Of Apple and Crude Oil
OUTSIDE THE BOX
By Alex Otti; alex.otti@thisdaylive.com
Let me start with a confession. I like apple products, from the iPod, through the iPad to the iPhone and of course the iTunes. Apple makes beautiful and very user-friendly products and sometimes, they are intoxicating, seductive and addictive. This write up, however, is not about the products as such, as it is about innovation and what happens when the human intellect is combined with a thinking-friendly environment and a clime that supports creativity and industry. The story of apple is a very interesting one. Two friends who, by the way, were school drop outs, Steve Jobs and Steve Wozniak, founded the company from their garage on April fool’s day in 1976. A third friend Ronald Wayne, was invited by Jobs to take a minority stake in the company and act as an arbiter, should the two Steves fight. The company has since grown to become the most valuable company in the world with a market capitalisation of over $630b and revenues of over $216b as at end of last year.
Their products are some of the most important products in the technology space. Apple remains one of the most innovative companies of the world. Could Apple have done so well if the founders were from and operated out of Nigeria? I believe opinion would vary on this question, but one thing we should all agree on, is that our country is not wired to support startups, innovation and industry. Of course, the founders had their fair share of challenges when they were starting. Banks were unwilling to touch them when they were trying to commercialise their innovations. In compiling the story of Steve Jobs, Nik Rawlinson wrote that Wozniak was the real “techie” guy while Jobs was the business man. Both of them sold something, (HP calculator by the former, and Volkswagen microbus by the latter) to finance the production of the first apple, christened “Apple 1”. Jobs, having fixed a commercial price against Wozniak’s position of selling the computer at a price that would just cover the cost of the component parts, got a deal to sell 50 units of the computer to Mr. Paul Terrel, owner of the Byte Shop. Walter Isaacson in his book, “Steve Jobs: The Exclusive Biography” stated that the two youngsters didn’t have resources to fulfill the orders, neither could they get loans from banks at that time. Virtually all the parts stores, including Atari, where Jobs had worked, wanted cash for any components sold. At the end of the day, it was Byte Shop’s order that heralded the Apple Corporation. Jobs had taken the order to a component parts dealer, Cramer Electronics and convinced the manager to put a call through to Mr. Terrel to confirm the order. “Terrel was at a conference when he heard over a loud speaker that he had an emergency call (Jobs had been persistent). The Cramer manager told him that two scruffy kids had just walked in waving an order from the Byte Shop. Was it real? Terrel confirmed that it was, and the store agreed to front Jobs the parts on thirty day credit” The rest, like they say, is history.
Nigeria is the 6th largest oil producer in the world. Oil was discovered in Oloibiri in the present day Bayelsa state in 1956. There is no doubt that a lot of innovation has been introduced in the way oil is produced between the time oil was discovered and now. What we have not done is to harness the opportunity such that Nigerians would be technically sound enough to take over most of the production in country. I’m aware of all the efforts that have been made to domesticate oil production. I know about the Nigerian Content Development initiative. I also know about the Cabotage law which is not just about oil, but also about Shipping and vessel ownership. I’m also not unaware of the efforts made by Nigerians to implement some of these laws in breach. I’m aware that some foreigners in connivance with unscrupulous Nigerians go into joint ventures that present Nigerians as owners of companies which in reality are foreign companies. The whole idea is to present those companies as Nigerian companies for the purpose of defeating the law on indigenous ownership and local content. This normally goes with compensation to the shortsighted Nigerian accomplices.
We have unfortunately failed to add significant value to the crude we produce. While apple has created so many products and continue to improve on existing ones, we have basically been shipping crude oil in its crudest form since it was discovered. Again, I am aware that we had set up four refineries in the past to process the crude oil into final products like diesel, premium motor spirit, kerosene, aviation fuel etc. It was a great idea to set up those refineries, but at the moment the 455,000 barrels per day refineries are operating at a shameful 5% capacity. Like I had stated elsewhere, per 2015 figures, given that our local consumption stood at 408,000 barrels per day, while we produced an average of 24,000 barrels per day, we had a wide local consumption gap of 384,000 barrels per day which is filled with importation. Meanwhile, other OPEC countries are doing a lot better. Algeria, for instance, has installed refining capacity of 650,000 barrels per day and actually refines 628,000 barrels, while it consumes 418,000 barrels per day and exports 210,000 barrels per day of refined products.
Kuwait with a population of 4 million people has installed refining capacity of 936,000 barrels of crude per day. It however, refines over a million barrels per day, the excess being accounted for by Gas to Liquids. Kuwaitis consume just 345,000 barrels per day while they export over 680,000 barrels of refined products per day. The question to ask is who or what has bewitched us? Beyond all the primary products listed above, there is a lot we could have done with our crude to make our life better and diversify our sources of revenue. The most pathetic is that gas associated with crude production which other countries reinject or produce are flared with reckless abandon. Someone described that action as setting money on fire. Of course, little or no attention is paid to the environmental hazard of the continuous flaring of gas to host communities and their neighbourhoods.
We also got so lazy that virtually everyone in the country is now dependent on oil. When prices came tumbling down, we all became prostrate. Meanwhile, we had demonstrated that we were just pretending, when we convinced ourselves that we were an oil economy. From our estimated population of over 180m people and our average production of about 1.7m barrels per day, about 370 people will share 1 barrel of oil per day and at a price of $55 per barrel, each person would be entitled to a little less than 15 cents per day and at the current exchange rate of N305 per dollar, it would amount to less than N46 apiece. I don’t know that it makes sense for us to pay as much attention to oil at the detriment of a lot of other possibilities open to us.
Statistics indicate that Nigeria earned $95b from petroleum exports in 2012, $90b in 2013, $77.5b in 2014 and $42b in 2015. Looking at the revenues for Apple for the same period, the company earned $157b in 2012, $171b in 2013, $183b in 2014 and $234b in 2015. The difference is very clear.
It is almost becoming too late for us to sit down and hold an honest conversation about the structure of our economy. Is this the way we want to continue? Where are we going to be in the next five to ten years? Can we do things differently? What sectors of the global economy would continue to boom in the foreseeable future. Can we refocus our people to become more productive and creative? I believe that all the ingredients exist to move this country from the joke of potentially great to a truly great country. The most important ingredient, to my mind, is human capital. However, there must be the political will and the honesty of purpose to ensure that we harness the great potentials and the ingenuity of our people. As we go from town to town and from village to village, we are confronted with the reality of very industrious and hardworking people. But all sorts of speed breakers are placed on their way. We must begin to dismantle them for our people’s ingenuity and creativity to blossom.
We must first and foremost remove barriers to entry into business. There is a comparative report compiled annually by the World Bank Group referred to as “ease of doing business report”. This report rates 190 countries on a scale such that higher rankings indicate more conducive business and regulatory environments for starting and running a local firm while low rankings indicate the opposite. As of last year, Nigeria ranked 169 out of the 190 countries rated. In Sub-Saharan Africa, countries that placed better than us include Mauritius 49, Rwanda 56, Botswana 71, South Africa 74, Kenya 92, Ghana 108, Zimbabwe 162, and some other 30 countries before getting to us, unenviably sitting at the 169th position. For ease of understanding, it is important that we highlight some of the issues that the World Bank measures to arrive at the report. These include starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency. I thought this was important to underscore that everyone has a role to play in resolving the problem of road blocks to creative and innovative thinking.
I cannot conclude without drawing attention of the young people to some of the lessons to be learnt from the story of Apple. It is important because many a times, we are very quick to point fingers at the multitude of reasons why things could not be done. In terms of education, the two young Steves were drop outs from school. They refused to allow that deter them. They set up a joint company, complementing each other in terms of skills. These days, we want to go it alone, sharing no risks and sharing no skills. They brought in a minority shareholder who they believed could be an arbiter in case of fracas. That was forward thinking. That banks rejected them could not stop them. These days, what we hear is “I don’t have capital, banks are not lending money” etc. Those could just be excuses and they are not new. Note that “Steve Jobs was persistent” and I dare add, creative, taking an LPO to a parts supplier to get credit. They had to sell what they had to produce the first apple computer. Sometimes, you may need to part with something of value to create better value. Finally, as they became successful, they worked harder, put on better thinking caps and this led to new and better products. You don’t need to rest on your oars, when you think you have arrived. That is the time to work harder.
By the way, Apple products are so pricey going by the current dollar exchange rates. The iPhone 7 goes for anywhere between $769 and $969, the iPad sells for between $800 and $1100, the MacBook will set you back some $1000 to $2,400 and the iPod commands a tidy $400, depending on specification. Meanwhile, our crude oil is still struggling at around $55 per barrel. Just like the saying goes, you dare not compare Apples and Oranges, much less a product as crude as crude oil.
