Lacuna in Nigeria’s economy, which had been adjudged the biggest in Africa, provokes high-wire argument between two global financial gurus, Charles Soludo and Ngozi Okonjo-Iweala. SAM NWOKORO hazards a review of these two Nigerians’ handling of the economy.
Former Governor, Central Bank of Nigeria (CBN), Professor Charles Soludo, and President, Board of Governors of the World Bank, has contributed immensely in shaping the economic destinies of many third world countries. At least, until he became chief economic adviser to former President Olusegun Obasanjo in 2003, from where he went to the CBN in May 2004, Soludo had been renowned as a number one economist who has in his fingertips answers to global finance nuances. The Asian Tigers owe, at least partially, their economic rejuvenation to Soludo’s inputs one way or another.
On the other side, Nigeria’s Finance Minister and Coordinating Minister of the Economy, Dr. (Mrs.) Ngozi Okonjo-Iweala, also joined the federal government from the World Bank system, the same period Soludo did. She goes down in the annals for her efforts in convincing the London and Paris clubs of creditors to cancel the country’s debt. Nigeria got a debt relief of about $36 billion, and only had to repay about $5 billion to finally exit a most suffocating debt trap. Since then, she has become the darling of successive governments.
The global pedigree of these two experts, the impact of their roles in Nigeria’s social engineering processes, coupled with the fact that they still remain global decision-makers whose actions affect the life and destinies of the entire world, qualify them and the issues they raised about the management of an economy to be worthy of mention.
Professor par excellence
Professor Soludo needs no much introduction. His signature has remained in some of the naira notes long after he had left the CBN where he held sway between May 29, 2004 and May 29, 2009. He actually came on a rescue mission to Nigeria. Because his advent heralded numerous changes in the nation’s economic life, his became a household name. He was obviously a folk hero accomplishing many things within a short while. His was like an angelic visitation. His backroom advice to Obasanjo from 2003 effected a dramatic paradigm shift in the economic scene, as well as policy design methodology.
He introduced polymer notes, a new currency type in this part of the world, and others with more security features. He introduced some higher denominations, minimising the task of currency counting and sorting. He virtually drew the policy designs of Obasanjo’s graduated deregulation programmes and institutional reforms that midwifed Nigeria’s transition to market economy.
Consolidation of the banking system, which made small banks merge together or enabling bigger ones buy off non-performing ones, thereby closing the chapter of ‘family bank’ and ‘rent services’ for which the banking sector was initially notorious. He launched the culture of the now flourishing business clinic, an off-shoot of the banking consolidation exercise that led to bankers availing themselves of regular updates in new banking techniques to be able to manage the big banks that have just berthed into the economy. The consolidation project put banks in bigger picture before the global financial system.
Also the consolidation had the immediate impact of availing credit in an environment previously controlled by small family units where accessing credits from banks was much like searching for a pin on the beach. Armoured bullion vans introduced by Soludo for cash movement substantially eliminated the incidence of robbing banks while cash is on transit.
While this global citizen held sway in Nigeria, the country’s financial sector actually got improved acceptance in the global community. Foreign nationals were buying shares in Nigerian banks, even ordinary folks caught the bug of buying shares as newly-created entities floated initial public offers (IPOs). Space actually would not allow for in-depth capturing of Soludo’s miracle in Nigeria.
The Aguata Anambra State-born economist was the only African among the seven-member strategy committee headed by renowned economist, Professor Joseph Stiglitz, which the United Nations mandated in 2008 to redraw a global economic and world finance system at a time global recession hit the world in 2009. Part of the recommendation of that Stiglitz committee was that governments have to try to promote “inclusive growth” in development policy designs, to capture as much as possible more age brackets and small enterprises in the development matrix. That policy was to tame the obviously reduced tempo of rapacious capitalism, and moderate it with controlled state intervention, without necessarily undermining the principles of private property.
It is worthy of note that nations the world over are now striving to meet that mandate embedded in the Millennium Development Goals (MDGs). These and many other pedigree make Soludo thick in the discourse of national economies.
Soludo was (or still is) a visiting professor at the International Monetary Fund (IMF), University of Cambridge, the Brookings Institution, the University of Warwick, Oxford University and Swarthmore College, United States of America. He works as consultant for some international organisations like World Bank, the UN Commission for Africa and the United States development Project (UNDP). For a scholar who came tops in all his levels of academic endeavour up to professorial level, his discourses about any nation’s economic management cannot be ignored.
Record-setting minister
Okonjo-Iweala, like Soludo, is a product of Bretton Woods system, right from her youth. She grew in an environment of rugged-free willing do-it-right now-and-get-it-done-once-and-for-all temperament. That was the American spirit of never giving up. Nigerians are usually puzzled by the woman’s ability to pull unparalleled punches in an African political establishment dominated by mafias. Also, like Soludo, her coming to Nigeria also had angelic strings attached. It was as if she came for that.
The debt relief by London and Paris clubs gave Nigeria space to redraw her fiscal architecture and thus channelled much of the money earmarked for debt service into other areas of the economy. Principally, the gains of the debt relief was that emoluments of security forces, especially the police and army, were effected several times: during Obasanjo’s time, and also during the late Umaru Yar’Adua’s time. There was also increment in the monthly allocation to states.
Chiefly, the debt write-off enabled Nigerian banks, just newly capitalised, to access multilateral funds with which, for the first time, they bankrolled some high end enterprises. Nigeria’s sovereign rating improved and international investors started showing interest in Nigeria’s economy.
At the inception of the President Goodluck Jonathan administration in 2011, the minister was called back to help nurture the economic blueprints of the administration’s transformation agenda. Longers Anyanwu, one of the foremost ambassadors of the agenda remarks: “Transformation agenda is meant to transform Nigeria genuinely. The Minister of Finance, who is also in charge of seeing to the new economic development directions, is the same woman that virtually single-handedly wrote off Nigeria’s debt. Without that write-off, where do you think we would have been now? Nothing has been done in this country for a long time. The roads were unattended to, the rail had no plan at all. The airports were like motor parks. You are hearing about dams being built, new seaports being dredged. Do you think the only work of the minister of finance is just to dole out money? She is also instrumental in the decision of all development plans.”
Point of convergence
Observers of Nigeria’s economic scene point out that the roles which Soludo and Okonjo- Iweala played in husbanding Nigeria’s economy since 2003 complement each other.
Chibundu Akubueze, an importer and exporter says: “I have read the exchange of letters between these two great Nigerians. I think what makes it take this high controversy is the timing. Although Soludo says he is addressing the two political parties, it is like he is being sponsored to write it. Why did he wait all this while, and choose this period to voice the concern?
“Remember, he is a renowned world leader and so anything he says can sway or carry public sympathy against the government he is criticising. However, both Soludo and Okonjo-Iweala have been of immense service to this nation and their efforts should be to complement each other’s, and not to run each person down.”
Point of divergence
The recent letter by Soludo to the two main presidential candidates, President Jonathan of the PDP, and Mohammadu Buhari of the APC centred around their alleged lack of plan to address what he described as cash crunch in the economy today. Essentially, the thrust of Soludo’s letter released on January 25 are summarily: that neither Jonathan nor Buhari has a well-thought-out programme to tackle the different challenges in the country, despite their promises; that corruption, insecurity, debt-laden economy, unemployment, poverty, power, infrastructure, health, education etc. are still crying for huge attention, but both parties are missing the golden opportunity to sensitise the citizenry about the enormous challenges and hence mobilise them for the inevitable sacrifices they would be called upon to make soon; that PDP and APC are not telling Nigerians how much those 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… 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 for the soon-to-be beleaguered private businesses or massively devalue the naira?”
Soludo, while justifying his fears about the economic breakdown, said: “I resisted the IMF advice to deplete reserves for liquidity management, and Nigeria had enough self-insurance to survive the global crises. The opposite has happened under you, Madam (referring to the finance Minister) and the Nigerian economy is in trouble. Naira exchange rate appreciated under me from N133 to N117 before the global crises, and reserves grew all time high to $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.”
In response, Okonjo-Iweala lectured in self exculpation in reference to Soludo’s tenure as CBN governor: “In fact, the banking sector was brought under its knees and required a massive bailout. 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 (Asset Management Corporation of Nigeria) from where they are managed today.
“After consolidation, the regulatory function of the CBN was very poorly exercised. As governor, he failed to adequately supervise and regulate the now large banks, an anomaly in financial sector supervision.”
As expected, the exchanges between these two managers of Nigeria’s past, present and likely future did not pass without comments. As at the last count, TheNiche counted 500 tweets in the social media barely five days after Soludo’s reply to the minister’s reaction.
President, Centre for Leadership Values and tutor at Pan African University, Professor Pat Utomi, remarked: “I do agree with Soludo that issues matter. I also think that those who turn to divisive emotion-laden typecasting of others, rather than issues pertaining to the wellbeing of the Nigerian people, do grave disservice not only to democracy, but to the long term common good of all. The Soludo thrust of criticism sounds like an attack on the statist’s perspective that interventions can generate jobs and economic growth.”
The opposition APC was the first to take up from Soludo’s remarks: “While we accept his critical comment on our party, more for the intentions than the letters, we believe some clarifications would be quite necessary: the APC does not intend to ride into power on a mere rhetoric of change. The change we propose is more fundamental in many ways.”
On the other hand, PDP’s publicity secretary, Olisa Metuh, said: “The PDP is not wrecking the economy. We have continued to maintain a high moral ground in keeping to issue-based campaigns. This (referring to APC’s reaction) is a ploy to divert attention from its lack of acceptable blueprint and the refusal of its presidential candidate, MB to intellectually engage Jonathan on economic and other matters. The nation has become the primary investment destination in Africa under Jonathan’s administration.”
Still their problem
There is this perception among Nigerians that both Okonjo-Iweala and Soludo have been largely responsible for Nigeria’s positioning into global stage. According to Dr. Peter Uduak, a marine engineer, “These two big powers (I call them big powers because it is the World Bank and IMF people that loaned them to us) should mind the way they talk, so that they don’t scare investors. They are ‘expensive’ (prominent) people and whatever the say matters. I only believe they know this. But as for performance, they have been a tremendous blessing to Nigeria, never mind their utterances.”
