Nigeria’s Megacity Gives Fashola Platform to Woo Investors

19 Dec 2012

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Gov. Fashola

A caller to Traffic Radio in Lagos, a city that long has been a byword for chaos, pollution and crime, complained that an illegal building blocking a drain is worsening floods in his neighbourhood.

“The governor will send a team to take it down,” Billy Ganiyu, a taxi driver, said as he listened to the Nigerian state-run station while stuck in a traffic jam. “He hates that sort of thing.”

That residents of Lagos, sub-Saharan Africa’s biggest city, believe the authorities will act on their complaints shows the progress Governor Babatunde Fashola, 49, has made. Re-elected last year with 81 per cent of the vote, Fashola is courting residents and investors by building roads, an urban railway, bridges and hospitals, and cutting red tape.

In a city ranked by the Economist Intelligence Unit as the third-worst place to live after Dhaka, Bangladesh, and Port Moresby, Papua New Guinea, it’s working. The success may set Fashola up to bid for the nation’s presidency.

Porsche SE (PAH3), the luxury car-maker, Intercontinental Hotels Group Plc (IHG), Sheraton Holding Corp. and Radisson Hotels International Inc. and supermarket groups, Shoprite Holdings Ltd. (SHP) and Massmart Holdings Ltd. (MSM), have either set up or expanded in Lagos since Fashola took office in 2007. Were it a country, the state economy, which Lagos-based Economic Associates values at $31 billion, would rank along Ethiopia’s as the sub-Saharan Africa’s sixth-biggest, according to International Monetary Fund figures.

Fashola’s government is planning a free-trade zone that will have an international airport, and Philippine operator International Container Terminal Services Inc. (ICT) will run a port there by 2016.

Two years into his second and final four-year term, Fashola is selling bonds to raise funds for infrastructure. Lagos, a city of 22 million people, relies on Nigeria’s oil wealth to finance a third of its budget. That compares to 80 per cent for the Federal Government in Abuja, the capital.

Expectations have grown so high that “if there’s a blip, the impression is you’re slacking”. Fashola, dressed in an open-necked blue shirt, said in an interview at his residence. “Cleaner streets, ability to repair roads in a much more sustainable way, keeping the streets lit up at night when four or five years ago almost all of Lagos was in darkness at night,” he said, listing some of his achievements.

Fashola has faced criticism for some measures considered draconian and detrimental to the poor, such as restricting the movement of motorcycle taxis, imposing tolls on a key city highway and partly demolishing the waterfront slum of Makoko. The government plans to build the Makoko residents a new, safer neighbourhood with utilities, he said.

“These people are expendable to them,” said Felix Morka, executive director of the Social and Economic Rights Action Centre, which provides the Makoko community with legal advice. “If the government has its way this place won’t exist, maybe within five to 10 years it will be glass houses, penthouses.”

Fashola, a member of the opposition Action Congress of Nigeria party, may use his success in Lagos as a platform to bid for the presidency of Africa’s biggest oil producer and most populous nation, said David Cowan, a London-based Africa economist at Citigroup Inc.

“Things have definitely changed for the positive,” said Cowan, a frequent traveller to Lagos for more than a decade. “I’d put a pretty high percentage that he will use Lagos as a platform to try and run for office and I think that would be very good for Nigeria.”
Fashola bats away the speculation. “President of FIFA?” he said, referring to soccer’s world governing body. “Still have a lot of work to do here.”

The state needs about $5 billion of infrastructure investment annually over the next 10 years to make up a decade and a half of neglect under military rule that ended in 1999. Fashola’s administration is now collecting taxes from three million people in the state, compared to about 500,000 people before his tenure. That’s still five million short of the state’s estimates of who should be paying, he said.

The state sold N80 billion ($507 million) of debt in November, its biggest and third issue in six years, to fund developments including the urban rail system that needs about $1 billion to complete. The 7-year notes were priced with a 14.5 per cent coupon.

Fashola joined the state government in 2002 as chief of staff under previous governor Bola Tinubu after 14 years as a lawyer in Lagos.
A Muslim married to a Christian, Emmanuela Abimbola, he brushes off the significance of a mixed religious marriage in a nation where sectarian violence has claimed thousands of lives since independence from the U.K. in 1960.

“It’s no different from New York where you have multinational, multi-immigrant human capital,” he said. “I’m Muslim, my wife is Roman Catholic, my mother is Anglican, my father is Muslim. So in that sense we have found the harmony and the energy and the diversity.”
While infrastructure in Lagos has generally improved, Fashola still has a lot to do, said Chike Nwagbogu, 42, who co-runs the Bogobiri Hotel and Nimbus art gallery on Lagos’ Ikoyi island and says he spends N50,000 a day on diesel to run generators because of power cuts.

“We have four generators; we supply our own electricity, our own water, our own security,” he said. “If we didn’t have such overheads the rooms would be cheaper, the rooms would be fuller.”

Nigeria’s High Cost of Governance

John Campbell, Council on Foreign Relations

Lamido Sanusi, Nigeria’s courageous governor of the central bank, has once again called attention to the high cost of government in Nigeria.  He claims, credibly, that at least 70 per cent of government revenue is spent on the government itself. In a comment that will hardly endear him to the political class, he called for the downsizing of government by half. Sanusi bravely pointed out that it was not just civil servants that receive government salaries.

  He said, “this is a country where we have 774 local government councils; in each council you have a chairman, a vice chairman, and maybe ten councillors.” Each receives a government salary, as opposed to other countries where local governments are paid by revenues raised in their locale.

For Sanusi, the fundamental problem is the constitution, and its requirement that state resources and jobs be allocated to each of the states to uphold the principle of “federal character.”  Hence, each state must be represented in President Jonathan’s cabinet–which means a cabinet of thirty-six ministers and thirty-six ministers of state.

Sanusi was made central bank governor by President Umaru Yar’Adua, Jonathan’s predecessor. A Muslim from the North, he is regularly speaking truth to power, including within the National Assembly, which he has accused of wasting his time. Not a member of Jonathan’s inner circle, he is likely protected by his justifiably high international reputation and because it is difficult to fire a governor of the central bank.

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