– Smoke and Mirrors
In a skewed article dressed up as an innocuous assessment of the ongoing political campaigns by both the ruling party and the opposition, Prof. Charles Soludo finally broke the silence after over five years of avoiding the public eye. Many of the points raised in the article are typical of grudges hitherto suppressed for a prolonged period but that have finally bubbled to the surface or were perhaps forced out by a higher force.
The article published in the Vanguard newspaper of January 25th did not say anything different from what opposition sympathizers, armed with a hunger for power but with limited awareness or with a deliberate disregard for the current hard data, would be disposed to putting out. If this article represents Prof. Soludo’s ‘big idea’ and epiphany, it surely is too little and is coming too late to alter our perception of Soludo the man. For keener minds will see the article for what it is; a subtle act of self-worship by a glory hunter desperate to crawl back into relevance; a ‘me too’ submission by a man eager to update the public that he is now into ‘international’ engagements. The last time we heard from the former CBN governor was in 2011 when he was decisively defeated in the Anambra governorship elections by the amiable Peter Obi. Ex governor Obi has moved on to become the head of President Jonathan’s re-election campaign in the South East. But it appears that, judging from the content of the ex-CBN governor’s recent article, Prof. Soludo has not forgotten that humbling loss.
Prof. Soludo set out in his article to discredit the current government’s economic management records by twisting facts and drawing ridiculous parallels. Ordinarily, seeing that we are seemingly in an era of ultra-liberal politics where Nigerians enjoy the full rights and privileges of free speech, one would be tempted to ignore Prof. Soludo’s submission as just another opinion piece. But one is constrained to put out a rejoinder because a little misinformation in our current climate is too much misinformation. And although the government is yet to issue an official response, this one by a private citizen will seek to examine, paragraph by paragraph, the misrepresentations in Prof. Soludo’s article.
– Comparing Melons and Water Melons
Prof. Soludo’s reference to Shagari’s government failure to check excessive borrowing and frivolous spending by the different tiers of government, and his equation of same with the current administration’s approach, shows that he may be out of touch with the times. The global economic environment and the current government’s policy responses to that environment are markedly different from the Shagari era. For one, while President Shagari had no stoppers in place to control borrowing by the different tiers of government, the current administration has a coherent policy that streamlines the borrowing process for federal and state governments. It is Known as the Medium Term Rolling External Borrowing Plan, a policy which requires that borrowings to be undertaken by the federal and states governments within a three-year planning framework be transparently shown with the aim of focusing borrowings on priority projects and reducing borrowings for non-priority projects. Another plan called Medium-Term Debt Strategy limits both domestic and foreign debt exposures of the government. So now, more than ever, the government has taken deliberate steps to control the debt burden.
Also, the increased spending carried out under this administration is focused on critical infrastructure to support the diversification of the economy. Prof. Soludo’s position seems to favour pilling up foreign reserve to shore the value of the Naira. This is unsustainable short-term thinking which will do little to help the economy should the oil glut persist, as Russia learnt quite quickly following its initial attempt to defend the Ruble as the falling oil price combined with economic sanctions to hit its economy. And the glut is expected to persist given the prevailing oil supply and political situations in the international market which are markedly different from what Soludo believes he presided over as CBN governor.
– ‘Not One Penny Added’
The claim by Prof. Soludo that the foreign reserve did not increase at any point under this administration cannot be further from the truth. It is true that Soludo left behind $45Bn in foreign reserve at the end of his tenure as CBN governor. But much of the reserve was depleted during the short-lived President Yar’adua administration as a result of the global economic crunch such that when President Jonathan came into office in 2010, he inherited $32 Bn in foreign reserves from the Yar’adua regime. The current government grew the foreign reserve to a peak of $50Bn in 2013. So although the foreign reserve now stands at $39Bn since part of the foreign reserve was used to fund infrastructural development, it is simply not true that ‘not a penny’ has been added to the foreign reserve under this administration.
Prof. Soludo’s comparison of oil earnings in the President Obasanjo regime and President Jonathan regimes reveals his penchant for half-truths. His claim that the average monthly crude oil price under the current administration has been over $100 is a lie put forward to give force to his smear campaign. The data is available for any interested person to verify for himself but Soludo has intentionally cooked up figures to suit his plan of discrediting the government. Or how else does one explain a situation where a former CBN governor applies a wildly overestimated figure for a data even when a simple visual observation would reveal the inaccuracy of that estimate?
– Picky About Data
Prof. Soludo takes his mischief to an unimaginable height, for a man of his standing, by pronouncing that a government has performed woefully in 2015 because the 2010/2011 NBS data for the incidence of poverty and unemployment and future projections on those data are unfavourable, even when readily available recent data show otherwise! By implication, Soludo is arguing that the incidence of poverty for Nigeria in 2015 is much higher than the scary estimated 71% figure in 2011. This is an outright lie. A July 2014 World Bank Report for Nigeria using more recent NBS data puts the incidence of poverty at about 33%of the population.
It is also instructive to note that Soludo conveniently forgot to point out that the dollar exchange rate of the Naira depreciated to around N180 in the run up to his exit from office. It is this kind of selective use of data that sets apart a mischief maker from neutral commentators. And Prof. Soludo’s article leaves one in no doubt where he belongs.
– Obasanjo or Jonathan: Who Wore it Better?
The comparison between Obasanjo era growth rate and the President Jonathan era growth rate exposes that Prof. Soludo doesn’t take into much consideration the impact of the global recession on economic growth. With a sustained 7% growth rate at the current time when countries like china are cutting back on their growth forecast and Greece, Italy and South Africa are floundering, Nigeria remains in the group of countries with an admirable growth rate. Another issue that may have escaped the professor’s notice is the differences in policy priority in the Obasanjo era and in this era.
The advent of mobile telecommunications in the Obasanjo era had the effect of ballooning economic growth at a rate that can hardly be duplicated by any other sector in the same timeframe. Nigeria’s policy priority at this time is rightly the development of the critical infrastructure neglected over many decades because of a lack of the political will to invest in sectors of the economy which would not yield instant gratification, in the form of higher growth rates, that the government of the day can point to and thump its chest in the fashion that Prof. Soludo has done about the economic growth rate in Obasajo’s tenure in his article. Thankfully, this government doesn’t seem to be growth-hunting at the expense of developing the critical industries which will have multiplier growth effect on other sectors in the future.
Prof. Soludo’s stance on the employment generation efforts of the government easily catches one’s attention. He pointed out that a country like Greece experiences high unemployment despite the availability of relatively modern infrastructure. While this is true, one must bear in mind that Nigeria struggles with such basic infrastructure that even a marginal improvement in its infrastructure will smoothen a good part of the bottle necks which the Professor mentions in his article. In other words Nigeria is operating at a far lower infrastructure threshold than Greece and therefore still has the opportunity to benefit from the low hanging fruits of infrastructure improvement as far as job creation is concerned.
There is surely some economic dislocation in the Nigerian economy as Prof. Soludo raised in his article. But that dislocation is not a product of poor policy decisions by the government, but is rather a temporary disorientation created by an accelerated diversification process which has focused resources on key projects which will reduce the economy’s vulnerability to oil price shocks. Things will smoothen out soon as many programmes take root and Nigerians are better positioned to benefit from these programmes.
– Much Ado About a Jobs Board
The Professor took a swipe at the President’s constitution of a Jobs Board, a move that should ordinarily illustrate that the government views the issue of unemployment as deserving of a state of emergency declaration. Of course the Job Board is only an additional move by the President Jonathan administration besides the numerous other policy initiatives that have certainly added more jobs to the Nigerian economy than the shambolic NAPEP formulated under Prof. Soludo. Some 1.6m new jobs were estimated to have been added in 2014 as a result of innovative programmes such as YOUWIN, CSS, GIS and SURE-P. Even more jobs will be created in agriculture, power, transport and automobiles in the coming years. So when President Jonathan promised 2 million jobs, he was making a conservative promise. We can choose to juxtapose the current unemployment statistics which has been blown up by graduates of the hundreds of new universities which were non-existent in Soludo’s time. In Soludo’s time as CBN governor, in addition to the problem of questionable data integrity, tens of millions of unemployed and unsuccessful university applicants were hidden away as ‘students’ and kept off the unemployment statistics. The current government’s crime, as Prof. Soludo sees it, is that it is opening more universities and giving even more access to people that will end up creating an unfavourable unemployment record.
– Soludo’s Way: Talking Two Different Things at Once
Prof. Soludo’s article also criticizes the government for spending on critical infrastructure and criticizes former governor Peter Obi for saving money in one breath. This disposition shows that Soludo’s position has more to do with his personal grievances with personalities in President Jonathan’s camp than it has to do with his sincere disagreement with the government’s policies. In any case, at least Soludo hints that a government that piles up foreign reserve in the face of pressing infrastructural challenges is preparing to ‘democratise poverty’.
This government actually pursues a policy that takes care of the immediate economic concerns as well as the future ones. That is why the Sovereign Wealth Fund (SWF) was set up under this government to set aside money to fund development projects in periods of unfavourable oil prices. Our SWF stands at $2.5Bn and recently received an improved rating by the world-acclaimed Sovereign Wealth Institute, making it a joint 2nd alongside top SWFs of the US, France, Brazil and South Korea, from its previous 33rd position. The SWF in its current form is a more progressive arrangement than the illegal Excess Crude Account (ECA) which was formed during Soludo’s time as CBN governor.
As Alan Greenspan, the famous former chairman of the US Federal Reserve, noted, economics is not an exact science and it is usually difficult to get economists to agree on the precise actions to be taken to solve an economic problem. One can therefore imagine that while all economists are fully in agreement about the need to protect our economy against plummeting oil prices, building consensus on the means to do so is another matter. Indeed, piling up foreign reserve to defend the Naira is a short-term approach which is not sustainable in the face of the global economic realities.
– The Road to Sustainability is Full of Thorns
The structural changes in the global oil marketplace call for a more sustainable approach to economic management than the traditional foreign reserve argument which Soludo has put forward. For although shoring up our foreign reserve would allow us to artificially fight back foreign exchange pressures in the short term, it is not a sustainable solution in itself as the Russia experience showed. A stronger scenario for Nigeria would be one in which the economy is diversified away from oil to cushion the effect of crude oil price volatility in addition to the traditional foreign reserve approach.
Economic diversification is the current government’s approach to finding a lasting remedy to the oil price volatility problem. That is why the government is investing huge resources in agriculture and building the supporting infrastructure in irrigation dams, rails, roads, power plants, to strengthen the manufacturing sector. But Soludo chose to call such vital spending a waste of resources in his article. He was quick to point out that the built-up physical infrastructure does not match the levels of borrowing, conveniently forgetting that the ongoing efforts to contain the insurgency in the North East constitutes a major area of government spending that is not readily available to be ‘sighted’ by critics.
Government policies are already bearing fruits and the oil glut provided just the right opportunity to test the robustness of some of these policies. Despite the depreciation in the Naira’s exchange rate, the prices of basic food items have remained steady. So for ordinary Nigerians, the dollar exchange rate of the Naira remains a distant construct if the prices of their everyday items remain unchanged.
– Strong GDPs Can Carry Heavy Debt … Well, Literarily
Prof. Soludo acknowledges the well-known position that excessive concerns about debt-GDP ratio should not stop a bourgeoning economy from securing the loans that it needs, especially when the ratio is as low as Nigeria’s (The empirically established safe Debt-GDP ratio is 60% but Germany, Japan, US and India maintain a debt-GDP ratio of above 76%,225%,101%, and 67% respectively). He is however concerned that Nigeria is a mono product economy that is vulnerable to oil price shocks with a questionable debt profile and the debt-GDP ratio. But he does not take into consideration that the contribution of oil to Nigeria’s GDP has shrank and the non-oil contributors of Agriculture, Telecommunications and Entertainment are increasingly making bigger contributions to Nigeria’s GDP. Even manufacturing is on the rise as evident from 2014 data. Perhaps Prof. Soludo deliberately opted to use outdated data in his analysis to score cheap points in his discrediting campaign. It is therefore pointless attending to his accusation that a government which is still in office has incurred ‘abandoned capital projects littered all over the country’ valued at $50Bn.
– A See-through Veil
Keen observers will see through Soludo’s mischief despite his best efforts to hide his true intentions. For one thing, the ‘strong’ economic team under former President Obasanjo, which Soludo so praised in his article, had as its pioneer leader, the current sitting Minister of Finance and Coordinating Minister of the economy, Dr. Ngozi Okonjo-Iweala. And the debt pardon that was achieved under President Obasanjo was spearheaded by the same Dr Okonjo-Iweala. So Prof. Soludo’s attempt to lecture the current team on the benefits of a ‘strong’ economic team and the significance of the debt pardon for Nigeria’s future must come with some discomfiture to even his closest friends.
Overall, the submission reveals Soludo as a man desperate to put out his word in the run up to the elections like many entities have done, including former President Obasanjo, MEND, and Boko Haram. He seems eager to remind us of his records in office, many of which we would rather forget. Or would one want to remember the shambles that government that Soludo was a part of left behind in the power sector after squandering $16Bn? Would one want to remember the tens of billions of dollars worth of abandoned projects, most of which had been funded, left behind by the Obasanjo administration of which Soludo was a key player? How can one quickly forget the mess that Soludo left behind in the banking sector which Sanusi had to deal with when he took over as CBN governor?
– Look Everyone, it’s Jacob!
As CBN governor, Soludo connived with bank CEOs to milk the economy and render us vulnerable to the global recession. By the time Sanusi took over, a big chunk of the Foreign Reserve saved under the Obasanjo regime had to be deployed to safeguard our economy. And many banks, which had been making tens of billions of Naira in paper profits and with CEOs winning ‘awards’ and hobnobbing with Soludo, had to be taken over by the government to avoid a massive economic crisis. Is that the kind of record that anyone with any decency left in him and with an independent mind will like to remind us about? It could easily be the case that this article isn’t coming from someone with an independent mind, but from someone prodded to put out something damaging by an old master who he owes a favour. And Soludo’s far milder remarks against the opposition give away the possibility that the entire article was coerced out of him by an old master and written for the oppositions’ benefit. We know who Prof. Soludo’s old master who is also sympathetic to the opposition is, don’t we?
Article written by Daniel Essien, a renowned Economists.
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