Nigeria: the debate should not be about an oil benchmark but fading oil power

Nigeria still remains the dominant crude oil producer in the West African region, but the country has clearly lost its monopolistic claim of being the sole producer in the region. All around West Africa, new crude oil reserves are being discovered almost on a monthly basis. Ghana, Ivory Coast, Chad, Mauritania are among the few West African neighbours where crude oil in commercial quantities have been discovered in the last few years. In 2010 and 2011, commercial quantities of crude oil were discovered in Sierra Leone, Ghana, Niger, Cameroon, Gabon, and Angola. 

Diezani Allison Madueke-Nigeria's Minister of Petroleum Resources 

Discoveries have already been confirmed in Liberia, while explorations are on-going in Togo, Mauritania and even Benin republic. The West African Coast has become a crude oil coast with significant discoveries and more expected. Outside West Africa, East Africa, especially Kenya and Uganda are all positioned to become major producers of crude oil within the next one to two years.

With proven crude oil reserves of about 36 billion barrels, Nigeria is like a giant compared to its neighbours in the crude oil store but then Nigeria also has the largest mouths to feed compared to its African neighbours. Angola has a population of about 18 million but with proven crude oil reserves of about 13 billion barrels, an average of 722 barrels per head. Nigeria on the other hand has a population of about 160 million with proven reserves of 36 billion, an average reserve of 225 barrels per head. 

So Nigeria has more reserves but it has more mouths to feed and therefore should be prudent in managing the revenues that come from those reserves. That, however, seem not to be the case with the constant bickering between the National Assembly and the Presidency over an appropriate benchmark price for crude oil revenues rather than an appropriate beyond oil strategy.

With the increasing discovery of crude oil reserves all over Africa, Nigeria’s proven reserves buried underground are becoming less valuable. Simple economics teaches us that the more the quantity of any commodity, the less the price. With increasing number of countries joining the crude oil producing club, and most of these countries having more crude oil than they actually need, not only does it reduce the number of countries that Nigeria can sell crude oil to, but also increases the number of countries in the market to sell crude oil.

The oil outlook looks even bleaker when the fact that the US is increasingly becoming less dependent on external crude oil is thrown in. The Energy Information Administration (EIA), the US agency which provides data on US energy consumption notes that only 45% of petroleum consumed in the United States were imported in 2011, the lowest since 1995.

The EIA gives different reasons for the decline in US consumption of foreign crude oil. The reasons include, the economic downturn after the financial crisis of 2008, improvements in efficiency, changes in consumer behaviour and patterns of economic growth, increased use of domestic biofuels (ethanol and biodiesel), and strong gains in domestic production of crude oil and natural gas plant liquids, expanded domestic supplies and reduced the need for imports.

Efficiency, changes in consumer behaviour, substitution of petroleum products with biofuel and increased crude oil production in the US are permanent changes that will likely see the world’s largest consumer of crude continue reducing its consumption of the product. There are analysts who expect the US to eventually become a net exporter of crude oil soon maybe as early as 2013.

In 2011, Nigeria supplied just 10% of US crude oil needs compared to an average of 20% a few years ago. China and other Asian countries have moved in to fill the drop in demand from the US, however, with potential supplies coming from many other sources, the natural trajectory for future crude oil prices is a downward spiral. Many agree that tensions in the Middle East accounts largely for current price levels.

But while the dynamics of the crude oil environment is changing fast, Nigerian leaders seem stuck in lethargic past unable to take the necessary steps to take maximum advantage of its current crude oil resources or diversify its economy from over dependence on a volatile product.

Nigerian leaders seem not to be reading the writing on the wall. Current crude oil prices, which bring in 80% of government revenues, are not sustainable in the very short term. There are analysts estimating that a steep fall is likely very soon with projections that it may fall as low as US$ 30. True. There are alternative forecasts that even see crude oil prices rising, fuelled by demand from China and India assuming both countries sustains their current economic growth rates.

But the uncertainty over the future direction of crude oil prices certainly makes it a slippery platform for Nigeria to continually benchmark its economic future. There is an urgent need for a post oil boom strategy. Any sustained drop in crude prices, as it happened in 2008, when prices dropped to as low as US$ 40 per barrel, would certainly plunge the country into a financial crisis with current external at US$41 billion reserves able to cover export for just eight months and portfolio investments in Nigerian bonds reaching significant levels.

The debate that Nigerian leaders should be having should not be about an appropriate crude oil benchmark but a debate about the best strategy to diversify the Nigerian economy from its over dependence on oil revenues and what incentives should be in place to maximize our current crude oil and gas reserves before they become less valuable commodities in international trade. 

first published in BusinessDay of October 09, 2012

The lost memo on banning foreign medical trips for Nigerian public officers

In April, Nigeria’s Minister of Health, Professor Onyebuchi Chukwu made a bold announcement  that he is considering sending a memo to the Federal Executive Council (FEC) meeting to ban public officers going abroad for medical treatment.

President Goodluck Jonathan 

It is not clear if this memo was ever sent to the FEC.  Perhaps, next time the media meets with the honourable Minister, they have to remind him of his lost memo. Hopefully, he will not be embarrassed answering the question considering the President’s wife is currently said to be on a medical trip abroad.

Obviously, despite billions spent, the health facilities in Aso Rock are still not comparable to health facilities in Germany, Saudi Arabia and all the other places staff and residents of Aso Rock fly to at the slightest sign of head or belly ache.

In the last five years, from 2008 to 2012, a total of N4.15 billion has been spent by the Presidency to provide healthcare facilities in Aso Rock.  Going by the nature and amount of expenditure, the State House Medical Centre (SHMC) should be one of the best equipped hospitals in the world.

Drugs and medical supplies bought for the SHMC in Aso Rock consumed N1.69 billion in the last five years. In this year’s budget, the Presidency made a provision of N314 million for drugs and medical supplies. This was just 21% below the N402 million spent in 2011.

The presidency also spent N901 million purchasing different medical equipment in the last five years. The SHMC should be one of the best equipped medical centres for dialysis, considering the items bought in the last five years.

In 2008, for example, the Presidency spent about N6.8 million on the provision of a dialysis centre. It also spent N127 million on procurement of equipment for a medical laboratory, dental laboratory, physiotherapy, pharmacy, surgical, O&G, paediatrics, and ophthalmology.

The 2012 budget shows that the presidency spent about N93 million on a Dialog+Haemodialysis machine with an option for automatic blood pressure measurement. It also bought a Diapact CRRT (whatever that means), an acute dialysis machine, a modular one water reverse osmosis system (for up to 10 dialysis machine with pre-treatment) a comfort therapy dialysis chair, and a bedside table for dialysis chair

The Presidency also spent some money on a central sterilizing building for the State House Medical Centre and also bought a magnetic resonance imaging machine, and converted an existing mortuary(?) into an MRI room, offices, conveniences, medical records and common room for its medical officers.

But while the State House Medical Centre has been equipped with the state of the art medical facilities, which unfortunately fail to meet the medical needs of its exotic occupants, the non-exotic Nigerian on the street is faced daily with poorly equipped hospitals plagued by strikes from frustrated medical personal and lack of drugs.

While  rich  Nigerians can afford a trip abroad to take care of their headaches and other medical issues, the many poor die daily from commonly preventable diseases. Life expectancy in Nigeria at 48 years ranks among the lowest in the world, comparable only to war torn countries. The chance of a child born in Nigeria celebrating his fifth birthday is one of the lowest in the world. The Nigerian child is seven times more likely to die before the age of five than an Egyptian Child and twice more likely to die than a Ghanaian Child. 

Nigerians, who can afford it, spend an average of $200 million yearly travelling abroad to seek medical treatment. Basically, they are spending this money to escape death. 

However, it should be unacceptable that a public officer, spends public money, that should have gone into providing medical facilities locally, to go abroad for medical treatment for common ailments. This is double jeopardy for the ordinary Nigerian.

This is why the Minister’s memo to ban public officers spending public funds for foreign medical treatment is important. Unfortunately, that memo will remain lost in transit if the President, who is to approve the memo, has his wife abroad undergoing treatment for “belly ache” despite the state of the art medical facilities in Aso Rock. 

For an interesting piece on why Nigerians seek medical treatment abroad  read Outbound Medical Tourism

On Barth Nnaji’s resignation

I must say I am one of those who feel highly disappointed by the forced resignation of Nigeria’s former minister of power, Barth Nnaji.  I am not alone. His resignation has been a subject on social media with a good number of people expressing disappointment at his resignation. 

Barth Nnaji-Nigeria's former Minister of Power 

The disappointment has mainly been because most Nigerians have for the first time seen a dedicated commitment by a minister to make an impact in the perennially underperforming power sector. The clear evidence that he was making progress was not just the fact that most Nigerians were beginning to experience improved power supply in their homes but the powerful labour unions in the power sector were beginning to feel uncomfortable.

The entrenched interests in the Nigerian power sector in collaboration with some compromised staff of PHCN who have made their fortunes from the misfortune of Nigeria’s power situation suddenly realized that their days were numbered with the progress Nnaji was making in the power sector. Power was not only improving but the various timelines set for selling the successor companies to the dissolved PHCN was being adhered to strictly. Unlike before, it was obvious that the status quo in the power sector was about to change permanently.

His sudden resignation has however put the whole process under jeopardy, no matter what the government may want to say about it not affecting the whole exercise. Personally, I think the reason given for his forced resignation was lame. I see nothing wrong with what has been made to look like a wrong doing in some media.

I have had the privilege of going through some of the best codes of ethics and best practices from highly respected professional bodies and in all  conflict of interest situations, what is required is disclosure first and avoidance second.

From media reports, It was Nnaji that informed the committee that a company that undertook a contract for his company in the past was involved with the bid for some of the power assets and that also Geometric, which we all know was run by Nnaji before he became power minister was part of a  Eastern Nigeria Electric Company consortium bidding for the Eastern Nigeria Distribution Company.

Global best practice in this situation is disclosure of this potential conflict of interest, which Nnaji did. There is absolutely nothing wrong with those companies bidding for the power assets. A company that is technically qualified and financially capable to bid for power assets does not stand disqualified because it worked for the power minister in the past. Also, disclosing that Geometric was part of a consortium bidding for a  stake in Enugu Electricity Distribution Company was the right thing to do. The other action was ensuring that he abstained from the selection process of the successful bidders for Eastern Nigeria Electricity Distribution Company which from media reports, he did. 

 What was expected of the minister was not to be part of the decision making process in the bid evaluation involving the companies that could generate potential conflict of interest. From media reports, he also did that when he informed the technical committee evaluating the bids that two companies that were distantly related to him are taking part in the process and excused himself from the process.  As far as I can see from media reports, Nnaji met all the requirements of transparency and fairness that are supposed to be met in a process like this.

Wrong doing can only be ascribed in this situation if it can be proven that he may have passed information to any of these companies that are related to him that was not passed to other bidders and the companies have emerged without submitting the best bids.  From my reading of media, reports, I have not seen any such accusation.  In the US, Dick Cheney was the Managing Director of Halliburton before becoming Vice President of the US, and that did not stop Halliburton from winning contracts from the US government while he was the Vice President.

It is important that we do not hold public officers to impossible standards if we want to get credible people in the private sector to go into governance. Nnaji was not expected to close his private company down just because he wants to work for government. He took all the right actions he was supposed to do in such a situation by placing his shares in Geometric in a blind trust. This could explain why he found out only at the evaluation stage that his company was also involved in the bid. With a blind trust, he is not supposed to know what his company was doing while he is a minister.

It is really sad that, one of the acknowledged good hands in the current administration has been forced to resign. I sincerely hope, his resignation does not open the loophole for those who do not desire the success of the whole power reform programme to   compromise the process for their selfish end. There are still critical challenges ahead for the power reform process.  The greatest challenge is continuity. Bankers who are going to ultimately provide the finance to successful bidders are already concerned about the sustainability of the whole power reform process if it is not concluded within the lifespan of the current administration. Most bankers would definitely be reluctant to open their books to successful bidders if the whole process is not concluded before the 2015 elections.

The last time Obasanjo left and Yar Adua took over, the NIPP projects were all suspended, resulting in bad loans which created one of the excuses the Central Bank of Nigeria (CBN) needed to take over some banks. Nigerian banks may not want to take that risk again and the sudden resignation of Nnaji only shows that the risks associated with Nigeria’s power reforms are very real.

It would really be sad if the power reforms are derailed again. Succeeding with the power reforms may be Nigeria’s best chance to redeem its economy and remain as a nation. 

Does Nigeria need a N5000 note?

The announcement by the Central Bank of Nigeria (CBN) to introduce N5, 000.00 notes and coin the lower denominations of N5, N10, and N20 has received a lot of criticism from the Nigerian public already.  The criticism has mainly revolved around the fear that the higher note will cause inflation.

Cartoon by Asukwo: Source BusinessDay 

The CBN has however argued that there is no evidence that higher denomination can cause inflation, arguing that inflation is caused by increase in the volume of money in circulation rather than by the denomination of the money in circulation.

What I am going to do in this opinion piece is to look critically at the CBN argument. Would the new CBN denomination policy cause price increase in commodities and services in Nigeria?

First, as argued by the CBN, Nigeria would not be the first to coin  lower currency denominations. The CBN is proposing to coin the N5, N10 and N20 and introduce N5000.00 notes. Denmark has coins in the same range as being proposed by the CBN, while Japan and South Korea have coins in the range of 50, 100 and 500. Japan and South Korea also have a 5000 and 10,000 note. So it could be argued that the CBN is not doing something that has not been done in some other part of the world. The difference however is that these countries also have very advanced cashless payment systems so these notes are hardly ever seen physically.

So are Nigerians right in being apprehensive about the introduction of N5, N10 and N20 coins? If the characteristics of a good payment system are taken into consideration, then Nigerians have every reason to fear that the coinage of the lower denominations would be inflationary. A good payment system is expected to be efficient, convenient and low cost for the users of that payment system.

Would coining N5, N10 and N20 be efficient, convenient and low cost for Nigerians? The answer is most likely no. As the CBN admitted during the introduction of its cashless policy, 90% of banking transactions are below N150, 000.00 and that Nigeria is largely cash oriented society unlike Denmark and Japan or South Korea.

This is largely true as most transactions in Nigeria are carried out in the informal market, where a good proportion of individual transactions are done under N1000.00 in the open market. Most market women hold huge amount of money in porches tied around their waist, from where they dish out money for items or as “change” for purchased items. Coining the N5, N10, N20 notes would mean that these women would no longer find it convenient to hold these monies in the way they are used to holding it for ages.  This will affect the millions of informal market women who will suddenly find that holding this amount of money is no longer convenient.

These informal market participants would be forced to adopt the next higher currency note, N50 in order to restore the convenience that has been denied them with the lower coins. This would lead to price increases.  No amount of education as planned by the CBN would make Nigerians adopt the massive use of these coins because it is inconvenient, the informal market is huge and significant amount of transactions still take place with these lower end currencies. Coins are meant for low value transactions so where higher currency values are forced into this bracket, the most likely result will be avoidance of transactions that would create the inconvenience of using coins.

At the other end of introducing N5, 000.00 notes, there is a chance that pricing of commodities and services would be adopted to suit the higher denomination. This may be done by merchants to encourage convenience in paying for goods and services and to avoid the issue of having to give change for the higher denomination.  The most likely pricing strategy would be to migrate all prices that are closer to N5000.00 say within the N3000 to N4500 range to N5000.00 to avoid the inconvenience of having to give “change.”

There is also the strong argument of the higher denomination being against the cashless policy of the CBN. Higher denominations would encourage users to demand it for higher value transactions. It is however possible that the high cost of transactions for cash withdrawal by the CBN may discourage this trend. So the question is, why is the CBN introducing a higher denomination currency if there are already policies in place to discourage its use?

The argument that it would lower cash processing cost by banks is also lame since the cost of printing and processing coins is far higher than that of notes. The implication is that the CBN will spend more to introduce a set of currency with low demand. That would amount to waste of funds and increase cost and inconvenience for banks.

Perhaps, the most important issue that the CBN would have to deal with when it introduces the N5, 000.00 notes will be counterfeiting. In a largely informal economy like Nigeria, it would not be surprising if the N5, 000.00 note becomes the counterfeiters gold. There is a real possibility that the N5, 000.00 notes are counterfeited and circulated widely in the informal economy since the cost of counterfeiting would be less than the value that would be derived from circulating the fake currency.

The whole idea of the CBN currency restructuring exercise is against its own cashless policy which it has pursued vigorously since the beginning of the year. It would have made more sense if the CBN had continued to fine tune the cashless policy, make it more acceptable and workable, as that is the global trend, than derail its own policy with its latest initiative. 

Boko Haram: The Devil's Alternative

There is a current call for the Federal Government to negotiate with Boko Haram, a sect that has made the killing of other Nigerians a call to duty. 

 Goodluck Jonathan, President Federal Republic of Nigeria. 

On the basis of this call for dialogue, the new NSA is said to making moves to start a dialogue process with Boko Haram.

The premise for negotiating with Boko Haram seems to be the fact that when Niger Delta militants carried out a series of violent attacks against the Nigerian state, dialogue was eventually used to resolve it.

But, perhaps, the very faulty resolution option adopted by the Federal government for the Niger Delta crisis may be blamed for the Boko Haram monster the nation is currently facing.

When a government makes it a policy to reward violence, the natural response is more violence.  It is called positive reinforcement. When a positive action is rewarded, it creates a tendency for more positive actions, when negative action is negatively rewarded, it deters negative action but when the negative action is positively rewarded, it creates more negative action. 

The creation of a punishment system for negative behaviour in any society is as hold as humanity itself. This will not be changed in Nigeria. Unfortunately, the Nigerian government, since 1999 seem to have adopted a policy to reward insurgency with lucrative concessions to those who dare to rebel against the state. Asari Dokubo, Gani Adams, Government Tompolo are just a few Nigerians who have made fortunes from carrying guns against the state. 

Niger Delta militants carried guns against the Nigerian state, the government rewarded them with a very expensive peace plan that is costing the nation billions and is not sustainable in the long run. We all know it is a peace built like castles in the air, existing only because of the thriving bunkering business in the region, the monthly unearned income being paid out to former militants and the lucrative contracts to a few warlords that should be chilling in Nigerian prisons.

Now we are talking of similar “peace” with Boko Haram. First, it is not possible to dialogue with Boko Haram. Their demand is not contiguous with the existence of Nigeria as a nation.  Boko haram demand that “for Christians in Nigeria to know peace, they must accept Islam as the only true religion” rules out the possibility of coexistence with a large proportion of other Nigerians who do not share that faith and with a rightful claim to existence in Nigeria. You cannot negotiate away the faith of this other Nigerians or dilute their faith to make Boko Haram happy.

Destruction from a Boko Haram attack

Even more so, Boko Haram seems to practice a form of Islam that does not accommodate even other Muslims. The close shave of the Shehu of Bornu with death by bombs as practiced by Boko Haram on Friday is further evidence that Boko Haram simply has no respect for life. If they have a religion, it is a religion that worships death, not God. Many Muslims have equally died from the bombing campaign of Boko Haram as have Christians who they claim to be fighting against. The only dialogue that may suit Boko Haram therefore may be the death of every Nigerian and the creation of a Boko Haram Empire for them to live in peace with their bombs just because there is no one else to bomb.  

But even then, an enclave for Boko Haram will not give Nigeria peace. This is seen in places like Afghanistan, Somalia, and Pakistan where the existence of an enclave for fundamentalists have not stopped attacks on the neighbouring countries.  The enclave becomes a safe haven for attacks and the breeding ground for fundamentalist who cannot tolerate the existence of alternative thinking.

The logical conclusion that arises out of this situation is the painful acceptance that the only option available to the Federal Government is the defeat of Boko Haram in this fight against the Nigerian state. I said painful option, because it will mean the loss of more lives and the destruction of public property.  Terrorism anywhere in the world is never easily defeated. The NATO with all its powers and modern ammunition has not been able to stop terrorism in Afghanistan. US ran out of Iraq and Somalia. Terrorists are a tough bunch to defeat. I do not see it being different in Nigeria that before now, even basic crimes were difficult to crack.

However, the truth is that the government cannot continue to reward violence and expect to have peace. The earlier the Federal government realizes that there is no alternative B in this fight against insurgency, the earlier it would concentrate its resources in defeating this evil that has arisen among us.  

But maybe there is alternative B after all. This is for the Federal Government to accept that the task of maintaining the internal peace and the territorial integrity of Nigeria is now beyond its control. This will mean calling for a national conference and discussing the best way to restructure the nation or dissolve the Federation into more manageable parts. This is the devils alternative. 

The God Particle and Nigeria

The news of the week in the international media was the discovery of the “God Particle” by scientists. Also referred to as the Higgs Boson particle, this particle is said to give other particles their mass, hence its reference as the “God Particle.”

To discover this god particle, scientists have had to build what is called the Large Hadron Collider (LHC), which is estimated to have costs £6.6 billion (N1.65 trillion). The LHC works by smashing protons, particles found inside atoms, to produce temperatures as high as four trillion Celsius, 250,000 times hotter that the centre of the Sun. The collision of the protons produces debris, which was then examined for the Higgs Boson particle.  

So on 4th. of July, why Americans were preparing to celebrate their independence, Scientists came out with the historic announcement that they have found the “God Particle” 50 years after Peter Higgs, a professor at Edinburgh University first proposed the existence of the particle. Interestingly, he was there to listen to the announcement.

According to the Telegraph, London, “The Higgs boson is the final piece of the Standard Model of Particle Physics, a theoretical model which describes the fundamental particles and forces that control our Universe.”

Finding the Higgs boson proves the existence of the Higgs Field, a force which provides fundamental particles - the building blocks of the Universe - with their mass. Without mass they would simply zip around the cosmos at the speed of light and never form into stars and planets. It is also the last missing cornerstone of the Standard Model of Physics, which explains what the Universe is composed of, according to the Telegraph.

Professor John Womersley, chief executive of the Science and technology Facilities Council, told reporters at a briefing in London: "They have discovered a particle consistent with the Higgs boson. “Discovery is the important word. That is confirmed. It's a momentous day for science."

Science discoveries usually make the news in the Western media. But the announcement of the discovery of the Higgs Boson had a celebrity touch. Perhaps, this is due to the huge amount involved in the experiment leading to the discovery and also the significance of the discovery.

Interestingly, Scientists are still very unclear about the practical implications of the discovery of the Higgs Boson particle. The Telegraph quotes Higgs as saying “It’s around for a very short time. “It’s probably about a millionth of a millionth of a millionth of a millionth of a second. I don’t know how you apply that to anything useful.

 “How you could have an application of this thing which is very short lived, I have no idea.”

But the Telegraph quotes Alan Walker, a colleague from the Edinburgh University School of physics and astronomy, as saying there had been the same uncertainty when the electron was discovered. So it may just be a matter of time before the discovery of the God Particle leads to new practical applications that change the way we live.

The news that made dominated the headlines in Nigeria; the same week the discovery of the Higgs Boson was being announced in London was the $3 million bribery scandal involving Nigeria’s House of Representatives. This news fought for front page attention with the usual news about the campaign of bombing being carried out in Northern Nigeria by the Boko Haram anarchists.

Less prominent was the news about the dwindling interest in Science by Nigerian students as reported by the Nigerian Guardian in a short story July 8, 2012. This story reported the lamentation by the Vice Chancellor of the Nnamdi Azikiwe University in Eastern Nigeria. The VC disclosed shockingly that of the 52,000 candidates that applied to the University for Admission, only 76 candidates offered to read Mathematics.  Also more than half of the 52,000 applicants offered to read courses in the Arts and Humanities.  Most likely, a good proportion of the remainder; will offer to read courses in the Business and Social Sciences leaving just a small fraction to read the sciences.

The pattern of student preferences is not surprising. Most students are responding to expected job market demands. We all know who gets the high paying jobs after University. Besides, it is also a factor of how well students feel prepared to tackle the challenges of studying science at the University. We all know most public secondary schools science labs are poorly equipped. It is not much different at the University level.

A survey among secondary school students in Nigeria may show that surprisingly a large proportion would have loved to read the sciences. So the obvious challenge is the lack of institutional encouragement and poor post study demand for those who read sciences in Nigeria. The marketing departments of most banks have a significant representation of graduates who made first class and second class uppers in sciences. For lack of good jobs that can give them living wages in their preferred fields, they now hawk financial services on the streets, a vocation that demands little intelligence.

There is the challenge of poor funding for public education and the reluctance and inability of parents to also pay higher fees for higher quality education. Quality education is expensive, a reality both the government and Nigerians are yet to accept. This does not necessarily mean that higher cost education is equal to higher quality education but good quality education is definitely not cheap. Well equipped laboratories are expensive. Quality teachers and lecturers will not accept non living wages. 

There are also lack of incentives to encourage science education. There are no scholarships and government backed student loans are also non existent. It is not also clear how  research activities in Nigerian public universities are linked to their public funding. How well linked is the promotion of lecturers to their achievements in research? 

The media also needs to play a critical role. What prominence does the Nigerian media give to scientific achievements in our universities? The media is quick to report sexual harassment, cultism and the politics of appointing vice chancellors in Nigerian universities. How well does the media give equal coverage to scientific discoveries in the universities? 

Does Nigeria need science education? Most definitely. Sciences of the God Particle may sound farfetched for the daily struggles of the average Nigerian.  The science of the Western world has moved to space exploration, but Nigeria still need the science that helps it conquer high levels of poverty.  For example, there are still many tropical diseases that western drugs have no precise answers yet or have overly expensive remedies.

The immediate question is how do change the culture of consumer worship to the worship of knowledge and understanding? We may not need to discover another God Particle; but we need to discover the science to conquer our immediate challenges. For example, how well do we understand the science of Nigerian corruption? 

Still on amending the Central Bank of Nigeria Act

The decision to amend the CBN Act by Nigeria’s house of assembly has been received with a lot of criticisms from the media. In my reading however, I have seen little or no attempt by the media to actually put before the public how Central Banks in other countries operate.  So in the next few paragraphs, I write on how the Central Banks of the United States of America (USA), Canada and Germany operate in relation to their financial systems.

Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria

The equivalent of Nigeria’s Central Bank is the Federal Reserve Bank in the USA. Like Nigeria’s Central Bank, the Federal Reserve Bank is in charge of monetary policy in the US but unlike Nigeria’s Central Bank, it is not solely in charge of bank regulation in the US.   It is usually referred to as the Federal Reserve System because there are 12 other regional reserve banks in the US in charge of regulating banks within their regions.

The Federal Reserve Bank, commonly referred to as the “Fed” is responsible for regulating the US monetary system and monitoring the operations of Bank holding companies. The Fed is controlled by a seven man board chaired by the Ben Bernanke, who can be referred as the Governor of the Fed. The Board also has a Vice Chairman. The Seven members of the board are appointed by the President and confirmed by the US Congress.

The Chairman of the board is also required to brief congress twice yearly on its conduct of monetary policy and economic developments and prospects for the future.

The Chairman of the board is also required to appear before the Banking and Financial services committee of Congress on scheduled dates to brief it on key issues about the economy as well as submit a detailed report on the economy to congress before its appearance.

The Congress also sets the salaries of the board members of the Federal Reserve System. For 2012, the Chairman's annual salary is $199,700. The annual salary of the other Board members (including the Vice Chairman) is $179,700.

The Federal Open Market Committee (FOMC) is the monetary arm of the Fed. It is made of the seven members of the Fed Board and additional five members selected from the Presidents of the 12 regional Feds who rotate their positions on a yearly basis except the Present of the New York Fed who is a permanent member of the FOMC.

The US Department of Treasury, the same as Nigeria’s Ministry of Finance, also has regulatory powers over the US banking system through the operations of two agencies it oversees, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, which regulate banks and savings and loans.  The Fed can also only offer financial support to failing banks with the collaboration of the Department of Treasury.

The OCC is responsible for licensing all U.S. banks and, more broadly, for ensuring the stability of the banking system while the Office of Thrift Supervision (OTS) is charged with supervising federally-licensed savings and loan associations, also known as "thrifts. The Federal Deposit Insurance Corporation (FDIC), with similar functions as Nigeria’s Deposit Insurance Corporation (NDIC) also has regulatory powers over the financial system while the Securities and Exchange Commission (SEC) regulates securities trading.

Canada.

In Canada, the Bank of Canada does not have supervisory powers over banks. Instead, it acts as a lender of last resort, supplier of emergency liquidity to banks in distress, fiscal agent to the Canadian government and issuer of currency. The Bank of Canada is thus mainly in charge of monetary policy and financial stability. The actual regulation of banks is the function of the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC).

The highest financial regulatory organ in Canada is the Financial Institutions Supervisory Committee (FISC) comprising the Superintendent of the OSFI, Governor of the Bank of Canada (equivalent of Nigeria’s Central Bank Governor), Chair of the Canadian Deposit Insurance Corporation, Commission of the FCAC and the Deputy Minister of Finance. The FISC is chaired by the Superintendent of the OSFI, meets quarterly and reports directly to the Minister of Finance. It is also interesting that the Minister of Finance has the power to set the monetary policy of Bank of Canada with the approval of the Canadian Parliament.

The German Bundesbank

The Executive Board governs and manages the Bundesbank. It comprises the President (equivalent of the Central Bank Governor), the Deputy President and at four other members. The members of the Executive Board are appointed by the President of the Federal Republic of Germany. The President, the Vice-President and one other member are nominated by the Federal Government; the other three members are nominated by the Bundesrat (the upper house of Parliament representing the Federal States) in agreement with the Federal Government.

Banking supervisory functions of the German Central Bank is jointly shared between it and the German Financial Supervisory Authority (Bafin) which is under the supervision of the Ministry of Finance.  Bafin is an integrated regulatory body with supervisory powers over insurance and securities trading. The Bundesbank audits the banks but has to take its findings to the Bafin which takes the final decision on the outcome of the audits.

A look at most regulatory models around the world shows that it is a close collaboration between the Ministry of Finance, the Central Bank, other regulatory bodies with the parliament offering  oversight and accountability. Most Central Bank’s independence is more  restricted to carrying out monetary policy decisions but not necessarily in non-monetary functions like bank supervision and regulation.  It is important that this distinction is made in the current debate about the autonomy enjoyed by the Central Bank of Nigeria.

But as I noted in an earlier post, the debate should go beyond amending the CBN Act to how the financial sector is regulated in Nigeria.

Watch a sceptics view of Central Banking

Alan Greenspan speaks on monetary and fiscal policy