Vunderkind
Social Member
Nigeria survived the global crisis because of this, and it is the banking sector that has largely been powering the economic growth you claim (compare banks trillions of naira credit for investments in the productive sector with your government’s miserable expenditure on critical infrastructure and investment; much of your borrowing – bonds – is from the banks). Your privatization of power sector, several PPP projects on infrastructure, etc, are now possible because of the mega banks. Today, Nigerian banks syndicate multi-billion dollar loans— unthinkable before. Madam, if the consolidation was ‘mismanaged’, there would not have been any bank to start with in the aftermath of the global crisis— as President Yar’adua correctly pointed out. Even you, during a recent presentation at the Banquet Hall in Abuja advertised consolidation as a historic achievement. How can you recognize a ‘mis-managed’ project as an outstanding achievement? As we say in Igbo, you can’t cover the moon with your palms.
Let me be clear: the quantum size of the new banks following consolidation presented challenges of risk management and supervision. We deployed all we had and overworked the CBN staff. The carry-over of bad loans from the consolidated banks was quickly cleaned up. To the best of my knowledge, we instituted stringent regulatory and supervisory regime (consistent with best practices at the time). We even had resident examiners in the banks and required bank MDs to personally sign their reports to CBN. I recall that the former MD of GTB complained of “regulatory intrusiveness”. To our credit, non-performing loans (NPL) came down from 22% in 2003 and 2004 to 6% as at 2008. Anywhere in the world, a central bank that brought NPL from 22% to 6% over a four year period does not look like one with a loose supervisory regime. Name other developing countries that performed better, Madam. So, on point of fact, Madam lied. Yours was a reckless assertion without basis by a Finance Minister.
The banks in Nigeria were supervised by the CBN and NDIC, but other institutions— international firms which audited them, international rating agencies which also examined their books, capital market operators since most were listed companies — all had oversight. I put on record that there was never any information/report of infractions by any bank which was brought to my attention and which we did not act upon decisively during my tenure. I heard the comment that some of the bank MDs were my friends. Well, my response is that perhaps as CME you should kill all your friends operating in the economy or become their enemies. For the record, my successor audited all the banks and none of my so-called friends was indicted. It speaks volumes. Indeed, it is also a fact that the alleged personal criminal infractions (including lapses in corporate governance Madam alluded to) by some bank CEOs were found out, only AFTER they had been removed from office. My successor told me that the comprehensive audit of the banks did not reveal such infractions. Of course, you must be God or have a special tip-off from inside to get to such information while the MDs are in office. Unfortunately, all over the world, no financial system has succeeded in routing out all criminal behaviours by the operators. So, Madam, I challenge you to provide one shred of evidence that ‘there was no separation between regulators and regulated’ or be honourable enough to retract your reckless statement.
What happened? The unanticipated and unprecedented crisis of 2008/09 hit the world. More than 40 US and European banks either collapsed or were shaken badly (remember the Lehman Brothers, Fannie Mae and Freddie Mac, Wachovia, HSBC, Lloyds TSB, Citibank, Goldman Sachs, even UBS, etc) and hundreds of billions of dollars were spent to bail them out. The contagion effects spread like a wild fire, destroying national stock markets and banks. The nascent (big) banks in Nigeria faced sudden multiple shocks— liquidity, exchange rate, oil price, capital market, etc. As oil prices collapsed, loans to oil and gas became non-performing overnight; loans to the capital market became non-performing overnight; etc. Our first priority was to save the entire banking system and the economy from systemic collapse. I assured Nigerians that no bank would be allowed to fail, and not many people know what it took to achieve it. Once we had navigated through the unexpected /unprecedented turbulence, we laid out a comprehensive plan to clean up the debris which we presented to stakeholders in Lagos (March 2009). I had pleaded with the Senate to pass the AMCON bill which we sent to them in 2004. But I had a comprehensive plan to finish the clean-up with or without AMCON by the end of 2009, including second round consolidation and a N500 billion fund (my book will detail all these). I left behind an 11-volume document of the Financial System Strategy 2020 (FSS2020) which has remained the policy roadmap for the CBN/financial sector since I left office.
I have two analogies for our experience. Ours was really like an airplane that was cruising and suddenly meets an unexpected and unprecedented turbulence. After the pilots and the crew succeed in navigating through the potential crash and probably land the airplane, people look in and start blaming the crew for the broken tea cups, chairs, and drinks that fell during the turbulence as evidence that the crew never kept the airplane clean or serviced it. My second analogy is that of a sudden earthquake in a region it was never expected and some houses collapsed. All of a sudden, the housing authority is to blame for not requiring earthquake-proof foundations for the houses. Well, my legal experts call it force majeure, an act of nature!
To be fair, after every crisis, there are lessons (and my book will detail what, with benefit of that experience, we should have done differently). Risk management— which has always been there— now took a new centre stage all over the world following the crisis. But for anyone to suggest that CBN under me, for one minute, took its eyes off the ball is, to say the least, ludicrous. The US financial system literally crippled the world costing America hundreds of billions of dollars but no one has suggested that Alan Greenspan is no longer the great maestro!
AMCON is a big topic (which I will address at a later date) but her claims show either ignorance or mischief. She claims that N5.7 trillion of AMCON funds was used to rescue banks and the ‘bond issued’ as ‘cost to taxpayers’. Really? I will deal with the AMCON I envisaged and the AMCON under you later but let me state that even if 100% of the banks’ NPL was offloaded on AMCON, it would not be up to N5.7 trillion. Enough said for now. The fact is that the Federal Government has not put a penny in the AMCON fund: the banking system is financing itself, and together with the sinking fund by banks, AMCON surely can’t default (thanks to consolidation that the banks are now big enough to cough out such funds to solve the system’s problem). Did you intend to deceive the readers by refusing to tell them that much of the AMCON fund is ‘investment’ and not ‘expense’. Am sure you heard the IMF’s alarm about moral hazard? If you want, we can have a focused debate on AMCON.
Next, let me briefly respond to a few outlandish claims. She brags about ‘single-digit’ inflation rate ‘now’ and alleges that when I left office, inflation was above 13%. I just laughed at this one. 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. It was not for nothing that the world cheered us as monetary policy czar, Madam! Perhaps you are also not aware that we broke a world record by having a depreciated real effective exchange rate during a time of export boom and this was at the heart of our reserve accumulation and the portfolio/FDI inflows. I resisted the IMF advice to deplete reserves for liquidity management, and Nigeria had enough self-insurance to survive the global crisis. The opposite has happened under you Madam, and the Nigerian economy is in trouble. Naira exchange rate appreciated under me from N133 to N117 before the global crisis; and reserves grew to all time high of $62 billion. For the first time since 1986, the official, interbank and parallel market exchange rates converged under me. You can’t match these records!
I hereby challenge your attempt to blame others for not saving for the rainy day. It is not a virtue when you are quick to appropriate all the credit when things are going well, but shift the blame when they go wrong. You blame the state governors— who, according to you, have taken the Federal Government to the Supreme Court—not that a Supreme Court judgment forced your hands. For your information, the governors have never agreed to savings and always threatened court action even under Obasanjo. Why did we save under Obasanjo but not under Jonathan? Two keywords explain it: leadership and integrity. Governor Amaechi said the governors insisted on sharing the funds because they found out that you were illegally fiddling with the savings. So, as Nigerians still wonder, if billions of dollars are now ‘missing’ under your nose, why should governors trust you to keep their money? Do the states that have taken the federal government to the Supreme Court and refused to save also include the PDP governors—who are in the majority? If so, then it is fatal: even governors of your own party, PDP, do not trust you to keep their money! Furthermore, did the governors also stop the Federal Government from saving part of its share? If you ran a surplus budget at the Federal level, you would have had credibility to blame others or to say they did not listen to your advice. The key point is that since you were running huge deficits yourself, it was also in your own interest to share the ECA. You did not show leadership or credibility, full stop!
Next, Madam, I was really embarrassed for you to read that one of the reasons for declining forex reserves is ‘oil theft’. Under you as Minister of Finance and coordinator of the economy, the basket of our national treasury is leaking profusely from all sides. Just a few illustrations! First, you admit that ‘oil theft’ has reduced oil output from the average 2.3 – 2.4 million barrels per day (mpd) to 1.95mpd (meaning that at least 350,000 to 450,000 barrels per day are being ‘stolen’. On the average of 400,000 per day and the oil prices over the past four years, it comes to about $60 billion ‘stolen’ in just four years. In today’s exchange rate, that is about N12.6 trillion. This is at a time of cessation of crisis in the Niger Delta and amnesty programme. Can you tell Nigerians how much the amnesty programme costs, and also the annual cost for ‘protecting’ the pipelines and security of oil wells? And the ‘thieves’ are spirits? Come on, Madam!
Second, my earlier article stated that the minimum forex reserves should have been at least $90 billion by now and you did not challenge it. Rather it is about $30 billion, meaning that gross mismanagement has denied the country some $60 billion or another N12.6 trillion.
Now add the ‘missing’ $20 billion from the NNPC. You promised a forensic audit report ‘soon’, and more than a year later the Report itself is still ‘missing’. This is over N4 trillion, and we don’t know how much more has ‘missed’ since Sanusi cried out. How many trillions of naira were paid for oil subsidy (unappropriated?). How many trillions (in actual fact) have been ‘lost’ through customs duty waivers over the last four years? As coordinator of the economy, can you tell Nigerians why the price of automotive gas oil (AGO), popularly called diesel, has still not come down despite the crash in global crude oil prices, and how much is being appropriated by friends in the process? Be honest: do you really know (as coordinator and minister of finance) how many trillions of Naira, self- financing government agencies earn and spend? I have a long list but let me wait for now. I do not want to talk about other ‘black pots’ that impinge on national security. My estimate, Madam, is that probably more than N30 trillion has either been stolen or lost or unaccounted for or simply mismanaged under your watchful eyes in the past four years. Since you claim to be in charge, Nigerians are right to ask you to account. Think about what this amount could mean for the 112 million poor Nigerians or for our schools, hospitals, roads, etc. Soon, you will start asking the citizens to pay this or that tax, while some faceless “thieves” were pocketing over $40 million per day from oil alone.
You alluded to debt relief in your response and tried to take credit. Well, your CV is honest enough to admit that your two achievements in office as Finance minister under Obasanjo were that “you led the Nigerian team that struck a deal with the Paris Club” and that you “introduced the practice of publishing each state’s monthly financial allocation in the newspapers”. You are right about the two achievements. Let me put on record that Nigeria would have secured debt relief under anyone as Minister of Finance. President Obasanjo secured debt relief for Nigeria. Much of his first term was used to get Nigeria back into the international community and to campaign for debt relief. Before you were sworn in as Minister of Finance, President Bush visited Nigeria and both of us accompanied President Obasanjo during the meeting. There, Mr. Bush promised to support Nigeria with debt relief and asked our president to ensure that he met the conditions of the Paris Club. Obasanjo mobilized the global political support and coordinated all of us to ensure that the government met the check-list of ‘conditionalities’ as required. I spent five weeks in the hotel with my team (as coordinator/chairman for drafting the National Economic Empowerment and Development Strategy, NEEDS).
Some of the reform targets in NEEDS became the ‘conditionalities’ Nigeria was required to fulfil to merit debt relief. You and I signed the various MoU with the IMF on behalf of Nigeria (the policy support instrument). We had a great team at work and each member of the economic team had specific aspects of the conditionalities to deliver: Bode Agusto was in-charge of the budget; Oby Ezekwesili held sway at Bureau of Public Procurement and later Minister of Solid Mineral, and Education (but specifically tasked with delivering on EITI and procurement reforms); Nuhu Ribadu was at the EFCC fighting corruption; I was at the Central Bank delivering on monetary policy and banking reforms; Steve Oronsaye worked hard to delist Nigeria from the FATF; Nenadi Usman was in-charge of the parastatals; El-Rufai held forth at FCT and in charge of public sector reforms; privatization programme went on, etc. Did you know that the IMF wrote President Obasanjo threatening that there would be no debt relief if the CBN did not meet some monetary targets, and do you know the magic we performed to meet them? Can you tell Nigerians which of the ‘conditionalities’ that you personally implemented? With the groundswell of political support and Nigeria meeting all the ‘conditionalities’, debt relief was assured.
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Let me be clear: the quantum size of the new banks following consolidation presented challenges of risk management and supervision. We deployed all we had and overworked the CBN staff. The carry-over of bad loans from the consolidated banks was quickly cleaned up. To the best of my knowledge, we instituted stringent regulatory and supervisory regime (consistent with best practices at the time). We even had resident examiners in the banks and required bank MDs to personally sign their reports to CBN. I recall that the former MD of GTB complained of “regulatory intrusiveness”. To our credit, non-performing loans (NPL) came down from 22% in 2003 and 2004 to 6% as at 2008. Anywhere in the world, a central bank that brought NPL from 22% to 6% over a four year period does not look like one with a loose supervisory regime. Name other developing countries that performed better, Madam. So, on point of fact, Madam lied. Yours was a reckless assertion without basis by a Finance Minister.
The banks in Nigeria were supervised by the CBN and NDIC, but other institutions— international firms which audited them, international rating agencies which also examined their books, capital market operators since most were listed companies — all had oversight. I put on record that there was never any information/report of infractions by any bank which was brought to my attention and which we did not act upon decisively during my tenure. I heard the comment that some of the bank MDs were my friends. Well, my response is that perhaps as CME you should kill all your friends operating in the economy or become their enemies. For the record, my successor audited all the banks and none of my so-called friends was indicted. It speaks volumes. Indeed, it is also a fact that the alleged personal criminal infractions (including lapses in corporate governance Madam alluded to) by some bank CEOs were found out, only AFTER they had been removed from office. My successor told me that the comprehensive audit of the banks did not reveal such infractions. Of course, you must be God or have a special tip-off from inside to get to such information while the MDs are in office. Unfortunately, all over the world, no financial system has succeeded in routing out all criminal behaviours by the operators. So, Madam, I challenge you to provide one shred of evidence that ‘there was no separation between regulators and regulated’ or be honourable enough to retract your reckless statement.
What happened? The unanticipated and unprecedented crisis of 2008/09 hit the world. More than 40 US and European banks either collapsed or were shaken badly (remember the Lehman Brothers, Fannie Mae and Freddie Mac, Wachovia, HSBC, Lloyds TSB, Citibank, Goldman Sachs, even UBS, etc) and hundreds of billions of dollars were spent to bail them out. The contagion effects spread like a wild fire, destroying national stock markets and banks. The nascent (big) banks in Nigeria faced sudden multiple shocks— liquidity, exchange rate, oil price, capital market, etc. As oil prices collapsed, loans to oil and gas became non-performing overnight; loans to the capital market became non-performing overnight; etc. Our first priority was to save the entire banking system and the economy from systemic collapse. I assured Nigerians that no bank would be allowed to fail, and not many people know what it took to achieve it. Once we had navigated through the unexpected /unprecedented turbulence, we laid out a comprehensive plan to clean up the debris which we presented to stakeholders in Lagos (March 2009). I had pleaded with the Senate to pass the AMCON bill which we sent to them in 2004. But I had a comprehensive plan to finish the clean-up with or without AMCON by the end of 2009, including second round consolidation and a N500 billion fund (my book will detail all these). I left behind an 11-volume document of the Financial System Strategy 2020 (FSS2020) which has remained the policy roadmap for the CBN/financial sector since I left office.
I have two analogies for our experience. Ours was really like an airplane that was cruising and suddenly meets an unexpected and unprecedented turbulence. After the pilots and the crew succeed in navigating through the potential crash and probably land the airplane, people look in and start blaming the crew for the broken tea cups, chairs, and drinks that fell during the turbulence as evidence that the crew never kept the airplane clean or serviced it. My second analogy is that of a sudden earthquake in a region it was never expected and some houses collapsed. All of a sudden, the housing authority is to blame for not requiring earthquake-proof foundations for the houses. Well, my legal experts call it force majeure, an act of nature!
To be fair, after every crisis, there are lessons (and my book will detail what, with benefit of that experience, we should have done differently). Risk management— which has always been there— now took a new centre stage all over the world following the crisis. But for anyone to suggest that CBN under me, for one minute, took its eyes off the ball is, to say the least, ludicrous. The US financial system literally crippled the world costing America hundreds of billions of dollars but no one has suggested that Alan Greenspan is no longer the great maestro!
AMCON is a big topic (which I will address at a later date) but her claims show either ignorance or mischief. She claims that N5.7 trillion of AMCON funds was used to rescue banks and the ‘bond issued’ as ‘cost to taxpayers’. Really? I will deal with the AMCON I envisaged and the AMCON under you later but let me state that even if 100% of the banks’ NPL was offloaded on AMCON, it would not be up to N5.7 trillion. Enough said for now. The fact is that the Federal Government has not put a penny in the AMCON fund: the banking system is financing itself, and together with the sinking fund by banks, AMCON surely can’t default (thanks to consolidation that the banks are now big enough to cough out such funds to solve the system’s problem). Did you intend to deceive the readers by refusing to tell them that much of the AMCON fund is ‘investment’ and not ‘expense’. Am sure you heard the IMF’s alarm about moral hazard? If you want, we can have a focused debate on AMCON.
Next, let me briefly respond to a few outlandish claims. She brags about ‘single-digit’ inflation rate ‘now’ and alleges that when I left office, inflation was above 13%. I just laughed at this one. 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. It was not for nothing that the world cheered us as monetary policy czar, Madam! Perhaps you are also not aware that we broke a world record by having a depreciated real effective exchange rate during a time of export boom and this was at the heart of our reserve accumulation and the portfolio/FDI inflows. I resisted the IMF advice to deplete reserves for liquidity management, and Nigeria had enough self-insurance to survive the global crisis. The opposite has happened under you Madam, and the Nigerian economy is in trouble. Naira exchange rate appreciated under me from N133 to N117 before the global crisis; and reserves grew to all time high of $62 billion. For the first time since 1986, the official, interbank and parallel market exchange rates converged under me. You can’t match these records!
I hereby challenge your attempt to blame others for not saving for the rainy day. It is not a virtue when you are quick to appropriate all the credit when things are going well, but shift the blame when they go wrong. You blame the state governors— who, according to you, have taken the Federal Government to the Supreme Court—not that a Supreme Court judgment forced your hands. For your information, the governors have never agreed to savings and always threatened court action even under Obasanjo. Why did we save under Obasanjo but not under Jonathan? Two keywords explain it: leadership and integrity. Governor Amaechi said the governors insisted on sharing the funds because they found out that you were illegally fiddling with the savings. So, as Nigerians still wonder, if billions of dollars are now ‘missing’ under your nose, why should governors trust you to keep their money? Do the states that have taken the federal government to the Supreme Court and refused to save also include the PDP governors—who are in the majority? If so, then it is fatal: even governors of your own party, PDP, do not trust you to keep their money! Furthermore, did the governors also stop the Federal Government from saving part of its share? If you ran a surplus budget at the Federal level, you would have had credibility to blame others or to say they did not listen to your advice. The key point is that since you were running huge deficits yourself, it was also in your own interest to share the ECA. You did not show leadership or credibility, full stop!
Next, Madam, I was really embarrassed for you to read that one of the reasons for declining forex reserves is ‘oil theft’. Under you as Minister of Finance and coordinator of the economy, the basket of our national treasury is leaking profusely from all sides. Just a few illustrations! First, you admit that ‘oil theft’ has reduced oil output from the average 2.3 – 2.4 million barrels per day (mpd) to 1.95mpd (meaning that at least 350,000 to 450,000 barrels per day are being ‘stolen’. On the average of 400,000 per day and the oil prices over the past four years, it comes to about $60 billion ‘stolen’ in just four years. In today’s exchange rate, that is about N12.6 trillion. This is at a time of cessation of crisis in the Niger Delta and amnesty programme. Can you tell Nigerians how much the amnesty programme costs, and also the annual cost for ‘protecting’ the pipelines and security of oil wells? And the ‘thieves’ are spirits? Come on, Madam!
Second, my earlier article stated that the minimum forex reserves should have been at least $90 billion by now and you did not challenge it. Rather it is about $30 billion, meaning that gross mismanagement has denied the country some $60 billion or another N12.6 trillion.
Now add the ‘missing’ $20 billion from the NNPC. You promised a forensic audit report ‘soon’, and more than a year later the Report itself is still ‘missing’. This is over N4 trillion, and we don’t know how much more has ‘missed’ since Sanusi cried out. How many trillions of naira were paid for oil subsidy (unappropriated?). How many trillions (in actual fact) have been ‘lost’ through customs duty waivers over the last four years? As coordinator of the economy, can you tell Nigerians why the price of automotive gas oil (AGO), popularly called diesel, has still not come down despite the crash in global crude oil prices, and how much is being appropriated by friends in the process? Be honest: do you really know (as coordinator and minister of finance) how many trillions of Naira, self- financing government agencies earn and spend? I have a long list but let me wait for now. I do not want to talk about other ‘black pots’ that impinge on national security. My estimate, Madam, is that probably more than N30 trillion has either been stolen or lost or unaccounted for or simply mismanaged under your watchful eyes in the past four years. Since you claim to be in charge, Nigerians are right to ask you to account. Think about what this amount could mean for the 112 million poor Nigerians or for our schools, hospitals, roads, etc. Soon, you will start asking the citizens to pay this or that tax, while some faceless “thieves” were pocketing over $40 million per day from oil alone.
You alluded to debt relief in your response and tried to take credit. Well, your CV is honest enough to admit that your two achievements in office as Finance minister under Obasanjo were that “you led the Nigerian team that struck a deal with the Paris Club” and that you “introduced the practice of publishing each state’s monthly financial allocation in the newspapers”. You are right about the two achievements. Let me put on record that Nigeria would have secured debt relief under anyone as Minister of Finance. President Obasanjo secured debt relief for Nigeria. Much of his first term was used to get Nigeria back into the international community and to campaign for debt relief. Before you were sworn in as Minister of Finance, President Bush visited Nigeria and both of us accompanied President Obasanjo during the meeting. There, Mr. Bush promised to support Nigeria with debt relief and asked our president to ensure that he met the conditions of the Paris Club. Obasanjo mobilized the global political support and coordinated all of us to ensure that the government met the check-list of ‘conditionalities’ as required. I spent five weeks in the hotel with my team (as coordinator/chairman for drafting the National Economic Empowerment and Development Strategy, NEEDS).
Some of the reform targets in NEEDS became the ‘conditionalities’ Nigeria was required to fulfil to merit debt relief. You and I signed the various MoU with the IMF on behalf of Nigeria (the policy support instrument). We had a great team at work and each member of the economic team had specific aspects of the conditionalities to deliver: Bode Agusto was in-charge of the budget; Oby Ezekwesili held sway at Bureau of Public Procurement and later Minister of Solid Mineral, and Education (but specifically tasked with delivering on EITI and procurement reforms); Nuhu Ribadu was at the EFCC fighting corruption; I was at the Central Bank delivering on monetary policy and banking reforms; Steve Oronsaye worked hard to delist Nigeria from the FATF; Nenadi Usman was in-charge of the parastatals; El-Rufai held forth at FCT and in charge of public sector reforms; privatization programme went on, etc. Did you know that the IMF wrote President Obasanjo threatening that there would be no debt relief if the CBN did not meet some monetary targets, and do you know the magic we performed to meet them? Can you tell Nigerians which of the ‘conditionalities’ that you personally implemented? With the groundswell of political support and Nigeria meeting all the ‘conditionalities’, debt relief was assured.
Click here to continue reading