In my last episode, I made a concise analysis on the policy thrust of Governor Ayade with specific focus on expansion of Government. That article made provision for both policy framework and its Praxis because many policies have hit the rocks during implementation-process for want of sound implementation modalities. Often times, most policies appear very impressive on paper, but in practice, they become impossible to implement. Another very important aspect of Ayade's policies is that they are often made available to the public at their formative stage for periodic evaluation and inputs for proper summative assessment during implementation to ascertain whether they have yielded the intended results. This is not unconnected with the Governor's stance on making his administration an all-inclusive one where the people have the sense of participation and belonging. In my last episode, we saw a situation where accruable revenue to the State was standing very frail in the face of massive projects with unimaginable cost and raised a poser on how the Governor has been able to accomplish so much which brought us to the concept of "intellectual money".
However, before I commence on the analysis of what constitutes intellectual money, I will want to, unequivocally, establish that any society with the aspiration for enduring prosperity, must be resolute in initiating programmes that have dominative focus on human capital enhancement. Therefore, any administration that lays emphasis on economic growth and social reproduction without a deliberate road-map on human capital development, does not have the genuine concern for the society it administers. This is because, every other substance/resources that exist outside the milieu of human capital growth are finite and exhaustible hence, the concept of intellectual money by Governor Ayade.
Many advanced societies regarded as first world countries, today, were very poor in natural resources and from available records in history, we can assume that ingenuity comes to play at the height of lack which also lends credence to the assumption that necessity is the mother of invention. Actually, no society can totally trust the confidence of her economy in what her continental shelf and soil hold as resources because, those resources are non renewable, finite and exhaustible. Back to Cross River State: with the ceding of the Oil rich Bakassi to Cameroun and the loss of the 76 oil wells, Cross River State lost her status as an oil producing state with attendant drastic reduction in federal allocation which is also compounded by the current recession, there has been an increasing search on alternative ways of improving the state's economy. This search gave rise to the Ayade's concept of intellectual money.
In this concept, Intellectual money can simply be described as a situation where a State, Organization or individual with laudable project ideas, without funds for execution can reach out to firms, organizations etc with available funds for the execution of these projects and thereafter proceeds are share by both parties. This concept appears simple, but very deep and delicate. How does intellectual money apply to governor Ayade setting up industries and executing his signature projects that runs into trillions of Naira, when the state can barely boast of N80 billion a year (a figure that includes what the state generates and her allocation from Federation Account and Allocation Committee). Governor Ayade developed an alternative funding platform in which the state spends no money, through foreign Senior Debt Funders and their Strategic Equity Partners. Governor Ayade, intelligently, modelled a value proposition so attractive that these foreign investors keep rushing yet, at no cost and no debt to the state.
These Senior Debt Funders are the actual investors from advanced economies who hire the services of Strategic Equity Partners to provide technical services like consummate due diligence and feasibility prior the commencement of any project of interest. It should be noted that these Senior Debt Funders are from highly advanced countries dominated by the private sectors. With so much capital amassed from decades of investment-returns, these foreigners are even richer than some countries, but they have a common problem of not being able to reinvest into their economies because their labour aristocracies have become so organized that labour and land have become quite expensive and we know that the sole interest of investment is profit-driven.
If profit remains the cardinal interest of investment and land/labour become quite expensive then, investing in these areas wouldn't be commercially ideal. Consequently, these Senior Debt Funders and their strategic equity partners are always in search of alternative markets where land/labour are cheap and patronage is high which makes Nigeria very ripe for Direct Foreign Investment (DFI). Governor Ayade leveraged upon these to develop an irresistible value propositions that keep investors running to the state even when the state has a zero pecuniary stake in the partnership structure of such business.
However, the investors, through their Strategic Equity Partners must make available their Indicative Term Sheet which is in form of their own value proposition or terms and conditions. Once these terms and conditions show the likelihood of not putting the state into some future technical and financial risk, it is accepted by government and there is a financial close which ends the paper work and signals the commencement of actual project execution. Financial Close is attained when the terms and conditions of a funding proposition are met and the Financial documents are executed so, expectations are that the several investors funding propositions will materialize and thus support our project implementation.
Some people have argued that this new alternative funding platform created by Governor Ayade has the potential to further plunge the state into irredeemable debt portfolios, but with Cross River State being declared insolvent, can no longer borrow, instead of a sovereign guarantee, the governor has carefully designed alternative guarantee options in such a way that the investor is not seen in the light of a creditor and the state in the light of a debtor in any of the projects/businesses to be executed.
One of the guarantee options is the Build Operate and Transfer (BOT). In this case, the investors, after a financial close, brings in 100% of the capital for the project implementation, operate the facility to recoup their capital and transfer ownership to the state. During the operation of the company by the investors to recoup their capital, they retain the ownership of the company or facility and transfer ownership to the state after invested capital is fully recouped from investment-returns. This is normally done with backing legislation.
The next, is the Build, operate and Own (BOO) in which case, the investor builds, operates and retain ownership of facility in the State's soil. In this case, the state benefits from the angle of the company providing employment opportunities for its teeming indigenes, the company assumes certain corporate social responsibilities and contributes to the economic stability in the state, while the last one is the PPP which is very popular.
Governor Ayade must have acquired this Concept of Intellectual Money from the Asian Tigers. The Four Asian Tigers are the economies of Hong Kong, Singapore, South Korea and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates (in excess of 7 percent a year) between the early 1960s (mid-1950s for Hong Kong) and 1990s through Direct Foreign Investments from the bourgeois aristocracies of Europe, North America and Japan. These investors saw the prospect for commercial viability in South Korea, Taiwan, Singapore and Hong Kong through the availability of cheap labour, land and high patronage. Today, all Asian Tigers are rated as Second worlds because of massive trans-border capitals in form of Direct Foreign Investments into their countries.
Ayade's perceived priority is to decouple the state from dependence on Federal Allocation and civil service dependence with accelerated economic growth through aggressive industrialization, through DFI so that in the nearest future, Cross River State would offer opportunities that are more promising and with the design of attracting DFI at no pecuniary stake to the state, he has actually put his intellectual superiority and might to the very test.
* Otaba Special Assistant, New Media to Governor Ayade wrote from Calabar.