By Paul C. Nwabuikwu
For
anyone who has not read Professor Charles Soludo’s article in the
Vanguard (online version) on January 25 2015, I would encourage them to
do so. It is littered with abusive and unbecoming language.
It shows how
an embittered loser in the Nigerian political space can get so derailed
that they commit intellectual harakiri by deliberately misquoting
economic facts and maliciously turning statistics on their head to
justify a hatchet job. We hope all the intellectuals in the
international circles in which Professor Soludo has told us he flies
around in will read what a Professor of Economics has chosen to do with
his intellect.
In this one article Soludo has
shamelessly pandered to so many past leaders that Nigerians are asking
one more time – what position is Soludo gunning for now? He claims in
his article that he has had his own share of public service, yet he has
failed twice in his attempts to be Governor of Anambra State and Vice
Presidential candidate of various parties. There is definitely an issue
of character with Prof. Charles Soludo and his desperate search for
power and relevance in Nigeria. Nigerians should therefore beware of
so-called intellectuals without character and wisdom because this
combination is fatal.
But let us turn to the main
subject of Soludo’s discourse. So much of what is written is outright
nonsense and self-seeking aggrandizement that need not be dignified with
a response. It is totally remarkable that Professor Charles Chukwuma
Soludo, the man who presided over the worst mismanagement of Nigeria’s
banking sector as Governor of the Central Bank of Nigeria between May
2004 and May 2009, can write about the mismanagement of the economy.
Nigerians
must be reminded of his antecedents as CBN Governor, and even prior to
that, as the Chief Economic Adviser to the President. The consolidation
of the banking sector was a good policy idea of the Obasanjo
Administration but Soludo went on to thoroughly mismanage its
implementation leading to the worst financial crisis in Nigeria’s
history. So what did Soludo do?
After consolidation,
the regulatory functions of the Soludo-led CBN were very poorly
exercised. As Governor, he failed to adequately supervise and regulate
the now larger banks – an anomaly in Financial Sector Supervision. In
fact as every Nigerian knows, in his time there was very little
separation between the regulators and the regulated which is a violation
of a key requirement of Central Banking success. This led to
infractions in corporate governance in many banks 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. This massive accumulation of bad debts or
non-performing loans as they are called in the banking sector 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 tax payers. This
bailout was done by his successor (now Emir of Kano) who cleaned up all
the bad debts and transferred them to the newly-established AMCON, from
where they are managed today. So let it be noted for the record books
that Soludo’s single-handed mismanagement of the banking sector led to
an incredible accumulation of liabilities that will cost tax payers
about N5.67 trillion (being the total face value of AMCON-issued bonds)
to clean up. Let it be noted also that this amount, which is more than
the entire Federal Government 2015 Budget, constitutes the bulk of
Nigeria’s “contingent liabilities” mentioned in Soludo’s article. 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.
Let us now look at some
of the points he makes. Luckily, Soludo has told us that he has been
busy travelling internationally, hobnobbing with his global partners. It
is obvious from this article that from the rarefied heights at which he
is flying he is completely out of touch with what is happening with the
management of this economy. Take his comments on the mismanagement of
the economy and the imposition of the austerity measures. The present
fall in oil prices, a global phenomenon over which Nigeria has no
control, has given every charlatan the opportunity to attack the
economy, and by extension the managers of the economy
It
is true that the economy grew well during the second-term of former
President Obasanjo as a result of the reforms supported by the President
and implemented by the Economic Management Team. Please note that the
Finance Minister under whose leadership that good performance took
place, including massive unprecedented debt relief, is still Finance
Minister today. But thorough examination of the facts on performance
under the Jonathan Administration will also reveal that at a time when
global economic performance was mediocre, with GDP growth averaging
about 3 percent per annum, Nigeria’s GDP growth – averaging about 6
percent per annum – is indeed remarkable. Even more interesting is the
fact that the oil sector did not drive this economic performance but the
non-oil sector (Agriculture, Manufacturing, Telecommunications, the
Creative Economy, and so on), which shows that the current
Administration’s diversification objective under the Transformation
Agenda is working. Transformation equals diversification
This
current government managed to control inflation, which he (Soludo) was
not able to do during his time at the helm of monetary policy in
Nigeria. When he left the Central Bank in 2009, inflation – which hurts
the poor and vulnerable in the society the most – was above 13 percent
per annum. Now, inflation is
at single-digit, at 8 percent per annum. What about exchange rates?
Well this administration again managed to stabilize the naira exchange
rates, such that between May 2011 and the end of 2014, official exchange
rates against the dollar rarely moved out of the N153 to N156 band. It
is only with the recent dramatic fall in oil prices and the consequent
impact on our foreign reserves that the exchange rate has become quite
volatile. The drop in oil price has been heavy and rapid impacting all
oil producing nations significantly. Nigeria is no exception and
appropriate fiscal and monetary policy measures are being put in place
to manage this situation.
In fact, history will recall
that careless remarks by Prof. Soludo (then Chief Economic Adviser to
the President) hypothesizing a possible naira devaluation, condemned the
naira to a free fall towards the end of 2003. Ray Echebiri, in his 2004
article in the Financial Standard, wrote that not even the assurances
given by the then CBN Governor, Mr. Joseph Sanusi or President Obasanjo
that any plans to devalue the naira existed only in the head of
Professor Soludo could halt the fall of the naira from N128 to the
dollar in the official market to about N140 between September and
December 2003.
It is true that our foreign reserve
accumulation is less than what it should be but the reason for this has
been fully given, not as excuses but simply as fact: lower oil
production and crude oil theft along with the refusal to save in the
Excess Crude Account (ECA) are the reasons. Contrary to what Soludo
said, oil production under President Obasanjo was higher than current
levels. Quantities produced averaged 2.4 million bdp, 2.22 million bpd,
and 2.21 million bpd in 2005, 2006, and 2007 respectively but has
declined now to between 1.95 and 2.21 million bdp due to vandalism of
the pipelines and the resulting “shut-ins” to fix the problem. It is
true that had production been at the previous levels and had there been
willingness to save we would have had more money in the ECA and also in
the reserves. But the overriding setback to savings is that the state
governors felt it was their constitutional right to share the money.
Please recall that even as we speak the states have taken the Federal
Government to the Supreme Court on this issue
Soludo’s
claim that 71 percent of Nigerians live below the poverty line is
misleading and disingenuous. He uses 2011 statistics on poverty by the
NBS to support his argument while ignoring more recent figures. But as
stated in the Nigeria Economic Report 2014 by the World Bank, poverty
rate in Nigeria has dropped from 35.2 percent of population in 2010/2011
to 33.1 percent in 2012/2013. By the way, the reason why our poverty
numbers have been so wrong is that the National Bureau of Statistics
(NBS), under Soludo’s supervision as CEA and Vice-Chair of the National
Planning Commission, departed from the international standard method of
poverty measurement. Is he now ignoring the right economic statistics to
wilfully manipulate information?
No doubt we have a
problem with unemployment in this country and we must deal with it.
Indeed this administration is dealing with it and stands proud of what
it has accomplished so far and is pushing hard to accomplish much more.
As a first step, the administration, through the office of the Chief
Economic Adviser to the President and the NBS, worked hard to determine
how many jobs we need to create in a year. What you don’t measure you
cannot make progress on. Why didn’t Soludo do this when he was CEA?
We
need to create about 1.8 million jobs a year in this country to cater
for the new entrants into the labour market, but we also need to deal
with the backlog of the unemployed and the underemployed, e.g. those
selling on the streets. Dealing with this global challenge of
unemployment is not an easy task for any country, as can be seen from
the experiences of developed countries particularly in the euro area.
But the Jonathan administration is making good progress, creating an
average of about 1.4 million jobs per year by driving quality growth in
key sectors like agriculture, where the bulk of new jobs are being
created, Housing, Manufacturing, Financial Services, and the Creative
Industries like Nollywood.
In addition we have special programmes to promote job creation among the youth and these include:
v
Promoting entrepreneurship among the youth through the “Nagropreneurs”
programme to support 750,000 youth farmers with grants and training, and
the YOUWIN programme that is directly supporting up to 5,400 young
entrepreneurs with grants, training, and mentorship and so far
beneficiaries are creating an average of 9 jobs each, for themselves and
others. About 22,000 jobs have been created by the first 2,400
youwinners.
v Graduate Internship Scheme: that is
reducing the vulnerability of unemployed graduates by enhancing their
employability. The Scheme targets up to 50,000 unemployed graduates in
the 36 states of the Federation and FCT and about 22,000 graduates have
so far been placed by the programme.
v Community
Services Scheme under SURE-P: developed to empower young unskilled
Nigerians, women and people with disabilities. About 120,000 mostly
young workers have been engaged across the country.
On
the issue of debt, Nigerians deserve to know the truth and we have said
it before. The truth is that the government borrowed in 2010 to pay an
unprecedented 53.7 percent wage increase to all categories of federal
employees as demanded by labour unions. The
total wage bill rose from N857 billion in 2009 to about N1.4 trillion
in 2010, and as a result, domestic borrowing increased from N200 billion
in 2007 to about N1.1 trillion in 2010 to meet the wage payments. Where
was Soludo at the time? Why did he not react to the borrowing then? Was
it because he wanted to pander to labour in preparation for his
political career?
It is noteworthy that since 2011, the
administration of President Goodluck Ebele Jonathan has been prudent
with the issue of debt and borrowing. The Economic Management Team not
only looks at debt to GDP ratio, where Nigeria has one of the lowest
numbers in the world at 12.51 percent but it looks at debt service to
revenues. That is why in spite of the rebasing and a larger GDP, the
administration has taken a prudent approach to borrowing. The prudent
approach helped to drive down domestic borrowing from N1.1 trillion in
2010 to N642 billion in 2014. In fact for the first time in our nation’s
borrowing history we even managed to retire N75 billion of domestic
bonds outright in 2013.
Despite the present tough
situation, we do not plan to go on a borrowing spree but to keep
borrowing modest at a level sufficient to help us weather the present
situation. We have already ramped up efforts to generate more non-oil
revenues for the government while cutting costs of governance.
Therefore, Soludo’s claim that this Administration is reckless with debt
does not hold true.
Since
Soludo seems so ignorant to what has been achieved by the Jonathan
Administration, let us present just a few examples of them here again.
This information is easily verified.
We are improving
infrastructure across the country. For example, 22 airport terminals are
being refurbished, and five new international airport terminals under
construction in Lagos, Port Harcourt, Kano, Abuja, and Enugu. Soludo’s
kinsmen in the South East now have an international airport in Enugu,
and for the first time in Nigeria’s history can fly direct from Enugu to
anywhere in world for which they are very grateful to this
administration. But with Soludo being up in the air with his
international travels, he has not touched ground in the Southeast to
observe this development for himself.
Various road and
bridge projects have either been completed or are under construction.
Those completed include the Enugu – Abaliki road in Enugu/Ebonyi States,
the Oturkpo – Oweto road in Benue State, the Benin – Ore – Shagamu
highway, and the Abuja – Abaji – Lokoja dualization, and the Kano –
Maiduguri dualization. The Lagos – Ibadan expressway and the Second
Niger Bridge are under construction.
Rail from Lagos to
Kano is now functional, as is parts of the rail link between Port
Harcourt and Maiduguri. All these have brought transport costs down. We
recognise that more needs to be done in the power sector, but bold steps
(like the privatisation of the GENCOs and DISCOs) have been taken, and
our gas infrastructure is being developed to power electricity
generation
In
Agriculture, over 6 million farmers now have access to inputs like
fertilizers and seeds through an e-wallet system, which is more than the
403,222 that had access in 2011. Rice paddy production took off for the
first time in our history, adding about 7 million MT to rice supply. An
additional 1.3 million MT of Cassava has also been produced and as a
result, the rate of food price increase has slowed considerably,
according to the NBS.
In Housing, we have put in place a
new wholesale mortgage provider – the Nigerian Mortgage Refinance
Corporation (NMRC) – to provide affordable mortgages to ordinary
Nigerians, starting with those in the low-middle income bracket. This
sector will help the economy grow as we tap it as an economic driver for
the first time. Mortgage applications from 66,000 people are currently
being processed and 23,000 have already received mortgage offers
Our
Manufacturing sector is reviving with new automobile plants by Nissan,
Toyota, etc. This is in addition to the backward integration policy in
key sectors like petrochemical, sugar, textiles, agro processing and
cement, which Nigeria is now producing 39,000 MT and exporting to the
region.
The Creative sector is now a factor in our GDP,
with Nollywood alone accounting for 1.4 percent, creating over 200,000
direct jobs and nearly 1 million indirect jobs. This is the first
Administration to recognise its importance and support its further
development with a grant program.
A
new bank – the Development Bank of Nigeria – will soon be operational
and this bank will help bridge the access to finance gap, which is a
major constraint for the private sector especially SMEs. The bank will
provide long-term (5 – 10 years) financing at affordable rates for the
first time in our nation’s history.
This is the path
that the government has been on before this fall in oil prices. The
response to the economic shock has been spelled out to the Nigerian
public over and over again, and the Administration intends to focus on
managing this crisis appropriately. This year will be difficult. To say
anything less to Nigerians will be untruthful. It would have been better
if there had been a bigger cushion of the Excess Crude Account to
manage this situation but despite this the nation can rise to the
challenge. More importantly, President Goodluck Ebele Jonathan and the
Economic Management Team are seeing this as an opportunity to diversify
the revenue sources of an already diversifying economy. In fact let me
at this juncture use this opportunity to comment on Soludo’s appalling
statement that rebasing brings no policy value. Rebasing has enabled us
to better grasp the new diversified nature of our economy. This provides
the basis for our present drive to support different sectors with
appropriate policy instruments to enhance their development. Rebasing
has also enabled the Administration to create the platform from which to
drive our work on increasing non-oil revenues. These are areas of
critical policy value.
Soludo mentioned the issue of
the Economic Partnership Agreement with the EU, noting that this
Administration has not been vocal or clear on its direction with this
agreement. On the contrary, the Administration, particularly the
Ministry of Industry, Trade, and Investment, has been clear on this
issue but since Soludo has been in the air he probably has not been
aware of this. Just recently, the Minister of Industry, Trade and
Investment reiterated again to the corporate sector that Nigeria has not
signed and does not propose to sign the EPA in its present form.
The
point is that this government has been pursuing the right economic
policies, and its efforts have been acknowledged nationally and
internationally. Let me say that there are objective ways to measure
performance. There are international institutions globally accepted to
do this. They have acknowledged this Administration’s good economic
management up to the recent crisis and even now.
We
cannot go by someone’s subjective view, driven by bitterness and bile.
We need to look to the truth and to professionalism. This is where
Professor Soludo totally fails. For the other gratuitous, political, and
personal attacks, we are sure that those mentioned will respond
appropriately. 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, his sojourn in politics, ended
in overwhelming rejection by the electorate, and more recently, his
sojourn abroad, has put him out of touch with the reality of the
Nigerian economy.
•Nwabuikwu is Special Adviser to the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala
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