the verdict “Alams, go and sin no more”. Two, maybe it’s the government’s way of demonstrating its Transformation Agenda… changing destinies, transforming ex-convicts. After all, amnesty is granted to militants as part of transformation. Old things have passed away and (by transformation) all things are new. Third, perhaps it’s an obvious signal that a Nigerian can assume an Executive role, commit economic and financial crimes, mysteriously jump bail, spend a day in prison, get released, and assume political relevance again – all it takes is time. Recall that Mr Bode George, who was indicted, convicted and sentenced to prison for fraud, got released in February 2011, to meet much pomp and celebration.

What impressions are being created in the minds of the young generation? That fraud, theft, and economic crimes are frequently embraced by this regime? Or in simple terms, that you can do whatever you want, serve your time ‘creatively’, and emerge eventually as a celebrated personality?

How do teachers in Primary and Secondary Schools teach their students not to steal? How do professors communicate the rudiments of ethical behaviour to their college students? How do you convince the average trader on the streets not to engage in undue opportunistic behaviour in a bid to achieve abnormal profit? How will religious folk, juxtapose the message of ‘sowing and reaping’ with vivid stories of transformed ‘ex-convicts’ around? What are the impacts of such signals on national values, if they still exist?

It would help if there were a commensurate number of corruption cases fully investigated, charged and convicted by the same regime. We however struggle to cite any cogent cases. Little wonder the Opposition considers Jonathan’s government of lacking the capacity to tackle corruption. When people see dark clouds in the sky, it is only reasonable to assume that rain is about to fall. When the orchestra sees the conductor wave his baton, it is time to play. When the entertainer hears the rhythm and kick, it is time to dance. They are only reading the signals.

How to Join a Political Party

Information is power… a commonly referenced phrase. The world, at large is said to be in the information age. Clearly, knowledge is king in these digital times. An individual’s wealth of information and knowledge can very well distinguish him or her. Where it remains difficult to access knowledge, the bane of societal transactions results… information asymmetry. Information, in today’s world, must be available, accessible, verifiable and reliable.

Every now and then, one hears this question thrown to the public fore – “How do I join a political party in Nigeria?” “What’s the process to follow?” Naturally, when people require such information nowadays, a Google search does the trick, yielding as many results as possible, meeting the information need. However, a quick Google search for the process of joining a political party in Nigeria yields little or no information. Link to link, page to page, there is hardly a well laid out process for joining. So, for the politically minded Nigerian youth, interested in getting involved at the minimal level of party membership, information asymmetry is the first bottleneck.

According to the Independent National Electoral Commission (INEC) website, there are currently 25 registered political parties in Nigeria. 7 of these have listed websites, but only 2 are functional at the moment – PDP and ACN. Websites have become a basic and primary information channel. The PDP website alone includes a page on ‘How to Join’, detailing eligibility for membership and steps to follow at Zone, State, Local Government and Ward levels. No other party website provides this information. In a country with up to 135 million connected GSM lines as at December 2012, such information ought to be widely spread and readily available online and perhaps on mobile devices. The inadequacy of reliable and clear information in this regard has resulted in people depending on ‘word of mouth’ as an alternative source of information on how to join a political party.

The generally accepted and verbally communicated process of joining a political party in Nigeria is as follows: Interested individuals are advised to visit the respective party headquarters at their Wards and seek the attention of the Ward Secretary (Each Local Government Area is subdivided into Wards for political purposes). The individual will fill a party registration form and provide supporting documents and payment as may be required by the party. Once registration is judged to be complete, a membership card will be processed and issued to the individual as confirmation. Then, the individual is referred to as a ‘card-carrying member’. Political parties typically hold weekly Ward meetings which members are expected to attend. A simple process, yet, requiring increased awareness and widespread documentation.

The least expectation is that each political party manages a functional website, publishing therein its national structure – a breakdown of Zones, States, Local Government Areas and Wards with contact details for party officials at each level. An individual who seeks to join a political party should be able to pick an internet enabled mobile phone, browse the website for the party of interest, navigate the national structure down to the Ward closest to him/her, copy details of the responsible party official, make an inquiry call and/or physical visit. Information should be at the public’s beck and call. So, while the PDP site provides initial information on ‘how to join’, it needs to incorporate information and contact details down to the Ward level. It currently lists PDP State Chairmen with few of their contact numbers but excludes details on LGA and Ward officials.

The Lagos State Government has been kind enough to publish via its website, the list of all Lagos State LGA’s, respective Wards and contact details of the Chairman and Vice Chairman – a ready-made template for each political party to adopt. The Oyo State Government website has a similar list of LGA’S within the State. Unfortunately, there is no breakdown of the Ward structure for each LGA, neither are contact details included.

Moreover, each political party should fully explore and execute the option of online registration for prospective party members. The Action Congress of Nigeria seems to be the trailblazer with this concept and may be testing it already via its Join ACN Today link.

In enhancing our growing democracy, information on political processes and requirements for partial or total involvement must become readily available to the average citizen. The ease and speed of accessing reliable information are key success factors to increasing and improving political involvement especially for Nigerian youth.

Parties

2012 Refinery Capacity Utilization

A quick peek into how our national refineries have fared through 2012.

Available data is limited to Jan – Aug 2012

Chart

Table

Source:http://www.nnpcgroup.com/PublicRelations/OilandGasStatistics/MPIFigures/MonthlyPetroleum/tabid/130/FolderID/148/Default.aspx

Okada in Lagos – A need, A solution

Blanket bans were a hallmark of the military era in Nigeria in the ’80s and ’90s. Many will recall the infamous announcement of government takeover by General Abacha in 1993:

“The National and State Assemblies are dissolved…The State Executive Councils are dissolved… All Local Governments stand dissolved… The two political parties are hereby dissolved… All processions, political meetings and associations of any type in any part of the country are hereby banned.”

Such was the character of military style leadership – command and rule. Democracy on the other hand eschews such top-down insensitivities. It rather embraces the voice of the people, evaluating the impacts of both actions and inactions of leaders on the people.

Accordingly, one would hardly expect that an evolving mega city like Lagos, within a democratic dispensation, would employ the use of a blanket ban to fix the issue with motorcycle taxis, popularly referred to as ‘okada’. While the arguments in favour of the ban may be cogent, the strategy of execution generates much concern.

A critical analysis of the issue further elucidates this discourse. What is/was the primary issue? Okadas had become very conspicuous on Lagos roads. Like flies, these motorcycles swarmed both major and minor roads, meandering their way around traffic, constantly plying the route of least resistance, oblivious to every traffic sign and signal, scarcely seeing the need to apply the brakes even in precarious conditions. Consequently, they became highly accident prone, leaving many Lagosians with severe injuries, orthopaedic damage, and in extreme cases, death.

Numerous accounts have also been told and recorded of theft and armed robbery involving the use of okadas especially at ungodly hours. Obviously, based on the foregoing, okadas became a high risk to public safety, health and security in Lagos State.

Having understood the ‘What’, the discourse is furthered by root cause analysis to define the ‘Why’ – Why did okadas ever become a means of transport? Why is the use still sustained? The answer is simply expressed – ‘a need’.

Motivational speakers and business people have for ages spoken of identifying public needs as a trigger to business solutions. Similarly, there was a transportation need, a gap. The inability of existing public and private transportation to adequately cover the metropolis, irregular routes, bad roads and inconspicuous locations created a need. The inability of the State to rid its roads of traffic-induced downtime created a need for a faster means of transport. Okadas became the solution to a public need. Furthermore, okada, while meeting public transportation needs, provided employment to many young unskilled men, providing them a steady cash flow. A government-induced public need simply attracted a private-driven innovative response, laden with high risk. It was labelled ‘okada’.

Juxtaposing the ‘what’ against the ‘why’, one wonders, how does a government manage a ‘high-risk’ solution to an obvious need? Eliminate the solution with its attendant risk, thus re-creating the need? Or tactically work out a withdrawal and substitution parallel plan? So far, what has been done is an outright ban, elimination. Yet, the need persists and commuters are stranded at bus stops, previous okada riders become unemployed, creating another risk of idle hands, prone to evil and crime. Elimination ultimately creates another risk cycle of unemployment and crime.

The alternative is a multiple prong approach. First, effective communication and involvement of the public is paramount in determining a substitute solution with less risk.  Perhaps consider an initial withdrawal of all okadas, then a substitution midway – with appropriate structure and controls in place. Motorcycle lanes should be marked out/demarcated on all major roads. A parallel follow-up to this may be a re-registration program for all potential motorcycle riders involving an intensive mental health check, safety indoctrination, road traffic education, several driving tests, motorcycle road worthiness, first aid training, and some business planning and management for value-add. Licenses should be issued only to successful candidates. Each okada driver should then be deployed to a pre-determined local government area with bi-weekly surveillance reports.

A similar case is seen in the construction of a highway within a city, leaving residences on both sides. While this portends a solution, it nonetheless creates a need. Pedestrians may need to move from one side of the road to the other. A high-risk solution rears its head – run across the road. Ban pedestrians from crossing the highway? No. Rather, build usable average height pedestrian bridges at regular crossing points. Employ change management to motivate pedestrians to use it.

In the bid to eliminate adjudged high-risk solutions, government must endeavour to avert re-creating public needs. A blanket ban hardly augurs well in the long run. Public need will always beckon innovative solutions, each with attendant risks. Parallel substitution is vital.

Eliminate solutions? No. Eliminate needs. Provide solutions.  Improve solutions. Mitigate risk.

 

 

 

Plan it, Track it…or Lose it

In today’s world, new businesses are born from the culmination of innovative ideas. Each business operates primarily to make profit on investment by providing products and/or services that meet an existing or expected market need. The fact that a business boasts revenue does not imply that it is profitable. Profit making businesses, small or large, create success and continuously improve by effective planning, execution, tracking and controls.

At the initial stage for many small businesses, financing is typically a major hurdle, especially within a Nigerian market where easy credit facilities are still in the evolution process. As such, angel investors, which may include friends, colleagues, family, are usually approached by beginning entrepreneurs saying – “I have a business idea…will require start-up capital of N500k. Can you help?” In expected response, the potential investor whether family, friend or private equity firm will request to see a business proposal – “Show me your business plan“.

Planning, top-down or bottom-up, is one of many crucial factors to business success. Simply put, the business owner needs to be clear on a number of points – What is the product/service? What output capacity is planned (e.g. No of units/day/month/year)? How will this be achieved – What key activities are required to achieve output? What are the human resource needs for each activity? What materials and equipment do you need to get started? How much revenue do you expect per unit? What is the total owner’s cost per unit? Investors will expect you to prepare a cash flow sheet, determining the present value and expected profitability of your business. These metrics are only ascertained based on your business plan. So, plan properly.

Now the financing is in place, the business plan approved, and somehow, you have started running business operations. How well is your business doing? While it is understandable that many times, businesses may not ‘stick to the plan’ due to complexity and uncertainty in business environments, it remains essential that progress on the plan must be tracked. Plan it, and Track it. A local cement block making business planned to produce 400units/day and sell at least 350, leaving a daily inventory of 50units/day for the first 6 months. After being funded, the business commenced accordingly. However, over the first month, actual production was 250units/day with daily sales of 200 units. The business owner, oblivious to this gradual development, continued operations, overjoyed with the decent revenues. Was the business making money? Yes, probably even covering cost, but how well was it performing? It was certainly not meeting the plan, and was certainly underperforming its profit, if it expended the planned cost to produce yet less output.

It is one thing to track and measure, it is another thing to track and measure the right things. Readily, a business would prefer to track and measure quantity of output and cost but focus must also be placed on quality, speed, dependability and reliability. Were customers pleased with the quality of cement blocks produced? Were they durable, reliable and dependable? Having displeased customers is easy potential for undermining expected sales. What is the rate at which the cement blocks were being produced? Why the drop versus the plan? Was it due to faulty equipment, incompetent employees or perhaps environmental factors like continuous rainfall? At the end of the day, the business must not forget to track its customer base. What sorts of customers are most frequent and loyal? Which ones have reduced patronage? Why? Do you need to target other types of customers? What works for one business may not work for the other. It is important to track the right metrics.

Performance tracking, controls, and progress measurement provide a health check for any business and should be done on a routine basis. Small or big, each business should produce a periodic form of reporting. It could be weekly, bi-weekly, monthly, documenting specific performance indicators, plan versus actual etc. Effective tracking raises red flags, identifying operational issues very quickly, to enable the business respond promptly and appropriately.

To fail to plan, they say, is to plan to fail. What you do not track and measure, does not get done, so goes the old management adage. How can you improve business performance if you hardly know whether it’s doing well or not? To the business owner, the message is clear – Plan it, Track it…..or Lose it.

NB: This post was first featured in an SME Magazine (June 2012), and then YNaija (September 2012)

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