Not So Well Done, Prof. Soludo: Nigeria Former Central Bank Governor

Published on 6th July 2009

Prof. C. Soludo Photo courtesy
Prof. Charles Chukwuma Soludo was never a seasoned banker nor someone with in-depth understanding of the roles and functions, and the effective tools a Central Bank can deploy to make an economy come alive. Not that most before him did any better, but considering how his fan club members trumpeted the fact that he made 'first class', and as a result, he is a superstar banker, beats me. Making a 'first class' is not a measure of intelligence. I say 'all that glitter is not gold' as the educational standards in Nigeria has fallen and the content of the 'first class', may not really measure up. 

That someone was able to regurgitate materials, pass exams, and often copy and paste ideas, does not mean when in a position such as CBN Governor, they will excel. While a 'first class' pass is great, it is not a measure of how well one can do later in life. If Nigeria pays attention to educational diplomas not minding that such only contribute about 20% of what is needed to be successful, the country will always fall short. Take a look at Kenya. President Kibaki, made 'first class' at the London School of Economics, but look how his politics and economic prescriptions for Kenya have always fallen short. So, apart from impressing mostly ignorant countrymen, how have all these Africans that have towering and impressive academic diplomas done well for their country? The answer is a resounding dismal outcome. 

Nigeria does not really have a functioning economy outside of the oil/gas and banking sectors. The CBN is mainly a bank for the government and is not an independent institution that deploys aggressive and effective monetary and fiscal policies to lobby the government for programs and reforms necessary to enhance the economy. Outside of the controversial equalization scheme and recapitalization of banks that Mr. Soludo engineered, the latter with some success, the naira versus dollar/pound exchange rate has continued to devalue any gains made in the economy. 

Throughout Mr. Soludo's tenure, the naira never managed long periods of stability against any of the two currencies but went from a potential convertible currency to a worthless currency whose value is secured on the amount of foreign exchange reserve Nigeria has. The volatile nature of the naira has made trading in the currency very difficult, with the attendant result that most Nigerian business persons prefer to be paid in 'hard' currencies. There is no backing of the naira by any program that when critically examined is considered an effective tool to shore the currency. When the value of any currency is measured based on the amount of foreign reserves, such a currency is not worth much and fluctuates depending on the price of a single or a combination of commodities, in the case of Nigeria: Oil. The naira weakness, is an indication that local production is non-existent. 

The borrowing rate in Nigeria is (and continues to be) one of the highest. How can a business person borrowing at 35%, with pay back period that is no more than 1 year survive? Mr. Soludo, should have fought to see that borrowing rate is no more than 8%. That would have eliminated the scrambling by Nigerian banks to be correspondent institutions for foreign lenders. Any economy will receive a boost when money is lent at a single digit or at least 8%, in case of developing nations, as opposed to 35%. Such would have stabilized the naira, making local production and consumption increase and reasonable. 

Mr. Soludo appeared to be more interested in a 'copy and paste' policy without fully explaining why some programs should be encouraged. If he is such a bright mind, how much lobbying did CBN do with the National Assembly to promote some of the ideas he wanted to introduce? I believe that duly educating the National Assembly and seeking their political support to improve the economy and the naira, would have enhanced his tenure. Instead, Mr. Soludo spun programs that were not understood and in turn exposed himself to unfriendly reaction by his bosses. 

Until the interest rate in Nigeria is brought down to a single digit, no amount of monetary policy will work. That is the first order of business in reforming the economy and must take precedent and priority over any equalization/stabilization of the naira.  

Between Heaven and Earth is Government and between Government and the People, is Money. Until developing nations learn the tools of monetary policies with manipulations needed to shore their currency, stretching their arms for alms to developed nations will never pull them out of perennial dependency and cycle of poor programs. If sovereign rules entitle nations to reasonable monetary and fiscal policies, why must they be poor? It is more a beggar attitude than anything.  

Mr. Soludo should continue to seek other ways to be relevant. He may be like Mrs. Ngozi Okonjo-Iweala, who after serving as Finance Minister is overseas working for the World Bank. Mr. Soludo should now go get a real job as a banker or go back and really become a 'professor' of substance teaching in some Nigeria university. But I doubt this. When I saw Mr. Chu Okongwu in 2004, a man that was once both Central Bank Governor and Finance Minister of Nigeria, I was perplexed by his appearance. And I wondered after these individuals leave office, how come their life always looks miserable?  

There should be life after service, assuming the so called 'bright' minds in Nigeria/Africa know how to make things happen.  

By ejike okpa ii

Next Generation Fellow, The American Assembly


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