PETERSIDE ECONOMIC REVIEW

Chamberlain S. Peterside, Ph.DThursday, February 3, 2011
[email protected]
New York, NY, USA

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THE SOLUDO VERSUS AGANGA WAR OF WITS:
THE ISSUES AS I SEE IT…

any people following the recent public spat between erstwhile Central Bank Governor Soludo and current Finance Minister Segun Aganga must have had an earful. The altercation started with the hard-hitting criticism of 2011 budget proposal by former Vice President and Presidential candidate at the last PDP primaries, Atiku. This was followed by a vociferous reaction by the finance minister in a TV interview where he was quoted (not to paraphrase him) as saying that some people should rather be in jail by now for implementing misguided financial policies than walking free and talking down the economy.


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In reaction to that statement, Soludo who is perceived as an informal economic advisor to Atiku’s campaign had to respond and his rebuttal is well founded if you ask me, because everyone has a right to defend himself whether in the law courts or court of public opinion. However am sure they both understand that economic development through policy formulation and implementation is a continuum hence it might be unfair to often look back and judge one for what might have been done different or blame somebody for circumstances that are totally out of their control. Therein lies the merit of Soludo's stance.

I don't believe that Soludo has to necessarily be jailed for actions or unpremeditated misdeeds during his tenure at CBN - he tried his level best under prevailing circumstances. But in defending himself for Soludo to boast of his professional credentials in international agencies or informal advisory role to other central bankers is quite low and totally off-point. I don't imagine that Soludo has more qualifications or experience than Aganga now or at the point when they ascended to their respective positions. Aganga is after all not a spring chicken in the world of finance, but rather a seasoned investment banker who rose through the ranks in one of the most revered financial institutions in the history of the business.

Running the financial system of any country is more complex than simply credentials or deal-making. It takes highly calibrated intuition, analytical skills, deep intellectual insight, exposure, discipline and professional candor. Alan Greenspan’s style speaks volume of these attributes not withstanding the warped opinion of detractors on his performance as head of US Federal Reserve Bank in the period leading to the recent financial debacle. I was an early fan and supporter of bank consolidation initiated by Soludo and still commend the role that played in strengthening the institutional framework of the banking system. But maybe that success got too much into the former bank governor followed by what I consider overzealous hobnobbing with the bank executives probably with focus on post-CBN governorship political aspiration.

This in my opinion made Soludo take his eyes off the ball. The banking system was indeed bleeding under the weight of toxic assets resulting from bad stock market bets and other deals gone wrong. It is highly debatable that Soludo the policy wonk could have been the regulatory crisis-manager to salvage the situation. Without the ensuing surgical strike by the current CBN governor Sanusi, there might have been a systemic catastrophic failure of the banking industry during the last global meltdown.

Soludo is smart enough to have seen this scenario unfolding but already might have been too compromised and in bed with the key players to take very decisive actions. The fundamentals of the economy was indeed impressive and in an upswing during 2003-2007 time-frame thanks in part to savvy fiscal policies initiated by the economic management team, which Soludo was a key part of.

Nigeria’s current predicament was set in motion by; first the blow to the oil industry by militancy, secondly by the global financial meltdown of 2008, thirdly by how the new administration from 2007 responded to the challenges ahead when it took over in the early years, during which time Soludo was still in office anyway.

Things were made worse by the devastating impact on oil production of incessant pipe-bursting that was allowed to fester during 2006-2009. That tremendously depressed the revenue profile so much that government had to make up the shortfall with drawing down the excess crude account. In the wake of the global financial crisis when foreign investors scampered for safety from the Nigerian capital market as international lenders called in credit-lines to Nigerian banks in late 2008 there was a run on the Naira, which had to be defended with the foreign reserves or else dollar exchange rate might have surpassed N200 by now.

I wouldn't blame neither Soludo nor Aganga for this confluence of unfavorable factors that have severely damaged the economy and from which Nigeria is yet to fully recover. In fact it might be fair to say that Segun Aganga the finance minister and Sanusi the CBN governor since assuming office over less than 2 years ago have been in trouble-shooting mode without which the situation might be far worse today - so they deserve some credit. Is the economy growing now? Yes. Is that growth adequate or the kind of jobless growth Nigeria needs? Not at all. Whether the economy is growing through pumping more oil or favorable weather conditions thanks to which agricultural harvest is thriving as Soludo opined is totally inconsequential.

The consensus is that current borrowing binge is truly bad for the long-range financial health of Nigeria, but it has been in motion for a while now. In fact the recent $500 million Euro bond deal has been in the pipeline for 2 years before it was finally launched this January. If one might ask, how will Nigeria make up for huge revenue shortfall in the face of rising expenditure without borrowing? Your guess is as good as mine. The sensible alternative is to drastically cut overhead cost, but how soon you can reasonably do that without wreaking social havoc is a different matter. The issue with the budget and economy that worries me greatly is how things will play out in the next 6 months to 1 year and beyond after election.

Hindsight is always 20/20 as they say and few months or years from now if/when Aganga is no longer in office he could see things another way and wonder how or what might have been done differently if he had a second chance. That's exactly the thought process I imagine Soludo is going through right now. But yes it is our common wealth and heritage that is at stake in Nigeria so we must all stand up firm and defend it.

In so doing to have two people of high probity engage in such public row is unconscionable. If they must indulge in issue-based debate they need to keep it civil, factual and on point only through that can Nigeria benefit from their wisdom in the pursuit of suitable economic growth strategies.

Chamberlain is a New York based financial professional and member of Rivers State Economic Advisory Council.

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