You just won me over…
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I’m happy we are converging to a common viewpoint. The more factors of production i.e. land, capital, entreprenuership, labour, and technology that on-shore Nigerians own, the better. I think the difference in opinion stems from how to achieve it.
On one extreme is the Chavez strategy of increased state regulation, penalizing foreign investors, and socialist wealth redistribution, which has terrible predictable results, and on the other extreme is Libertarianism which is untested, and carries the risk of large wealth gaps, and potential societal breakdown. We need a middle ground.
Everyone wants Nigerian unicorns to emerge and stand toe-to-toe with their global peers. For example, our banks have come a long way from the days when no Nigerian bank was in the top 1000 in the world. We now have 4 in the top 500 and our economy is better for it.
However, to own these factors of production, we need capital, which is principally USD, and which unfortunately we cannot manufacture, breed, or teach, and which means we have to embrace and partner with investors that currently own the capital, and as every beggar knows, you can’t also be a chooser. It’s great that China’s emergence as a global financial power has given us more options but even their capital has strings attached. I’m pretty sure that an investor that provides $1bln in interest free capital to build a railway and road infrastructure will be exempted from Mr Femi Gbajabiamila’s work permit restriction bill as carefully indicated by this quote:
Although, the comptroller-general reserves the right to exempt any one from this provision and that right must be exercised in the interest of Nigeria.
So what do we do? We all know the end goal i.e. own all the factors of production ergo our economic destiny. The only way to get there is to create things of value for both local and foreign consumers.
The government cannot “fiat legislate” their way to the end goal. It has to be done organically, possibly starting policies that will directly:
- Reduce the operational burden on our deep entrepreneurial pool i.e. rent, broadband, electricity, ITF and employer pension contributions, etc.
- Reduce taxes or provide tax incentives to more people i.e. R&D tax credits for tech, engineering, pharma companies, and job creation tax credits in the agronomy, manufacturing, and service sectors
- Fund or encourage the establishment of adult training campuses to increase computer literacy and proficiency in the trades.
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We’re getting closer.
Now you forgot to mention Uber is CREATING new value when there was none. So for instance, I spend more on taxi’s than I would have. There are a fee hundred more drivers than before Uber. More office space rented. More insurance sold etc.
On paper at least, a minimum of 70% of the fare we pay go to the driver and car owner. It doesn’t leave the country. The remaining 30 % is used to pay for office rent, advertising (using local ad agencies) , training, accommodation of local execs etc.
It would not be suprising if Uber in Nigeria is loss making presently. So, they are actually bringing in money for now.
This is quite different from extractive industries where the value is from here and they sell it and keep the money outside.
Of course, I am for the government making it easier for more money to be reinvested here. However, you have to be careful not to chase the people creating value.
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U got the idea right. But most importantly, we Nigerians must understand that unfortunately our time came in the globalization era and there is nothing we can do about this.
- First and most importantly, we must learn how to do business. Entrepreneurs are good at finding their way around politics and govts to do business. We must learn how to compete effectively. What we have is home advantage. What we are missing is a mindset on how to do business effectively. It is not about political godfatherism, or state and govt contracts but about creating things that people want, need and are willing to pay for.
“If someone else created this product, what would make me give up my hard earned N50 from my N18,000 [assuming minimum wage] monthly?” If you answer this question, you got your product.
Most of us would be familiar with AWS and DigitalOcean etc. Now as much as we would all love to have our data hosted on our own cloud away from big brothers, it is just simpler and easier to use these people. Coupled with the fact that they set the standard for quality in delivering this service.
Adequate research on customer profile, purchasing power and why they pay for what they pay for is also key. Build apps and solutions to solve Africa’s problems (assuming we live in nigeria) not first world problems. Nigerian students do not need and will not pay for a location app, the okada guy/Car GPS/random mkt person on the road has filled that gap.
They might pay a little for an app that helps them instantly access and manage their course works online and offline. “How do u penetrate these universities and course contents without having to deal with bureaucracy”?
Then nigerians must begin to sew in quality and trust into their products. I am a Nigerian and I love Nigeria but as a human being working hard to earn money, I will only pay for what i believe is durable and needed, things that saves me money or saves me time. I wont pay for a location app (thank u google) neither would i pay for an app that has a response rate of lower than 50% or crashes 20% of the time or messes up with other apps that are more important to me.
It is not about You, but the value your customers derive from using your products.
Measure KPIs: Willingness to pay, Value given, customers lost, etc. It is all about the customers.
Again my bill gates example: When 20% of the 6billion people on earth go online, at least 2-5% of those people everyday, pay for a service bill gates is providing. Same with apple, google, etc.
Ask yourself, “why would i pay for this product”? “What do i currently use to perform this task?” “how can i replace that with something that is better and get people to accept?”
This is the real landscape of business.
i like your analogy but unfortunately this is simply not true. No business will run their business at a loss. That is insanity. Secondly have you asked yourselves who owns these “office spaces” uber says they pay rent to. I do not have this figure but i can bet you it is not state owned govt property.
So uber claims that it employs ur drivers and pays them. Great!!
Drivers will buy these cars from “Ford, Peugeot or some foreign car manufacturing company”, then they will fuel their cars with petrol provided by Shell and Total and then pay rent for office spaces to china or india.
What’s that?
My dear, the rich countries are rich because they have the ability to create things people need and the poor ones r poor because they r deluded in the concepts of resource wealth, progressiveness, investments etc. What Nigeria needs is to build its productive capacity. In other words, get more Nigerians producing things that Nigerians need.
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This is an intelligent analysis 
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Interesting discussions. Valid points all round. Here are my thoughts.
- We need to welcome direct foreign investments
- We need to actively protect our interest
Basically, what I am saying is…
While we need to welcome direct foreign investment, we need to actively protect our interest.
In any business relationship, everyone actively looks out for his own interest. As the investor looks to make a killing (the most profit) in our country, we must look to learn as much as we can, develop our capacities and become globally competitive.
Every nation passes through various stages of development.
From being incapable of developing its resources beyond the raw material stage, to being capable of processing raw materials to finished goods and competing globally.
Real wealth is made when you are capable of processing raw materials to finished goods and competing globally. Find below links to learn the top ten exports of the world’s biggest economies:
In comparison, take a look at our top 10 exports.
We are still in the first stage. We need to learn, develop our capacities and start to pull our weight.
How do we learn?
We learn from others, more specificifally, we learn from foreign direct investors. They possess and will bring in the know-how we need.
Yes, at the beginning it might seem exploitative. But if we know what we are doing we will learn in no time. When we do, we become self-sufficient and a force to reckon with.
China as an example started by enticing investors to set up shop with the promise of cheap labor and a conducive environment. It learned from such investors. And very well developed its capacity. Now it a great force to reckon with.
That said…
Yes, I totally agree. But we best learn from others that have done it. And what better way than in close proximity in our envirnment. Which is what can be obtainable with foreign direct investments.
I disagree. Silicon Valley startup model is; move fast, gain market share ultimately building a monopoly. Make profit later.
Most unicorns are running at huge losses with the hope of making a killing after owning all or most of the market.
I think that Uber and its like are the types of businesses we need to actively look out for. To be cautious about. They “MIGHT” destroy jobs without creating any worthwhile replacement. Thus greatly increasing income divides.
There are links about the wages of Uber drivers in some US cities (below or just slightly above minimum wage).
- From Inc
- From CNBC
- From Cnet
- From Vice’s Mother Board
- From Business Insider
Uber has said it times without number that it looks forward to changing drivers with self-driving cars. For greater efficiency and profitability.
We discussed technology, automation and the future of work in a radar thread. There, I stated that…
Just my thoughts.
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This is only partially true.
What you call the Silicon Valley startup model is actually a general business growth strategy.
During the growth stage, there is little or no profit not because the business does not want to make profit, but because that is how growth works.
It is also a very delicate balancing act, and businesses that fail to execute growth strategies correctly get slaughtered.
Also, profits cannot be deferred forever. There must be eventual profitability, or the business goes into extinction.
This is because the markets they are in are profitable. Growth would not help any business that finds itself in an unprofitable market i.e. there would be nothing to kill.
Whether now or later, the purpose of business is to make profit - as @dataGuru rightly opined .
Yes, I know that. Uber was the topic of discussion and hence my reference to the Silicon Valley startup model.
Again I know that but I differ here.
That’s not necessarily how growth works. The approach to growth of businesses that bootstrap differs from once that are venture funded. With bootstrappers, growth is funded from revenue and profit. There is a great emphasis on profit here. Growth is pursuit cautiously.
Those with investor funding go aggressively for growth. The strategy is to gain huge market share and ultimately own the market. It is assumed that once that happens, profit will follow.
[quote=“ukay, post:111, topic:7024”]
It is also a very delicate balancing act, and businesses that fail to execute growth strategies correctly get slaughtered.[/quote]
Yes, we see alot of examples of that especially with those that go for aggressive growth with venture funding.
No, it cannot. A business exits primarily to deliver value at a profit. At the end. No profit no business.
Again I agree. Didn’t say anything contrary.
I disagree with the bolded. Except you were in @dataGuru’s mind. Her statement was clear.
As explained, a growth strategy is to run at a loss so as to gain market share or “own the market”. So as to make great profit later or get acquired. Whatever comes first. Which I said was the Silicon Valley model.
Jumia and Konga all run the same model. Are they not running at a loss at the moment in an effort to “own the market”?
I was talking about growth with a focus on profitability.
Growth (actually aggressive growth) has one aim:
buy time/the future i.e. achieve in 5 years what should normally take 20 years. That is how growth works, essentially.
A real life analogy comes to mind: children who go through double promotions, writing common entrance exams at primary 4 etc. getting to finish school in a shorter than normal period.
I think we need to come to an understanding of what “running at a loss” means.
As cocoa takes 5 years produce fruits, would the farmer be said to be running at a loss in the 4 years prior?
What I believe @dataGuru means by
is that no business would be run without the aim of making profit either now or in the future, not that no business would ever have a loss/expense in its books.
I think your rationale for disagreeing with her statement is that for companies whose profits are in the future, losses/expenses would show up in the books till profitability is achieved.
In other words, I think @dataGuru uses “running at a loss” to mean business failure while you use it in its strict accounting sense.
Do correct me if I misunderstood you.
According to Wikipedia, Globalization is:
" a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology."
The discussion we are having here is extremely important because so many countries in the world are realizing this: Globalization is becoming a BIG problem. Period. That’s the main message I believe @dataGuru has been trying to get across, and she has a huge point that cannot be understated or swept under the rug, even if her views may be considered extreme.
Is globalization wrong? Absolutely not. But there must be balance and a system that favors the citizens of countries. Since globalization has become so extreme, people are suffering. In order words, the rich/huge corporations are getting richer, while the poor/small business keeps getting poorer. It’s everywhere. In fact, we haven’t even scratched the surface in Nigeria yet.
Nigeria’s growth should be driven my small/medium businesses. Nigeria’s tech industry needs to focus on building more businesses than start ups. I can’t stress this enough.
Here are some policies in Canada (very different from U.S.) that should work in Nigeria.
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The board of a Canadian corporation must be comprised of at least 25% Canadian citizens/permanent residents who reside in Canada. 25% is fair to implement in Nigeria, as we do not want to have very strict requirements that will deter foreign investments.
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Small-medium businesses are KING. Small business are easy to open and the tax incentives are so good that so many people venture into it just for tax purposes. Nigerian gov needs to give incentives, rather than mediocre loans to local businesses.
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The Canadian gov invests in trade careers (carpenters, technicians, painters, electricians etc). Canadian polytechnics (offer short diplomas and 2 year degrees) are strong and students graduating from polytechnics have higher chances of getting jobs that universities. Nigeria needs to revive it’s Polytechnic institutions and give incentives to students to study trades careers. Apprenticeships, instead of NYSC, should be mandatory.
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Another way to curb youth unemployment in Nigeria is to subsidize salaries for new grads. Some Canadian provinces have gov programs that subsidizes youth salary up to 50% for a certain number of months. Now imagine the incentive companies will have to employ youths if that was implemented in Nigeria.
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Loans are hard to get for small businesses in Canada (just like Nigeria). However, agriculture is KING. Since few people look into agriculture, some provinces provide huge loans to foster farming. I believe we have similar policies in Nigeria, but these loans need to be more accessible.
Nigeria is not perfect, but neither is the outside world. I am curious of what the news of the new African Union will be. Could open up new possibilities to Nigeria.
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You did misunderstand me.
If you had simply written this rather than a lecture on growth and profitability, I would have agreed with you. I did state clearly that the “Silicon Valley model” is to make profit later.
Yes, I did take @dataGuru statement “in its strict accounting sense”.
i simply do not understand why people these days have found a way to brand the truth “extreme”. this is simple and exists in all textbooks, if a country lacks the capacity to produce, u r better off operating a closed economy. now ‘closed economy’ has been replace with ‘protectionist/extreme/leftist/…’ and ‘open economy’ has been replaced with ‘globalization/acceptance/progressiveness/…’ but let us not cloud our judgements n call it what it is. if u let non-indigenous companies operate freely in a country with no productive skill/resources to compete the former will kill the latter. certainly. It comes down to what you want as a country.
call it ‘extreme’ i call it a ‘closed system’ which is what countries do when they need to boost their productive capacity. China, Russia, N.Korea,india,singapore. some of these countries u call tyrants n ‘extreme’ but in reality they r the new world powers. there is a reason 4 dat.
Subsidies (as implemented in Nigeria) have proven to be more problem than they are worth. Let’s scratch that off the list.
Compared to the actual steps countries take to protect & advance their interests in today’s world, @dataGuru’s views are PG-13.
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So Red Cab rents from a state owned property? Uses Made in Nigeria cars and locally refined fuel?
Remember, I said whatever criteria you apply to Uber, apply to others.
As for “No one running there businesses at a loss” others have already answered you. But that statement clearly shows you are speaking passionately but with very limited information.
I’d suggest you ask questions rather than make erroneous statements.
If you’re looking at creating a communist state whereverby the government owns everything including renting out office space, that lets be clear on that.
However, you make so many contradictory statements that it’s hard to know where to start from.
My advice would be to try and think through what you’re trying to say. Perhaps pose the question or issue you have and then have a conversation about what solutions may be appropriate.
If you keep up with this scattergun approach you’ll not be more learned that when you started out. And it would be a waste of time to spend so much time without learning any thing new
You are getting this subsidy confused with oil subsidy. Not all subsidies are created equal. Let’s put things in perspective for a sec.
The salary subsidy I’m talking about is short term, specific, and should have a cap to prevent fraud. I don’t really see a major problem with it and I prefer them to most government programs that are aimed at youths. I prefer incentives rather than meaningless promises from gov to provide jobs.
Where did you see me write “oil subsidy”? I said
as in all the subsidies Nigeria has ever implemented.
You’re an agripreneur, so how have agricultural subsidy schemes (defunct & operational) fared?
Did they achieve their intended impact?
@ukay Where did I mention anything about an agricultural subsidy??? Nice try. I said the gov can subsidize youth salaries, instead of promising jobs. The subsidy should have a cap, be short term, and specific. This has nothing to do with agric loans or subsidies.
For example, if the salary of a new graduate is 80K naira. The gov will pay a maximum 40K naira (50%) while the company pays 40K for a period of 6 to 24 months, depending on the type of job. It gives incentives for businesses to hire new grads. Isn’t that better than them promising to pump xxx amount of money to create xxx amount of jobs?
I mentioned that Nigeria offer agric loans, but like I said earlier, they are not accessible to people who need it the most.
I do not know how much clearer i can be. You can take what ever perspective suits your narrative but
“It is about the owner of means of production, boosting productive capacity, making sure that more is coming into the economy than leaving, ensuring that Nigerians and our skills remain relevant, ensuring we do not have to depend on and external body for the basic necessities, roads, food, house etc.”
“This discussion was not about Uber or Shell, or RedCab. These were just case studies or examples.”