Soludo And The Critics

Anthony Ola

The title of this piece was informed by the rather unfortunate article I read in one of the dailies, in which a somewhat strange justification was made for the removal from office of the incumbent Central Bank Governor, Prof Chukwuma Soludo. In the article, one respondent claimed that Soludo should be sacked for deliberately devaluing the naira to satisfy the ambition of resurrecting the Biafran currency. I am still at a loss how a sensible person can make such allusion and a newspaper would go ahead and publish it. Something is definitely amiss. Whatever misgivings people may have against the said public official, this latest smear campaign is deplorable and in bad taste. It is utterly condemnable and we should all rise in unison to rail against tribal jingoists from fanning the embers of ethnic hatred.

The attack on the CBN Governor is becoming strident in recent times now that his tenure is ending in May this year. In their desperation, those angling for the coveted job feel the only way the savvy professor can be prevented from getting another shot was to embark on a campaign of calumny, since he is comparatively far better than those that have been touted so far. However, it did not occur to some of us that in this attempt, all is fair in war.

So, how come the same Soludo was appointed by the United Nations to serve on the Committee charged with finding solutions to the global economic meltdown if he does not have the pedigree? Are we saying the UN made a terrible mistake with his appointment since the only cause he might be championing is a myopic one? These are the issues that should agitate our minds as Nigerians irrespective of anti-Soludo sentiments being expressed by those casting aspersions on his person.

Soludo’s appointment by the global body is an eloquent testimony of his recognition as an economist of repute, who practically demonstrated his understanding of the subject in his capacity as the apex Bank Governor. The world requires new ideas and fresh thinking on global economic issues and that was why Soludo’s name popped up. If the young man had not conceptualized new ideas on how to position Nigerian Banks, maybe the evil wish of those who are not happy that Nigerian banks have not yet been consumed by the global scourge would have come true.

Have we all forgotten so soon the banking consolidation exercise of 2004? Do we remember that just some five years back, only one or two Nigerian deposit money banks had shareholder funds in excess of =N=2 billion naira. When Soludo literally decreed in 2004 that the banks should recapitalize from =N=2billion to =N=25 billion, some of us were among those who felt the time span of 18 months was rather too short and draconian. Thanks to his foresight, Nigerian banks are not only strutting the world stage, they are still in business where the likes of legendary Lehman Brothers are down and out. Before the exercise, none of the banks was in the top 1000 banks in the world. Today, three of them are listed by Forbes among the top 2000 biggest companies in the whole world. For good measure, Nigerian banks are now hoisting our flags in over 20 African countries and five western countries.

Our memories are so short we do not remember the money shops of yesteryears that were mere extensions of family businesses. We have forgotten so easily how some of our compatriots were wary of banks that they preferred to put their money under their mattresses. Worse, the total capitalization of the so called 89 banks put together was not up to that of the fourth largest bank in South Africa. From available figures, shareholders funds is now in excess of =N=2.8 trillion, a far cry from the mere =N=291 billion five years ago.

But, we can all pretend to suffer from collective amnesia. We can safely ignore the fact that it was the banking consolidation exercise initiated by Soludo that somewhat staved off what could have been a catastrophe. With the global financial meltdown, the money shops would have been swept off by the gale and we might have ended up like Ireland that lost all its banks to the crisis. So, how would our fragile economy has fared?

The answer is what our expert tried to paint in ethnic configuration to satisfy ignoble ends. With the global economic downturn, it should be clear to discernible minds that primary commodities exporting countries are in for shocks. The situation becomes precarious for mono-cultural economies such as Nigeria that are dependent on crude oil for almost a significant proportion of their earnings. Besides the collapse of oil prices, the global recession also forced institutional investors to bail out from our economy, thereby constricting further foreign exchange avenues. With this scenario, what should be the appropriate response?

One of our so called business chieftains recommended the printing of more naira notes as if the problem was just that simplistic. If it were so, then no country would be poor when more currencies can easily be printed. Need we remind ourselves of Zimbabwe with the highest inflation rate in the whole world? For emphasis, if confronted by dwindling foreign exchange inflow and lower commodity prices, what should be the strategic response?

The first thing we need to note is the structural nature of Nigeria’s economy which is predisposed towards foreign consumption and few manufacturing export. That means considerable amount of forex goes to importing those junk that we love so much at the expense of local manufactures. With the global recession, imports are cheaper, and no nation would fling its doors wide-open without dire consequences on its revenue. So, the choice lies between import controls or exchange rate adjustment to reflect market dynamics. Perhaps, we have also forgotten the era of imports licensing with the attendant corruption after the oil price shock of 1982. Do we remember the austerity measures of that period with massive lay-off of civil servants and long queues for the few available goods aptly tagged essenco?

These reminders are necessary for us to understand the imperative of market dynamics that led to the depreciation of the naira recently and to also debunk the notion that the exercise was done to reintroduce the Biafran currency. If the CBN had not effected the adjustment, maybe the foreign reserves would have been wiped out by now. The adjustment is a major requirement for keeping the economy internally and externally on an even keel. Those advocating direct fixing of the exchange rate are also living in the past. Maybe, we should try fixing it and see what would happen to the reserves. The consequences would be so dire and in a matter of days the reserves would be completely drawn down and the exchange rate would then adjust in a more drastic form. Is it not better to preserve the reserves and ensure that the country continues to meet its legitimate obligations at stable prices over a considerable period?

We need to be wary of all manner of experts who proffer solutions capable of causing disaffection. No matter what anybody has to the contrary, Soludo’s name would forever remain indelible in the annals of Nigeria’s economy for his breath of vision and courage.

Ola is an Abuja based analyst.