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On Economic Recession And Chukwuma Soludo’s Tenure By Benedict Okereke
Detractors and friends of the CBN governor, Chukwuma Soludo, have been having bouts over his tenure. Mute, as expected has remained Soludo’s response. It appears he has learnt to control his acclaimed weakness - inability to resist mounting, or being dragged to the rostrum even at the shortest notice, a habit that can have an Albert Einstein goof on a discussion on energy, mass and light’s speed. By and large, the deleterious effects on the nation’s economy of the overdrawn speculations on the incumbent CBN governor’s tenure may yet surface.
By the 3rd quarter of 2007, the CBN’s programme of reverse decimalisation of the Naira had received many hard knocks.
Like many debates on topical issues in Nigeria, at some point, that on reverse decimalisation of the Naira veered closer to name calling. In The Proposed New Naira Exchange Rate And The Nigerian Economy Sam Aluko from Ontario, Canada, had to remind the CBN governor, that “the CBN is to operate and execute the monetary policy of the government, the government is not to operate the monetary policy of the CBN,” and that the CBN “should not act alone as if the Naira is its property.”
Eventually the government distanced itself from the idea of kicking off two zeros from the Naira units to obtain low, single unit exchange rates.
But many among those critics were either scarce with facts, laden with sentiments or could not or refused to look beyond 2007. This class of critics was mainly preoccupied with the immediate aftermath, and not the enduring benefits of reverse decimalisation.
(i) In countries where currency reverse decimalisation were effected, with the public enlightenment and careful execution it required, there were the anticipated initial slight surge of inflation which later petered out and in many instances provoked deflation. The introduction of the Euro in many European countries attests to the above. Turkey and Ghana are successful examples of reverse decimalisation outside the Euro zone. Forget the embargo- and crisis-ridden Zimbabwean example. (ii) A few of those critics bothered to prospect on today’s oil price plunge. The price of crude oil in 2007 was high and rising and ensured the piling up of the nation’s foreign reserve, and by extension, the instantaneous stability of the Naira.
(iii) From the third quarter of 2007 till date if there had been any tangible efforts to improve on the nation’s infrastructure to enhance industrial productivity and services, they are yet to impact positively on these sectors, and by extension, on the stability of the Naira.
When it became obvious the government would not buy into CBN’s reverse decimalisation prescriptions, at least, in the immediate future, Nigerian traders not used to cheque stumps (though many could not have understood the intricacies of reverse decimalisation) but were warming up to prune the number of their cash-carrying Ghana-must-go bags and the associated risks weren’t elated. It was business as usual for the ubiquitous bullion vans and their koboko and gun-totting escorts. Soludo retreated, but like every mortal, could have been subjected to some degree of crisis of self doubt.
But unlike most mortals, Soludo did not display any disenchantment with the system. He rather went about his duties with much more diligence and dignity. That was a true test of good servant/leadership.
Later-day critics of Soludo cite the recent depreciating value of the Naira as an example of his non-performance. But at the dawn of the global economic crisis analysts had expected a worse case scenario for Third World economies. Some of his critics often fail to take cognisance of some untoward machinations of some economic policy makers in the rich world aimed at sustaining economic well-being within their domains; for such policy makers it does not matter if such machinations render poor countries poorer. Many in the rich world based on the vagaries of the ‘economic weather’ preach globalisation in one instant and at the next shift to protectionism. And if the truth must be told, neither of the above two concepts has yet found favour with the poor nations’ economies. For these economies, protectionism is a killer dose; globalisation, on the other hand, forces the cash-strapped Third World entrepreneur to shop for the same factors of production (except unskilled labour) in the same market where the cash-laden, rich world entrepreneur obviously dictates the pace. Third World economies still yearn for some sort of Marshal Plan for a catalyst.
Again, bankers in the rich world knew (more than 18 months) before October 2008 of the impending economic meltdown but tried to hide the bust. Most bankers and economic policy makers in the Third World were taken by storm. Or was Brazil’s Lula Da Silva merely looking for scapegoats when he stated that the recession “was caused by irrational behaviour of white people with blue eyes”?
So Soludo could not have been meant to take the hard knocks as the economic ill-wind was bound to visit Nigeria. He should rather be given kudos for Nigeria’s financial system’s prompt reaction to the economic crisis. The Naira did undergo some measured and manageable devaluation in the circumstance, thanks to the managerial skills of those in charge at Nigeria’s apex bank. Nigerian banks quickly adjusted to the already bad situation and did not immediately go bust, no immediate bank bailouts, vintage CBN’s banking reforms
Remove any of these two factors - political stability and transparent financial regimen (read buoyant banking sector) from any nation’s economic machinery, abject poverty sets in. Soludo inherited a banking sector which in the past, confidence men were said to have been strolling onto the central and commercial banks’ floors to organise advanced-fee-fraud. It was an open secret that one military leader before then would order the CBN governor to transfer, with immediate effect, huge sums of foreign currency in Ghana-must-go bags to his office. Soludo inherited family banks where depositors’ money could vanish overnight. Before him, Nigerians in the diaspora who lost deposits in Nigerian banks of the 90’s would not have any thing to do with banks back home, foreign investors were scared of Nigerian banks, in fact, they shunned them like a plague. It was not until Soludo came to the apex bank and cleared the Augean stable through his splendid banking reforms that Nigeria was repositioned on the path of economic growth. At least, ‘Naija Pundit’ in : Is CBN Governor Embezzling Money or Merely Engaged in Extensive Corruption? acknowledged this with the statement: “with a vigorous anti-corruption campaign and the cleaning of the banks, the path was clear for the most remarkable banking reforms in the history of the nation.” ‘Naija Pundit’ set out churning out apparently spurious allegations of corrupt practices on the part of Soludo ostensibly with a mission to pre-empt a possible Soludo re-appointment, and perhaps, enhance the chances of his candidate for the man’s job; but in the above statement, he unintentionally ended up highlighting the signature tune that serves as Soludo’s bulwark in the court of public opinion. However, in Soludo And the Burden of Public Office Ignatius M. Ejikeme who apparently knew Soludo very well debunked much of the allegations of ‘Naija Pundit.’
Trading on convertible currencies on the streets of any nation is the trademark of a disjointed economic/financial system. For donkey years the practice characterised Nigeria’s business space and weighed down on any serious integration of the nation’s banking/finance system with the global banking/finance mechanism. It distorted the nation’s economic indices and frustrated her economic planners and policy makers. Simply put, the practice does no Nigerian any good. Back-street fixation of the exchange rate of the Naira and sale of foreign convertible currencies were nearly stamped out not by force but by sound monetary and banking policies instituted by Soludo and his team at the CBN. And that reminds one of the recent directive by the CBN to commercial banks to remove their ATM outlets at some strategic positions in the country. Before confidence was reintroduced into Nigeria’s banking system, and when other countries had long been using the ATM outlets, Nigerians had their unconventional ATM cash dispensing mechanism. An average Nigerian would stock up the US dollar which he could exchange for the Naira even at the dead of the night by merely knocking on the doors of a trusted back-street foreign currency seller. Depending on the level of desperation of the buyer, the exchange rate agreed upon could influence the next day’s exchange rate. That was the real voodoo economic system. The bank reforms of the CBN nearly extinguished the system but for its recent upsurge deriving from the global financial meltdown.
The spectre of dumping performing public servants has continuously rubbed off on Nigeria’s economic development. Some of these servants deploy the initial period of their assignments to undergo on-the-job training and no sooner had they become masters on their jobs than they were shoved off for some imprudent considerations. Trevor Manuel as finance minister has run South Africa’s economy for 13 years and has guided the nation from economic crisis to near boom. And he is not leaving soon because successive South African presidents have learnt to appreciate the economics wizkid. United States’ Alan Greenspan served various GOP and Democratic party presidents as Treasury Secretary for 18 years until he was seen to be about to resort to the use of walking stick in 2006. In many of the countries we envy for their economic well-being, performing public servants are wooed and encouraged to hold on to their jobs as long as it is constitutionally permissible. “Naija Pundit” in the article cited above made reference to Ngozi Okonjo- Iweala, Nigeria’s ex-finance minister as “the gifted MIT-trained development economist.” Wouldn’t it have been to Nigeria’s advantage if Okonjo-Iweala is still serving the country?
There is no doubt today there are so many Nigerians who can take over the job of Soludo and perhaps, perform as well, but timing is an important factor here. In the midst of a global economic crisis Nigeria cannot afford the party of musical chairs. A new boss this time at the CBN irrespective of his/her level of preparedness for the job must surely be overwhelmed by the current economic crunch. It is to Nigeria’s advantage that those at the helm at the CBN and the finance ministry who received the first impact of the global economic crisis and must have studied the A-Z of it be left to guide Nigeria out of the crisis. And above all, if we have a leader at the apex bank, (or indeed, any other public office) who is seen by Nigerians as having performed well during his first tenure, why must we not strive to continue to profit from the leader’s on-the-job potentials until we reach the limit of his or her constitutionally allowed term?
Finally, we need to see as a rare gem a Nigerian who lost his mother at the age of 8 and ended up bagging a first class honours degree and received the faculty’s highest prices all the way to doctoral level in the 1980’s. Soludo’s good works impact positively on every Nigerian. It is drab and counter-productive to circumscribe matters about Soludo of this moment on the closet of ethnic considerations as some do. There is a saying that in President Yar’ Adua Nigeria is bestowed with the first leader that got a thorough university education. Therefore, so long as Soludo’s fingers are not soiled by the spoils of office it is expected that the President recognises the abundant assets in the incumbent CBN governor.
Benedict Okereke Obenox@hotmail.comkjhb,klòkjggkl.-.l
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