This article is based on a number of trips I undertook in Northern Nigeria to advise the Jigawa state pension scheme over the last couple of years. Unfortunately, since I have been working there Kano has been in the news for the wrong reasons as the scene of recent terrorist atrocities, which has also curtailed my work there.
Kano is the major city of Northern Nigeria of approximately 10 million people. This figure may not be correct, because in Nigeria population figures are subject to political manipulation as they determine the size of the state’s budget. Kano is therefore officially larger than Lagos, which apparently, is a ridiculous suggestion.
Nigeria could be described, to misquote a famous footballing cliché, as a country of two halves. The South is Christian, liberal, often lawless and contains oil. The North is Muslim, has sharia law, practically no crime (until the recent intervention of the Nigerian Taliban) and no oil.
Kano is a rambling though not unattractive place, with wide tree-lined avenues of large mansions, fronted by dust and very poor people trying to sell things. The hotel I frequent in Kano is the lovely Prince’s hotel – to anyone who has not travelled round Africa, it would seem pretty ordinary, but compared to other hotels in North Nigeria it’s the height of luxury – clean, with a swimmable swimming pool (which you really appreciate when it’s 40C) and a nice Lebanese restaurant -the Lebanese seem to own all of the functioning businesses in Kano.
Kano is a really interesting town – it is an historic market town on the edge of the Sahel which traders have used for over a millennia – it could almost rival Marakesh as a tourist destination, if it wasn’t in Nigeria. It was founded in the 9th Century, and has an amazing old market, which still has the buildings that used to house slaves. The city’s historic center used to be surrounded by 1000 year old mud walls, a 100m stretch has been rebuilt and looks suitably impressive. However, the German agency that had funded this had actually paid for the walls’ entire reconstruction but the rest of the money disappeared. The rest of the walls are in a sorry state – piles of mud which goats use to graze and which locals use for building material. There is also a place where they dye fabric, which doubles as a popular meeting place for flies, and a small but fascinating museum. Of particular interest to me was a photo of the two armies, the victorious British and defeated Hausa during the ‘Scramble for Africa’ at the end of the 19th Century. I already knew the story, the adventurer Fredrick Lugard had conquered the whole of the country and placed under British rule. However, what struck me about the photo was that the soldiers in the two armies were made up of the same people, i.e. black Nigerians. So what exactly was it about the ‘British’ army that could easily defeat the Hausa if it wasn’t the solidiers? The Britishness is actually a series of rules, institutions and blueprints that meant that Britain had the knowledge to produce the uniforms, guns and organize an army, and this is what enabled them to project their power to far-flung places. This also explains my presence here, although hopefully in a more constructive capacity and invited by the locals, I supposedly am possessor of another set of blueprints, and knowledge of how to implement them.
I was not actually working in Kano, but in Dutse the capital of Jigawa province a 2-hour drive North, towards the border of Niger. The drive was fascinating. The roads are crammed with the ubiquitous Jin Chao – a cheap Chinese motorbike. It is an amazing site to see the Kano men, adorned in their white Kaftan’s and traditional cap, and the ladies resplendent in their colourful robes riding on these bikes and more unbelievable to see what they transport –most impressively was a car windscreen carried vertically on the back of a bike.
The Nigerian government receives all of its revenue from oil rather than taxes; to get into power in Nigeria you build up favours from various interest groups who you then have to pay off. Your success depends on how much of the oil revenue you can secure. Much of that revenue is siphoned off and leaves the country. The result is that the government has no interest in providing an environment that businesses can function to pay taxes, as it does not depend on these taxes for its income. You can see the physical manifestation as you drive along; there is rubbish everywhere, picked over by goats, no sewage the schools have no roofs (and, apparently no toilets and the teachers have rudimentary education), I could go on. The money for this infrastructure has disappeared. Apparently, things are much better than they used to be, though – Nigeria has risen from the most corrupt county in the world to a heady 143rd least corrupt country in the world.
In the bad old days under Suni Abacha if you met an army or police checkpoint the advice to international workers would be to drive over the nails that they put in the road to stop you and keep going until you can’t anymore. Then you could phone and be rescued rather than fall prey to the mercies of the army/police.
As you leave Kano, the scenery changes as you enter the Sahel proper, which is semi-desert. The landscape is pancake flat, punctuated by Baobab trees (as a child I loved the book The Little Prince so I was particularly excited about these) and by traditional villages. These consisted of collections of mud huts surrounded by a straw corral. If you come here in the wet season though, the landscape is transformed into a lush paradise where the villages are no longer visible due to the abundant flora.
Anyone who has read my previous articles will know that I always have a “what am I doing here?” moment. But in this case, was I really here: middle of nowhere Africa where the people are apparently totally untouched by the modern world – do they really need actuarial advice on a defined benefit pension scheme?!
The journey was also fascinating for my companions. There was the driver, who was weighing up weather to marry a 4th wife, and my assistant Amin, a talented and prolific essayist who railed against the corruption of the government, but also, the corrupting morals (or lack thereof) of the West. Later I later shared a drink with Amin in one of the few bars in Dutse; as they have Sharia law in North Nigeria, alcohol is illegal, so the only place you can get a drink is in the car park of the police station.
We finally arrived in Dutse. Dutse is a new town, a sort of Nigerian Milton Keynes; it is surprisingly clean without fields of rubbish and has things which you notice when they are not there, like traffic signs and road markings. It would be unfair to say that my hotel, the ESSPIN Guesthouse was the worst place I’d ever stayed in, that title goes to and hopefully will remain for the rest of my life with the nameless and charmless place I stayed in Qurghonteppa, Tajikistan (see my previous article). But it was a distant second. The proprietor was very willing and he did de-fumigate my room many times a day and the food was flavoursome and didn’t make me ill.
Jigawa is a new state which was created out of Kano. Starting with a clean slate, they are trying to make it modern, hence the new-town capital, and also the state of the art civil servant’s defined benefit pension scheme. The rationale for the scheme was ambitious. In Nigeria, there has been a lack of belief in the viability of the country and this is one of the reasons that resources have been siphoned off to such an extent. But a funded public service pension scheme means that the government is thinking long term, civil servants turn up to work knowing they have a pension which will be there when they retire and hence have an incentive to keep the state going. This is a significant aspirational statement and the workers see it as such.
The state’s headquarter building is really a remarkable place. It is like a benign version of Kafka transported to the middle of Africa. Outside the building there are a bunch of men milling around for no apparent purpose who all greet you and shake your hand. The dusty corridors are also populated by people sitting or standing around. Offices of senior figures all have a antechambers with couches and a TV permanently blaring out BBC News 24 at full volume. The offices are full of men sitting around watching the TV. Similarly the main office has BBC News 24 on permanently and there is a constant interruption during meetings of people coming in to shake hands, or the mobile ringing, or power cuts.
During my stay in Dutse I experienced an authentic African experience. I joined most of the men in the town in a field to watch a transmission of the Champion’s League quarter final. Half of Dutse are passionate supporters of Chelsea and half AC Milan, so there was a great atmosphere.
I found Nigeria so fascinating that I have not yet even told you about the work – this was fascinating too. Before you even get to an actuarial review, I discovered the scheme is beset with problems; the main one being human resources. The people who set up and are in charge of the scheme are visionaries, but there is a lack of depth of resources – because of the low levels of education, it is hard to recruit people with more than rudimentary mathematics, IT and administration skills. Also, the scheme is operated in a vacuum; Nigeria does actually have sophisticated pensions legislation with very clever incentive and transparency laws. However, there are no other defined benefit schemes, so the scheme employees have no peers to compare themselves against and develop best practice. It is therefore very hard for them to spot pitfalls.
I think many actuaries would find the challenges of valuing the system very interesting. Besides the lack of data to go on (which I am used to), how do you, for example, set a mortality basis? Nigeria has a life expectancy in the 40s, but surely this does not apply to Jigawa civil servants? What about inflation or salary inflation? Historically this has been very high, but has now been brought relatively under control, i.e. it is below 10% (just). And, like in many muslim countries, the scheme operates under sharia law. So when a member dies his pension is split between wives and children, and can be paid for life to unmarried daughters. So, for example if a man dies at 65 with a 30 year old wife (quite likely as polygamy is common) and a 2-year old daughter, his pension will be paid in full for the life of that daughter if she doesn’t get married – possibly 80 years! I have just been reading the excellent report on discount rates by Chris Daykin and Chinu Patel, which sets out the difference between a matching and a budgeting basis . But how do you set a discount rate for a state in Nigeria, where investment returns are around 15% (in bank accounts), a government bond is not exactly ‘risk free’ and the scheme is mostly unfunded?
Nigeria has massive problems, but things are getting much better and it has great potential – a relatively benign government, natural resources, a rich and diverse culture and most of all 170 million wonderful people. On my return to Kano, the head of the Scheme turned up at my hotel saying “Mr Nick I have brought my tailor!” and insisted on having him make me a traditional costume. This doesn’t happen in London. I was touched.