THE ECONOMY: WHO IS IN CHARGE? - 2
'It is better sometimes not to follow great reformers of abuses beyond the threshold of their homes'. George Elliot, 1819-1880.
Only three years ago, we thought a great reformer had come to take charge of the Central Bank of Nigeria, CBN. How wrong we were. The cure to our ailments is proving to be worse than the disease. For more than two years, we have lurched, like drunkards, from one side of the road to another totally with no sense of direction.
Imagine, if you can, an aircraft in flight. The pilot, usually called Captain, is embroiled in self-provoked free for all fight with some passengers despite great dangers to the aircraft he should control. The co-pilot is 'unavoidably absent'.
Sanusi Lamido Sanusi, CBN's governor
The Flight Engineer, a bull in a china shop, after taking control of the craft, proceeds to pilot the vessel as he liked - without regard to the safety or comfort of those on board.
Crazy, is it not? Then welcome to the Nigerian economy. Either with the plane or with our national economy, it has become a matter of DESTINATION UNKNOWN. We are captives of a crew, so totally distanced from reality, as to leave us saying our last prayers. That sounds alarmist? Then wait for the evidence.
The pilot, or Captain, is none other than our dear President, Goodluck Ebele Jonathan, GEJ. Consider these fearsome conflicts threatening the peace and stability of the nation without which no meaningful or lasting progress can be expected. Start with the Boko Haram menace.
Anybody who seriously believes that this nation can grow its economy from under $200 billion in 2011 to $900 billion in 2020 must point to the principle of economics which states that investors will stake their money in such large quantum as to make that possible, on a country ranked among the seventeen most violence prone nations on earth - unless, of course they also assume that Nigeria can attain top 20 status without wide swats of the North now in the grips of Boko Haram and where people are fleeing. Pilot GEJ has offered no solution to all these.
Related to that is Islamic or Non-Interest Banking which has had ordinarily level headed Nigerians, President of CAN and the Sultan at daggers drawn; not to mention the lunatic fringe of Islam led by someone best left unnamed. Here again, the Captain had been treating this explosive issue with benign neglect.
As if those were not enough problems rocking the craft, the controller of our fates had introduced the issue of tenure elongation thereby inviting others who had hitherto sat quietly to join the bedlam.
The Co-Pilot is none other than our dear Minister of Finance, Dr Okonjo-Iweala, unavoidably absent at, perhaps, the most crucial time in our nation's economic history.
Only God knows why Jonathan could not find someone else just as competent and who could resume duty immediately to handle the fiscal policy measures which will complement the monetary policy initiatives of the CBN, and also check the excesses of the Frankenstein, which the CBN has become all of a sudden.
Only in Nigeria do we appoint someone, as Minister, who cannot resume duty until six months after. The new International Monetary Fund, IMF, Managing Director, was a Minister in France, when appointed; she is already in the US on her new job. What on earth is the shakara about? We need her NOW!
The bull might destroy the whole china shop before she arrives only to serve as an undertaker. What then would be the benefit of her vaunted expertise to us?
The Flight Engineer is, of course, our Governor of Central Bank, who has taken absolute control of our economy and is now running it aground with ill-advised measures likely to send our country back to the Dark Ages.
The latest stunt from that institution was the nationalization of the three banks and the creation of three new banks to replace them. The explanations so far offered and the game plan announced have confounded investors, not only directly involved in the three banks, but in all banks as well; irrespective of whether distressed or not. Investors have started voting with their 'sell orders' to stock brokers. A massacre is underway.
Incidentally, on Friday, August 5, 2011, THE NATION on page 11, published a statement by the Director General of the Security and Exchange Commission, SEC, Ms Arumah Oteh, saying, 'We have huge infrastructure deficit in many of our [African] countries.
I believe the solution is to continue to grow world class capital markets….we can raise the funds we need for infrastructure from the capital market and transform our economy'.
The DG-SEC spoke well, but her advice, at the moment, is relevant to other countries not Nigeria. After the latest direct assault on the banks, and indirect hit on the Nigerian Stock Exchange, NSE, by the CBN, our most urgent need is not 'growing world class capital market' but preserving the carcass of the existing one from total annihilation.
By the time you read this, many bank shares would have shed close to 40% of their value before BLACK FRIDAY 2011 ( Friday, August 5, 2011). They are poised to lose more.
Bearing in mind that every single one of those shares have suffered close to 70% price drop since 2008, when the relentless slide started, the disastrous and unintended consequences of the CBN's announcement will be with us for years to come.
Trading on the shares of the three banks taken over has been stopped. In fact, they no longer exist. Their shareholders are holding unto something without any value; even less valuable than tissue paper. Several collateral damages arise from that stark reality. Two and only two will be dealt with at the moment.
Banks and other lenders which had hitherto accepted those shares as collaterals for loans find themselves holding nothing; billion of naira worth of loans are now at risk as a result.
Unfortunately, the damage will not be limited to the directly affected banks, it will have a negative impact on all bank shares which might no longer be acceptable as securities for loans.
Borrowing and lending, the life blood of all economies, will crawl almost to a stop. And, if bank shares become suspect, what would be the fate of other shares as the capital market goes into another steep dive? It must be the most closely guarded secret if the CBN ever considered these consequences.
Yet, those are the sad facts playing themselves out in the nation's financial markets at the moment. Who cares about 'world class capital market' when you went to bed on Thursday, August 4, 2011 a paper multi-millionaire and went to bed on Friday, August 5, 2011 a destitute? Former British Labour Prime Minister once said, 'A month is a long time is politics'.
Sanusi has just proved to the world that a day might be a long time in the Nigerian Stock Exchange and a month almost eternity. Foreign portfolio investors are pulling up tents. Those who previously took a 'wait and see' attitude about the Nigerian Stock Exchange, in the hope that the magic that attended the Nigerian capital market up to 2008 would return, have started the process of departure.
They are no longer waiting; because they have seen enough. A silent operator and friend told me, it might be his last foray into the Nigerian capital market; after close to twenty years here.
At 65, he cannot wait for the market to recover in ten years time. He might not be alone. Any Nigerian shareholder over 65 who bought any of the banks shares at the dizzy prices, for which they were sold in 2008, may never live long enough to recover his investment. And the last chance for any strong recovery might just have disappeared on BLACK FRIDAY 2011.
Meanwhile, the Captain was last seen in one African country attending the inauguration of a President starting his fourth term. Incidentally, that sit-tight leader was first elected on a constitution allowing two terms which he got amended twice. That should serve as a warning to us when our Presidents canvass constitutional amendments.
Show me your friends and I'll tell you who you are. A president who could travel out with so many urgent economic, social, security and political problems begging for attention at home must consider inauguration more important than calming the nerves of restive religious leaders, finding lasting solutions to terrorism; mobilizing funds to pay minimum wage while still repairing roads; creating jobs and reassuring investors.
That is certainly no way to build world class capital market or a nation for that matter. Our Captain thinks leadership is all about clinking champagne glasses with despots in foreign lands!!
Who, for goodness sake, is in charge of the Nigerian economy?