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Centre for African Entrepreneurship and Leadership

The Centre for African Entrepreneurship and Leadership (CAEL) coordinates capacity building activities that focus on entrepreneurship and leadership, and provides opportunity for evidenced-based research and policy for Africa.

Month

July 2015

“Go hungry, break the law, or create wealth”: thoughts on poverty, conflict and entrepreneurship activities in Nigeria By Paschal Anosike

 Nigeria is amongst the top ten largest countries by population, and more than half of the world’s 7.2 billion population is under 35 years old. About twenty-four per cent of nearly 170 million Nigerians are today either under-employed or unemployed. Of this percentage, the youth sector is the worst hit. Youths (ages 15-35) account for nearly sixty per cent of the Nigerian population, which represents thirty per cent of the Nigerian workforce – yet, thirty-eight per cent of them remain unemployed. One obvious implication of this is that most Nigerian youths who are either underemployed or unemployed have little or no chance of competing globally. A more worrying implication is that by 2020 and beyond, most Nigerian youths will become parents themselves with little or no means of sustenance – therefore, it is doubtful how they would contribute to achieving the Vision 2020 goal.

When individuals lack the economic means to sustain their wellbeing or that of their families, two things become inevitable – they either go hungry or they break the law. This situation presents a very serious challenge for Nigeria. Entrepreneurship development could mitigate this challenge.

Although the actual size of entrepreneurship activity in Nigeria may never be accurately estimated, entrepreneurial activity in Nigeria is not only triggered by a desperate need for an individual to obtain means of subsistence for his or her family, evidence suggests that entrepreneurship activity have been recreated and expanded under diverse economic circumstances. In particular, entrepreneurial activity in Nigeria has evolved from agriculture, manufacturing to embrace entertainment, retailing and more recently the provision of repair and maintenance services in mobile telecommunications sector. Religion also plays a significant role in the expansion of entrepreneurial activity in Nigeria. Through the growing influence of “prosperity gospel”, a significant swathe of the Nigerian unemployed has resorted to evangelism as a means of achieving economic prosperity. To better understand the dominant form of entrepreneurial activity in Nigeria, I divide entrepreneurship into two types   – opportunity-based entrepreneurship and necessity-based entrepreneurship.

With opportunity-based entrepreneurship, an individual seeks out opportunities and chooses to pursue them in order to improve his or her wellbeing and the community. Necessity-based entrepreneurship is a situation in which one is left with no other viable option to earn a living, not as a choice, but out of compulsion seeks out any means of survival in order to avoid starvation and criminality. The distinguishing characters of these two entrepreneurship forms are the disposition or orientation of the individual at a particular moment in time as a result of specific trigger to act vs a deep-rooted desire for greater self-satisfaction and autonomy. Sadly, the dominant feature of entrepreneurship in Nigeria today gravitates towards necessity based entrepreneurship. The challenge is therefore to encourage an opportunity-based entrepreneurship to take a firm root in Nigeria.

As an idea, entrepreneurship is synonymous with personal and behavioural attributes namely, creativity, innovation, experimentation and risk- taking behaviours. These attributes are manifest through the individual because of a desire to achieve self-satisfaction and autonomy. Autonomy as a dimension of entrepreneurship is a state of independence that influences an individual to follow through a conceived idea. Creativity and innovativeness explain the individual’s propensity to orchestrate a novel or uniquely demanding achievements. Experimentation and risk-taking connotes the individual’s willingness to seek and seize opportunities even in the face of uncertainty. A tolerance for uncertainty is part of entrepreneurship and is manifest through willingness to do something and the commitment to see it through without a guaranteed outcome.

Sadly, the situation that emerges in Nigeria suggests that the individual as an “entrepreneur” has yet to exhibit the above attributes. This is not to say there are no examples in the Nigerian society where these attributes have been manifest. Indeed, there are. The likes of Aliko Dangotes, the Wale Adenugas and the Pascal Dozies are only few examples. These examples are a testament that given the right conditions, Nigerians possess and can exhibit the much-needed opportunity-based entrepreneurial mind-set. The key question, of course, is whether we are a society of individuals willing to seek out opportunities in order to enhance our wellbeing and that of our communities without relying on the State.

Responding to this call will force us to think about the host of other pertinent but problematic challenges in the relationship between the Nigerian individual and the State. The issue of a perennially lack of the investment climate and the poor infrastructure remain a moral conundrum for the Nigerian State and a dilemma for the Nigerian entrepreneur. In this, perhaps, the enduring words of former American President – John F. Kennedy offer a hint for a reflection: “Man holds in his mortal hands the power to abolish all forms of human poverty”, he went on: “ask not what your country can do for you – ask what you can do for your country”. To these I add – what will make Nigeria great is not so much as what it can give to the individual, rather, as an individual what we are willing to sacrifice and give for the good of Nigeria.

 

Higher education in Nigeria: is more less? By Seun Kolade

On Tuesday 14th July 2015, the body responsible for coordinating entry examinations to higher institutions in Nigeria announced its decision to lower the minimum score for university entry to 180 marks. This is arguably the lowest it has been for decades, and the announcement has been met with strong criticisms by Nigerians on social media, many lamenting falling standards and lack of adequate attention and commitment from government.

In spite of the increasing level of graduate turn out in Nigeria, unemployment and poverty have remained very high, and graduate unemployment in particular has worsened in recent years. According to official statistics, unemployment rate increased from 11% in 2006, to 24% in 2011, and a great number of those employed are under-employed (World Bank 2013). The group mostly affected by the unemployment crisis is the youth, with one report estimating that the unemployment rate among the Nigerian youth is at least three times the national composite average, and three times the average rate for other sub-Saharan African countries. Moreover, it has been estimated that about 71% of the Nigerian population are living in relative poverty .

Graduate unemployment constitute a significant part of overall youth unemployment in Nigeria, and it is an especially disturbing statistics considering one of the key objectives of universities is to produce graduates with requisite knowledge and skills to fill the manpower needs of the national economy (Federal Ministry of Education 2008). A recent assessment of the quality assurance process in Nigerian universities has revealed significant, sometimes drastic, reduction in quality of student recruitment processes, examinations, and staff appointment and promotion, among others. These were especially noticeable from the 1990s, and some have attributed the trend to governments’ reduced attention and investment on education, and the associated phenomenon of “brain drain”, with many academics leaving Nigeria for greener pastures overseas. Increasingly in recent years, employers have complained about troubling un-employability of Nigerian graduates. Investigators have reported that a growing number of the Nigerian university graduates are weak in analytical and communication skills, and are especially deficient in entrepreneurial skills standards of higher education in the country. Already, many stakeholders in the higher education sector and industry have expressed concerns about the quality and relevance of higher education to requirements and needs of the national economy.

Since the start of the fourth republic in 1999, the number of higher institutions, and the number of students enrolled in them, has increased significantly. This is partly due to government’s liberalisation of the higher education sector, and the attendant licensing of private universities. This report for example indicates that, between 2003 and 2007 alone, the number of universities in Nigeria grew from 53 in 2003 to 128 in 2013 accordingly, student enrolment and graduate turnout have grown considerably over the years, with university enrolment increasing from 780,001 in 2005 to 1,013,337 in 2009.

It may be a little simplistic to attribute the problem of graduate unemployment mainly or solely to lower quality of higher education and turnout, in terms of analytical and communication skills. The current structure of the Nigerian economy is such that there exists limited opportunities for graduate jobs. The national economy is dominated by heavy reliance on crude oil, and successive governments have given very little attention to other sectors of the economy. In recent years there have been some growth in the services sector, but the manufacturing sector is severely under-developed, and there has been no progress in Agriculture, among others. As such, even highly academically gifted graduates are often faced with the challenge of very limited opportunities for employment.

In the light of the foregoing, a key part of on-going debate and recent policy intervention is the renewed emphasis on entrepreneurship education. It is suggested that stakeholders in the higher education sector need to embrace a paradigm shift that reflects the peculiarity of the Nigerian experience. There is, it is said, need to put greater emphasis on prospects for new small-scale business start-ups across the whole spectrum of the nation’s economy. Instead of waiting for employment opportunities, graduates can actively explore opportunities to be employers of labour.

In order to achieve this paradigm shift, there is the need to revamp the structure and content of curricula in the universities. Specifically, there is a critical need to invest resources and personnel in to integrate entrepreneurship content into university courses, among other strategies to emphasize entrepreneurship in the curricula.

To grow the wealth of nations, fix property rights! By Seun Kolade

A review of “The mystery of Capital”

Author: Hernando De Soto

Transworld Publishers, 2000

276 pages

“The hour of capitalism’s greatest triumph is its hour of crisis”. This is Hernando De Soto’s opening statement in what has now become a classic of property rights. He starts with a brief description of the “triumph” of capitalism and the end of the cold war. “Capitalism”, he says, “stands alone as the only feasible way rationally to organise a modern economy. At this moment in history, no responsible nation has a choice”. So then, the “responsible” nations of former communist and third world territories embraced capitalism with considerable enthusiasm, following the fall of Berlin Wall. And wait for it: they came away with bitter disappointment. And how did the leaders and Capitalist America and Europe respond? With the same old “wearisome lectures: stabilize your currencies, hang tough, ignore the food riots, and wait patiently for the foreign investors to return”

Why has capitalism prospered in the West, and generally failed elsewhere? That is the Big Question De Soto sought to address in this book. Of course, 15 years after it was originally published, some of the claims are now dated, but the key ideas continue to gain traction in policy and development research circles.

De Soto empathically rejects the suggestion that “Third World” peoples are lacking in entrepreneurial spirit or market orientation. On the contrary, he says, the inhabitants of poor countries are highly entrepreneurial, and have such a ready grasp of technology that American Businesses, for example, are “struggling to control the unauthorised use of their patents abroad”. So then, again, why has capitalism failed so woefully in these poor countries?

De Soto’s big idea is “Property”, and with it the explanation of the inability of these poor nations to produce capital, which is in turn the “lifeblood of the capitalist system”, the means by which it “raises productivity of labour and creates the wealth of nations”. The curious paradox is that most of the poor already possess the assets to make a success of capitalism. By one estimate, “the value of savings among the poor is… forty times all the foreign aid received throughout the world since 1945”. The poor have things, “but they lack the process to represent their property and create capital. They have houses but no titles; crops but not deeds; businesses but not statues of incorporation.

At this point, De Soto introduces his “five mysteries of capital”, and these will be the titles of the next five chapters: The mystery of missing information; the mystery of capital; the mystery of political awareness; the missing lessons of US History; and The Mystery of Legal Failure.

The author now turns his attention to the phenomenon of “dead capital”, and how this is caused and aggravated by the lack of legal documentation and formal representation of property held by the poor. In Haiti, for example untitled real-estate holdings were, as of 1995, found to be worth 158 times the value of “all foreign direct investment in Haiti’s recorded history”. At the time of writing, De Soto and his team estimated that the total value of real estate held but not legally owned by the poor was $9.3 Trillion, which was “about twice as much as the total circulating US money supply”! The poor face great obstacles to legally register their property and businesses. In Haiti, it takes an estimated 19 years to go through all the bureaucratic obstacles to legally own a land! And what is not formally documented, legally owned, cannot be “taken to the bank”. It is dead capital, and cannot be transformed into usable forms to facilitate or promote economic productivity. The vast assets of the poor, because they are not fixed in a formal property system, are very difficult to move in the market. Formal representation makes assets more fungible.

However, it is instructive that the capitalist nations of the West have in fact been through the process of transition from undocumented and informal arrangements to legally documented property rights, and this formal representation has been instrumental for economic progress.  In Britain and the rest of Europe, the process took about three hundred years of tumult and turbulence, during which the great numbers of informal settlers and unregistered entrepreneurs came in constant conflict with the law. Ultimately, officials and kings came to the final recognition that the problem was actually with law, and not with the people. The extralegal settlers and businesses had come to stay, and the law needed to catch up and integrate them. Nowadays, the idea of fixed, formalised assets is taken for granted in Europe, and this is partly why the economic preachments of the West often fail to address the peculiar circumstances of the developing world, because certain fundamentals, including property rights, cannot be taken for granted in these poor countries. For example, in sub-Saharan Africa, the vast majority of property held by the poor are untitled, not legally owned, and cannot be used as collaterals in banks, or in other legally binding business transactions. Millions of these innovative entrepreneurs are locked out of the mainstream, left to depend on scraps and crumbs in the informal sector.

The United States has, relatively more recently, gone through a similar process. If we set aside, for a moment, the tragic episode of land grab from native Indians, European settlers in North America were squatters who simply occupy tracts of lands, often secured by a few deadened trees at the boundaries. For a long time they were deemed illegal trespassers by the official governments of the colonies. After years of bloody conflicts between the squatters and the government, they ultimately came to formal agreements on legal documentation of the squatters’ holdings.

Paradoxically, a major obstacle to needed reform in poor countries today is the legal system that is not only unfit for purpose, but also resistant to change. De Soto does not like lawyers, obviously. He considers lawyers to be, by default, stubborn defenders of the status quo against the practical realities of human experience. In a sense, De Soto seems to be saying, by way of an old cliché, that the law was made for man, and not man for the law. A legal system that keeps majority of the population out official mainstream is bound to fail, sooner or later. A functional law should reflect the reality of how people live, not hinder or stifle human enterprise and creativity. Lawyers should support, and not stand in the way of, necessary reform.

As compelling as De Soto’s arguments are, it is impossible to shake off the nudging feeling that the challenge is a bit over simplified, and that his prescribed solution is a little over-stated. The challenge of under-development may be more complex than antiquated property laws. There are other institutional and leadership challenges. Even at that, his central thesis is persuasive: get rid of artificial, antiquated barriers and give people the rights and opportunities to make the best of their assets. Then stand by and watch them make great, unprecedented contribution to “the wealth of nations”.

Welcome to CAEL’s blog!

This blog features contributions and viewpoints about on-going research and various intervention programmes being run by the Centre for African Entrepreneurship and Leadership (CAEL).

CAEL coordinates capacity building activities that focus on entrepreneurship and leadership, and provides opportunity for evidenced-based research and policy for Africa.

CAEL serves the wider African communities in a programme of Africa-based entrepreneurship, connecting groups and institutions with Faculties and business support units within the University for the purpose of developing sustainable schemes for SMEs growth, graduate and youth employment and women empowerment.

 

 

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