An Assessment of Odu'a Investment Company
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Covenant University Journal of Politics & Internationall Affair. Vol. 7 No. 1, June 2019 ISSN: p. 2354-3558 e. 2354-3493 DOI: 10.20370/ddtf-z111 An Open Access Journal Available Online Bleeding the Commonwealth: An Assessment of Odu’a Investment Company Limited, 1985-2008 Abimbola Oyarinu Department of History and Strategic Studies, University of Lagos, Akoka Lagos, Nigeria Received: 24.02.2019 Accepted: 25.05.2019 Date of Publication: June, 2019 Abstract: Corruption is a scourge destroying public enterprises in Nigeria but the idea that corruption is the major reason why public enterprises fail might be far from the truth. Enormous corruption occurred in Odu’a Investment Company Limited between 1992 to 2008, which led to the obliteration of the Yoruba patrimony. While associated companies, which are run by private hands are making profits and paying dividends, the subsidiary companies are being bleed white owing to massive corruption stemming from a dysfunctional structure. A historical method is adopted as data were collected from archives, interviews, private records, company journals, newspapers, books and internet materials. The study is both descriptive and analytical and data is analysed using content analysis. This work concludes that corruption is not the major reason why public enterprises fail but the structure like neorealism postulate. The structure of public enterprises is discovered to lack Agency. Keywords: Corruption, OICL, Owner-States, Public Enterprises, Structure Introduction made her balance of trade a mockery The idea that government has no to the eyes. Awolowo, an business in business is an argument accomplished Keynesian economist, advanced and popularized by neo- had realized as far back as the 1950s liberalists in the 1970s. While this that aggressive state investment is a might be beneficial to countries with necessary condition for rapid strong economies and wealthy private economic development, especially individuals, the same cannot be said where you have a weak indigenous of countries of the Global South. capital base (Awolowo, 2014). The Neoliberal ideas have further wanton corruption in state-owned impoverished African nations and enterprises has made the idea of a 48 Abimbola Oyarinu CUJPIA (2019) 7(1) 48-75 government led economy unpopular, directive not to collectively own which seem the fastest path to assets, the new military administrators development. tinkered with a lot of options and in OICL’s long history thus began in the process consulted the erstwhile 1949 with the establishment of Premier of the Western Region, Chief Western Region Production Obafemi Awolowo. He warned Development Board (WRPDB) and vehemently against selling, and rather, the Western Nigeria Marketing Board advised that a holding company in 1954. These later transformed into should be established to hold the WNDC in 1959 and later Western assets of the company together (Daisi, States Industrial Investment and 2018). Therefore, a State Credit Corporation (WSIICC) in 1973 Implementation Committee (SIC) and eventually OICL in 1976. The comprising the three military companies that were established under governors and their secretaries to these corporations had governments government and Heads of Service was of the regions owning less than 49% established with Brigadier David equity in most cases, thus allowing Jemibewon as the Chairman. The first the expatriates to manage the meeting of the committee was held in companies. The government of the Ibadan on March 3, 1976. Between Western Region in some cases that date and April 1, 1976, when the subscribed only land as its own equity states effectively took off, the share, such land was capitalized committee deliberated on all matters (Fasuan, 2018). The corporations affecting the three states. Broadly thrived at independence up until 1966, speaking, the committee's duty was to when political issues were to decide ensure the smooth take-off of the their future. These were the coups that newly created states, the equitable soon metamorphosed into the distribution of shares and assets of the Nigerian Civil war in 1967. The war former Western State since the led to the decimation of the regional Federal Government directed that new structure, which gave way to the state states should not, as far as practicable, system as it is currently practised. maintain common services (OICL, When the Western Region in 1976 2009). was broken into three states, namely Theoretical Framework Oyo, Ondo, and Ogun, Brigadier This paper would receive two David Medaiyese Jemibewon was hypotheses in relations to the topic, appointed the Military Governor of which are Systems theory and Agency Oyo State, while Wing Commander hypothesis. System theory was David Ikpeme and Lt. Col. Ayodele propounded by Ludwig von Balogun were named military Bertalanffy however with the end goal governors of the newly created Ondo of this investigation Niiklas and Ogun states respectively (OICL, Luhmann's sociological clarification 2009). In order to ensure the smooth would get the job done. It underscores take-off of the new states and to the manner by which organized adhere to the Federal Governments systems (human and non-human) URL: http://journals.covenantuniversity.edu.ng/index.php/cujpia 49 Abimbola Oyarinu CUJPIA (2019) 7(1) 48-75 react in a versatile method to adapt to the manager owns 100% of the firm critical changes in their outside versus when the manager is sharing an surroundings in order to keep up their equity share with others. In the former fundamental structures unblemished. structure, the owner/manager will act System theory explains how politics to maximize the firm's welfare and other external factors affect the because the full benefit of this structure of OICL and until external maximization will accrue to him. and internal factors can leave the However, when the owner/manager structure of OICL unblemished then shares, say, a 20% equity stake to an corruption would continue to be a outside shareholder, agency costs will problem (Johnson, 2005). arise from the divergence of interests Adam Smith as early as the eighteenth between the manager and the century had created a significant shareholders. Jensen and Meckling number of the key ideas of Agency conclude that these agency costs are theory. From the 1970s up until 2003, inevitable when there is a separation different researchers have added to of ownership and control, and that to the theory. Researchers like Jensen, call these costs "inefficiencies" is Mitnick, Murphy, Ross are known appropriate only if comparing to an figures who have added to the "ideal world" where principal and advancement of various shades of agent interests could be aligned at Agency theory. This work would, zero cost. The proposition of Agency therefore, concentrate on Jensen and theory as espoused by Jensen and Meckling's rendition of the theory. Meckling is vital in explaining the For the most part, Agency theory just subject matter of this thesis. It put; is one in which one or more discusses ownership pattern which is persons (the principal) engage another obtainable in OICL. It discusses the person (the agent) to perform some approach for management of wholly- services on their behalf, which owned companies and subsidiary involves delegating some decision- companies, which are prevalent in making authority to the agent. As part OICL (Jensen and Meckling, 1976) of a broader theory of the firm, Jensen Military Board and Meckling explore agency costs Odu'a made a total income of N85.8 and its sources. They identify million between 1985-1989. The monitoring the agent's actions as a subsidiary companies that gulped source of agency cost, but they also 84% of the investment funds identify at least two other sources: generated only N15.5 million (18%) bonding costs borne by the agent and of the total as opposed to N45 million the wealth loss borne by the principal (52%) generated by the Associated when the agent's actions do not Companies. Even Minor Holding over maximize his welfare (referred to as the same period generated N16.7 "residual loss"). To that end, Jensen million (19.5%). In the five-year and Meckling compared the period (1985-1989), out of a total management behaviours found in two income of N86 million earned, over different firm structures: one, where 70 per cent came from the 21 URL: http://journals.covenantuniversity.edu.ng/index.php/cujpia 50 Abimbola Oyarinu CUJPIA (2019) 7(1) 48-75 associated companies in which Odu'a assets of the Company. Equally the had no more than 50 per cent equity operational effectiveness of OICL's participation. The 24 companies major property holdings shows wholly owned by Odu'a or in which it complacency. There were accounts of has majority shares contributed only inadequate attention to the prompt 18 per cent of income. The remaining collection of rents, of broken down 7 per cent came from dividends generators, of frequently unusable provided by minor investments in elevators and of poorly maintained different companies. It is this water supply and sanitation facilities relatively unimpressive performance in OICL properties that are by all that provokes a continuing re- means gold mines because of their appraisal of the Company. This was a chosen locations. Mabogunje clear case of robbing Peter to pay attributes this misnomer to Paul. A casual observation will reveal indiscipline. that OICL did not establish any new When an individual with business, did not venture into any new tremendous and easily industry and created very few jobs. perceptible capabilities fail to OICL during the period was a risk realise his promise, one of the averter, staying in the safe and invest reasons usually adduced is his lack of discipline and in business areas where income application… Within an generation is trusted into hands of organization, such as a business others and crumbs of dividends travel establishment, discipline can be in regularly as a routine (OICL, 2009, examined at the level of the 26).