“The Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, has promptly responded to a recently published article titled ‘Buhari vs Jonathan – Beyond the election.”
The article, by former Governor of Central Bank of Nigeria, Chukwuma Soludo, which purports to proffer solutions to our severe social and economic challenges, simply echoed the prevailing popular sentiments regarding the failure of President Goodluck Jonathan’s economic policies and deepening poverty.
However, although Soludo’s contribution does not contain any fresh mind-boggling revelations on the incompetence of the current Economic Management Team, his glowing reference to superior economic performance during Olusegun Obasanjo’s era should ordinarily be sweet, comforting notes to Ngozi who was leader of the economic ‘wizards’, seconded by the IMF and World Bank to rejig the Nigerian economy; nonetheless, Soludo’s latest condemnation of the “terrible policy choices” made by Okonjo-Iweala in her second coming in Jonathan’s administration, probably stung Madam Minister as a betrayal of espirit des corps.
Consequently, the Iron Lady quickly fired back in a press release, in which she noted that “It is a sad day for Nigeria and the economics profession that someone like Soludo, a former CBN governor, should write such an article. If Soludo wants to regain respect, he should return to the path of professionalism. He certainly needs something to improve his image from that of someone whose sojourn into national economic management ended in disaster for the banking sector.”
It is not clear when the honourable minister, realised that CBN’s management of banking regulation was a disaster; the question is, did she ever bring her reservations about the potential adverse impact of Soludo’s mismanagement to President Obasanjo, and if not, did she choose to simply keep mute as her own expression of patriotism?
Sadly, those who expressed concerns on the shenanigans of Soludo’s management of the banking subsector were just simply ignored until the bubble burst in 2008/2009, despite the ex-governor’s unflinching assurances to all and sundry that the Nigerian banking sector was immune from the economic crisis that engulfed everywhere else worldwide. (See: ‘Will you borrow your own money back…?’ (27-12-04); ‘W-DAS – Why is CBN fooling Nigerians?’ (27-02-06); ‘How the CBN engineers poverty in Nigeria’ (07-02-05); ‘Banks and fraud incorporated’ (03-10-05); ‘CBN don miss road’ (11-09-06) at www.lesleba.com.
Latter events have shown that Soludo’s acclaimed banking consolidation and market regulation were all founded on quicksand and Okonjo-Iweala is clearly now more appreciative of the fact that Chukwuma’s reckless brand of banking regulation and supervision, ultimately, led according to the minister to “massive accumulation of bad debts, (which) meant that our banks were ill-positioned to deal with the global financial crisis when it hit. In fact, the banking sector was brought to its knees and required a massive bailout by Nigerian taxpayers.”
It has not been established that Soludo was a covert beneficiary of the rot he knowingly induced in the banking sector, but according to Iweala, it was evident that “there was very little separation between the regulators and the regulated.” Thus, Soludo unwittingly or knowingly sustained a relationship that Iweala considered as “clearly a violation of a key requirement of central banking success.”
Iweala holds that the regulatory lacuna led “to infractions in corporate governance as loans and other credit instruments running to hundreds of billions of naira were extended to clients without following due process and several of these loans could not be paid back.” Sadly, innocent investors who survived the resultant stock market crash are still licking their wounds today.
So, according to the CME, “Soludo’s singlehanded mismanagement of the banking sector led to an incredible accumulation of liabilities that will cost taxpayers about N5.67tn (over $36bn) to clean up.” Sadly, future generations will inherit this debt, which according to Iweala, “constitutes the bulk of Nigeria’s contingent current liabilities’ which reportedly were mischievously decried as profligate by Soludo!
Conversely, Chukwuma’s article paints a completely different picture which portrays the erstwhile CBN governor as the brain behind an exemplary and also socially and economically progressive Economic Management Team. Nonetheless, the public should recognise such perception as false. Indeed, the economic strategies of the current administration are clearly a continuation of the failed strategies that characterised the Obasanjo era.
The uncomplimentary features that Soludo observes in the current regime are in fact amplified derivatives of Soludo/Iweala fiscal and monetary strategies between 1999 and 2007. For example, the fiscal tradition of comparatively modest annual capital votes against increasingly humongous recurrent consumption, prevailed in that era; Okonjo-Iweala has loyally followed the same trajectory, such that almost 90 per cent of total spending in 2015 will be devoted to plain consumption with a paltry vote of 10 per cent for infrastructural remediation; regrettably, education budget has hardly exceeded 15 per cent since 1999, despite UNESCO’s recommendation of 26 per cent of annual budgets as best practice.
Furthermore, CBN’s current monetary framework adopts the same template that Soludo inherited from his predecessor; for example, the oppressive system of placing government deposits for zero returns, while government embarks on regular borrowings from commercial banks with extreme rates, which distort efficient resource allocation, was also a permanent feature of Soludo’s monetary strategy, despite the needless cost and the attendant heavy accumulation of loans which are ultimately stored away as idle funds!
Similarly, the present administration continues to battle with the oppressive burden of surplus cash which Soludo also sweated, unsuccessfully, throughout his tenure to mop up; curiously, not even the opposition parties appear concerned to locate the unending source of systemic surplus naira, despite its abiding adverse consequences on the level of inflation and the capacity of small and medium enterprises to thrive and create more jobs.
In addition, CBN’s anti-social strategy of deliberately creating dollar scarcity after inundating the market with freshly created humongous naira allocations is actually the cause of increasingly weaker naira exchange rates even when reserves are fortuitously bountiful; curiously, Lamido Sanusi kept faith with this same strategy which he inherited from Soludo, and Godwin Emefiele, the current governor, has also become a loyal apostle.
Sadly also, real sector cost of funds has remained well above 20 per cent, the same oppressive rates that constrained industrial growth when Soludo was governor; inexplicably, over N40bn contributed as levies on banks’ profits under Soludo for the promotion of SMEs was surprisingly returned by the governor to the same banks, because CBN could not come up with an acceptable strategy for disbursement!
Yet, in spite of considerable evidence of impunity and controversial deals while CBN governor, Soludo attempts to reinvent himself as our saviour in his article. His intentions remain unclear, but the impunity exhibited in the establishment of the African Finance Corp, the wastefulness attendant on the failed re-introduction of coins in our currency profile, the cloud of corruption over the refurbishment of the Nigeria Security and Minting Company, as well as issues relating to alleged fraud in the production of the controversial polymer currency, are certainly serious enough to send Soludo into eternal retirement from seeking public attention.
Indeed, according to the finance minister, “it is only in Nigeria where someone who perpetrated such a colossal economic atrocity would have the temerity to make assertions on public debt and the management of the economy.”