A Commentary on the Controversy

A Commentary on the Controversy between Mrs. Ezekwesili and Government Reputation Managers

Dr. Emmanuel Ojameruaye

On January 24^th, 2013, Mrs. Obiageli Ezekwesili, the former World Bank Vice President for Africa Region and former Minister of Education under President Obasanjo (OBJ), delivered a thought-provoking Convocation Lecture at her alma mater, the University of Nigeria, Nsukka, on the topic “The Wealth and Poverty of a Nation: Who will restore the dignity of Nigeria?” Unfortunately, the key messages of the lecture have been overshadowed by one sentence: “Furthermore, it is happening back to back with the squandering of the significant sum of $45 Billion in foreign reserve account and another $22Billion in the Excess Crude Account…that the Obasanjo administration handed over to the successor government in 2007”.

The reputation managers of the Jonathan (GEJ) administration wasted no time in firing back at what they perceived as an attack from an Amazon of the OBJ administration at a time of frosty relationship between OBJ and GEJ. In a statement issued three days after the lecture, the Minister of Information, Mr. Labaran Maku, stated that “The recent statements by Mrs. Obiageli Ezekwesili … betray a surprisingly limited understanding of government finances…The statement…that the governments of Presidents Musa Yar'adua (YA) and Goodluck Jonathan (GEJ) have squandered $67 billion in reserves …left by the Obasanjo Administration at the end of May 2007 is factually incorrect. At the end of May 2007, Nigeria's gross reserves stood at $43.13 billion - comprising the CBN's external reserves of $31.5 billion, $9.43 billion in the Excess Crude Account, and $2.18 billion in the Federal Government's savings… The figure of $67 billion alleged in her statement is therefore clearly fictitious”. He went further to question Mrs Ezekwesili’s record as Education Minister and concluded by painting a rosy picture of the macro-economic performance of the GEJ administration.

Two days later, in an oblique response to Mrs. Ezekwesili’s claim, the Minister of Finance, Dr. Ngozi Okonjo-Iweala, disclosed to the Meeting of the Convergence Council of Ministers and Governors of Central Banks of the West African Monetary Zone in Abuja that “on the back of greater efficiency in the management of our resources, our foreign reserves soared from US$32.6 billion at the end of 2011 to about US$44.6 billion now…the Excess Crude Account, balance has also improved from $4.57billion in August 2011 to about $9 billion now”. The same day, the Senior Special Assistant to the President Jonathan on Public Affairs, Dr Doyin Okupe addressed a press conference on the same issue and reiterated Mr. Maku’s earlier claim that Mrs. Ezekwesili lied about the amount of external reserves OBJ bequeathed to the Yar’Adua/Jonathan administration. Quoting from documents and statistics published by the CBN, he stated that “at no time did the nation’s external reserve rise up to $67 billion, let alone the government have such to misuse. He then called on Mrs. Ezekwesili “to disclose the source of her figures or retract her statement and apologise to the government and people of Nigeria” or else “she should be regarded by all as a wilfully perjured individual not worthy of any respect or recognition whatsoever.”

I simply cannot understand why the reputation managers of the GEJ administration decided to impugn the integrity of a woman who clearly belongs to the best and brightest of economic managers Nigeria has ever produced, and who has represented Nigeria well abroad as a Vice President of World Bank and a Director of Transparency International. In this article, I will examine the errors or mistakes of Mrs. Ezekwesili’s “offending sentence” and the unwarranted attacks by Messrs Maku and Okupe, the reputation managers of the GEJ administration. I would like to state upfront that there is nothing unusual about the errors or mistakes I will be discussing. They are common errors that professional economists make very often. The fact is that economists are not trained as “clinicians” as noted by Prof. Jeffery Sachs (2005).

For a start, it is important to point out that Mrs. Ezekwesili never used the figure $67 billion which is a “straw number” created by Messrs Maku and Okupe by adding the two numbers in Mrs. Ezekwesili’s sentence. Her phrase was “$45 Billion in foreign reserve account and another $22Billion in the Excess Crude Account”. She did not add both numbers. It appears that she thought that Nigeria’s excess crude account (ECA) is different or separate from its foreign (or external) reserve account (FRA). My guess is that not many economists know that Nigeria’s FRA is defined to include the ECA because the definition of Nigeria’s FRA is somehow weird and confusing. According to the CBN, “Nigeria’s external reserves comprise of three components namely, the federation, the federal government and the Central Bank of Nigeria portions. The Federation component consists of sterilized funds (unmonetized) held in the excess crude and PPT/Royalty accounts at the CBN belonging to the three tiers of government. This portion has not yet been monetized for sharing by the federating units. It is sometimes ignorantly referred to as the reserves of the country. The Federal Government component consists of funds belonging to some government agencies such as the NNPC… etc. The CBN portion consists of funds that have been monetized and shared…”. It is a fact that the ECA has been a subject of controversy and legal tussle between the federal government (FG) and the State Governors. Some economists believe that the ECA should not be a component of the FRA. Like many other economists, Mrs. Ezekwesili may have thought that the ECA is separate from the FRA. If this is the case, it does not in any way “betray a surprisingly limited understanding of government finances” as stated by Mr. Maku. I will not be surprised if neither Mr. Maku nor Dr. Okupe was aware of the difference between the FRA and the ECA before this controversy. If Mrs Ezekwesili was aware that that the ECA is part of the FRA, she would have said “$45 Billion in foreign reserve account including $22Billion in the Excess Crude Account”. By treating the ECA as separate from the FRA, she committed an error of “double counting” which is not uncommon among professional economists and in public policy.

Mrs. Ezekewsili’s second error is one of approximation and/or data source. From the CBN data quoted by Mr. Maku and paraded by Dr. Okupe, we know that the level of the FRA as of the time OBJ left office was in fact $43.13 billion, including $9.43 billion in the ECA, as against the sum of $45 billion and $20 billion, respectively, alleged by Mrs. Ezekwesili. Clearly, the difference between $45 billion and $43.13 billion for the FRA is not statistically significant but the difference between $20 billion and $9.43 billion for the ECA is significant. The likely explanation of the differences between Mrs Ezekwesili’s numbers and those of the CBN could be due to the fact that she may have obtained her figures from non-CBN sources or from past “provisional” CBN statistics which are different from actuals. However, I do not think she needs to disclose her sources or apologise as Dr. Okupe has demanded. Most researchers know that there are many government official publications that contain wrong or inaccurate data, and nobody has called on the publishers to apologise. With regards to the ECA data, it must be pointed out that there have been issues of accountability and transparency with that account and data series.

Mrs Ezekwesili’s third error or mistake is the use of the word “squandering”. The word appears is inappropriate in the offending sentence, and she clearly misspoke. While some funds in the FRA bequeathed by OBJ to the YA/GEJ administration may not have been spent in a rational manner, not all of it was squandered because some of the funds may have been used rationally. The way Mrs. Ezekwesili framed her statement gives the impression that the YA/GEJ administration reduced the FRA and FCA to zero but we know that there was never a time when these accounts were zero since May 2007. In fact, the FRA reached its highest level ever ($62.1 billion) in September 2008 and the average monthly level has remained relatively high since 2007 thanks to higher prices of crude oil and higher crude oil production levels than under the OBJ administration. The average monthly level of the FRA increased from $5.31 billion in 1999 to $8.59 billion in 2003, then to $45.39 billion in 2007, $53.47 billion in 2008. Thereafter it declined to $44.7 billion in 2009, $37.36 billion in 2010, $32.58 in 2011 and stood at $43.83 as of December 2012 – almost the same level as of May 2007.

Mrs. Ezekwesili fourth mistake was the use of a decline in the level of FRA as an indicator of profligacy. FRA is a “stock variable” and its level is determined by many short-term and volatile factors, especially the price of crude oil and output levels. I do not think “profligacy” or “squandermania” is a strong explanatory variable for the monthly or annual fluctuations in the level of the FRA. I think she should have used a “flow variable” such as oil revenue received over a period of time, recurrent expenditure, expenditure of the national assembly, presidency, oil subsidy and other non-productive expenditure as a percentage of total expenditure. In order to determine whether funds were “squandered”, it is important to examine the spending details and results of the spending and then pin-point the exact amount that was “squandered” and on what. However, if you take a close look at the FG budget details and actual spending, it is safe to say that at least 30% of FG spending qualifies as “squandering” as evidenced by the substantial overpayments for fuel subsidy, inflated contracts, the bloated federal executive, the excessive cost of government, wasteful and unproductive expenditures such as the N14 billion for the construction of the Vice President’s house, N2.2 billion for the construction of a banquet hall in the presidential villa, the reported GEJ’s 22 overseas trips in 2012 that gulped N3.3 billion, the N4 billion for Africa First Ladies House in Abuja and a host of similar expenses. Having gone through the FG budget details published on the FMF website, I have no doubt that there are a host of spurious items that can be eliminated or reduced drastically without affecting the performance of government and its agencies.

Mrs. Ezekwesili fifth mistake was that her statement implied that she was comparing OBJ’s performance in economic management with that of Yar’Adua and GEJ. To be fair, if one looks at the context of the offending statement, it is clear that her aim was not to compare the three or two administrations. Her aim was to show that Nigeria has always failed to take advantage of the opportunities offered by commodity boom cycles to transform the economy – an irrefutable fact. Even the two OBJ administrations (1976-1979 and 1999-2007) failed on this score! The sentence preceding the offending statement reads as follows: “I have known at least five cycles of commodity booms that offered us rare opportunities to use revenues generated from oil to transform our economy. Sadly, each cycle ended up sliding us farther down the productivity ladder. The present cycle of boom of the 2010s is however much more vexing than the other four that happened in the 70s, 80s, 90s and 2000s. This is because we are still caught up in it even as I speak today and it is more egregious than the other periods in revealing that we learned absolutely nothing from the previous massive failures” No one can deny this fact. Perhaps, Mrs. Ezekwesili would have framed the next sentence in a way that would not have given the impression that she was trying to compare OBJ and GEJ. Unfortunately, after the offending sentence, she stated that “Six years after the administration I served handed over such humongous national wealth to another one; most Nigerians but especially the poor continue to suffer the effects of failing public health and education systems as well as decrepit infrastructure and battered institutions. One cannot but ask, what exactly does Nigeria seek to symbolize and convey with this level of brazen misappropriation of public resources? Where did all that money go? This could be interpreted as a comparison of both administrations and a castigation of the GEJ administration. If indeed her intention was to compare both administrations – and I see nothing wrong with that - she should have used some “flow variables” as I indicated previously. It may be too early to compare the OBJ administration with that of GEJ since the latter has about five more years to equate OBJ’s eight-year rule.

Having looked at the offending statement of Mrs. Ezekwesili, it is only fair to look at the mistakes of Messrs Maku and Okupe. First, their reaction was appalling, “unstatesmanly” and disproportionate to the error/mistakes of Mrs. Ezekwesili’s offending sentence. This was a situation where “silence is golden”. What point were they trying to make? To prove that the GEJ administration is not guilty of profligacy or “squandermania”? As I write, pictures of Nigeria women protesting against the N4billion First Ladies Mission House as a “wasteful allocation” have flooded the internet for the world to see. Ironically, the reaction of Messrs Maku and Okupe has attracted more attention to the profligacy of not only the GEJ administration but also those of the state and local governments, which is good!

Secondly, Messrs Maku and Okupe focused on only one errant sentence and ignored its context as well the messages and unassailable truths of the lecture. In fact, one can say that they were intellectually dishonest. No person who reads the entire lecture will conclude that it was aimed at discrediting the current administration or comparing it that of OBJ under which Mrs. Ezekwesili served. She clearly stated the purpose of her lecture in the penultimate paragraph is a very poetic and inspiring manner, by stating that “I have spoken to you today to stir up your collective effective angst at the indignity of your inheritance. If I have succeeded in raising your determination to free our nation from the trap of oil, then my coming is worthy. If I have succeeded in helping you see how continuous education not more extraction of oil will help you outperform and take Nigeria up the economic development ladder, then my coming worthy... If I have deposited in you a deep seethed contempt for poor governance, then my coming is worthy. … Above all, if I have succeeded in getting you motivated and empowered enough to walk out of this hall seeing ready to walk and work as a part of the Turning Point Generation that courageously dares to restore the dignity of Nigeria then is my BEING truly worth it!”. No one who reads the entire the lecture can say that she did not focus on this purpose, even if in doing so she stepped on the toes of the current and past administrations.

In conclusion, the reputation managers of the GEJ administration should learn to be tolerant of criticisms, especially from professionals like Mrs. Ezekwesili, even if they see them as opponents. More importantly, our governments and their representatives must develop a capacity to listen to, and take criticisms in good faith.