(Vanguard of Sunday, September 2, 2007)
Last week, the one I called Kate was asking if what Central Bank Governor Prof Chukwuma Soludo had set out to do would materialize. The pointers are that it may not, not because Soludo had breached a section of the Central Bank Act, as has been alleged, but that forces I was afraid would use that alleged breach as a peg to destroy what Soludo had set out to do would laugh last. But for God’s sake, let us set aside the failure to ask for approval and look the proposal straight in the face.
Those asking for the head of Soludo seem to be stuck with the explanation of the Attorney-General and Minister of Justice Michael Aondoakaa that as chief law officer, he advised the president and the president accepted the advice that the Central Bank Governor had to advise the president in writing and the president would have to accept in writing that what Soludo set out to do was going to be done. In the light of that failure to seek approval, the naira redenomination project had to be suspended!
Ordinarily, all the board of the bank would have had to do, in the light of the breach of procedure, would have been to write to the President seeking approval for what they wanted to do and asking that such approval be given with the urgency the situation demanded so that the schedule of change-over would not be unduly disrupted. But did we not hear former deputy governor of the bank and now Finance Minister Dr. Shamsudeen Usman, saying that the CBN has power to do what they did and that the economic committee set up to relate to the bank was going to look at the grey areas only? Did the committee envisage such grey areas to include a threat to the programme of change for the reason only that prior consultation was not made? Are those advising the President not aware that what Soludo was doing was to determine the exchange rate of the naira which the bank has a right to do to the exclusion of any other body, including the presidency? What else can anyone draw from the totality of the provisions of Part IV of the CBN Act, to the effect that the exchange rate of the naira “shall be determined, from time to time, by a suitable mechanism devised by the Bank for that purpose.” (sec 16)
My worry is how it is possible for Soludo to ride slipshod over that “suitable mechanism” which would be driven by men who know their onions or they would not be there at the apex bank? Even more basic is the question whether the preparation to make Nigeria what it is hoped it would become by 2020 did not have all the instruments of change settled in the short and long-terms? Am I to be persuaded that the government’s Financial System Strategy 2020 Vision conference at which the President said on June 18 at Abuja that his priorities are the economy first, the economy second and the economy third, did not detail every segment of activity that would enable us achieve 13% growth per annum for the next 13 years? The President told the stakeholders to “think out of the box and take extraordinary steps” to achieve the annual growth rate which was put at 10 % last year but fell short by 4%.
Soludo and his team are part and parcel of the challenge to make us grow willy-nilly. But to grow, we must not only produce, we must be heard to produce, be seen to produce. What are we producing? Oil and gas? What of other mineral resources if we must depend helplessly on nature? But minus these, which will no longer be there to be reckoned with in the next 30 years, what are we going to be producing, be heard to be producing, be seen to be producing? Japan has a success story to tell and so are some other countries, especially in Asia. But what is it they have been producing, that they have been heard to be producing, that they have been seen to be producing? Which home anywhere in the world has no visible proof of Japanese products?
Thinking out of the box made Japan and other industrious countries what they became? Haven’t you heard of an inventor who is productive, “inventing” only when he is submerged in water? It is people that matter and how seriously we grow them to be part of creating an environment in which ideas will translate into seeds that will be sown to blossom and bear fruit socially, politically, economically, educationally, environmentally and culturally. It is the result of thinking out of the box that people win welfare and security and prosperity battles. So, in challenging situations we find ourselves in, when the call comes from the highest level that we should achieve almost impossible economic recovery targets by thinking out of the box, it is unfair to blame those who may seem to be carrying the exercise too far. So don’t blame me for what I am about to say.
My thesis is that Obasanjo was sold on a package to make Nigeria great in Nigeria, great in the West African sub-region, and even greater in Africa. He wanted Nigeria to be competitive in playing in the big league where the powerful financial teams are stretching out far and wide to acquire assets in a fast shrinking world. For Nigeria to be competitive, Nigerians had to be empowered. The rapid growth of Transcorp can be understood in this light. It was the outcome of thinking out of the box.
The consolidation of banks with a more solid base is senseless without thinking of the picture of a powerful regional economic body emerging in which Nigeria would be a key player. That Obasanjo was selective in empowering people to be in the league can be explained from his point of view. He said at the forum where the PDP presidential train was being hosted in Lagos early this year that he did not regret choosing a few he could empower. He said if he had the opportunity, he would choose a few more to empower. The fact is that there are Nigerians today, and Nigerian banks, that can be present at fora and not be intimidated by foreign interests which had in the past seen them as only useful in positions of fronts and agents.
If anyone wants to try to explain the mindset of Obasanjo, he will not hesitate to concede that our former head of state had never been cut out to play the second fiddle in any arrangement. I can see him wanting to have a naira that is as strong as, if not stronger than any other African currency. He would not see that strength in the picture of 118 -120 yen to the American dollar. No. It would make more sense to see it as one naira to the dollar. But why did he not do so before he left?
The answer is that he had a war to fight and winning that war was more important than the cost involved. Translated for the uninitiated, he had an election to win, do or die? Having introduced higher denominations of the naira to access the funding he needed, and having therefore driven other denominations like N5, N10, N20, and N50 out of use by replacing them, he was in full control of the money pot for the April elections. If he had to introduce the redenomination project before leaving, he would have lost the election because Nigerians would not have been able to see the N20 as the highest currency note being the value equivalent of N2,000! The denominations we were used to were N100, N200, N500 and N1,000 notes which the market woman would hold in her hand and more fully smile at, than the equivalent in denominations of N1, N2, N5 and N10!
To fast-track the growth challenge, thinking out of the box would involve drastic psychological ways to push the issues. When Soludo announced that the naira would be redenominated to the pre-1985 value, he was telling everybody that the naira was being revalued and that an exchange rate that would make the dollar not attractive to hold was in the offing. I do not know how you see it, but that is what I saw.
A friend who wanted to change some dollars to naira 24 hours after the announcement was shocked when he was told that the value of the dollar had fallen and he was being offered N2 less. So, what the currency dealers are seeing is not N1,000 becoming N10. They are not interested in exchanging naira for naira. They are interested in the value of the naira to the dollar. What they see therefore is N1 becoming one dollar, whether the naira is new or old. There perhaps would have been a different picture in the head if the naira would be re-baptized by a change of name.
So, to the currency dealer at the airport and in Surulere, the dollar is being devalued because the naira is being revalued. With redenomination, nothing has changed, but psychologically, everything has changed. The student in London who in 1984 was hawking the pound sterling for N4 when the official rate was N2.5 will be back sooner than we think if we do not think out of the box.
The redenomination is notice therefore to the return of the black market because we are not exploding bombs on Nigeria to awaken every segment of our lives for development which will come because of the redenomination. The $320 billion Nigerians have salted away in foreign banks should be rushing home into a fast-growing economy. The billions of naira notes that politicians kept in ceilings and silos and hidden rooms will emerge to be spent before time runs out on them. And the area of expenditure will be investments.
Our president seems to be under pressure to throw out the redenomination of the naira in the reform programme and people are reading ethnicity into this, just as they accused Obasanjo of encouraging vested interests when he wanted to empower some people in the economy to the exclusion of others. But if the president is sold on the reform programme, he must allow more thought on the place of a redenominated naira in his programme. That it had never been part of the reform packaging should emerge from the discussions.
If Idi Amin can ask that a retired colonel who was accused of using corrupt money to set up an industry that employed 400 Ugandans should bring more of his loot from abroad and run his textile factory, why can we not ask those who have billions trapped in foreign banks to bring them home and fast-track our growth plans with the promise that we will ask no questions, instead of the money getting lost when the owners die? That, sir, is one way, like plea bargaining, of thinking out of the box!
(Published in Vol. 2 of Democracy Watch, A Monitor’s Diary by Tony Momoh, pages 388 – 392; Lagos, 2008).