Okonjo-Iweala's Response To Charles Soludo's “Buhari Vs Jonathan: Beyond the Election

For anyone who has not read Professor
Charles Soludo’s article in the Vanguard
(online version) on January 25 2015, I
would encourage them to do so. It is
littered with abusive and unbecoming language.
It shows how an embittered loser in the
Nigerian political space can get so derailed that
they commit intellectual harakiri by deliberately
misquoting economic facts and maliciously
turning statistics on their head to justify a
hatchet job. We hope all the intellectuals in the
international circles in which Professor Soludo
has told us he flies around in will read what a
Professor of Economics has chosen to do with
his intellect.
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, 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 traveling 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 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 rapid impacting all oil
producing nations significantly. Nigeria is no
exception and appropriate fiscal and monetary
policy measures are being put in place to
manage this situation.
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 bdp, 2.22 million bpd, and 2.21
million bpd in 2005, 2006, and 2007
respectively but has declined now to between
1.95 and 2.21 million bdp due to vandalism of
the pipelines and the resulting “shut-ins” to fix
the problem. It is true that had production
been at the previous levels and had there been
willingness to save we would have had more
money in the ECA and also in the reserves. But
the overriding setback to savings is that the
State Governors felt it was their constitutional
right to share the money. Please recall that
even as we speak the States have taken the
Federal Government to the Supreme Court on
this issue
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 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 rates
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
such an article. If Soludo wants to regain
respect, he should return to the path of
professionalism. He certainly needs something
to improve his image from that of someone
whose sojourn into National Economic
Management ended in disaster for the banking
sector, his sojourn in politics, ended in
overwhelming rejection by the electorate, and
more recently, his sojourn abroad, has put him
out of touch with the reality of the Nigerian
economy.
Paul C Nwabuikwu
Special Adviser to the Coordinating Minister for
the Economy and Minister of Finance