Soludo Solutions & Economic Reforms in Nigeria
By Paul Adujie
Wednesday, 28 February 2007
Keen watchers of Professor Charles Soludo’s reforms agenda are impressed with his accomplishments thus far, since assuming the helms, as governor of Central Bank of Nigeria.
I am personally impressed with his efforts at changing the way banks and other financial institutions in Nigeria do business; However, I am reserving my thunderous applause for Professor Soludo for a time when our national currency, the Naira recovers considerably and the exchange rate become or does better than what it was in 1980 or earlier.
I have been planning an article, titled, “Kudos to Soludo” off and on, for quite sometime now, but I have been reluctant say hurrah or celebrate, dancing with my two legs over Professor Soludo admirable and arduous drive to change the culture of the banking sector or industry of the economy of Nigeria.
Critics of the current governor of Central Bank of Nigeria predicted that the sky would fall as a result of the bank recapitalizations and consolidations embarked upon and successfully undertaken by Professor Soludo.
Thankfully, the skies have not fallen! These recapitalizations and consolidations have actually created a more viable banking industry in Nigeria. A sub-sector now worthy of respect, not only in Nigeria, but on the world stage as well.
I am in complete support of community banks or banking, that is directed at the individual of average means and persons in the small and medium entrepreneurial pursuits. That however cannot, and should not have been the basis for the loud anti recapitalization and consolidations drive by Professor Soludo.
Prior to Professor Suludo’s reforms in the banking sector, it was the case that the banking industry in Nigeria was populated by individuals who used their personal fortunes and connections to establish or float banks, banks which were banks in names only! Banks which some individual founders used as if, it were their personal safe deposit box, banks which were never treated any regard or respect by the founders. These banks were banks that were unknown outside the town or city of its founders.
These banks were for the most part, banks intended to facilitate the personal ego, and self aggrandizement of founders and their “business” these “banks” practiced no banking in the true essence of the word. These banks observed little or no banking practices and procedures or ethics that are usually the customs and traditions of bankers in Nigeria and elsewhere in the world. Expectedly, most of these banks wounded up in bankruptcies and monumental failures. These were banks, which acted, as if pointedly, to eschew best business practices! When these banks failed, Nigerian depositors bore the brunt the egregious practices which were pervasive within the banking industry at the time.
Anyone familiar with my commentaries on Nigerian issues would probably remember my views on our national currency the Naira, which I have argued in the past, as undervalued and devalued or have been allowed to be in free-falls for more than twenty years! This is in part, due to foreign exchange dealer-banks’ collusions and conniving profiteering. Hence there continued to be huge banking profits in the midst of zero production capacity in Nigeria as witnessed in the preceding twenty-years plus!
No one, not even me, would of course blame Professor Soludo for Naira’s free-falls! After all, he is new, relatively, at the helms of Nigeria’s apex bank and, banker to bankers. We are quite aware of the enormous challenges with which he contends
The point I want to make, the point that I feel strongly about, is the fact that it has become very urgent for something, anything and everything, to be done to enhance the appreciation of the Naira. And yes! I have heard all the Harvard Business School arguments about productive capacity, inflationary pressures risks and the almost trite concept of allowing supply and demand or market forces determine exchange rates between our Naira and other currencies. And I make bold to say, that I reject them, one, and all!
These theories by seasoned eggheads have not helped Nigeria in course of the preceding thirty years! Isn’t lunacy by any other name, same as doing the same thing over and over, in the same way, but, expecting different results or outcomes?
Have we not seen active government involvements in the supply and demand or market forces outside of shore of Nigeria? Have we not seen how often the governments of America and Europe are quick to subsidize their agricultural, steel, and national defense sectors of their economies? Why must eggheads who are policy wonks in Nigeria advocate and practice Harvard Business School THEORIES to the detriment of the average Nigerian? Why must we practice these theories in isolation to the realities of how the world works?
Certainly, Nigerian policy wonks must be familiar with the frequency with which other governments gets involved or actually interferes in the supply and demand processes or the inner workings of the so-called market forces. Nigerians policy formulators and implementers have to be aware of the regularity with which the World Trade Organization or WTO resort to officiating disputes between the advanced countries of America and Europe as they struggle for supremacy and their resort to trade wars.
Trade wars by war of agricultural and food production subsidies, subsidies of steel and steel production, subsidies for lumber, more social welfare subsidies in housing, transportation and various social safety nets which provide cushions for their citizens; And yet, we are to ape and copy the theories of free-market and subsidies removals that are not believed or let alone, practiced by its most strident proponents?
If it was up to me at this point, I will operate the Central Bank of Nigeria and the entire economy of Nigeria solely for the best interests of Nigerians and Nigeria. I will operate all public policies relating to our economy, as if nearly oblivious of the World Bank and the International Monetary Fund! Look at what has happened to Argentina and Brazil?
Why must the developing world adopt and practice models and theories that are not even considered by the proponents of such theories in the home countries of these theorists?
Developing countries, and in particular, Nigeria in its current state of affairs, with abject poverty, extreme hardships and economic hopelessness, cannot afford these academic experiments while our people die waiting for the very basics and barest minimum of life.
The ultimate Soludo solution to me therefore, must be actions and pronouncements from him, which stems stops and ends the free-fall of our currency the Naira. Thirty years of free-free fall and near crash must now! A new and better day for the Naira begins now!