Analysis: Nigerian Sub-Nationals

Abia State: Ready for lift off?

Can a landmark judgement by the Appeals court lead to the renaissance of a state harbouring one of Nigeria’s largest industrial clusters

Abia State in South East Nigeria is an enigma of sorts due to its legendary industrial capabilities and enterprising people but inability to fully exploit that potential largely as a result of bad leadership and lack of vision by earlier Governors of the state.

The Port Harcourt – Aba zone has the largest industrial cluster in the country, outside of the Lagos-Otta-Agbara industrial zone.

Aba, the commercial and industrial capital of Abia State has a well known reputation as home of shoes and leather wears in Nigeria even though the fortunes of shoe manufacturers has taken a nosedive due to progressive decay of infrastructure in the commercial city.

The fortunes of the state could however be on the brink of decisive change if the ruling of the Court of Appeal, sitting in Owerri, which removed Okezie Ikpeazu of the Peoples Democratic Party as governor of Abia State, is upheld by the Supreme Court.

The Court of Appeal went on to declare Alex Otti of the All Progressives Grand Alliance (APGA) the winner of the April 11 and April 25 supplementary elections in the state.

Delivering judgment in an appeal filed by Otti, the five-member panel, headed by Justice Oyebisi Omoleye, said the APGA candidate scored 164, 444 valid votes to defeat Ikpeazu who scored 114, 444 votes.

The court declared that Otti was the winner of the April 11 and April 25 supplementary elections in Abia.

The reason for the optimism of a potential game changer for Abia State in the candidacy of Otti lies in his private sector background and free markets pedigree, which is rare for most Nigerian Governors or Presidents.

Alex Otti (born February 18, 1965) is a Nigerian economist, banker, investor, and philanthropist. Otti was the immediate past Group Managing Director of Diamond Bank Plc, a leading retail financial institution in Nigeria.

While at the University of Port Harcourt, he distinguished himself by graduating not only with a First Class honors degree in economics in 1988 and as the Best Student of the Faculty of Social Sciences but also as the Overall Best Graduating Student for that year.

The new Governor Otti began his banking career in 1989 with the Nigerian International Bank, a subsidiary of Citibank New York, where he worked in the operations department. Thereafter he moved to the then Nigerian Intercontinental Merchant Bank Ltd. While at Intercontinental Bank, he worked both in the treasury and financial services unit as well as the corporate banking division.

In 1992, he joined Societe Bancaire Nigeria Limited (Merchant Bankers), a subsidiary of Banque SBA Paris where he rose to the position of a senior manager. He moved on to the United Bank for Africa (UBA) as principal manager overseeing the bank’s corporate banking sector for the entire South Division with the responsibility of growing the oil and gas business for the bank.

In May 2001, he joined First Bank of Nigeria, PLC as assistant general manager in May 2001 with the sole responsibility of growing the Energy Sector for the bank.

In April 2004, he was promoted to the position of deputy general manager, and a year later was appointed executive director, commercial banking.

This was followed by a re-designation as the executive director south directorate, where he was responsible for over 140 branches in both the South-South and South Eastern geo-political zones of the country.

In March 2011, he moved from First Bank Nigeria PLC to Diamond Bank as group managing director/ ex chief executive officer and has led the bank through a major transformation. Upon expiration of his first tenure, Diamond Bank renewed his tenure in March 2014 to an additional three years.

Energy as Aba’s weakest link and the Otti – Geometric angle

When Paul Wolfowitz, the former World Bank president flew into Aba in 2005 in company of the then Nigerian Finance Minister Ngozi Okonjo-Iweala, for an interactive session with the Aba business community, it was evident that power outages were the greatest impediment to the industrial take-off of the city.

A thriving hub of large industrial production despite lack of electricity, Aba is the Japan of Africa, “A diamond in the rough” according to Barth Nnaji, chief executive of Geometric Power.

Aba shoemakers are renowned across West and Central Africa; and dominate ladies shoe and men’s leather sandals market.

“The Aba shoemakers control 60 to 70 per cent of the ladies shoe market in Nigeria,” according to Nextzon Business advisory Services.

Analysts say that for Aba to reach its full potentials as a commercial and manufacturing city; developing Aba with its industrial clusters should be the next critical step and this cannot be achieved without constant power supply.

Industrial and commercial activities which Aba is reputed for, has seen a significant decline over the years due largely to the poor power situation.

As at 2005, there were about 165 major industries in the city. However, due to epileptic power supply, the number of the industries operating in the city at present is less than 30 with the attendant massive job loss.

While power holds down Aba, Chinese shoe manufacturers are moving to Ethiopia, because there’s power, leather and skills. Huajian, a Chinese shoe factory in Ethiopia employs 2,000 people out of which 1,670 of them are Ethiopians.

Ethiopia is taking advantage of this increase in demand for leather products – it earned $65.8 million from leather exports between December 2012 and June 2013.

Aba’s power problems could be easily resolved if Geometric Power’s distribution of power to the ring-fenced Aba metropolis from its 141 Megawatt plant located in the city (which is being blocked by Interstate Electric) is allowed to move ahead.

Analysts BusinessDay spoke to believe that there will be a renewed push by Governor Otti to get the Geometric Power Aba Independent Power Plant (IPP) on stream in conjunction with the Federal Government and Ministry of Power.

Diamond Bank which Otti headed was the major financier of the massive Geometric power project.

Leadership as crucial in effecting change

In Nigeria the mindset and disposition of leaders often matters for change to happen.

In Nigeria’s commercial capital Lagos it took the coming of the reform minded Babatunde Fashola for the mega-city to begin to improve its ability to administer taxes and deliver services to its 22 million people.

In Anambra State in the east, the former governor Peter Obi is widely seen to have been prudent in managing the state’s resources (leaving a fiscal surplus without debt), and delivering on infrastructure, leading to situation whereby the state was able to navigate the collapse in oil prices unlike most other Nigerian sub-nationals.

A signal of Abia state’s underperformance is its internally Generated Revenue (IGR) of N 12.37 billion in 2014 (or N1.03 a month), compared to Lagos Sates IGR of N276 billion (N23 billion a month), data from the National Bureau of Statistics (NBS), show.

This is despite the fact that Abia state has a higher income per capita than Lagos State.

Aba City in Abia State is in a position to rival Lagos in attracting industries as Nigeria’s retail and wholesale trade industry has the potential to grow by 7.1 percent per year, and by 2030 could be the largest contributor to the country’s GDP, according to a recent report by McKinsey Global Institute.

Sales of packaged food and beverages are expected to grow by 6.8 percent a year, contributing around 85 percent of the growth in consumer goods.

The report, Nigeria’s renewal: Delivering inclusive growth in Africa’s largest economy, estimates that demand for consumer goods could more than triple by 2030.

One strategy for consumer facing companies in Nigeria is to adopt a city and regional approach, as opposed to a nationwide approach where distinct differences in culture, demographics and wealth exist.

McKinsey suggests regional clusters of cities, including Aba that together produce sizable populations to rival Lagos.

Port Harcourt, Warri, Benin City, Aba, Enugu and Onitsha make up the six city southeast cluster.

“Companies playing in these clusters could target 20% more households earning above $7,500 than in Lagos,” notes the research.

According to the report, total GDP in this cluster alone is $63bn, which is a close rival to Lagos’s GDP of $68bn, despite having far fewer households. Both Port Harcourt and Aba have considerably higher consumption per capita than Lagos.

The Owerri-based five-member panel of the court of appeal was headed by Justice Oyebisi Omoleye who said the cancellation of the elections held in three LGAs of Obingwa, Osisioma Ngwa and Isiala Ngwa by the returning officers after the results were uploaded to INEC was wrong.

“In the Electoral Act, the Returning Officer has the right to only declare results of elections and not to cancel elections.

“This panel discovered that the earlier results uploaded to INEC headquarters correspond with the correct valid registered voters in the three LGAs, while that awarded to the respondent shows over voting and therefore null and void.’’

The court delivered judgement on the election petition on the last day of the year 2015,

Omoleye had previously struck out the preliminary objections by Ikpeazu’s (PDP) counsel to the effect that the appeal lacked merit. The court also affirmed the arguments of APGA’s counsel that the members of the panel were wrongfully constituted.

An alumnus of the prestigious Harvard Business School, Otti has attended various international courses including the Executive Development Programmes of the Columbia Business and Stanford Business School and Wharton Business School (University of Pennsylvania.)

Fig 1: Alex Otti