Nigeria: Who could perform better than Professor Soludo?

How times change. It all seems like a different era when Soludo was being praised to the high heavens for his concerted programme aimed at stabilising the financial sector. He was garnering awards and being feted by Institutions all over the word as the world’s master banker. Everyone

now indulges in the favourite pastime of vilifying him for the hiccups in the economy. Those policies for which he was praised to high heavens – the consolidation of the banks, now supposedly caused a crash in the value of the Naira.

Are you surprised at this Soludo-bashing; as charlatans, ethnic jingoists and pseudo-intellectuals are angling, positioning and showcasing themselves as more-than-worthy successors?

Soludo’s present travails reminds me very much of the present Prime Minister of the United Kingdom, Mr Gordon Brown. In 1997, one of the first actions undertaken by the new Labour and Brown was to set Bank of England free, giving the Bank of England independence from political control and creating the Financial Services Authority (FSA) as part of the move that saw the Bank of England stripped of responsibility for overseeing the banks.

This was hailed as a masterstroke. The decision to give the Bank of England its independence was seen as a decisive move, the swiftness of which took many by surprise coming only four days after Labour’s landslide election win. It was described as the most radical shake-up in the bank’s 300-year history.

A “tripartite” system was introduced, involving the Bank of England, the Treasury and the FSA, each of which had some role in regulating and overseeing the industry. Mr Brown quickly developed a reputation as an iron chancellor and “prudence” became his watchword. He went on to become UK longest-serving modern day chancellor.

But today, Gordon Brown is facing an unprecedented barrage of criticism over his role in the UK‘s financial crisis amid claims he was responsible for massive gaps in the regulatory system and that he failed to maintain stability in the country’s finances. His poll ratings have slumped. At the heart of the criticism is that same decision taken by Mr Brown, as chancellor, for which he was hailed just a decade ago; to create a new regulatory framework for the banking industry when Labour came to power in 1997.

Now, he is being derided as “Culpability Brown” and berated by the Tories for “destroying” the previous regulatory system in 1997. The Prime Minister also had to endure detailed and damning critiques from financial experts and regulators. Political opponents now claim Mr Brown’s creation of the tripartite system has been fundamental to the present economic crisis.

The Shadow business secretary Kenneth Clarke termed the system had been a “complete failure”.   Some even called for Mr Brown’s resignation saying; “He promised no more boom and bust. He must be held accountable for his failure to oversee the stability of the country.”

Soludo came to national prominence in Nigeria in 2003 when, as former President Olusegun Obasanjo’s economic adviser, he helped formulate the country’s macroeconomic stabilisation programme and pushed for a total comprehensive reform and consolidation of the country’s then inefficient banking system.

Soludo resuscitated, re-branded and re-capitalised and re-positioned the banks to attract billions of foreign equity capital at a time when the country’s financial system was being derided in almost all international banking circles for fraud, money laundering and other internet scams.

Nigerian banks are today among the strongest and largest in sub-Saharan Africa and a half dozen of them are now exploring opportunities across West, East and Central  because of Soludo.

The Obasanjo reforms which Soludo and his fellow reformers supervised triggered new inflows of FDI and new equity capital for listed companies. A restructuring of $34 billion in national debt and high inflows from oil exports which coincided with the banking sector reforms, helped underpin a four-year bull market for the Nigerian economy.

This trend dramatically increased the positive wealth effects of the ever expanding Nigerian middle class and attracted new telecom and other consumer goods players to the country

But today, the metamorphosis of the banks into mega banks is being derided as the “creation of monsters”; “they grew bigger appetites and began to eye bigger markets abroad and looked on the Nigerian market with something akin to scorn”. How ironic!

When I wrote ‘The Case against Ndi Onyiuke Okereke’, my intention was also to publish a sequel, ‘The Case against Professor Soludo’. One of the responses I got then which were quite legitimate was that I took Onyiuke Okereke to task as if she alone is culpable for the massive economic crime committed against Nigerian investors. One fellow wrote that Soludo was far guiltier as a “spineless regulator”.

But I got very reluctant to publish that article because of the fierce campaign by an array of critics determined to stop Soludo from being reappointed the Central Bank governor past his sell-by date of May this year; vested interests that includes several chief executives of the banks he supervises, former lieutenants, and prominent lawmakers. Many of those criticisms obviously were NOT being made in good faith.

Still one wishes to stay in the sidelines and observe and learn. The pre-eminent Lord Denning’s laconic observation in this respect is most instructive. He said ‘a fair judge  assumes a detached stance and rarely descends into the arena of combat, lest the dust of combat cloud his or her vision’.

One of the earliest blasts came from Sahara Reporters “Soludo is living large”; a story they reproduced from Next. In the said article it was claimed: “Mr. Soludo is facing growing criticism around his personal conduct while in office, the tactical and strategic decisions he has made since the beginning of the economic crisis as well as a damning official finding that investigated his highly questionable establishment and chairmanship of the African Finance Corporation”.

Before writing this article, I went back to that article and carefully searched for the purported “atrocities” committed by Soludo and for which it was claimed:  “Mr. Soludo’s flaws were quick in coming”.

In the said article Soludo was accused among other things of: ‘Fighting for a second term’, ‘Plucked from obscurity’, ‘Blind eye to dodgy loans’, ‘playing games with forex transactions’, and ‘Living it large’ with annual salary of about N12 million naira a year!

What quickly emerged was that the only charge of substance was; “The ambitious African Finance Corporation, which he founded in 2007, and over which he installed himself as chairman, was the subject of a criminal investigation that found him guilty of gross negligence and poor executive judgment”.

I juxtaposed this claim with a Guardian article of March 29, 2009 which wrote; “A committee set up to investigate the finance invested in the African Finance project by CBN later exonerated Soludo, when it found out that no money was actually missing after all…That was after their attempt to have him kicked out over the Naira redenomination failed to have the backing of President Umaru Musa Yar’Adua”. 

Where then are Soludo’s evil deeds? Lies can certainly be influential. Unfortunately, this lie was given prominence in several influential fora.

Of all the criticism I have read, none sounds as ridiculous as ‘Soludo: Decision time for Yar’adua’ by one Garba Deen Muhammad on NVS which again was broadcasted in a lot of online news media.

Throughout the article the author struggled to find the appropriate adjectives with which to condemn Soludo. At the end he landed on one story he said was published by one Pius Obasi, who “correctly summed up the story of Northern Nigeria… as the poorest and most backward part of Nigeria and it is getting poorer and more backward”.

He cited one statistics by The NAPEP figures on the incidence of poverty in the six geo-political zones in the country as quoted by Prince Obasi: In the North-West, 74 percent of the people are poor, that is they live on less than one dollar a day; in the North-East the poverty rate is 78 percent; North Central, the figure is 70 percent. By contrast the South-West has about 28 percent; the South-South 30 percent, while the South-East, from where Soludo (lucky him) comes from, turned out to be the wealthiest part Nigeria with a poverty rate of 23 percent.

Garba then blamed Soludo for this sad state of poverty and the fact that the “North also has the highest concentration of beggars, of all ages, than anywhere else in the world; it has the lowest literacy rate in and the lowest per capita, or income per head in the country. It has its fair share of moral depravity too; from Kaduna to Kano and Sokoto, cases of 60-year old men defiling 14-year-old girls are rampant; in some cases fathers have been known to impregnate their under-age daughters”!

Perhaps, Garba would also blame Soludo for the fact brought to our notice by The Arewa Youth Mobilisation, a non-governmental organisation has presented statistics showing that 30 per cent of Northern youths are street beggars…that over 30 per cent of Northern youths between the ages of four to 13 are street beggars. These youths are children who do not know anything or think for themselves”;

Or blame Soludo for the polio, blindness and leprosy that afflict the Northerners instead of blaming the Northern leaders, the backward northerners themselves and a religion that have conspired with the socio-political system in the North to consign the northerners to poverty.

Another charge against Soludo in that Saharareporters Article was that he is rumoured to have a political ambition; that “Mr. Soludo recently transformed a sleepy settlement into a festive occasion when he brought the elite of the Nigerian financial and bureaucratic tribe to come help him launch the Mgbafor-Soludo Diagnostic Centre”.

On this issue, in as much I agree that as a free citizen Soludo has the right to aspire to any political office of his choice but I consider his dabbling into politics an ill-advised move. I had cause to criticise his immersing himself in the politics of Anambra state in the last election. He sponsored a PDP candidate for the Aguata Constituency in the House of Representatives. Andy Ubah was so pissed off he sponsored a rival candidate from the Labour party, Hon Umeoji Chukwuma who won the election.

At a time that the capital market is in virtual collapse; the external reserves are being depleted; the naira has crashed; the spectre of inflation and spiralling unemployment are palpable; the fear of bank failures rises and Soludo’s legacy is being rubbished, getting involved in politics is distracting to say the least. Must every Nigerian be a governor, a senator or a president? Getting involved in politics when you are the high priest of government finance has the tendency to be corruptive.

In giving reasons why they believe Soludo would not be re-appointed for a second term, Euroasia in the advisory written by Sebastian Spio-Garbrah, analyst for Middle East and Africa catalogued a number of the apex bank’s policy somersaults, they noted condescending statements, talking up the economy and flip-flops which together with other issues have helped to dent the governor’s re-election chances.

But the fact is that which several commentators overlook is that the solid support which Soludo enjoyed under Obasanjo is lacking under Yar’Adua, this has crippled his handling of the present economic crisis. Soludo would have to perform now, while looking over his shoulders.

As noted by the advisory, since Yar’Adua took office in 2007; Soludo’s influence has been on the wane. In late 2007, a series of ambitious announcements to launch new monetary policy measures such as specific inflation targeting and full convertibility of the current account were quickly shot down by the president and his advisers who weren’t consulted before the plan was released. 

Another Soludo scheme to distribute oil revenues to the states in US dollars to prevent a growth in monetary aggregates was also mothballed. 

To compound matters further, according to one writer, “Soludo seems to have succumbed to political arm-twisting from ‘above’ else he won’t engage in the Don Quixotic alchemy of combining populist economics with practical finance”.

To illustrate Soludo’s new rumba dance. According to The Eurasia advisory, in December, the Central Bank of Nigeria arbitrarily suspended forex trading on a number of days, and then sought to reduce the net open forex positions of local banks by limiting how much leverage they could take.

In January it abandoned a Wholesale Dutch Auction System (WDAS) for a more cumbersome Retail Dutch Auction System (RDAS) despite a hue and cry by local banks.

Later, it said that it was going to defend the value of the Naira within (+/-3) band, but soon contradicted itself by a speech where Soludo simply warned that Nigeria was not going to follow Russia’s example and waste its reserves defending the local currency within that band.

Soludo then later arbitrarily suspended inter-bank forex trading and even seemed to want to specify what colour of advertisements banks could place in national newspapers. 

My take is it is all well and good with hindsight, to go all out against the economic plans that earned Soludo kudos under former president Obasanjo. We just have to note that there weren’t many people, including in the developed economies that got it right at the beginning of the present economic crisis.

In Nigeria it is made worse because the systemic failure goes to the heart of the system – to the internal supervisory system and right to the top of the spineless Yar’Adua government.

I would have said that Soludo lack guts. After his well-articulated redenomination plan for the Naira was shot down by government officials and ‘politicians too dense in their thinking to see beyond their noses’, he should have resigned. But unfortunately, appointees don’t resign in Nigeria until they are kicked out.

Today, a dangerous twist has been added to the equation – Tribalism and ethnic tensions between southern Christian bank executives and their mostly southern-based shareholders and the relatively poorer northern Muslim elites. Northern elites brood openly that Soludo’s banking consolidation concentrated too much power in the hands of southern elites and left the Muslim north with no bank of its own.

It is sad that the Contention for the head of the country’s monetary system is getting murkier, with some people and a section of the country bent on hijacking the position, irrespective of the achievements of Soludo and the fact that the Yar’Adua government is yet to find its feet in terms of monetary policies.

It is amusing watching the high-wire intrigues swirling around Prof. Soludo and would only caution Nigerians that, just as in the case of political leadership, we deserve whichever charlatan that steps into Soludo’s shoes if we are not careful; if the decision is made under some extraneous considerations.

In this contest, the onlookers are pitiful Nigerians who seem clueless about the game being played. In this contest, the outcome looks quite gloomy.