Buhari vs Jonathan: Beyond the Election, by Charles Soludo
I need to preface this article with a few clarifications. I have taken a long sabbatical leave from partisan politics, and it is real fun watching the drama from the balcony. Having had my own share of public service (I do not need a job from government), I now devote my time and energy in pursuit of other passions, especially abroad.
A few days ago, I read an article in Thisday entitled “Where is Charles Soludo?”, and my answer is that I am still there, only that I have been too busy with extensive international travels to participate in or comment on our national politics and economy. But I occasionally follow events at home. Since the survival and prosperity of Nigeria are at stake, the least some of us (albeit, non-partisan) must do is to engage in public debate. As the elections approach, I owe a duty to share some of my concerns.
In September 2010, I wrote a piece entitled “2011 Elections: Let the Real Debate Begin” and published by Thisday. I understand the Federal Executive Council discussed it, and the Minister of Information rained personal attacks on me during the press briefing. I noted more than six newspaper editorials in support of the issues we raised.
Beside other issues we raised, our main thesis was that the macro economy was dangerously adrift, with little self-insurance mechanisms (and a prediction that if oil prices fell below $40, many state governments would not be able to pay salaries). I gave a subtle hint at easy money and exchange rate depreciations because I did not want to panic the market with a strong statement. Sadly, on the eve of the next elections, literally everything we hinted at has happened. Part of my motivation for this article is that five years after, the real debate is still not happening.
The presidential election next month will be won by either Buhari or Jonathan. For either, it is likely to be a pyrrhic victory. None of them will be able to deliver on the fantastic promises being made on the economy, and if oil prices remain below $60, I see very difficult months ahead, with possible heady collisions with labour, civil society, and indeed the citizenry. To be sure, the presidential election will not be decided by the quality of ‘issues’ or promises canvassed by the candidates.
The debates won’t also change much (except if there is a major gaffe by either candidate like Tofa did in the debate with Abiola). My take is that more than 95% of the likely voters have pretty much made up their minds based largely on other considerations. A few of us remain undecided.
During my brief visit to Nigeria, I watched some of the campaign rallies on television. The tragedy of the current electioneering campaigns is that both parties are missing the golden opportunity to sensitize the citizenry about the enormous challenges ahead and hence mobilize them for the inevitable sacrifices they would be called upon to make soon. Each is promising an El-Dorado.
Let me admit that the two main parties talk around the major development challenges—corruption, insecurity, economy (unemployment/poverty, power, infrastructure, etc) health, education, etc. However, it is my considered view that none of them has any credible agenda to deal with the issues, especially within the context of the evolving global economy and Nigeria’s broken public finance.
The UK Conservative Party’s manifesto for the last election proudly announced that all its programmes were fully costed and were therefore implementable. Neither APC nor PDP can make a similar claim. A plan without the dollar or Naira signs to it is nothing but a wish-list. They are not telling us how much each of their promises will cost and where they will get the money. None talks about the broken or near bankrupt public finance and the strategy to fix it.
Goodluck-Jonathan-new
In response to the question of where the money will come from, I heard one of the politicians say that the problem of Nigeria was not money but the management of resources. This is half-truth. The problem is both. No matter how efficient a father (with a monthly salary of N50,000) is at managing the family resources, I cannot see how he could deliver on a promise to buy a brand new Peugeot 406 for each of his three children in a year.
Even with all the loopholes and waste closed, with increased efficiency per dollar spent, there is still a binding budget constraint. To deliver an efficient national transport infrastructure alone will still cost tens of billions of dollars per annum even by corruption-free, cost-effective means. Did I hear that APC promises a welfare system that will pay between N5,000 and N10,000 per month to the poorest 25 million Nigerians? Just this programme alone will cost between N1.5 and N3 trillion per annum.
Add to this the cost of free primary education plus free meal (to be funded by the federal budget or would it force non-APC state governments to implement the same?), plus some millions of public housing, etc. I have tried to cost some of the promises by both the APC and the PDP, given alternative scenarios for public finance and the numbers don’t add up. Nigerians would be glad to know how both parties would fund their programmes.
Do they intend to accentuate the huge public debt, or raise taxes on the soon to-be-beleaguered private businesses, or massively devalue the naira to rake in baskets of naira from the dwindling oil revenue, or embark on huge fiscal retrenchment with the sack of labour and abandonment of projects, and which areas of waste do they intend to close and how much do they estimate to rake in from them, etc?
I remember that Chief Obafemi Awolowo was asked similar questions in 1978 and 1979 about his promises of free education and free medical services. Even as a teenager, I was impressed by how he reeled out figures about the amounts he would save from various ‘waste’ including the tea/coffee served in government offices. The point is that at least he did his homework and had his numbers and I give credit to his team.
Some 36 years later, the quality of political debate and discourse seems to border on the pedestrian. From the quality of its team, I did not expect much from the current government, but I must confess that I expected APC as a party aspiring to take over from PDP to come up with a knock-out punch. Evidently, from what we have read from the various versions of its manifesto as well as the depth of promises being made, it does not seem that it has a better offer.
Let me digress a bit to refresh our memory on where we are, and thus provide the context in which to evaluate the promises being made to us. Recall that the key word of the 2015 budget is ‘austerity’. Austerity? This is just within a few months of the fall in oil prices. History repeats itself in a very cruel way, as this was exactly what happened under the Shehu Shagari administration.
Under the Shagari government, oil price reached its highest in 1980/81. During the same period, Nigeria ratcheted up its consumption and all tiers of government were in competition as to which would out-borrow the other. Huge public debt was the consequence. When oil prices crashed in early 1982, the National Assembly then passed the Economic Stabilization (Austerity Measures) Act in one day— going through the first, second, and third readings the same day.
The austerity measures included the rationing of ‘essential commodities’ and most states owed salary arrears. Corruption was said to be pervasive, and as Sani Abacha said in that famous coup speech, ‘unemployment has reached unacceptable proportions and our hospitals have become mere consulting clinics’.
General Muhammadu Buhari/Tunde Idiagbon regime made the fight against corruption and restoration of discipline the cardinal point of their administration which lasted for 20 months. I am not sure they had a credible plan to get the economy out of the doldrums (although it must be admitted that poverty incidence in Nigeria as of 1985 when they left office was a just46%— according to the Federal Office of Statistics).
We have come full circle. If the experience under Shagari could be excused as an unexpected shock, what Nigeria is going through now is a consequence of our deliberate wrong choices. We have always known that the unprecedented oil boom (in both price and quantity—despite oil theft) of the last six years is temporary but the government chose to treat it as a permanent shock. The parallels with the Shagari regime are troubling.
First, at the time of oil boom, Nigeria again went on a consumption spree such that the budgets of the last five years can best be described as ‘consumption budgets’, with new borrowing by the federal government exceeding the actual expenditure on critical infrastructure. Second, not one penny was added to the stock of foreign reserves at a period Nigeria earned hundreds of billions from oil.
For comparisons, President Obasanjo met about $5 billion in foreign reserves, and the average monthly oil price for the 72 months he was in office was $38, and yet he left $43 billion in foreign reserves after paying $12 billion to write-off Nigeria’s external debt. In the last five years, the average monthly oil price has been over $100, and the quantity also higher but our foreign reserves have been declining and exchange rate depreciating.
I note that when I assumed office as Governor of CBN, the stock of foreign reserves was $10 billion. The average monthly oil price during my 60 months in office was $59, but foreign reserve reached the all-time peak of $62 billion (and despite paying $12 billion for external debt, and losing over $15 billion during the unprecedented global financial and economic crisis) I left behind $45 billion.
Recall also that our exchange rate continuously appreciated during this period and was at N117 to the dollar before the global crisis and we deliberately allowed it to depreciate in order to preserve our reserves. My calculation is that if the economy was better managed, our foreign reserves should have been between $102 –$118 billion and exchange rate around N112 before the fall in oil prices. As of now, the reserves should be around $90 billion and exchange rate no higher than N125 per dollar.
Third, the rate of public debt accumulation at a time of unprecedented boom had no parallel in the world. While the Obasanjo administration bought and enlarged the policy space for Nigeria, the current government has sold and constricted it. What debt relief did for Nigeria was to liberate Nigerian policymakers from the intrusive conditionalities of the creditors and thereby truly allowing Nigeria independence in its public policy.
How have we used the independence? Through our own choices, we have yet again tied the hands of future policymakers. This time, the debt is not necessarily to foreign creditor institutions/governments which are organized under the Paris club but largely to private agents which is even more volatile. We call it domestic debt. But if one carefully unpacks the bond portfolio, what percentage of it is held by foreign private agents? And I understand the Government had removed the speed bumps we kept to slow the speed of capital flight, and someone is sweating to explain the gyrations in foreign reserves. I am just smiling!
In sum, the mismanagement of our economy has brought us once more to the brink. Government officials rely on the artificial construct of debt to GDP ratio to tell us we can borrow as much as we want. That is nonsense, especially for an economy with a mono but highly volatile source of revenue and forex earnings. The chicken will soon come home to roost.
Today, the combined domestic and external debt of the Federal Government is in excess of $40 billion. Add to this the fact that abandoned capital projects littered all over the country amount to over $50 billion. No word yet on other huge contingent liabilities. If oil prices continue to fall, I bet that Nigeria will soon have a heavy debt burden even with low debt to GDP ratio.
Furthermore, given the current and capital account regime, it is evident that Nigeria does not have enough foreign reserves to adequately cover for imports plus short term liabilities. In essence, we are approaching the classic of what the Shagari government faced, and no wonder the hasty introduction of ‘austerity measures’ again.
Fourth, poverty incidence and unemployment are also simultaneously at all-time high levels. According to the NBS, poverty incidence grew to 69% in 2010 and projected to be 71% in 2011, with unemployment at 24%. This is the worst record in Nigeria’s history, and the paradox is that this happened during the unprecedented oil boom.
*Jonathan and Buhari
*Jonathan and Buhari
One theme I picked up listening to the campaign rallies as well as to some of the propagandists is the confusion about measuring government “performance”. Most people seem to confuse ‘inputs’, or ‘processes’ with output. Earlier this month, I had a dinner with a group of friends (14 of us) and we were chit-chatting about Nigeria. One of us, an associate of President Jonathan veered off to repeat a propaganda mantra that Jonathan had outperformed his predecessors.
He also reminded us that Jonathan re-based the GDP and that Nigeria is now the biggest economy in Africa; etc. It was fun listening to the response by others. In sum, the group agreed that the President had ‘outperformed’ his predecessors except that it is in reverse order.
First, my friend was educated that re-basing the GDP is no achievement: it is a routine statistical exercise, and depending on the base year that you choose, you get a different GDP figure. Re-basing the GDP has nothing to do with government policy. Besides, as naira-dollar exchange rate continues to depreciate, the GDP in current dollars will also shrink considerably soon.
We were reminded of Jonathan’s agricultural ‘revolution’. But someone cut in and noted that for all the propaganda, the growth rate of the agricultural sector in the last five years still remains far below the performance under Obasanjo. One of us reminded him that no other president had presided over the slaughter of about 15,000 people by insurgents in a peacetime; no other president earned up to 50% of the amount of resources the current government earned from oil and yet with very little outcomes; no other president had the rate of borrowing; none had significant forex earnings and yet did not add one penny to foreign reserves but losing international reserves at a time of boom; no other president had a depreciating exchange rate at a time of export boom; at no time in Nigeria’s history has poverty reached 71% (even under Abacha, it was 67 -70%); and under no other president did unemployment reach 24%. Surely, these are unprecedented records and he surely ‘outperformed’ his predecessors! What a satire!
One of those present took the satire to some level by comparing Jonathan to the ‘performance’ of the former Governor of Anambra, Peter Obi. He noted that while Obi gloated about ‘savings’, there is no signature project to remember his regime except that his regime took the first position among all states in Nigeria in the democratization of poverty—- mass impoverishment of the people of Anambra. According to the National Bureau of Statistics, poverty rose under his watch in Anambra from 20% in 2004 (lowest in Nigeria then) to 68% in 2010 (a 238% deterioration!).
Our friend likened it to a father who had no idea of what to do with his resources and was celebrating his fat bank account while his children were dying of kwashiorkor. He pointed out that since it is the likes of Peter Obi who are the advisers to Jonathan on how to manage the economy (thereby confusing micromanagement which you do as a trader with macro governance) it is little wonder that poverty is fast becoming another name for Nigeria. It was a very hilarious evening.
My advice to President Jonathan and his handlers is to stop wasting their time trying to campaign on his job record. Those who have decided to vote for him will not do so because he has taken Nigeria to the moon. His record on the economy is a clear ‘F’ grade. As one reviews the laundry list of micro interventions the government calls its achievements, one wonders whether such list is all that the government could deliver with an unprecedented oil boom and an unprecedented public debt accumulation.
I can clearly see why reasonable people are worried. Everywhere else in the world, government performance on the economy is measured by some outcome variables such as: income (GDP growth rate), stability of prices (inflation and exchange rate), unemployment rate, poverty rate, etc. On all these scores, this government has performed worse than its immediate predecessor— Obasanjo regime. If we appropriately adjust for oil income and debt, then this government is the worst in our history on the economy. All statistics are from the National Bureau of Statistics.
Despite presiding over the biggest oil boom in our history, it has not added one percentage point to the growth rate of GDP compared to the Obasanjo regime especially the 2003- 07 period. Obasanjo met GDP growth rate at 2% but averaged 7% within 2003- 07. The current government has been stuck at 6% despite an unprecedented oil boom. Income (GDP) growth has actually performed worse, and poverty escalated.
This is the only government in our history where rapidly increasing government expenditure was associated with increasing poverty. The director general of NBS stated in his written press conference address in 2011 that about 112 million Nigerians were living in poverty. Is this the record to defend? Obama had a tough time in his re-election in 2012 because unemployment reached 8%. Here, unemployment is at a record 24% and poverty at an all-time 71% but people are prancing around, gloating about ‘performance’.
As I write, the Naira exchange rate to the dollar is $210 at the parallel market. What a historic performance! Please save your breathe and save us the embarrassment. The President promised Nigeria nothing in the last election and we did not get value for money. He should this time around present us with his plan for the future, and focus on how he would redeem himself in the second term—if he wins!
Sadly the government’s economic team is very weak, dominated by self-interested and self-conflicted group of traders and businessmen, and so-called economic team meetings have been nothing but showbiz time. The very people government exists to regulate have seized the levers of government as policymakers and most government institutions have largely been “privatized” to them.
Mention any major government department or agency and someone will tell you whom it has been ‘allocated’ to, and the person subsequently nominates his minion to occupy the seat. What do you then expect? The economy seems to be on auto pilot, with confusion as to who is in charge, and government largely as a constraint. There are no big ideas, and it is difficult to see where economic policy is headed to.
My thesis is that the Nigerian economy, if properly managed, should have been growing at an annual rate of about 12% given the oil boom, and poverty and unemployment should have fallen dramatically over the last five years. This is topic for another day.
So far, the Government’s response to the self-inflicted crisis is, at best, laughable. They blame external shocks as if we did not expect them and say nothing about the terrible policy choices they made. The National Assembly had described the 2015 budget as unrealistic. The fiscal adjustments proposed in the 2015 budget simply play to the gallery and just to pander to our emotions.
For a $540 billion economy, the so-called luxury tax amounts to zero per cent of GDP. If the current trend continues, private businesses will come under a heavy crunch soon. Having put economics on its head during the boom time, the Government now proposes to increase taxes during a prospective downturn and impose austerity measures. Unbelievable!
Fortuitously, just as he succeeded Shagari when Nigeria faced similar situations, Buhari is once more seeking to lead Nigeria. But times have changed, and Nigeria is largely different. First, this is a democracy and dealing with corruption must happen within the ambit of the rule of law and due process. Getting things done in a democracy requires complicated bargaining, especially where the legislature, labour, the media, and civil society have become strong and entrenched.
Second, the size, structure and institutions of the economy have fundamentally altered. The market economy, especially the capital market and foreign exchange market, impose binding constraints and discipline on any regime. Third, dealing with most of the other issues— insecurity, unemployment/poverty, infrastructure, health, education, etc, require increased, smarter, and more efficient spending. Increased spending when the economy is on the reverse gear?
If oil prices remain between 40- 60 dollars over the next two years, the current policy regime guarantees that foreign reserves will continue the precipitous depletion with the attendant exchange rate depreciation, as well as a probable unsustainable escalation in debt accumulation, fiscal retrenchment or taxing the private sector with vengeance. The scenario does not look pretty.
The poor choices made by the current government have mortgaged the future, and the next government would have little room to manoeuvre and would inevitably undertake drastic but painful structural adjustments. Nigerians loathe the term ‘structural adjustment’. With falling real wages and depreciating currency, I can see any belated attempt by the government to deal with the bloated public sector pitching it against a feisty labour. I worry about regime stability in the coming months, and I do not envy the next team.
The seeming crisis is not destiny; it is self-imposed. However, we must see it as an opportunity to be seized to fundamentally restructure Nigeria’s political economy, including its fiscal federalism and mineral rights. The current system guarantees cycles of consumption loop and I cannot see sustainable long term prosperity without major systemic overhaul. The proposals at the national conference merely tinker at the margins.
In totality, the outcome of the national conference is to do more of the same, with minor amendments on the system of sharing and consumption rather than a fundamental overhaul of the system for productivity and prosperity. President Jonathan promises to implement the report of the national conference if he wins. I commend him for at least offering ‘something’, albeit, marginal in my view. I have not heard anything from the APC or Buhari regarding the national conference report or what kind of federalism they envisage for Nigeria.
In Nigeria’s recent history, two examples under the military and civilian governments demonstrate that where the political will exists, Nigeria has the capacity to overcome severe challenges. The first was under President Babangida. Not many Nigerians appreciate that given the near bankrupt state of Nigeria’s finances and requirements for debt resolution under the Paris Club, the country had little choice but to undertake the painful structural adjustment programme (SAP).
I want to state for the record that the foundation for the current market economy we operate in Nigeria was laid by that regime (liberalization of markets including market determined exchange rate, private sector-led economy including licensing of private banks and insurance, de-regulation, privatization of public enterprises under TCPC, etc). Just abolishing the import licensing regime was a fundamental policy revolution. Despite the criticisms, these policy thrusts have remained the pillars of our deepening market economy, and the economy recovered from almost negative growth rate to average 5.5% during the regime and poverty incidence at 42% in 1992.
Under our democratic experience, President Obasanjo inherited a bankrupt economy (with the lost decade of the 1990’s GDP growth rate of 2.2% and hence zero per capita income growth for the decade). His regime consolidated and deepened the market economy structures (consolidation of the banking system which is powering the emergence of a new but truly private sector-led economy and simultaneously led to a new awareness and boom in the capital market;
telecommunications revolution; new pension regime; debt relief which won for Nigeria policy independence from the World Bank and Paris Club; deepening of de-regulation and privatization including the unbundling of NEPA under PHCN for privatization; agricultural revolution that saw yearly growth rate of over 6% and remains unsurpassed ever since;
sound monetary and fiscal policy and growing foreign reserves that gave confidence to investors; establishment of the Africa Finance Corporation which is leading infrastructure finance in Africa; backward integration policy that saw the establishment and growth of Dangote cement and others; established ICPC and EFCC to fight corruption, etc).
The economy roared to average yearly growth of 7% between 2003 and 2007 (although average monthly oil price under his regime was $38), and poverty dropped from estimated 70% in1999 to 54% in 2004. Obasanjo was his own coordinating minister of the economy and chairman of the economic management team— which he chaired for 90 minutes every week. I met with him daily. In other words, he did not outsource economic management.
We expected that the next government after Obasanjo would take the economy to the next level. So far, we have had two great slogans: the 7-point agenda and currently, the transformation agenda. They remain empty slogans without content or direction.
Let me suggest that the fundamental challenge for the next government on the economy can be framed around the goal of creating twelve million jobs over the next four years to have a dent on unemployment and poverty. The challenge is to craft a development agenda to deliver this within the context of broken public finance, and an economy in which painful structural adjustments will be inevitable if current trends in oil prices continue. Most other programmes on corruption, security, power, infrastructure, etc, are expected to be instruments to achieve this objective.
So far, neither the APC nor the PDP has a credible programme for employment and poverty reduction. The APC promises to create 20,000 jobs per state in the first year, totalling a mere 720,000 jobs. This sounds like a quota system and for a country where the new entrants into the labour market per annum exceed two million.
If it was intended as a joke, APC must please get serious. On the other hand, President Jonathan targets two million jobs per annum but his strategy for doing so is a Job Board— another committee of sort. Sorry, Mr. President, a Job Board is not a strategy. The principal job Nigerians hired you to do for them is to create jobs for them too. You cannot outsource that job, Sir. Creating 3 million jobs per annum under the unfolding crisis would task our creativity and audacity to the limits.
I heard one politician argue that once we fix power, private sector would create jobs. Not necessarily! Well, this government claims to have added 1,700MW to the national grid and yet unemployment soars. Ask Greece, Spain, etc with power and infrastructure and yet with high unemployment. Structural dislocations play a key role. For example, currently in Nigeria, it is estimated that more than 60% of graduates of our educational system are unemployable.
You can understand why many of us are amused when the government celebrates that it has established twelve more glorified secondary schools as universities. I thought they would have told us how many Nigerian universities made it in the league of the best 200 universities in the world. That would have been an achievement. Surely, creating millions of jobs in this economy would, among other things, require ‘new money’ and extraordinary system of coordination among the three tiers of government plus the private sector.
Unfortunately, from what I read, the CBN is largely likely to be asleep at this time the country needs the most revolutionary finance. This is a topic for another day. Only the President can lead this effort. Moreover, we are waiting for the two parties/candidates to spell out HOW they will create jobs, whether it is the 20,000 jobs per state by APC or 2 million per annum by President Jonathan. Let us know how you arrived at the figures. Whichever of the two that is declared winner will have his job cut out for him, and I expect him to declare a national emergency on job creation.
Surprisingly, none of the parties/candidates has any grand vision about African economic integration, led by Nigeria. There is no programme on how to make the naira the de facto currency of ECOWAS or the international financial centre that can attract more than $100 billion per annum.
Where is the strategy for orchestrating the revolutionary finance to power the economy during this downturn? For President Jonathan, I find it shocking that the most important initiative of his government to secure the future of the economy by Nigeria refusing to sign the ruinous Economic Partnership Agreement (EPA) with the European Union is not even being mentioned. President Obasanjo saved Nigeria from the potential ruin of an ECOWAS single currency while to his credit Jonathan safeguarded our industrial sector/economy by refusing to sign the EPA. Or does the government not understand the import of that? It will be interesting to know the APC’s strategy for exploiting strategic alliances within Africa, China, and the world for Nigeria’s prosperity.
If Buhari wins, he will ride on the populist wind for “change”. Most people I have spoken to who have decided to vote for Buhari do not necessarily know the specifics of what he would offer or how Nigeria would be different under him. I asked my driver, Usman, whom he would vote for President.
He responded: “If they no rig the election, na Buhari everybody go vote for”. I asked him why, and his next response sums it: “The man dey honest. In short, people just want to see another face for that villa”. But if he wins, the honeymoon will be brief and the pressure will be immense to magically deliver a ‘new Nigeria’ with no corruption, no boko haram or insecurity, jobs for everyone, no poverty, infrastructure and power in abundance, etc.
As a first point, Buhari and his team must realize that they do not yet have a coherent, credible agenda that is consistent with the fundamentals of the economy currently. The APC manifesto contains some good principles and wish-lists, but as a blue print for Nigeria’s security and prosperity, it is largely hollow. The numbers do not add up. Thus, his first job is to present a credible development agenda to Nigerians.
The second key challenge for Buhari and his team will be to transit and transform from a group of what I largely refer to as aggrieved people’s congregation to build a true political party with a soul from the patchwork of political associations. It is surely easier to oppose than to govern. This should not worry us much. After all, even the PDP which has been in power for 16 years is still an assembly of people held together by what I refer to as dining table politics.
I am not sure how many members can tell you what their party stands for or its mission and vision for Nigeria. The third but more difficult agenda is cobbling together a truly ‘progressive team’ that will begin to pick the pieces. The lesson of history is that the best leaders have been the ones who went beyond their narrow provincial enclaves to recruit talents and mobilize capacities for national transformation.
In Nigeria’s history, the two presidents who made the most fundamental transformation of the economy, Babangida and Obasanjo, were exceptional in the quality of the teams they put together. I therefore pray that Buhari will be magnanimous in victory – if he wins—to put together a ‘team Nigeria’ for the rescue mission.
If Jonathan wins, then God must have been magnanimous to give him a second chance to redeem himself. Most people I know who support Jonathan do so either out of self-interest or fear of the unknown. As a friend summed it: the devil you know is better than the angel you do not know. One person assured me that we would see a ‘different Jonathan’ if he wins as he has been rattled by the harsh judgment of history on his presidency so far. I just pray that he is right. In that case, I would just draw the President’s attention to two issues:
First, beside the coterie of clowns who literally make a living with the sing-song of transformation agenda, President Jonathan must know that it remains an empty slogan. His greatest challenge is how to save himself from the stranglehold of his largely provincial palace jesters who tell him he has done better than God, and seek out ‘enemies’ and friends who can help him write his name in history. Propaganda won’t do it.
Second, Jonathan must claw back his powers as President of Nigeria. He largely outsourced them, and must now roll his sleeves for a new beginning. I take liberty to tell you this brutal truth: if you are not re-elected, there is little to remember your regime after the next few years.
On 7th January 2004, I made a special presentation to an expanded economic management team to set agenda for the new year (as chief economic adviser). The focus of my presentation was for us to identify seven iroko trees that would be the flagship markers for the administration as well as how to finance them. I use the same framework to evaluate your administration.
What I say to you, Mr. President, is that your record of performance so far is like a farmland filled with grasses. Yes, they are many but there is no tree, let alone any iroko tree, that stands out. Think about this. The beginning of wisdom for every President in his second term is to admit that he is racing against time to cement his legacy. So far, your report card is not looking great. You need a team of big and bold thinkers, as well as with excellent execution capacity. So far, it is not working!
Under the executive presidential system, Nigerians elected you to manage their economy. You cannot outsource that job. Our constitution envisages a federal coordination of the economy, and that function is performed by the National Economic Council (NEC) with Vice-President as chairman. Indeed, the constitution and other laws of Nigeria envisage the office of the VP as the coordinator on the economy.
All major economic institutions of the federal government are, by law, chaired by the Vice-President including the national planning (see functions of the national planning commission as coordinator of federal government economic and development programmes), debt management office, National Council on Privatization, etc. As chairman of National Planning (with Ministers of Finance, Agriculture, CBN governor, etc as members), the VP oversees the federal planning and coordination.
Then the Constitution mandates the VP as representative of the federal government to chair the NEC, with only CBN governor and state governors as members—to coordinate national economy between federal and states. No minister is a member of NEC. Many people do not understand the logic of the design of our constitution and the role of the VP. Of course, the buck stops on the desk of Mr. President. Only the President and VP have our mandate to govern us.
Every other person is an adviser/assistant. I bet that you will only appreciate this article AFTER you leave office. Now that you are in power, truth will only hurt! Be assured that those of us who are prepared to die for Nigeria will never spare you or anyone else this bitter truth.
Nigeria must survive and prosper beyond Buhari or Jonathan!
Chukwuma Charles Soludo, CFR, was former CBN Governor.
Okonjo-Iweala responded to Soludo as below:
Okonjo-Iweala attacks Soludo, says he’s Nigeria’s worst CBN governor ever
The Minister of Finance, Ngozi Okonjo-Iweala, on Wednesday took the former Central Bank of Nigeria, CBN, Chukwuma Soludo, to the cleaners over his criticism of President Goodluck Jonathan’s management of the country’s economy, saying his comments amounted to committing “intellectual hara-kiri”.
The Minister, who spoke through her Special Adviser on Media, Paul Nwabuikwu, accused Mr. Soludo of single-handedly mismanaging the country’s banking sector between May 2004 and May 2009 and plunging the country into “an incredible accumulation of liabilities that will cost tax payers about N5.67 trillion”.
Mrs. Okonjo-Iweala, apparently livid, described the former CBN governor as “an embittered loser in the Nigerian political space” who is “so derailed” to “commit intellectual harakiri by deliberately misquoting economic facts and maliciously turning statistics on their head to justify a hatchet job”.
“Soludo has shamelessly pandered to so many past leaders that Nigerians are asking one more time – what position is Soludo gunning for now?” she asked.
“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,” she added.
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.
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.
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.
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?
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.
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 (Asset Management Company of Nigeria), 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.
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.
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 (gross domestic product) 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
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 rapidly 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.
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.
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 barrels per day, bpd; 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 bpd 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.
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?
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?
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 incredible accumulation of liabilities that will cost tax payers about N5.67 trillion incredible accumulation of liabilities that will cost tax payers about N5.67 trillion incredible accumulation of liabilities that will cost tax payers about N5.67 trillion 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.
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
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?
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.
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.
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 arates for the first time in our nation’s history.
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.
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.
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.
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 asuch 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.
Soludo Responded to Okonjo-Iweala as below
Okonjo-Iweala ‘needs serious help’, says Soludo
Charles Soludo, former governor of the Central Bank of Nigeria (CBN), has criticised Ngozi Okonjo-Iweala, Nigeria’s minister of finance, over her response to his recent criticism of President Goodluck Jonathan’s administration, saying she “needs serious help”..
Soludo had alleged that the economy was in a terrible state, accusing the government of promoting inefficiency and encouraging corruption.
But Okonjo-Iweala dismissed his criticism, saying he was only trying to gain political relevance. She described him as the worst CBN governor in the history of the country.
“Soludo is an embittered loser in the Nigerian political space and he is so derailed to commit intellectual harakiri by deliberately misquoting economic facts and maliciously turning statistics on their head to justify a hatchet job,” Okonjo-Iweala had said in a response circulated by Paul Nwabuikwu, her special adviser on media.
“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.”
However, in a lengthy piece written on Sunday, Soludo maintained that he was standing by his words, lamenting that the government has proven itself to be intolerant of criticisms.
“As a concerned Nigerian, I have a duty to speak out again. Regrettably, you have taken it very personal,” he said.
“I am not bothered about the personal abuses: I actually expected worse. What name has the government not called President Obasanjo or any person who has dared to disagree with it of late? Anyone who disagrees with the government must either be ‘insane’ or have a ‘character’ deficiency or must be ‘looking for a job’ or ‘without honour’, or a ‘charlatan’.
“Some days ago, a former president was called ‘a motor park tout’ and ‘un-statesmanly’ just for disagreeing. This ‘how dare you criticize us’ mindset of the government is dangerous for our democracy.
“Yesterday, Sanusi alleged that $20 billion was missing and he was accused of gross financial mismanagement, recklessness and poor governance to the point of being the first governor of central bank to be suspended from office. Today, he is the good one; and for daring to award an “F” grade for our economic performance, Soludo has become the ‘worst’ and ‘without character’ or perhaps ‘looking for position’ (Lol!).
“In my view, there are three criteria for evaluating a public officer’s stewardship: the evaluation by his employer; the satisfaction of the public he served; and the hard facts of performance.
“As I will show on these three counts, I am convinced that I left a world record of public service, and a thousand Okonjo-Iwealas cannot re-write that history. I served Nigeria under two presidents (Obasanjo and Yar’Adua).
“In Nigeria’s history, no governor of the Central Bank has delivered 24 consecutive months of single digit inflation as I did until the advent of the unprecedented global crisis in 2008.”
Lashing at Okonjo-Iweala, Soludo described the current administration as insensitive to the plight of Nigerians.
“Part of my frustration is that five years after, everything I warned about has come to happen and we are conducting our campaigns as if we are not in crisis,”he said.
“You are brilliant Madam, but you need serious help.
“Having spent all your life in the World Bank bureaucracy largely in administration/operations, no one will blame you if your economics has become a bit rusty. There are firebrand Nigerians all over the world to draft to service. It is certainly embarrassing to Nigeria for you to be bothering World Bank economists to help you with most basic economic analysis.”
Compiled by Ndubuisi Anaenugwu of Good Governance Ministry for record purpose
