Only Thing Constant…

The month of March 2015 will forever be etched in history in Nigeria especially between the 28th to 31st as those days brought out a lot of emotions and tension. Nigerians became more aware of their power to CHANGE what they do not want and stick with their conviction.
The new President-Elect of Nigeria General Muhammad Buhari should know that this is the time to hit the ground running. There is absolutely no time to dwell on past events or go on vengeance missions. Nigerians have kept their end of the bargain and all they want in return is actual action and manifestation of all promises made during campaigns.

We are currently at our lowest ebb in security, education, energy, employment and infrastructure.
When “Baba” assumes power, we need him to critically examine these things and take appropriate measures. We want to feel secured in our homes, be rest assured our higher institutions are not going on strike in another month or so, our secondary school pupils are not failing WAEC because they were not adequately taught, we want accountability for every kobo spent from the nation’s purse, we no longer want to see “state of origin” on forms rather we want “state of residence” because irrespective of our states of origin, Nigeria belongs to all of us and our state should not determine our fate.
These and many more are what the average Nigerian expects.

We hope the new administration would be ready to heed to our request because as it is now…the onle thing constant is what Nigerians are not afraid of anymore, it has now become a tool for them to choose their own future without sentiments or prejudice, and that is …CHANGE!

General Muhammad Bihari’s Acceptance Speech

Your Excellency, the Vice President elect, Professor Yemi Osinbajo, your Excellency, Chief Rotimi Amaechi, the Director General of APC Presidential Campaign, 2015, your Excellency, the former Governor of Edo State and National Chairman of our great party, your Excellency the Governor Imo State, Rochas Okorocha, your Excellency, the former Governor of Imo State, Dr Ogbonaya Onu, Your Excellency, the former Governor of Ekiti State, Engineer Oni, your Excellency the former Governor of Kwara, Bokola Saraki, your Excellency, the Speaker of the House of Representative, Honourable Aminu Tambuwal, Please, let me stand on existing protocol. 

At exactly 5:15 yesterday (Tuesday) evening, President Jonathan called to congratulate me on my victory. For this, I want all Nigerians to join me in congratulating and appreciating Mr President for his statesmanship. President Jonathan was a worthy opponent. I extend my hand of fellowship to him. I look forward to meeting him soon, as we plan the transition from one administration to another. He will receive nothing but cooperation and understanding from me, who led this nation to democracy. You stood in line patiently for hours; in the rain, in the sun and then in the dark to cast your votes. Even when the vote was extended to Sunday in some places, you still performed your civic duties.

You did so peacefully. You voted with your heart. Your vote affirms that you believe Nigeria’s future can be better than what it is today. You voted for change and now change has come. INEC has released the official result of the Presidential Election. INEC has declared that I gained the most votes with the required spread and won this election. In a more profound way, it is you, Nigerians that have won. The people have shown their love for our nation and their believe in democracy. The declaration of INEC accurately reflects the will of the people.

While there might have been some logistical obstacles and irregularities associated with the exercise, the result shall stand as what the people want. I thank all Nigerians who have made this day possible, our country has now joined the community of nations that have used the ballot box to physically change an incumbent president in a free and fair election To me, this is indeed historic. Most people will welcome the result because it is the one they voted for. Others will literarily be disappointed. I ask that we all be circumspect, respectful and peaceful in these times. This was a hard-fought contest. Emotions were high.

We must not allow them to get the better of us. This is not the time for confrontation. This is a moment that we must begin to heal the wounds and work toward a better future. We do this first by extending a hand of friendship and conciliation across the political divide. We hope and pray our friends in other parties reciprocate. I thank all the members of the All Progressives Congress, the APC, for their commitment and their hard work through the formation of the party, the campaigns and the presidential elections. Let me equally express my appreciation to the media, civil society and security agencies for their selfless service.

The international press and our friends abroad deserve a fair commendation for their support throughout the process. We promise a robust and dynamic engagement with your countries in matters of mutual interest. In the interim, I call on all Nigerians to be law abiding and peaceful. The eyes of the world were focused on us to see if we can vote in a peaceful way and carry out elections in an orderly manner. We have proven to the world that we are a people who have embraced democracy and a people who seek a government by, for and for the people.

We have put one party state behind us. We have voted for a government that will serve and govern, but will never rule over you. CHANGE has come and a new day and a new Nigeria is upon us. The victory is yours and the glory is that of our nation, NIGERIA. I will make a more formal address to the nation, later in the afternoon after I receive the certificate of return from the INEC.

May God Bless the Federal Republic of Nigeria.
Nigeria’s President Elect
Muhammadu Buhari

Soludo Is Relentless

The Former CBN Governor Charles Soludo has replied Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo-Iweala’s response to his article which went viral.

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I read some of the responses to my article, “Buhari vs Jonathan: Beyond the Election”, and I want to thank everyone who has contributed to the debate. I am glad that the debate has finally taken off. I have decided, for the record, to re-enter the debate if only to set some records straight and hopefully elevate the debate further. Whom do I respond to? First, let me thank Gov Kayode Fayemi for his very mature and professional response on behalf of the APC. It forms a great basis for deepening the conversation. Pat Utomi, Oby Ezekwesili, Iyabo Obasanjo, and thousands of other patriotic Nigerians have raised the content of the debate. Femi Fani-Kayode made me laugh, as usual.

The Gov. Jang faction of the Governors’ Forum played the usual politics, although I know what most of them think privately. Who else? Oh, Peter Obi. Well, since he can’t write and designated Valentine as usual to write for him (who never disputed the NBS statistics that Obi broke world record in the pauperization of Anambra people but instead focused on lies and abuses) I won’t dignify him with a response here. His third class performance in Anambra will be the subject of a comprehensive article later.

Here, I will focus on Dr. Ngozi Okonjo-Iweala’s response (as Minister of Finance and Coordinating Minister of the Economy–CME and hence on behalf of the Federal Government). Since I have known her, out of deep respect, I have never called her by her name: I call her Madam. I must state that I have great pains seeing myself on the opposite side of the table with Madam, in this way. I respect you, Madam, and will always do.  If you read my article of September 2010 (before you became Minister), the tone and elucidation were as strong as the current one. It is my honest effort to ensure that our choice of leaders is based on rigorous scrutiny of what is on offer.  Part of my frustration is that five years after, everything I warned about has come to happen and we are conducting our campaigns as if we are not in crisis. As a concerned Nigerian, I have a duty to speak out again. Regrettably, you have taken it very personal.

I am not bothered about the personal abuses: I actually expected worse. What name has the government not called President Obasanjo or any person who has dared to disagree with it of late? Anyone who disagrees with the government must either be ‘insane’ or have a ‘character’ deficiency or must be ‘looking for a job’ or ‘without honour’, or a ‘charlatan’. Yesterday, Sanusi alleged that $20 billion was missing and he was accused of gross financial mismanagement, recklessness and poor governance to the point of being the first governor of central bank to be suspended from office. Today, he is the good one; and for daring to award an “F” grade for our economic performance, Soludo has become the ‘worst’ and ‘without character’ or perhaps ‘looking for position’ (Lol!). Some days ago, a former president was called ‘a motor park tout’ and ‘un-statesmanly’ just for disagreeing.  This “how dare you criticise us” mind-set of the government is dangerous for our democracy.

In this Part One of my planned three part series, I will restrict it to the main issues you raised. I will not bother about the malicious attacks on my person. For me, it is nothing personal. In early 2011, I had a similar heated exchange with then Finance Minister Segun Aganga. But when the Nigerian economy was at stake and he invited me to a stakeholders meeting in his office (as Minister of Trade and Investment) to discuss Nigeria’s response to the ruinous EU- Economic Partnership for Africa (EPA), I flew into Nigeria for that (at my expense)– the first and only time I have been to any government office to discuss policy since I left office. It is about Nigeria. I will, as expected, remind people like you of the salient aspects of my record of public service in response to your charge; challenge your claim to debt relief, and your reason for not saving; highlight your forgery of economic statistics and the lies in your response; but most importantly re-focus our attention to the historic mismanagement of our economy which you carefully avoided. I will show that while you are introducing austerity measures and soon to immiserate the citizens, our public finance is haemorrhaging to the point that estimated over N30 trillion is missing or stolen or unaccounted for, or simply mismanaged– under your watch! We can’t go on like this, and I am convinced that an alternative future is possible. Can we have a public debate on this alternative future? The issues at stake are too grave to be trivialized through name calling. As I write, the naira exchange rate to the dollar is at N215 (from N158 a few months ago) and unless oil price recovers, this is just the beginning.  For the sake of Nigeria, I won’t keep quiet anymore!

Let me start with Madam’s rather comical, wild judgment on my tenure of office which I believe to be totally false and baseless. I apologise upfront that in the process of making a ‘personal defence’, it is difficult to avoid a rather uncomfortable emphasis on “I”. I did not want that but since Madam has dragged us this low, I have little choice but to do so in the next few paragraphs–just to keep the record straight!

In my view, there are three criteria for evaluating a public officer’s stewardship: the evaluation by his employer; the satisfaction of the public he served; and the hard facts of performance. As I will show on these three counts, I am convinced that I left a world record of public service, and a thousand Okonjo-Iwealas cannot re-write that history. I served Nigeria under two presidents (Obasanjo and Yar’Adua) and as my immediate bosses, below are their written testimonials of my record.

Said President Obasanjo (December 2004):

“Charles Soludo is a true Nigerian. He is the sort of Nigerian that we all know we can rely on. Among his numerous virtues is COURAGE. I have found in him a man who can take tough and realistic decisions, stand his ground, educate others on the salience of his decision, and work very hard to ensure that the decision is efficiently and effectively implemented. His dedication to duty is first rate. His leadership qualities are admirable and his willingness to listen and learn is simply infectious. Professor Soludo has within a short time emerged as one of the leading lights of our nation. Not because he has a godfather but by sheer hard work, loyalty, dedication to duty, commitment to the nation, creativity, and undiluted association with the reform agenda….”

President Yar’Adua (May 2009) had the following to say about the Central Bank of Nigeria under my leadership:

“… the CBN has performed creditably well in delivering on its core mandates. This is especially even more so in the last five years. Most people would agree that without the successful banking consolidation and effective management of our foreign reserves, the current global crisis would have shaken the financial system and our national economy to their foundations with calamitous consequences”.

In the President’s special letter of commendation after the completion of my tenure of office, President Yar’Adua (June 2009) had the following to say to me:

“As your tenure as Governor of the Central Bank of Nigeria comes to a glorious end, I write on behalf of the Government and people of Nigeria to place on record our debt of gratitude to you for your dedicated service and uncommon sense of duty over the past five years. I am confident that your worthy antecedents in the CBN and in prior appointments in the service of our nation remain sources of inspiration to an entire generation. As I wish you even more astounding successes in the years ahead, it is my fervent hope that you will readily avail us of your distinguished service when the need arises in the future”.

To the best of my knowledge, President Obasanjo has not changed those views even after ten years. The views of my two bosses, not the emotional outburst of an angry person desperate to get even, are what count.

How did Nigerians evaluate my public service? Unfortunately, we do not have scientific opinion polls on job approval ratings for individual public officers. But if the public opinions of individuals and organized groups (labour, employers, depositors, borrowers, stakeholders of the financial institutions, newspaper editorials, investors, etc) as expressed in thousands of newspaper/magazine clips during and after my tenure are anything to go by, then 82% of the public largely agree with the sentiments expressed by my two bosses. Your views belong to the other 18% which is okay, after all, no one is perfect. Five Nigerian newspapers and magazines simultaneously named us “man of the year” in one year– unprecedented in Nigeria’s history. I do not talk about hundreds of awards and recognitions by various segments of our society (during and even after service) for “excellent public service”. I was particularly touched by the historic award by the staff union of the Central Bank and the tears in the eyes of many as thousands of the staff gave me a standing ovation as I walked the aisle after my brief farewell speech.

Certainly, the international community (investors, bankers, scholars, donors, media, etc) took serious notice of the revolution in Nigeria’s monetary and financial system. I am recipient of five international awards as global and African central bank governor of the year, not to mention dozens of other recognitions (even after leaving office). The London Financial Times described us as “a great reformer”. Even as the global economic and financial crisis raged in 2008, the United Nations General Assembly appointed me to serve on the Commission of Experts to reform the international monetary and financial system. You don’t appoint someone who has ‘mismanaged’ his national financial system to reform the global system. For 8 years until 2012, I served on the chief economist advisory council (CEAC) of the World Bank, and together with two Nobel Prize winners in economics and other experts we met periodically and advised two presidents and two chief economists of the World Bank, and in 2011, I served on the External Advisory Group of the IMF.  Again, these are not positions for ‘mis-managers’. Since I left office, I have been advising countries and central banks; and there is hardly any two months I don’t consult/advise on banking/financial and monetary policy. I have given these illustrations to make the point that for every one Okonjo-Iweala’s attempt to rewrite history, there are thousands who disagree.

Now, to some skeletal facts of our stewardship! I will be brief as I have a whole book to tell my story. As chief economic adviser, I had advised that our banking system could not support the private sector-led economy envisioned under NEEDS. When I assumed office at CBN, I inherited 89 rickety, mostly family banks (all of which put together were not up to the size of number four bank in South Africa). Many were insolvent, with depositors’ money trapped, and 20 more about to collapse. To get a credit of $300 million probably required all the banks to syndicate it. For me, there was a national emergency. I drafted a 13-point reform agenda, discussed and agreed all the specifics with the President, and his VP; as well as my management team at the CBN, and we swung into action. President Obasanjo promised 100% support and actually delivered 1000%– which was decisive. I apologize to you Madam because I did not brief or inform you about it. We just wanted to keep it confidential given the sensitivity of the announcement. It is on record that you never supported it.

It was both a revolution and a war and most people thought it was “impossible”, but thank God we succeeded. For the first time in Nigeria’s history a policy of that magnitude was announced and deadline kept with precision.  We were courageous to revoke the licenses of 14 banks, including those of my friends, in one day. The FT-Banker concluded that the scale, precision, and cost of the transformation were unprecedented in the world. Before then, Malaysia had the least cost of banking consolidation at 5% of Malaysian GDP. It did not cost Nigerian taxpayers one penny. Twenty-five new, stronger banks emerged but the powerful idea behind consolidation ignited something even more powerful–‘the race to the top’. Banks raised more capital, and even banks like First Bank, Zenith, GTB, etc that did not merge with others went on capital raising several times. The consequence was higher levels of capitalization and within two years, 14 Nigerian banks were in the top 1000 banks in the world and two in the top 300 (no Nigerian bank was in the top 1000 before I came). Even after I left office, still 9 banks were in the top 1000. Our vision was to have a Nigerian bank in the top 100 banks within 10 years. As I see the new Access bank; Zenith, GTB, Fidelity, Diamond, UBA, FBN, FCMB, Skye, Stanbic IBTC, Union, Ecobank, etc, I cannot but feel that we have taken giant steps forward.

Deposits and credit soared (from barely N1.2 trillion to over N7 trillion); new technologies (ATM and e-banking) boomed, and banks had 57,000 new jobs; mega businesses emerged (ask any major operator in the Nigerian economy their experience with banking and credit before and after Soludo –the Dangotes, Arik, MM2, oil and gas operators; etc); capital market boomed and dominated by the banking sector. It was a new dawn for Nigerian private sector. I have heard Dangote twice say that he would not be near as big as he is today without the banking consolidation. Many other stakeholders still say it today. FDI and portfolio inflows flooded into Nigeria. The world celebrated, and one single transformative idea has changed the face of the private sector and economy forever.  Banks became Nigeria’s first transnational corporations with about 37 branches outside of Nigeria.

Nigeria survived the global crisis because of this, and it is the banking sector that has largely been powering the economic growth you claim (compare banks trillions of naira credit for investments in the productive sector with your government’s miserable expenditure on critical infrastructure and investment; much of your borrowing – bonds – is from the banks). Your privatization of power sector, several PPP projects on infrastructure, etc, are now possible because of the mega banks. Today, Nigerian banks syndicate multi-billion dollar loans– unthinkable before. Madam, if the consolidation was ‘mismanaged’, there would not have been any bank to start with in the aftermath of the global crisis– as President Yar’adua correctly pointed out. Even you, during a recent presentation at the Banquet Hall in Abuja advertised consolidation as a historic achievement. How can you recognize a ‘mis-managed’ project as an outstanding achievement? As we say in Igbo, you can’t cover the moon with your palms.

Let me be clear: the quantum size of the new banks following consolidation presented challenges of risk management and supervision. We deployed all we had and overworked the CBN staff. The carry-over of bad loans from the consolidated banks was quickly cleaned up. To the best of my knowledge, we instituted stringent regulatory and supervisory regime (consistent with best practices at the time). We even had resident examiners in the banks and required bank MDs to personally sign their reports to CBN. I recall that the former MD of GTB complained of “regulatory intrusiveness”. To our credit, non-performing loans (NPL) came down from 22% in 2003 and 2004 to 6% as at 2008. Anywhere in the world, a central bank that brought NPL from 22% to 6% over a four year period does not look like one with a loose supervisory regime. Name other developing countries that performed better, Madam. So, on point of fact, Madam lied. Yours was a reckless assertion without basis by a Finance Minister.

The banks in Nigeria were supervised by the CBN and NDIC, but other institutions– international firms which audited them, international rating agencies which also examined their books, capital market operators since most were listed companies — all had oversight. I put on record that there was never any information/report of infractions by any bank which was brought to my attention and which we did not act upon decisively during my tenure. I heard the comment that some of the bank MDs were my friends. Well, my response is that perhaps as CME you should kill all your friends operating in the economy or become their enemies. For the record, my successor audited all the banks and none of my so-called friends was indicted. It speaks volumes. Indeed, it is also a fact that the alleged personal criminal infractions (including lapses in corporate governance Madam alluded to) by some bank CEOs were found out, only AFTER they had been removed from office. My successor told me that the comprehensive audit of the banks did not reveal such infractions. Of course, you must be God or have a special tip-off from inside to get to such information while the MDs are in office. Unfortunately, all over the world, no financial system has succeeded in routing out all criminal behaviours by the operators. So, Madam, I challenge you to provide one shred of evidence that ‘there was no separation between regulators and regulated’ or be honourable enough to retract your reckless statement.

What happened? The unanticipated and unprecedented crisis of 2008/09 hit the world. More than 40 US and European banks either collapsed or were shaken badly (remember the Lehman Brothers, Fannie Mae and Freddie Mac, Wachovia, HSBC, Lloyds TSB, Citibank, Goldman Sachs, even UBS, etc) and hundreds of billions of dollars were spent to bail them out. The contagion effects spread like a wild fire, destroying national stock markets and banks. The nascent (big) banks in Nigeria faced sudden multiple shocks– liquidity, exchange rate, oil price, capital market, etc. As oil prices collapsed, loans to oil and gas became non-performing overnight; loans to the capital market became non-performing overnight; etc.  Our first priority was to save the entire banking system and the economy from systemic collapse. I assured Nigerians that no bank would be allowed to fail, and not many people know what it took to achieve it. Once we had navigated through the unexpected /unprecedented turbulence, we laid out a comprehensive plan to clean up the debris which we presented to stakeholders in Lagos (March 2009). I had pleaded with the Senate to pass the AMCON bill which we sent to them in 2004. But I had a comprehensive plan to finish the clean-up with or without AMCON by the end of 2009, including second round consolidation and a N500 billion fund (my book will detail all these). I left behind an 11-volume document of the Financial System Strategy 2020 (FSS2020) which has remained the policy roadmap for the CBN/financial sector since I left office.

I have two analogies for our experience. Ours was really like an airplane that was cruising and suddenly meets an unexpected and unprecedented turbulence. After the pilots and the crew succeed in navigating through the potential crash and probably land the airplane, people look in and start blaming the crew for the broken tea cups, chairs, and drinks that fell during the turbulence as evidence that the crew never kept the airplane clean or serviced it. My second analogy is that of a sudden earthquake in a region it was never expected and some houses collapsed. All of a sudden, the housing authority is to blame for not requiring earthquake-proof foundations for the houses. Well, my legal experts call it force majeure, an act of nature

To be fair, after every crisis, there are lessons (and my book will detail what, with benefit of that experience, we should have done differently). Risk management– which has always been there– now took a new centre stage all over the world following the crisis. But for anyone to suggest that CBN under me, for one minute, took its eyes off the ball is, to say the least, ludicrous. The US financial system literally crippled the world costing America hundreds of billions of dollars but no one has suggested that Alan Greenspan is no longer the great maestro!

AMCON is a big topic (which I will address at a later date) but her claims show either ignorance or mischief. She claims that N5.7 trillion of AMCON funds was used to rescue banks and the ‘bond issued’ as ‘cost to taxpayers’. Really? I will deal with the AMCON I envisaged and the AMCON under you later but let me state that even if 100% of the banks’ NPL was offloaded on AMCON, it would not be up to N5.7 trillion. Enough said for now. The fact is that the Federal Government has not put a penny in the AMCON fund: the banking system is financing itself, and together with the sinking fund by banks, AMCON surely can’t default (thanks to consolidation that the banks are now big enough to cough out such funds to solve the system’s problem). Did you intend to deceive the readers by refusing to tell them that much of the AMCON fund is ‘investment’ and not ‘expense’. Am sure you heard the IMF’s alarm about moral hazard? If you want, we can have a focused debate on AMCON.

Next, let me briefly respond to a few outlandish claims. She brags about ‘single-digit’ inflation rate ‘now’ and alleges that when I left office, inflation was above 13%. I just laughed at this one. In Nigeria’s history, no governor of the Central Bank has delivered 24 consecutive months of single digit inflation as I did until the advent of the unprecedented global crisis in 2008. It was not for nothing that the world cheered us as monetary policy czar, Madam! Perhaps you are also not aware that we broke a world record by having a depreciated real effective exchange rate during a time of export boom and this was at the heart of our reserve accumulation and the portfolio/FDI inflows. I resisted the IMF advice to deplete reserves for liquidity management, and Nigeria had enough self-insurance to survive the global crisis.  The opposite has happened under you Madam, and the Nigerian economy is in trouble. Naira exchange rate appreciated under me from N133 to N117 before the global crisis; and reserves grew to all time high of $62 billion. For the first time since 1986, the official, interbank and parallel market exchange rates converged under me. You can’t match these records!

I hereby challenge your attempt to blame others for not saving for the rainy day. It is not a virtue when you are quick to appropriate all the credit when things are going well, but shift the blame when they go wrong. You blame the state governors– who, according to you, have taken the Federal Government to the Supreme Court–not that a Supreme Court judgment forced your hands. For your information, the governors have never agreed to savings and always threatened court action even under Obasanjo. Why did we save under Obasanjo but not under Jonathan? Two keywords explain it: leadership and integrity.  Governor Amaechi said the governors insisted on sharing the funds because they found out that you were illegally fiddling with the savings.  So, as Nigerians still wonder, if billions of dollars are now ‘missing’ under your nose, why should governors trust you to keep their money?  Do the states that have taken the federal government to the Supreme Court and refused to save also include the PDP governors–who are in the majority? If so, then it is fatal: even governors of your own party, PDP, do not trust you to keep their money! Furthermore, did the governors also stop the Federal Government from saving part of its share? If you ran a surplus budget at the Federal level, you would have had credibility to blame others or to say they did not listen to your advice. The key point is that since you were running huge deficits yourself, it was also in your own interest to share the ECA. You did not show leadership or credibility, full stop!

Next, Madam, I was really embarrassed for you to read that one of the reasons for declining forex reserves is ‘oil theft’. Under you as Minister of Finance and coordinator of the economy, the basket of our national treasury is leaking profusely from all sides. Just a few illustrations! First, you admit that ‘oil theft’ has reduced oil output from the average 2.3 – 2.4 million barrels per day (mpd) to 1.95mpd (meaning that at least 350,000 to 450,000 barrels per day are being ‘stolen’. On the average of 400,000 per day and the oil prices over the past four years, it comes to about $60 billion ‘stolen’ in just four years. In today’s exchange rate, that is about N12.6 trillion. This is at a time of cessation of crisis in the Niger Delta and amnesty programme. Can you tell Nigerians how much the amnesty programme costs, and also the annual cost for ‘protecting’ the pipelines and security of oil wells? And the ‘thieves’ are spirits? Come on, Madam!

Second, my earlier article stated that the minimum forex reserves should have been at least $90 billion by now and you did not challenge it. Rather it is about $30 billion, meaning that gross mismanagement has denied the country some $60 billion or another N12.6 trillion.

Now add the ‘missing’ $20 billion from the NNPC. You promised a forensic audit report ‘soon’, and more than a year later the Report itself is still ‘missing’. This is over N4 trillion, and we don’t know how much more has ‘missed’ since Sanusi cried out. How many trillions of naira were paid for oil subsidy (unappropriated?).  How many trillions (in actual fact) have been ‘lost’ through customs duty waivers over the last four years? As coordinator of the economy, can you tell Nigerians why the price of automotive gas oil (AGO), popularly called diesel,  has still not come down despite the crash in global crude oil prices, and how much is being appropriated by friends in the process?  Be honest: do you really know (as coordinator and minister of finance) how many trillions of Naira, self- financing government agencies earn and spend? I have a long list but let me wait for now. I do not want to talk about other ‘black pots’ that impinge on national security.  My estimate, Madam, is that probably more than N30 trillion has either been stolen or lost or unaccounted for or simply mismanaged under your watchful eyes in the past four years. Since you claim to be in charge, Nigerians are right to ask you to account. Think about what this amount could mean for the 112 million poor Nigerians or for our schools, hospitals, roads, etc. Soon, you will start asking the citizens to pay this or that tax, while some faceless “thieves” were pocketing over $40 million per day from oil alone.

You alluded to debt relief in your response and tried to take credit. Well, your CV is honest enough to admit that your two achievements in office as Finance minister under Obasanjo were that “you led the Nigerian team that struck a deal with the Paris Club” and that you “introduced the practice of publishing each state’s monthly financial allocation in the newspapers”. You are right about the two achievements. Let me put on record that Nigeria would have secured debt relief under anyone as Minister of Finance. President Obasanjo secured debt relief for Nigeria. Much of his first term was used to get Nigeria back into the international community and to campaign for debt relief. Before you were sworn in as Minister of Finance, President Bush visited Nigeria and both of us accompanied President Obasanjo during the meeting. There, Mr. Bush promised to support Nigeria with debt relief and asked our president to ensure that he met the conditions of the Paris Club. Obasanjo mobilized the global political support and coordinated all of us to ensure that the government met the check-list of ‘conditionalities’ as required.  I spent five weeks in the hotel with my team (as coordinator/chairman for drafting the National Economic Empowerment and Development Strategy, NEEDS).

Some of the reform targets in NEEDS became the ‘conditionalities’ Nigeria was required to fulfil to merit debt relief. You and I signed the various MoU with the IMF on behalf of Nigeria (the policy support instrument). We had a great team at work and each member of the economic team had specific aspects of the conditionalities to deliver: Bode Agusto was in-charge of the budget; Oby Ezekwesili held sway at Bureau of Public Procurement and later Minister of Solid Mineral, and Education (but specifically tasked with delivering on EITI and procurement reforms); Nuhu Ribadu was at the EFCC fighting corruption; I was at the Central Bank delivering on monetary policy and banking reforms; Steve Oronsaye worked hard to delist Nigeria from the FATF; Nenadi Usman was in-charge of the parastatals; El-Rufai held forth at FCT and in charge of public sector reforms; privatization programme went on, etc. Did you know that the IMF wrote President Obasanjo threatening that there would be no debt relief if the CBN did not meet some monetary targets, and do you know the magic we performed to meet them? Can you tell Nigerians which of the ‘conditionalities’ that you personally implemented? With the groundswell of political support and Nigeria meeting all the ‘conditionalities’, debt relief was assured.

Your major role as stated in your CV was to lead the team to negotiate the specific terms of the relief, having fulfilled the conditions. I still believe that Nigeria should have gotten far better terms than you negotiated. Of course, with your eyes on returning to the World Bank after office, I did not expect you to boldly stand up to the donor community in defence of Nigeria. Was there a conflict of interest on your part?

By the way, can you tell Nigerians why you were eased out as Finance Minister and you cried like a baby begging OBJ to still allow you remain in the Economic Management team— barely few weeks after the debt relief? Why were you eventually also removed from the economic management team if you were so important?  Ironically, President Jonathan has recycled you, with a bigger title and greater responsibilities. But the difference is that the team that did the actual work is no longer there, and the world has seen that the king is naked.

You are brilliant Madam, but you need serious help. Having spent all your life in the World Bank bureaucracy largely in administration/operations, no one will blame you if your economics has become a bit rusty. There are firebrand Nigerians all over the world to draft to service. It is certainly embarrassing to Nigeria for you to be bothering World Bank economists to help you with most basic economic analysis.

Your response on the poverty issue is deeply troubling. You accuse me of using “2011 statistics on poverty by the NBS to support his argument, while ignoring more recent figures”. At least you did not refute the NBS figure as valid. In the next sentence, Madam went ahead to note that “as stated in the Nigeria Economic Report 2014 by the World Bank, poverty in Nigeria has dropped from 35.2 percent of population in 2010/2011 to 33.1 percent in 2012/2013”. Did you notice that you have quoted two figures for poverty for the same year as being equally correct? So, for 2011, was poverty 71% (according to NBS) or 35% according to the World Bank? To the best of my knowledge, the last published household survey by NBS was in 2011. The World Bank does not conduct household surveys in member states to determine poverty incidence. So, when and by whom was the survey that gave the World Bank figures?

What worries me is that this government is the first in our history to attempt to manipulate our national statistics under Okonjo-Iweala. When NBS published the poverty figures in 2011, she felt indicted and incensed. She called upon the World Bank to come and examine the ‘methodology’ and get NBS to ‘review’ its numbers. Oby Ezekwesili (as VP Africa Region rejected the call to try to tamper with a country’s statistics). Once Oby left, the ‘World Bank’ started talking about ‘new figures’, without conducting any new surveys.  I was told about it by a World Bank economist, and I cautioned that it was a dangerous gamble that would damage the credibility of the NBS. If you want to ‘review methodology’, you conduct another survey but you can’t change ‘methodology’ because you don’t like the published figures. No government in our history has tried it: even Sani Abacha allowed a poverty survey that put poverty at 67% under his regime. At this rate, who will believe statistics coming from the Nigerian government again? Is it now the World Bank that sits in Washington and allocates poverty numbers to Nigeria? Something smells here!

Madam alleges that the NBS–as a parastatal under the National Planning Commission (under me) departed from the ‘international standard method of poverty measurement’. How and when, Madam? I was in office at National Planning for 11 months from July 2003 to May 2004. A poverty survey was conducted in 2004 and the results computed and published in 2005/2006– more than a year after I had gone to the Central Bank. Or perhaps, it was a clever way to divert attention from your manipulation of published economic statistics. The NBS published its poverty data in 2006 when you were Minister of Finance, and you did not question the ‘methodology’ because the figures looked good. In 2011, the poverty numbers (using the same methodology as in 2005/2006) indicted the government and suddenly, the ‘methodology’ is wrong. Interesting times!

Now that you decide which economic statistics published by NBS to accept and which ones to ‘change the methodology’ to give favourable figures, you can keep feeding your manipulated figures to your international media circus for the vain glorious awards to sustain an empty hype, while Nigerians groan under hardship. We can actually ask Nigerians whether they are getting better off now contrary to your bogus figures.

Many of Madam’s responses were comical, but this one is classic. According to her, the chief economic adviser and NBS “worked hard to determine how many jobs we need to create in a year”, and went on to ask, “why didn’t Soludo do this when he was CEA?” (Lol!). Madam, any good economist needs less than 10 minutes to compute this figure, not the (months? of) ‘hard work’ by your team. My calculation is that the number of jobs Nigeria needs to create each year to significantly reduce unemployment rate to sustainable levels in the next few years is at least 3 million, and not the 1.8 million by your team. We are talking about the Nigerian economy, please.

Your magic wand for mass housing is the Mortgage Refinance Corporation with 23,000 mortgage offers–for a country with 17 million housing deficit! Then, there is the pedestrian proposal of a new development bank– financed with loans from the World Bank, etc? A World Bank loan to set up another ‘development bank’ where we already have Bank of Industry, Bank of Agriculture, NEXIM, Federal Mortgage Bank, etc? People have totally run out of ideas and can’t see anything for Nigeria without through the prism of the World Bank. I will offer you free consultancy on how to set up a development bank without a World Bank loan but we don’t need another one now. I actually gave President Yar’adua a two page note for a N3 trillion development fund then, and if we plug your leaking pipes, it could actually be a N10 trillion Fund. I envisioned and set up the Africa Finance Corporation (AFC)–Africa’s premier infrastructure bank!

Frankly, I don’t understand why you seem highly troubled that the Soludo you thought had “disappeared from the political space” seems to be still around. Well, let me assure you that I will only ‘disappear’ in God’s own time. I gave credit to two past presidents who laid the foundation of the market economy we operate today. You did not contest or contradict any of my points. Rather, what you see is that Soludo must be ‘looking for a position’. Pity! If I am looking for a position, I would be running around one of the candidates now just as you are busy dancing Atilogwu dance at TAN and PDP rallies, struggling to keep your job. How Yar’adua drafted me to contest for governor in Anambra and APGA leadership as well and how I was “stopped” on both occasions are in the public domain. But I am not deterred for one minute. Chinua Achebe said that on leadership, Nigeria is a country that goes for a football match with its 10th Eleven. I am proud and happy to have offered to serve my people, and for the service of Nigeria, I will do it again and again. How many times did Abraham Lincoln, Obama, Reagan, etc contest before they got there? I actually encourage everyone who believes he/she has something to offer to get involved or stop complaining. I am happy seeing the increasing critical mass of professionals (like you) now getting involved. It is good for Nigeria!

What is at stake is the survival and prosperity of Nigeria. Next elections are critical, and for me the key is the ECONOMY. We must offer Nigerians clarity on the choices before them. Can I propose a three-way debate with you (representing PDP/Federal Government), nominee of APC (Utomi or Fayemi? or any other), and myself (as independent citizen– I don’t belong to any of the two). Let us have two bouts of debate between now and 12thFebruary, 2015 focusing on: CBN/AMCON and the financial system (if you want); our economy and its outlook, and agenda/alternative paths to sustainable prosperity post elections. Choose the dates and times, and for the sake of Nigeria, I will fly in. You can invite any of your international media friends as moderators. I feel the pain of the 180 million Nigerians whosetomorrow you have carelessly rendered bleak, and when I think of what the missing trillions could do for them, it becomes extremely urgent that we all must deepen the debate. Eagerly waiting for your response, please!

Okonjo-Iweala Fires Back!

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Coordinating Minister for the Economy and Minister of Finance Ngozi Okonjo-Iweala has responded to former CBN governor Charles Soludo’s article titled Buhari Vs Jonathan: Beyond the election where he criticized the presidential economic team.

1. For anyone who has not read Professor Charles Soludo’s article 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.

2. 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.

3. 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.

4.  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?

5.  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.

6.  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.

7.  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

8. 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

9. 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.

10. 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.

11. 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

12. 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?

13. 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?

14. 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.

15.  In addition we have special programs to promote job creation among the youth and these include:

16. 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?

17.   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.

18. 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.

19.  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 infrastructureacross 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.

20.  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.

21.  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.

22. 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.   

23.  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.

Paul C Nwabuikwu

Special Adviser to the Coordinating Minister for the Economy and Minister of Finance

Buhari VS Jonathan-Beyond The Elections by Charles Soludo

I need to preface this article with a few clarifications. I have taken a long sabbatical leave from partisan politics, and it is real fun watching the drama from the balcony.  Having had my own share of public service (I do not need a job from government), I now devote my time and energy in pursuit of other passions, especially abroad. A few days ago, I read an article in Thisday entitled “Where is Charles Soludo?”, and my answer is that I am still there, only that I have been too busy with extensive international travels to participate in or comment on our national politics and economy.

But I occasionally follow events at home. Since the survival and prosperity of Nigeria are at stake, the least some of us (albeit, non-partisan) must do is to engage in public debate. As the elections approach, I owe a duty to share some of my concerns.
  
In September 2010, I wrote a piece entitled “2011 Elections: Let the Real Debate Begin” and published by Thisday. I understand the Federal Executive Council discussed it, and the Minister of Information rained personal attacks on me during the press briefing. I noted more than six newspaper editorials in support of the issues we raised. Beside other issues we raised, our main thesis was that the macro economy was dangerously adrift, with little self-insurance mechanisms (and a prediction that if oil prices fell below $40, many state governments would not be able to pay salaries). I gave a subtle hint at easy money and exchange rate depreciations because I did not want to panic the market with a strong statement. Sadly, on the eve of the next elections, literally everything we hinted at has happened.  Part of my motivation for this article is that five years after, the real debate is still not happening.

 The presidential election next month will be won by either Buhari or Jonathan. For either, it is likely to be a pyrrhic victory. None of them will be able to deliver on the fantastic promises being made on the economy, and if oil prices remain below $60, I see very difficult months ahead, with possible heady collisions with labour, civil society, and indeed the citizenry. To be sure, the presidential election will not be decided by the quality of ‘issues’ or promises canvassed by the candidates. The debates won’t also change much (except if there is a major gaffe by either candidate like Tofa did in the debate with Abiola). My take is that more than 95% of the likely voters have pretty much made up their minds based largely on other considerations. A few of us remain undecided. During my brief visit to Nigeria, I watched some of the campaign rallies on television. The tragedy of the current electioneering campaigns is that both parties are missing the golden opportunity to sensitize the citizenry about the enormous challenges ahead and hence mobilize them for the inevitable sacrifices they would be called upon to make soon. Each is promising an El-Dorado.

 Let me admit that the two main parties talk around the major development challenges—corruption, insecurity, economy (unemployment/poverty, power, infrastructure, etc) health, education, etc. However, it is my considered view that none of them has any credible agenda to deal with the issues, especially within the context of the evolving global economy and Nigeria’s broken public finance. The UK Conservative Party’s manifesto for the last election proudly announced that all its programmes were fully costed and were therefore implementable. Neither APC nor PDP can make a similar claim.  A plan without the dollar or Naira signs to it is nothing but a wish-list. They are not telling us how much each of their promises will cost and where they will get the money. None talks about the broken or near bankrupt public finance and the strategy to fix it. 

 In response to the question of where the money will come from, I heard one of the politicians say that the problem of Nigeria was not money but the management of resources. This is half-truth. The problem is both. No matter how efficient a father (with a monthly salary of N50,000) is at managing the family resources, I cannot see how he could deliver on a promise to buy a brand new Peugeot 406 for each of his three children in a year.  Even with all the loopholes and waste closed, with increased efficiency per dollar spent, there is still a binding budget constraint. To deliver an efficient national transport infrastructure alone will still cost tens of billions of dollars per annum even by corruption-free, cost-effective means.  Did I hear that APC promises a welfare system that will pay between N5,000 and N10,000 per month to the poorest 25 million Nigerians?  Just this programme alone will cost between N1.5 and N3 trillion per annum. Add to this the cost of free primary education plus free meal (to be funded by the federal budget or would it force non-APC state governments to implement the same?), plus some millions of public housing, etc.  

 I have tried to cost some of the promises by both the APC and the PDP, given alternative scenarios for public finance and the numbers don’t add up.  Nigerians would be glad to know how both parties would fund their programmes.  Do they intend to accentuate the huge public debt, or raise taxes on the soon to-be-beleaguered private businesses, or massively devalue the naira to rake in baskets of naira from the dwindling oil revenue, or embark on huge fiscal retrenchment with the sack of labour and abandonment of projects, and which areas of waste do they intend to close and how much do they estimate to rake in from them, etc?  I remember that Chief Obafemi Awolowo was asked similar questions in 1978 and 1979 about his promises of free education and free medical services. Even as a teenager, I was impressed by how he reeled out  figures about the amounts he would save from various ‘waste’ including the tea/coffee served in government offices. The point is that at least he did his homework and had his numbers and I give credit to his team. Some 36 years later, the quality of political debate and discourse seems to border on the pedestrian. From the quality of its team, I did not expect much from the current government, but I must confess that I expected APC as a party aspiring to take over from PDP to come up with a knock-out punch. Evidently, from what we have read from the various versions of its manifesto as well as the depth of promises being made, it does not seem that it has a better offer.

 Let me digress a bit to refresh our memory on where we are, and thus provide the context in which to evaluate the promises being made to us. Recall that the key word of the 2015 budget is ‘austerity’.  Austerity? This is just within a few months of the fall in oil prices. History repeats itself in a very cruel way, as this was exactly what happened under the Shehu Shagari administration. Under the Shagari government, oil price reached its highest in 1980/81. During the same period, Nigeria ratcheted up its consumption and all tiers of government were in competition as to which would out-borrow the other. Huge public debt was the consequence. When oil prices crashed in early 1982, the National Assembly then passed the Economic Stabilization (Austerity Measures) Act in one day— going through the first, second, and third readings the same day.  The austerity measures included the rationing of ‘essential commodities’ and most states owed salary arrears. Corruption was said to be pervasive, and as Sani Abacha said in that famous coup speech, ‘unemployment has reached unacceptable proportions and our hospitals have become mere consulting clinics’.  General Muhammadu Buhari/Tunde Idiagbon regime made the fight against corruption and restoration of discipline the cardinal point of their administration which lasted for 20 months. I am not sure they had a credible plan to get the economy out of the doldrums (although it must be admitted that poverty incidence in Nigeria as of 1985 when they left office was a just46%— according to the Federal Office of Statistics).

 We have come full circle. If the experience under Shagari could be excused as an unexpected shock, what Nigeria is going through now is a consequence of our deliberate wrong choices.  We have always known that the unprecedented oil boom (in both price and quantity—despite oil theft) of the last six years is temporary but the government chose to treat it as a permanent shock. The parallels with the Shagari regime are troubling. First, at the time of oil boom, Nigeria again went on a consumption spree such that the budgets of the last five years can best be described as ‘consumption budgets’, with new borrowing by the federal government exceeding the actual expenditure on critical infrastructure. Second, not one penny was added to the stock of foreign reserves at a period Nigeria earned hundreds of billions from oil. For comparisons, President Obasanjo met about $5 billion in foreign reserves, and the average monthly oil price for the 72 months he was in office was $38, and yet he left $43 billion in foreign reserves after paying $12 billion to write-off Nigeria’s external debt. In the last five years, the average monthly oil price has been over $100, and the quantity also higher but our foreign reserves have been declining and exchange rate depreciating.

 I note that when I assumed office as Governor of CBN, the stock of foreign reserves was $10 billion. The average monthly oil price during my 60 months in office was $59, but foreign reserve reached the all-time peak of $62 billion (and despite paying $12 billion for external debt, and losing over $15 billion during the unprecedented global financial and economic crisis) I left behind $45 billion.  Recall also that our exchange rate continuously appreciated during this period and was at N117 to the dollar before the global crisis and we deliberately allowed it to depreciate in order to preserve our reserves.  My calculation is that if the economy was better managed, our foreign reserves should have been between $102 –$118 billion and exchange rate around N112 before the fall in oil prices. As of now, the reserves should be around $90 billion and exchange rate no higher than N125 per dollar.  
 Third, the rate of public debt accumulation at a time of unprecedented boom had no parallel in the world.  While the Obasanjo administration bought and enlarged the policy space for Nigeria, the current government has sold and constricted it.  What debt relief did for Nigeria was to liberate Nigerian policymakers from the intrusive conditionalities of the creditors and thereby truly allowing Nigeria independence in its public policy. How have we used the independence?  Through our own choices, we have yet again tied the hands of future policymakers. This time, the debt is not necessarily to foreign creditor institutions/governments which are organized under the Paris club but largely to private agents which is even more volatile. We call it domestic debt. But if one carefully unpacks the bond portfolio, what percentage of it is held by foreign private agents? And I understand the Government had removed the speed bumps we kept to slow the speed of capital flight, and someone is sweating to explain the gyrations in foreign reserves. I am just smiling! 

 In sum, the mismanagement of our economy has brought us once more to the brink. Government officials rely on the artificial construct of debt to GDP ratio to tell us we can borrow as much as we want.  That is nonsense, especially for an economy with a mono but highly volatile source of revenue and forex earnings. The chicken will soon come home to roost.  Today, the combined domestic and external debt of the Federal Government is in excess of $40 billion. Add to this the fact that abandoned capital projects littered all over the country amount to over $50 billion.  No word yet on other huge contingent liabilities.  If oil prices continue to fall, I bet that Nigeria will soon have a heavy debt burden even with low debt to GDP ratio. Furthermore, given the current and capital account regime, it is evident that Nigeria does not have enough foreign reserves to adequately cover for imports plus short term liabilities.  In essence, we are approaching the classic of what the Shagari government faced, and no wonder the hasty introduction of ‘austerity measures’ again.

 Fourth, poverty incidence and unemployment are also simultaneously at all-time high levels. According to the NBS, poverty incidence grew to 69%  in 2010 and projected to be 71% in 2011, with unemployment at 24%.  This is the worst record in Nigeria’s history, and the paradox is that this happened during the unprecedented oil boom.

One theme I picked up listening to the campaign rallies as well as to some of the propagandists is the confusion about measuring government “performance”. Most people seem to confuse ‘inputs’, or ‘processes’ with output. Earlier this month, I had a dinner with a group of friends (14 of us) and we were chit-chatting about Nigeria. One of us, an associate of President Jonathan veered off to repeat a propaganda mantra that Jonathan had outperformed his predecessors. He also reminded us that Jonathan re-based the GDP and that Nigeria is now the biggest economy in Africa; etc.  It was fun listening to the response by others. In sum, the group agreed that the President had ‘outperformed’ his predecessors except that it is in reverse order.  First, my friend was educated that re-basing the GDP is no achievement: it is a routine statistical exercise, and depending on the base year that you choose, you get a different GDP figure.  Re-basing the GDP has nothing to do with government policy. Besides, as naira-dollar exchange rate continues to depreciate, the GDP in current dollars will also shrink considerably soon. 

 We were reminded of Jonathan’s agricultural ‘revolution’. But someone cut in and noted that for all the propaganda, the growth rate of the agricultural sector in the last five years still remains far below the performance under Obasanjo. One of us reminded him that no other president had presided over the slaughter of about 15,000 people by insurgents in a peacetime; no other president earned up to 50% of the amount of resources the current government earned from oil and yet with very little outcomes; no other president had the rate of borrowing; none had significant forex earnings and yet did not add one penny to foreign reserves but losing international reserves at a time of boom; no other president had a depreciating exchange rate at a time of export boom; at no time in Nigeria’s history has poverty reached 71% (even under Abacha, it was 67 -70%); and under no other president did unemployment reach 24%. Surely, these are unprecedented records and he surely ‘outperformed’ his predecessors!  What a satire! 

 One of those present took the satire to some level by comparing Jonathan to the ‘performance’ of the former Governor of Anambra, Peter Obi.  He noted that while Obi gloated about ‘savings’, there is no signature project to remember his regime except that his regime took the first position among all states in Nigeria in the democratization of poverty—- mass impoverishment of the people of Anambra. According to the National Bureau of Statistics, poverty rose under his watch in Anambra from 20% in 2004 (lowest in Nigeria then) to 68% in 2010 (a 238% deterioration!).  Our friend likened it to a father who had no idea of what to do with his resources and was celebrating his fat bank account while his children were dying of kwashiorkor.  He pointed out that since it is the likes of Peter Obi who are the advisers to Jonathan on how to manage the economy (thereby confusing micromanagement which you do as a trader with macro governance) it is little wonder that poverty is fast becoming another name for Nigeria. It was a very hilarious evening. 
 My advice to President Jonathan and his handlers is to stop wasting their time trying to campaign on his job record. Those who have decided to vote for him will not do so because he has taken Nigeria to the moon. His record on the economy is a clear ‘F’ grade. As one reviews the laundry list of micro interventions the government calls its achievements, one wonders whether such list is all that the government could deliver with an unprecedented oil boom and an unprecedented public debt accumulation. I can clearly see why reasonable people are worried.  Everywhere else in the world, government performance on the economy is measured by some outcome variables such as: income (GDP growth rate), stability of prices (inflation and exchange rate), unemployment rate, poverty rate, etc. On all these scores, this government has performed worse than its immediate predecessor— Obasanjo regime. If we appropriately adjust for oil income and debt, then this government is the worst in our history on the economy. All statistics are from the National Bureau of Statistics.

 Despite presiding over the biggest oil boom in our history, it has not added one percentage point to the growth rate of GDP compared to the Obasanjo regime especially the 2003- 07 period.  Obasanjo met GDP growth rate at 2% but averaged 7% within 2003- 07. The current government has been stuck at 6% despite an unprecedented oil boom.  Income (GDP) growth has actually performed worse, and poverty escalated. This is the only government in our history where rapidly increasing government expenditure was associated with increasing poverty. The director general of NBS stated in his written press conference address in 2011 that about 112 million Nigerians were living in poverty. Is this the record to defend?  Obama had a tough time in his re-election in 2012 because unemployment reached 8%. Here, unemployment is at a record 24% and poverty at an all-time 71% but people are prancing around, gloating about ‘performance’. As I write, the Naira exchange rate to the dollar is $210 at the parallel market. What a historic performance! Please save your breathe and save us the embarrassment. The President promised Nigeria nothing in the last election and we did not get value for money. He should this time around present us with his plan for the future, and focus on how he would redeem himself in the second term—if he wins!

 Sadly the government’s economic team is very weak, dominated by self-interested and self-conflicted group of traders and businessmen, and so-called economic team meetings have been nothing but showbiz time. The very people government exists to regulate have seized the levers of government as policymakers and most government institutions have largely been “privatized” to them. Mention any major government department or agency and someone will tell you whom it has been ‘allocated’ to, and the person subsequently nominates his minion to occupy the seat.  What do you then expect? The economy seems to be on auto pilot, with confusion as to who is in charge, and government largely as a constraint. There are no big ideas, and it is difficult to see where economic policy is headed to. My thesis is that the Nigerian economy, if properly managed, should have been growing at an annual rate of about 12% given the oil boom, and poverty and unemployment should have fallen dramatically over the last five years. This is topic for another day.
 So far, the Government’s response to the self-inflicted crisis is, at best, laughable. They blame external shocks as if we did not expect them and say nothing about the terrible policy choices they made. The National Assembly had described the 2015 budget as unrealistic. The fiscal adjustments proposed in the 2015 budget simply play to the gallery and just to pander to our emotions. For a $540 billion economy, the so-called luxury tax amounts to zero per cent of GDP.  If the current trend continues, private businesses will come under a heavy crunch soon. Having put economics on its head during the boom time, the Government now proposes to increase taxes during a prospective downturn and impose austerity measures. Unbelievable!

 Fortuitously, just as he succeeded Shagari when Nigeria faced similar situations, Buhari is once more seeking to lead Nigeria. But times have changed, and Nigeria is largely different. First, this is a democracy and dealing with corruption must happen within the ambit of the rule of law and due process. Getting things done in a democracy requires complicated bargaining, especially where the legislature, labour, the media, and civil society have become strong and entrenched.   Second, the size, structure and institutions of the economy have fundamentally altered. The market economy, especially the capital market and foreign exchange market, impose binding constraints and discipline on any regime.   Third, dealing with most of the other issues— insecurity, unemployment/poverty, infrastructure, health, education, etc, require increased, smarter, and more efficient spending. Increased spending when the economy is on the reverse gear? 

 If oil prices remain between 40- 60 dollars over the next two years, the current policy regime guarantees that foreign reserves will continue the precipitous depletion with the attendant exchange rate depreciation, as well as a probable unsustainable escalation in debt accumulation, fiscal retrenchment or taxing the private sector with vengeance. The scenario does not look pretty. The poor choices made by the current government have mortgaged the future, and the next government would have little room to manoeuvre and would inevitably undertake drastic but painful structural adjustments. Nigerians loathe the term ‘structural adjustment’. With falling real wages and depreciating currency, I can see any belated attempt  by the government to deal with the bloated public sector pitching it against a feisty labour.  I worry about regime stability in the coming months, and I do not envy the next team. 

 The seeming crisis is not destiny; it is self-imposed. However, we must see it as an opportunity to be seized to fundamentally restructure Nigeria’s political economy, including its fiscal federalism and mineral rights. The current system guarantees cycles of consumption loop and I cannot see sustainable long term prosperity without major systemic overhaul. The proposals at the national conference merely tinker at the margins. In totality, the outcome of the national conference is to do more of the same, with minor amendments on the system of sharing and consumption rather than a fundamental overhaul of the system for productivity and prosperity. President Jonathan promises to implement the report of the national conference if he wins. I commend him for at least offering ‘something’, albeit, marginal in my view. I have not heard anything from the APC or Buhari regarding the national conference report or what kind of federalism they envisage for Nigeria.
 In Nigeria’s recent history, two examples under the military and civilian governments demonstrate that where the political will exists, Nigeria has the capacity to overcome severe challenges.  The first was under President Babangida. Not many Nigerians appreciate that given the near bankrupt state of Nigeria’s finances and requirements for debt resolution under the Paris Club, the country had little choice but to undertake the painful structural adjustment programme (SAP).  I want to state for the record that the foundation for the current market economy we operate in Nigeria was laid by that regime (liberalization of markets including market determined exchange rate, private sector-led economy including licensing of private banks and insurance, de-regulation, privatization of public enterprises under TCPC, etc). Just abolishing the import licensing regime was a fundamental policy revolution. Despite the criticisms, these policy thrusts have remained the pillars of our deepening market economy, and the economy recovered from almost negative growth rate to average 5.5% during the regime and poverty incidence at 42% in 1992.