Orijin

Wednesday, 28 January 2015

Coordinating
Minister for the Economy and Minister of Finance Ngozi Okonjo-Iweala has
responded to former CBN governor Charles Soludo's article titled Buhari Vs
Jonathan: Beyond the election, where he criticized the presidential economic
team. NOI's res

ponse below...

1. For anyone who has not read Professor
Charles Soludo’s article 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:

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

· 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.

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