By Kwakwu Brown
The article by Chukwuma Soludo, former Governor
Central Bank of Nigeria, titled “Ngozi Okonjo-Iweala and the missing
trillions,” has rightly generated a lot of buzz in both social media and the traditional
media.
This is rightly so because of the credibility of the person that wrote
the article. Soludo is widely considered intelligent and his profile will
intimidate ordinary mortals any day. He is an economist who has proven his
mettle with several well researched papers and who is widely consulted on
economic issues.
So, when Soludo writes, especially, on economic issues, Nigerians and the world
pay attention. This is why his recent article, that was a reply to a response
from Ngozi Okonjo-Iweala on another article he published, attracted so much
attention.
But how much of the issues that Soludo raised in his article can
stand up to facts. I will take the key claims in the rather long article,
especially where it concerns figures.
N30 trillion missing
One of the claims that Soludo made
was that under Ngozi Okonjo-Iweala's watch “an estimated over N30 trillion is
missing or stolen or unaccounted for, or simply mismanaged.” Is this true? N30
trillion based on the average official rate of N175 to the dollar is about $171
billion. NOI was appointed Minister of finance in July 2011. So what Soludo is
saying is that from July 2011 to date, $171 billion has gone missing or
mismanaged under her watch.
CBN statistical bulletin as at
December 2013 shows that total federal retained revenues from 2011 to 2013 was
N11.2 trillion. If we assume that the retained revenues for 2014 was N4
trillion same as 2013 retained revenue, then the total federal government
retained revenue from 2011 to 2014 was N15 trillion.
Assuming the government
borrowing within the period stood at N5 trillion, then total government revenue
for the period was N20 trillion.
This basically means that there was
no way N30 trillion would have gone missing in the last four years. That would
have meant every penny the federal government earned in the last four years and
also more than 50% of the revenues that should go to the states has been stolen
or unaccounted for or simply mismanaged.
Practically, the Nigerian economy would
have collapsed as civil servants would have gone unpaid and businesses gone
burst since government spending drives business in the country.
Soludo did not however give us what
proportion of the N30 trillion was stolen mismanaged or has gone missing. This
Soludo claim cannot be backed up with facts and is therefore not credible.
Exchange rate
Soludo’s second allegation
concerned the exchange rate. He wrote “As I write, the naira exchange rate to
the dollar is N215 (from N158 a few months ago) and unless oil price recovers,
this is just the beginning.”
Soludo’s seems to be confused about
issues here. The N215 exchange rate that Soludo is referring to is apparently
the parallel or black market rate of the Naira which as at the date Soludo
wrote was actually about N210 to the dollar and definitely not N215.
Then instead of comparing the rate
with black market rate “months ago" Soludo compares to rate with the official
rate “months ago" of N155 to N158 which was devalued to N168. It is like saying
apples and mangoes are the same because both are fruits. The official rate of
the Naira has hovered between N155 to N168 and never N215. The black rate has
hovered between N180 to N210.
Still on the exchange rate, Soludo
says “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!”
Soludo is right but it is also true that the Naira depreciated heavily under
Soludo despite Nigeria’s huge reserves. From the N117 official rate as at
December 2007, it had depreciated by 26% to N148.22 in June 2009, the month
Soludo left as CBN governor. Compare it with the current depreciation of about
6% from N158 to N168.
In the black market, the Naira was
already exchanging as low as N155 to N170 to the dollar under Soludo from about
N134 before the global economic crisis.
It must also be noted that the
external reserves, which was at an all time high of $62 billion in September
2008 had dropped to a low $43 billion as at June 2009 by the time Soludo was
leaving office. About $19 billion had been spent by Soludo within 10 months
trying unsuccessfully to defend the Naira.
The external reserve currently
stands at $34 billion, which is just $9 billion less than the $43 billion
Soludo left in June 2009. So it is not factually right for Soludo to claim that
the current government ran down the external reserves in the last five years.
Non-Performing Credits
Soludo writes “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.”
Soludo statement is largely true
except that that by the time Soludo was leaving as CBN governor in June 2009;
the average NPL ratio was in excess of 40%, with eight banks having NPLs in
excess of 60%, which necessitated the setting up of AMCON to buy the toxic
assets from Nigerian banks.
All Nigerian owned banks sold toxic
assets to AMCON which acquired toxic assets with a face value of N5.7 trillion.
So, yes Soludo reduced toxic assets in the system but lax regulations of banks
under him, soon resulted in the fast growth of NPLs resulting in the eventual
collapse of eight banks.
Lax regulation
Soludo also defended his record of
lax regulation by saying: “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.”
He also wrote that “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.”
This is an interesting revelation
from Soludo. Because if it is true, it means that Sanusi Lamido Sanusi sacked
the Managing Directors of the banks before he sent auditors to the banks to
look for evidence to back his allegations that the banks were being mismanaged.
I hope Sanusi will clear the air on this allegation.
However, in a lengthy speech
delivered by Sanusi Lamido Sanusi at Bayero University Kano (BUK), in 2009, a few
months after emerging as CBN governor, and sacking the managing directors of
the eight banks, he indicted the Soludo led CBN leadership for failing to
take action, when it was obvious that some Nigerian banks were in trouble.
This is what Sanusi said in the
lecture delivered at BUK; “As credit levels rose and stock prices inflated, the
CBN failed to halt this vicious circle and foresee the consequences. The CBN
did not highlight or failed to communicate the problem to fiscal authorities
and the market in general. The sad story in all this is that we now have
evidence that junior officers in the CBN did document their concerns to CBN top
management at that time, but no action was taken. We also have evidence that
the NDIC documented its concerns but its efforts to get the CBN leadership to
act quickly were rebuffed.”
This is a clear contradiction to
what Soludo is now saying in his defense.
It is a bit surprising that a well
respected Professor of economics will write an article with so many factual
errors that can easily be cross checked. It sounds more like political mischief
than a desire to raise genuine debate on economic issues.
Kwakwu Brown is a financial journalist with several years of
experience reporting local and international business news.
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