By Paul C Nwabuikwu
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Professor Charles Soludo
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For anyone who has not read Professor
Charles Soludo’s article in the Vanguard (online version: http://www.vanguardngr.com/2015/01/buhari-vs-jonathan-beyond-election-charles-soludo/) 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 traveling
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 programs to
promote job creation among the youth and these include:
Promoting entrepreneurship among the
youth through the “Nagropreneurs” program to support 750,000 youth farmers with
grants and training, and the YOUWIN program 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.
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 program.
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.
Paul C Nwabuikwu is Special Adviser to
Nigeria's Coordinating Minister for the Economy and Minister of Finance.
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