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

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.