Vunderkind
Social Member
Former governor of Central Bank of Nigeria, Chukwuma Charles Soludo, has broken his self-imposed political silence and has written an extensive commentary/critique of Nigeria with a focus to the long-term implications ahead of the elections.
"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," he wrote.
"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."
Commenting on Nigeria's foreign reserves, he wrote: "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."
On Nigeria's so-called agricultural leaps: "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."
"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," he wrote.
"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."
Commenting on Nigeria's foreign reserves, he wrote: "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."
On Nigeria's so-called agricultural leaps: "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."