Okonjo-Iweala Says Soludo, A Failed CBN Governor, An Embittered Loser

Source: pointblanknews.com

Finance Minister and Coordinating Minister of the Economy, Dr. Ngozi

Okonjo-Iweala has described the five year tenure of Prof Chukuwma Soludo

as the Governor of the Central Bank of Nigeria as a failure and a disaster

to the banking and economic sector.
Soludo who was the apex bank governor between May 2004 and May 2009 who

also failed in his bid to Govern Anambra State had in an article claimed

that the Nigerian economy under President Goodluck Jonathan had performed

woefully.
Reacting through a statement issued by her Special Adviser Communications,

Mr Paul Nwabuikwu, Dr. Okonjo-Iweala said Soludo through his article has

committed what she described as “intellectual harakiri.”

Okonjo-Iweala while the article was laced with abusive and unbecoming

language, it shows Soludo, whom she described as an “embittered loser in

the Nigerian political space” can get so derailed by misquoting economic

facts and maliciously turning statistics on their head to justify a

hatchet job.”
The Statement reads:
1.    For anyone who has not read Professor Charles Soludo's article in

the Vanguard (online version) on January 25 2015, I would encourage them

to do so. It is littered with abusive and unbecoming language. It shows

how an embittered loser in the Nigerian political space can get so

derailed that they commit intellectual harakiri by deliberately misquoting

economic facts and maliciously turning statistics on their head to justify

a hatchet job. We hope all the intellectuals in the international circles

in which Professor Soludo has told us he flies around in will read what a

Professor of Economics has chosen to do with his intellect.

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:
•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

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 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
•    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.
The post Okonjo-Iweala Says Soludo, A Failed CBN Governor, An Embittered Loser appeared first on Pointblank News .