09 Feb

The week ahead – Old problems, old solutions

The Zinox Group has concluded the acquisition of e-commerce giant, Konga, in a move that is expected to alter the e-commerce landscape in Nigeria. ThisDay quotes an industry source, as saying that the transaction had been approved by the SEC. The move marks a bold return for Zinox to an industry it pioneered in Nigeria with the launch of BuyRight Africa.com, which was challenged by the country’s lack of an e-payment infrastructure when it was launched 12 years ago. While some industry observers say the acquisition could lead to the integration of Konga and Yudala, which is owned by Zinox founder, Leo Stan Ekeh’s son, to wade off competition, and make it one of the biggest e-commerce operations on the continent, Techpoint reports that a source at Zinox says both companies will not be combined.

Nigeria’s corn output for the 2017-18 season will probably decline by as much as 750,000 metric tons, due to the impact of pests and increased imports, the Producers’ Association said. It is estimated that the country will produce 10 million tons of corn in the current season, 7 percent less than 10.75 million tons in the 2016-17 season, Tunji Adenola, President of the Maize Association of Nigeria told Bloomberg. “Apart from imports, which is the major challenge to corn production in Nigeria, the two-year-old army-worm attack ravaging farms, has discouraged farmers from producing,” Adenola said. Those unable to compete with imported corn, which is cheaper, are being compelled to switch to other crops, he added. Nigeria is Africa’s biggest corn producer after South Africa, whose 2017-18 output is estimated at 12 million tons, according to the U.S. Department of Agriculture’s Foreign Agricultural Service. Corn imports jumped 33 percent in the 2016-17 season to reach 400,000 tons as USDA figures show.

The Nigerian Army on 7 February, said it will deploy troops to improve security in central states where a spate of communal violence has prompted criticism of President Muhammadu Buhari. Clashes between semi-nomadic herdsmen, and farmers over fertile land have killed dozens of people in the last few weeks. A mass burial was held for 73 people killed in the violence, was held in January. The unrest in central states have become increasingly political, ahead of elections in February 2019, with critics of President Buhari, accusing him of failing to get tough with herdsmen who are mostly from his Fulani ethnic group. The Army said training exercises would be carried out in the central states of Benue, Taraba, Kogi, Nasarawa and Niger, along with Kaduna from 15th February to 31st March. It said the need for the deployment had arisen “due to an upsurge in cases of armed banditry, kidnapping and cattle rustling,” as well as the clashes between herdsmen and farmers, and attacks by armed militias.

President Muhammadu Buhari has reinstated the suspended Executive Secretary of the National Health Insurance Scheme, Usman Yusuf. Yusuf was suspended by the Minister of Health, Isaac Adewole, in July 2017, following allegations of gross misconduct. A panel commissioned by the Minister after Yusuf’s suspension, later found him culpable for infractions that ranged from nepotism to theft of public funds. Premium Times reports an administration official, familiar with the development as saying that Buhari did not consider Yusuf’s indictment by a ministerial panel before asking him to return to work. The reinstatement letter urged Yusuf to work closely with the Minister upon resumption. Federal lawmakers accused Yusuf of “corrupt expenditure of ₦292 million,” which he allegedly spent on health care training “without recourse to any appropriate approving authority.” The NHIS chief denied any wrongdoing.

Suggestions

  • A 2016 report claimed that Konga had less than 200,000 active users buying on the site. For a market that has, according to another 2016 report, 92.7 million internet users, the fraction is tiny. The challenges of the e-commerce space in Nigeria derives from the underlying challenges within the economy – high poverty rates which mean that the effective market is much smaller than the nominal market; a crippling infrastructure deficit which makes logistics expensive; shrinking disposable income on the back of the rising cost of living, since income has remained static; and a preference by most Nigerians to buy items that they physically interact with. It remains to be seen if the new owners will be able to find a way around these problems, and not only make the business succeed but also scale it appropriately.
  • Mr. Adenola’s summation of the problem cuts to the heart of the real issue – he believes that imports are the major challenge to corn production in Nigeria. Nigeria is the continent’s second biggest producer, and from the report, imports in 2017 were only 400,000 tons, 4% of the 10 million tons domestically produced. We wonder how this small fraction morphed into the major challenge. The real challenges are different – standards, lack of further processing, seasonality due to lack of preservation and of course the pests which proper research/seeds will fix. We advise that the practitioners focus on these rather than the straw man of imports.
  • The Army’s response appears belated after criticisms of inaction by the government, especially in comparison to other crises in the country. While it is welcome, it however continues a habit of using the military to sort out internal security issues. This bad habit has the long term effect of further weakening the Police. To make matters worse, there is still no word on arrests of perpetrators of the killings, not to talk of their prosecution. This feeds the cycle of violence as more people will believe they can get away with murder.
  • In a supporting cast that reads amongst others, Baru, Maina, Magu and, the questions about the current administration’s comfy relationship with persons tainted by corruption scandals are unlikely to fritter away with Yusuf’s reinstatement. In addition, Yusuf’s reinstatement also serves the dual purpose of sending the wrong signal – that insubordination amongst heads of agencies to their supervising ministers – could – given the right circumstances – be tolerated, a worrying development for civil service discipline. As an illustration, Buhari saw no need to interfere with Finance Minister Kemi Adeosun’s current attempts at disciplining former SEC Chairman, Mounir Gwarzo, for broadly similar corruption concerns. The much heralded war on corruption has suffered a long drawn out demise dating to its inception. With Yusuf, we can call it well and truly, deceased.