State of Nigerian economy at halfway mark – 2

Professor Soludo, ex-Chief Economic Adviser to President Obasanjo and former Governor of the Central Bank of Nigeria, CBN, is an intriguing fellow. First, he was once in government at the highest levels. Except in Nigeria, a re-deployment from Chief Economic Adviser, CEA, to the President to Governor of the Central Bank would be regarded as a demotion because the CEA can influence far more by his activities and the policies and programmes he promotes within government than the CBN Governor. He can give advice on matters ranging from fiscal to monetary policy to social re-engineering of society along the lines he advocates. There are several examples in history of economists changing the political, social and economic faces of their countries and even whole continents with their ideas.

Jean Monnet was the economist who conceived of the European Economic Union which still shapes global economy till today. Naturally, he started with his contributions to his own country. Soludo started out in that mold as the CEA. He actually went so far as to bring out the National Economic Empowerment and Development Strategies, NEEDS I which was to guide Nigeria out of the dead-end of a mono-product economy. Then and now, it remains difficult to understand how Soludo did not realize that for NEEDS I to work and lead to NEEDS II which he advocated, it was essential for him to stay there for a while and nurture the ideas. NEEDS I was still winding its way through a government full of people still wedded to the “pump oil, sell and bring money to share” idea of economic management when he left. It is difficult to know if he lobbied for the job or it was offered by Obasanjo, but Professor went off to the CBN and started a banking revolution which started out like rocket fire but fizzled out in a short time. The nation is still trying to recover from banking consolidation.

In his latest outburst aimed at the incumbent Governor, Soludo accuses Emefiele of playing politics with foreign exchange allocation policies. He hinges his criticism on the existence of multiple foreign exchange rates now operating in Nigeria. The problem is that Soludo is right in the abstract. Conventional economic theory argues that foreign exchange should be totally deregulated. Markets should determine the rates. But, Soludo and the “purists” are arguing with a current success story and one of the three clear positive performers in the two years of almost total dismal performance by Buhari’s government. The other two are the Minister of Transport, Mr Rotimi Amaechi and Mr Umana O Umana of the Oil and Gas Free Zones Authority, OGFZA. We will eventually get to the two, but first, let us take a look at Emefiele using Soludo’s criticism which is in tandem with those of the International Monetary Fund, IMF, World Bank and some fellow Nigerians.

When Soludo left the CEA office, it was not left vacant. Professor Ojowu was his replacement. In addition, the FG had Dr Ngozi Okonjo-Iweala as the Minister of Finance. Between the two there was a semblance of Fiscal policy to which the CBN Governors – Sanusi and Soludo – added monetary policy. The CBN was not left alone.

Furthermore, those were days of surpluses. The price of crude oil was far above the benchmark used in the budget and the surplus made it possible to exit the debt trap. It was during those halcyon days that the Excess Crude Account, ECA was created. It was easy then to have uniform exchange rate. But, was there one? The answer is “No”. Even when Soludo was CBN Governor and foreign exchange was not our problem but how to spend it, we had no uniform exchange rate.

Emir of Kano, HRH Lamido Sanusi, has also joined Soludo in carpeting Emefiele. Again, the former Governor was in charge during the “Golden Age” of oil. The price virtually hit the roof. It went up to $145 per barrel temporarily before settling down to over $110 per barrel during most of his tenure in office. Again dollar scarcity was not our problem. Nor lack of will on the part of the CBN Governors. There was never a time when we had uniform exchange rate. And, under Sanusi, external reserves and ECA headed for the basement.

Unlike those two lucky chaps, Emefiele inherited an economy that was down on its knees, in which dollar scarcity had become intractable, in which nobody was and is offering comprehensible fiscal policy and the “Eagle Economy” was flying with only one wing – monetary policy. Uncharitably, critics have left the Presidents who created the “no-win” situation in which Emefiele found the CBN and had been doing a yeoman’s job of trying to get the economy back on its feet. A lesser man and without the instinctive feel for when to drop orthodox solutions and reach outside the box would have sent the economy flat on its back.

There is only one way to detect that the critics are just full of gas. They are full of high sounding theoretical prescriptions, but no concrete plan. If they have, they should publish them. Nigerians living and unborn will be grateful to them for so doing.

For my money, the CBN had sailed the economic ship of state masterfully through very stormy seas and we are not in calm waters yet. But, for the years 2015-2017, please pass the medal to Emefiele. He deserves it. Anybody who could crash forex from N520/$1 to under N380/$1 in a matter of two weeks deserves a good pat on the back.

Don’t get me wrong. Uniform exchange rates are desirable. But, they don’t constitute the Holy Grail of excellent or effective monetary policy as some of us think.

NEXT WEEK: Going Nowhere Without Railways; That Is Certain.

 

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