Okonjo-Iweala says Soludo’s self serving article on Economic management is deficit in facts, logic & honor

January 28, 2015 12:28 pm

Minister for the Economy and Minister of Finance Ngozi
has responded to former CBN governor Charles Soludo’s article titled
Buhari Vs Jonathan: Beyond the election, where he criticized the
presidential economic team. NOI’s response below…

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 . Nigerians should therefore
beware of so-called intellectuals without character and wisdom because this
combination is fatal.

3. 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.

4.  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?

5.  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.

6.  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
” 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 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
is working. Transformation equals diversification

9.  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.

10.  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

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?

13.   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:

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.

18. 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.

19.  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.

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.

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
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
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.
21.  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.
22. 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.   

23.  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
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