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MALLAM Sanusi Lamido Sanusi,would go down in history as the most controversial Governor of the Central Bank of Nigeria (CBN). From his actions and words since his appointment as the boss of the apex bank five years ago, he comes across as one who revels in controversy. No doubt his love for activism could be responsible for this.
There is really nothing wrong in being controversial, especially if he is sure about his facts on any issue he wishes to engage in. But this appears not to be the case with Sanusi. He would go down as one banker whose figures the public cannot depend on. Long before the brewing allegation of $49.8billion cum $10.8 billion/$12.8 billion and later $20 billion unremitted revenue somersaults, the Kano Prince had earned a reputation in voodoo presentation of figures and avoidable flip-flops.
Sanusi began his journey of manipulating Nigerians with controversial figures in 2012 with his allegation that the National Assembly gulps 25 percent of the national budget. He had told Nigerians during a convocation lecture at the Igbinedion University, Okada, Edo State, that the huge cost of running the government was inimical to national development and went ahead to cite the example of the National Assembly which, he claimed, gulped a whopping 25 percent of the national budget in 2010.
Both the House of Representatives and the Senate naturally took umbrage at Sanusi's statistics describing it as a ploy to incite the Nigerian public against the legislative arm of government. When he was called by the Senate to explain his figures and where he got them from, he said he stood by his figures which he claimed were sourced from the Budget Office.
Upon further interrogation on how the National Assembly's budget of N136.25bn for the year translated to 25 percent of the N3.9 trillion national budget, he recanted explaining that what he meant was that the National Assembly budget was 25 percent of total Federal Government overheads and that he was misquoted by journalists.
At the end of the inquiry, it became clear that the figures Sanusi relied on for his allegation against the National Assembly were not entirely correct as they did not take into consideration service wide votes. The then Minister of Finance, Mr. Olusegun Aganga, summarised the issue thus: "The document which Sanusi relied on did not consider service wide votes in the course of computation. Besides, his submission could not be totally written off as misleading, although it might not be as accurate as it should be."
Having been proved wrong, Sanusi resorted to blackmail. Instead of apologising for his gaffe, he resorted to threatening the Senate with resignation, saying that he was willing to tender his resignation as CBN Governor and that he was not born with the office. The Senators let him off the hook having established the fact that the CBN boss' figures were not completely correct as stated by Aganga.
Left off the hook without any sanction by the National Assembly, Sanusi was emboldened to rev up his ride with controversial figures with an allegation of unremitted $49.8bn oil revenue against the Nigerian National Petroleum Corporation (NNPC) in September 2013. In a letter to the President, Sanusi alleged that by the records available to him a whopping $49.8bn of revenue from oil sales between July 2012 and June 2013 was missing. How a banker and the chief economist of the nation could think and believe that such a huge amount of money could just disappear and the country would not be in a huge financial and economic mess beats the imagination!
But Nigerians believed him. The reasoning is: He is the CBN governor,as such, he should know. When the inter-agency team charged with the responsibility of reconciling the figures to verify the truth behind Sanusi's allegation came up with its interim report indicating that $39bn was actually remitted into the Federation Account as against Sanusi's $49.8bn, it became clear that the trust Nigerians placed on him as someone who should know was actually misplaced.
He later confessed that the crude oil export documents he relied on for his allegation did not indicate that NNPC lifted some of the crude oil on behalf of other government agencies; a point NNPC alluded to when it explained that the CBN boss's allegation was borne out of his ignorance of the workings of the oil and gas industry.
Barely two hours after the joint press conference where the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala; Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke; and the CBN Governor all told the world that $39bn of the original $49.8bn alleged to be missing by Sanusi have been reconciled with a $10.8bn outstanding yet-to-be reconciled, Sanusi told the Committee that what was outstanding was $12bn and not $10.8bn.
This is inspite of Dr. Okonjo-Iweala's earlier submission of $10.8bn. The question that arises from this and which most Nigerians have refused to ask is: Where did Sanusi get the extra $1.2bn he added to the $10.8bn yet-to-be-reconciled revenue to arrive at the $12bn he came up with at the Committee's hearing barely two hours after agreeing that what was outstanding was $10.8bn?
Again, Sanusi was left unsanctioned for misleading the public and heating up the polity unnecessarily with his false figures. His supporters argued that the yet-to-be-reconciled $10.8bn (which they chose to brand as "missing") was enough justification for the false alarm the CBN boss raised. NNPC came up with the explanation that the $10.8bn was not missing but was used for some of the critical operations it carried out as part of its statutory duties. It also provided legal backing for the expenditure (Section 7 Sub-section A and B of the NNPC Act which provides that the corporation can engage in such expenses and deduct same from proceeds of crude oil sales).
This effectively robbed Sanusi of the victory or justification he thought the so-called "missing" $10.8bn gave him.
Sanusi's fresh allegation of $20bn unremitted oil revenue against NNPC could therefore be seen as a gambit to redeem his image which has been thoroughly pulverized by his misguided adventure with false figures. For the fresh figure of $20bn unremitted oil revenue he has pushed into the public space, he has come up with series of documents to support his case just as he did in the last two instances. He appeared to have forgotten the vital lesson from his previous misadventures that figures could seem infallible when seen from a particular perspective that does not depict the entire picture.
The last hearing of the Senate Committee on Finance led by Senator Makarfi where the inter-agency committee chaired by Dr. Okonjo-Iweala presented its final report proved very instructive. Relying on the certification given by the Petroleum Products Pricing Regulatory Agency (PPPRA) which is statutorily empowered to verify petroleum products imports, the inter-agency team agreed that the outstanding $10.8bn has been accounted for by NNPC.
Sanusi himself agreed that since the PPPRA has signed off on the NNPC figures, he has no problem agreeing with the figures. The new issue the inter-agency team came up with was that they lacked the expertise to thoroughly assess the evidence supplied by NNPC for its claims, so it called for an independent forensic audit to look at the books of the various agencies involved in the collection oil revenues with a view to coming up with an authentic report to clear the air once and for all.
While Okonjo-Iweala owned up to the fact that the inter-agency team lacked the technical expertise to scrutinize the evidence supplied by NNPC, Sanusi on his part stated that neither he nor the CBN has the technical expertise to determine how much crude oil the Nigerian Petroleum Development Company (NPDC) produced and what part of it should accrue to the Federation Account. But in another breadth, he said he stood by his $20bn unremitted oil revenue figure. The question that arises from all these is: How did he arrive at the fresh figure of $20bn unremitted oil revenue when he has acknowledged lack of expertise in the rudiments of the business from which the revenue in question flows?
The two points that have emerged from the Senator Ahmed Makarfi-led committee hearing are: 1.) that further expert opinion by way of forensic audit is required to scrutinize the documentary evidence provided by NNPC for the shortfall of $10.8bn revenue into the Federation Account; 2.) that further expert opinion is required by way of legal interpretation by the Attorney General of the Federation on the legality of the Strategic Alliance Agreement between NPDC and Atlantic Energy and Seven Energy and the revenue that accrues to the two companies on the one hand, and how much of the revenue that accrue to NPDC should be swept into the Federation Account. Clearly, these are outside the range of what Sanusi can speak on or determine with any certainty. It is therefore wrong to take Sanusi's figures in this matter as the whole truth and on the strength of that pillory NNPC as a section of the media and civil society are currently doing. Besides, there is nothing in Sanusi's track record with figures that commends him for such support.
Going by his antecedents with figures, it would be remiss for Nigerians to depend on Sanusi's fresh figures. He has taken Nigerians down this futile road before, it would be foolhardy for anyone to take this figures as the gospel. It is wise to wait for the reports of the forensic auditors and the Attorney General as recommended by the Senate Committee on Finance than to allow the nation be taken on a ride by an unsure banker whose figures cannot be relied on.
Audu Obanta, US based Nigerian lawyer in Edgeware Court, writes from Bowie City, Maryland USA.
Nigeria's president asked central bank chief Lamido Sanusi to resign over a leaked letter about missing oil funds, a source has confirmed to the BBC.
But Mr Sanusi refused, telling Goodluck Jonathan that others could have leaked his memo about the state oil firm's failure to account for $50bn (£30bn).
Ex-President Olusegun Obasanjo referred to this in a letter criticising Mr Jonathan's leadership last month.
President Jonathan was angered by the criticism, denying government fraud.
In a rebuttal letter before Christmas, the president said that Mr Obasanjo, who is also a member of the governing People's Democratic Party, was threatening "national security" by whipping up opposition to his administration.
He dismissed allegations of "high corruption" in government and said that Mr Sanusi's allegations - made in a letter dated 25 September - were "spurious".
A respected banker, Mr Sanusi has spearheaded reforms in Nigeria's troubled banking sector since his appointment in 2009.
According to Nigeria's This Day newspaper, President Jonathan demanded the bank chief's resignation over the phone, asking him to leave by 31 December 2013.
But in a heated exchange, Mr Sanusi refused to leave his post before his term ends later this year, a source confirmed to the BBC.
Mr Sanusi said that about $10bn (£6bn) was still unaccounted for by the Nigerian National Petroleum Corporation (NNPC) and expressed surprise that those responsible were not being asked to resign instead.
Mr Jonathan accused the Central Bank governor of leaking the letter to Mr Obasanjo after which the full letter was published in the Nigerian media.
Mr Sanusi said the leak could have come from the presidency or ministry of finance and the blame could not lie with him.
Nigeria has recently been listed among countries that could become the next set of economic giants in years to come - known as the "Mint" nations.
Correspondent says deep divisions have engulfed the PDP over the last year amid fears that it could lose the election under Mr Jonathan's leadership.
Sanusi bags 2013 Emerging Markets Award
Emerging Markets Magazine has honored the Central Bank of Nigeria's Governor, Sanusi Lamido Sanusi with the 2013 Emerging Markets Central Bank of the Year Award for Sub-Saharan Africa for the three consecutive years.
The reason cited by the Director of Emerging Markets Magazines, John Orchard for the award was Sanusi's contribution to the economic and financial stability of Nigeria especially the reduction of inflation rate to a single digit and contribution to enhancing the price stability of the country.
At the award ceremony held at Washington DC and attended by governors of central banks and finance ministers from Africa, Europe, South America, Asia, and the Middle East regions, the central Bank Governor of Njgeria, Sanusi thanked Emerging Markets Magazine for the award.
Sanusi further emphasized and acknowledged that the entire country' s economic team including the workforce at Central Bank of Nigeria and Ministry of Fiance have partake in the country's progressively stabilized economy.
Nigeria's finance minister, Dr. Ngozi Okonjo-Iweala and former finance minister Dr. Mansur Muhtar whom were present at the award ceremony was acknowedged by Sanusi for their enormous contributions toward the microeconomic stability of Nigeria.
Sanusi Lamido Sanusi, Executive Governor of Central Bank of Nigeria (CBN) in next ten months will vacate his position as the chieftain of the country’s apex bank. He showed no interest in asking for the renewal of his job when the first term elapses in 2014.
Sanusi without a doubt has contributed to the macro-economic stability of Nigeria. But he was without controversy, some of his undertakings were not popular but he found strength, if not solace in the application of sound monetary policy. With the monetary tool at his disposal he has managed to maintain a fairly stable monetary policy. By lowering inflation, Sanusi has striven and was able to maintain some-what decent price stability. A reasonable price stability will be taken for what is it within the context of Nigeria’s reality. By putting into consideration that Nigeria economy is an importation orientated economy with oil as a major source of foreign exchange must be acknowledged.
When Sanusi came in there was financial instability and liquidity crunch, which was triggered by poor management especially on the failing banks that were over laden with toxic debts. He was able to reform the failed banks and re-capitalized them. Sanusi performed a delicate task of infusing capital into the banking sector without overheating the economy.
Although he was successful with the fixing of the banks but the inflation rate was not immediately suppressed. He promised to tame the inflation, which became difficult, if not elusive to accomplish but he eventually brought down inflation rate at less than ten percent as he earlier promised.
The tightened of the monetary tools may have brought down the inflation rate, but downside was the high interest rate that stood over 12 percent, which is not something to write home about. High interest rate may be attractive to investors in the capital market but it is not conducive for sustainable economic growth. High interest rate do discourages borrowing and that may dampen economic growth.
In reality with regards to an import and oil economy, the power of monetary policy may be limited and even waned. The best possible paradigm is to get the monetary and fiscal policies to be complementary. This is where the intervention of the executive and legislative branches becomes imperative. The complementary objective is to fashion out a pro-growth tax policy and to build electric infrastructure to incentivize economic growth and achieve an endurable macro-economic stability.
The answer to the economic problems may be found in the fiscal policy. The executive and law makers must work together to implement policies that could stimulate the economy and incentivize investors to infuse capital in the economy. The tax policy that is favorable for investment and repatriation of capitals are necessary to make the economy grow faster and bountifully. Lower taxes and meaningful regulations are good to catalyze the weak economic growth. .
Moderation in taxes and logical regulations with regards to fiscal policy may open the door to a steady and faster economic growth. The provision of durable infrastructures especially electricity and security hold the key to a growing and sustainable economy.
Sanusi’s tenure was not all rosy; some of his signature achievements including the introduction of Islamic banking was controversial. The opponents of Islamic banking argued that Nigerian constitution is secular and that the introduction of Islamic banking may reinforce sectarian politics. But he never bogged down nor back down, he stood up and judiciously defended the premise of Islamic banking in Nigeria.
Sanusi was quick to donate money to many organizations and institutions does not sit well with many law makers who accused him for overreaching and usurpation of the legislative power of the purse, the power to appropriate funds. Many legislatures insisted that constitution that guarantees CBN governor of independence must be taken away. But eventually cool heads prevail and the constitution was not altered and CBN continues to enjoy its independence.
Sanusi neaerly made the greatest blunder of his professional life asa banker by his decision to print N5,000 naira bank note but he was averted by ordinary Nigerians who seems to know more about the subsequent effect of such an action more than the white collar professionals who sit in Abuja air-conditioned offices.
Emeka Chiakwelu, Afripol Principal Policy Strategist and Analyst commented," By printing a large denomination of naira notes, the value of the naira will nosedive while inflation will gain momentum and that can be disastrous to the economy. Sometimes, our policy makers especially those of them that are making important financial decisions act like those that do not grasp the fundamentals of monetary and macro economic theories. One cannot quench a burning fire by throwing kerosene into it. How can you tame inflation by application of tools that will make it worse than before? I am totally disappointed with Central Bank of Nigeria."
Chiakwelu further stressed, "Does Nigeria desire to make naira become worthless akin to Zimbabwe currency that is miserably worthless? Is Nigeria policymakers ever ‘chill out’ and think critically on how their decisions may destroy the house they are trying to build. These impulsive financial and monetary decisions were what wrecked the economy of Zimbabwe. Nigeria is tilting to the path of Zimbabwe economic gulag where hyperinflation and incoherent economic decision will doom the nation’s economy."
Sanusi support for the removal of fuel subsidy was not universally acceptable to most Nigerians especially the large chunk of the country's poor that are surviving with less than two dollars per day. The danger they perceived in the removal of fuel subsidies were buttressed when the removal was partially implemented. The prices of household products were hiked up, transportation fares and kerosene prices were beyond the reach of the average Nigerians. Even inflation rate was briefly higher than anticipated and all these slowed down, if not muted the full implementation of fuel subsidies removal.
In totality, Sanusi will leave behind a stable monetary policy but the work of macro-economic stability is beyond the limited function of the governor of Central Bank. When fiscal and monetary policy becomes complimentary a more stable , successful and sustainable economy becomes imminent and viable .
The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, on Thursday, decried the low literacy level in the North saying that 93 per cent of female children in the region lacked secondary education.
The apex bank boss, who said this at this year’s Isaac Moghalu Foundation Leadership Lecture and Symposium held in Abuja, said the situation, if left unchecked, was detrimental to the economy.
The governor sited Jigawa State, where school completion rate among female is as low as seven per cent as an example.
Net enrolment of girls in schools in the country, according to him, is 22 per cent.
He said, “In the North-West, 70 per cent of women between 20 and 29 are unable to read, compared to 9.7 per cent in the South West.
“Only three per cent of females complete secondary education in the Northern zone. Now how do you build the country when 93 per cent of the girls in the most populous region of the country do not complete secondary schools?
“We are only treating the symptoms and not the ailment. We are spending so much on security compared to education and healthcare services. We cannot succeed in security without fixing the original problems
“If the women are sent to school and they have access to proper healthcare services, there may not be need to spend so much on security.”
He described illiteracy among women in the region as frightening, adding that senior female officials in the country had not done enough to assist the women folk.
Sanusi said, “The problem we have is that women are their own enemies. If you are a female minister or hold an important public position and after four years you cannot say what you did for women, shame on you.
“Many of these women secure these positions on the platform of gender, ethnicity among others and when they get there, they forget the ladder on which they went there.
“They become the queen bee and do not want to share the limelight with other women.”
He charged women to hold their counterparts, in leadership positions to account, adding that such move would help to reduce neglect.
Also speaking at the event, the Executive Director of IMoF, Mrs. Maryanne Moghalu, said the foundation would continue to focus on key areas to assist the society.
The areas, she said, include human capital development through education for under privileged children, strategic learning infrastructure support for educational institutions, vocational skills training, and public policy advocacy.
Moghalu added that the foundation would also examine the success of the country in developing women to leadership positions.
She expressed the need for women to be well trained and prepared for leadership roles in the public, private and non-profit sectors.
Moghalu stressed that the absence of women in leadership position had been identified by many countries including Nigeria as a major challenge in the process of economic and social development.
The foundation was founded in 2005 in memory of Mr. Isaac Moghalu, one of Nigeria’s pioneer diplomats and a former permanent secretary.
Source: The Punch
From a distance the Northern Nigeria environment shimmers like brown jewel in the darkness of space, the rich and incomparable enclave has been destroyed by it's political leaders! They remain accountable for turning the enclave into a cirque of emptiness.
Mallam Nasir El-Rufai, Sanusi Lamido Sanusi and Shehu Sanni have and share things in common! The trio are of Hausa-Fulani ethnic stock of Northern Nigeria, they are diminutive, with courage and boldness implanted in them, they dare, they say as it is, no hods barred! With the demise of Western Nigeria's vociferous and anti-corruption crusader, late Chief Gani Fawehinmi, the star has now sifted to the Northern axis of Nigeria and the trio could be described as "Aurora Borealis" The Northern Hemisphere light!
Mallam Nasir El-Rufai's 'Accidental Public Servant' explains former president Olusegun Obasanjo's ill fated third term hidden agenda [still no comment from Obasanjo], Sanusi Lamido Sanusi, [Nigeria CBN governor] exposure of National Assembly overhead cost and the resultant effect on Nigeria's economy [still no comment from the National Assembly], Shehu Sanni's exposure of a colossal revenue the Northern governors had collected and still the region remains backward and poorest [still no comment from the Northern States governors].
Sani Shehu (left) El-Rufai (Right)
Despite some mistakes about Mallam Nasir El-Rufais' handling of restoration of Abuja City master-plan, his tracks remains unique. The ban of commercial motorcyclists from Abuja City center, the unique Abuja Urban Mass Transit, Abuja Geographical Information System [AGIS], and Abuja Environmental Protection Board [AEPB], he indeed tried his best.
Sanusi Lamido Sanusi Nigeria's GBN Governor, a Kano prince and a seasoned economist, Shehu Sanni and Mallam Nasir El-Rufai, the trio remains a beacon of hope and a shinning light [Aurora Borealis] to the Northerners who has wallowed [and still wallowing] in poverty, unemployment, and poor health care facilities.
What I want the duo to address now, is how the Northerners rule of Nigeria for about 35 year and had nothing to show for it! From decay of infrastructure to army of jobless youths, poverty, stagnation, destruction of lives ans properties by Africa's second deadliest Islamic fundamentalists [after al-Shabab of Somalia], the Boko Haram, insecurity, dearth of industries in the zone, rusty country side, polio savagery, lead poisoning. And now the Northerners is insisting of coming back to occupy Nigeria's No 1 seat. The Yoruba's will called it 'Agogo Eewo' 'Gong of Taboo', it must not sounded, never to be heard! Are they coming to clear the alluvium of the deluge of these?
With available data at their disposal, the trio will be able to prove that the crop of Northern rulers caused Nigeria's decay and Northern candidates for 2015 Nigeria president will be a hard nut to sell to Nigerians voters [electorates]. Will unbend-able Gen Buhari step down for Alhaji Sule Lamido?
My ink has run dried!
Taiwo Lawrence Adeyemi.
Country Representative; Whisper Poetry.
Cells:+234  812-148-2077.
+234  816-950-3218.
Lamido Sanusi, the Governor of the Central Bank of Nigeria, is noticeably extroverted and loquacious. A public intellectual, the hell-raising technocrat would have been in his element in a university department of economics or a right-wing policy research centre where his managerialist and neoliberalist perspectives on the economy would have had full play. As the helmsman of the nation’s apex bank and lender of last resort, Sanusi comes across as frighteningly apolitical and stormy person, in a profession reputed for reticence and deadpan demeanour. His latest intervention, canvassing among others, a 50 per cent cut in the public sector workforce, a drastic pruning down of the legislature, the 36-state structure as well as the number of local government areas have had full play in the media.
In a vigorous reply to the acerbic criticisms, not to say uproar that trailed the publication of his opinion, Sanusi in a discussion with reporters in London argued that his views were sensationalised out of context but nonetheless went on to add that “the Central Bank is not a popularity contest. My job is to give frank and honest opinion as to where I think the economy should go”. Giving policy advice should of course take the form of a formal, or informal behind-the-door briefing to decision makers; the wisdom of giving advice on sensitive national topics on the pages of newspapers where they are in any case subject to trivialisation and the pressures imposed by headlines and deadlines remain extremely debatable. It is possible, however, that Sanusi was trying to raise a debate around matters which he had canvassed in policymaking circles, in which case he should have anticipated much of the spirited and hostile responses to his suggestions, especially from interest groups fingered in his dangling axe thesis. Apart from the extremely controversial dimension of sacking half of the nation’s civil servants, much of what Sanusi had to say concerning the urgency of prunning the political superstructure had been voiced at different times by others, including Prof. Pat Utomi, who tirelessly advocates part-time legislators, as well as Bola Tinubu, who recently called for a unicameral legislature to bring down the ever- rising tide of national expenditure.
These proposals are eminently sensible and should feed into the ongoing constitutional review process. It should be noted, however, that they do not exhaust the problems of our national prodigality and bonanza-spending which have assumed alarming dimensions under the Goodluck Jonathan administration, as illustrated by recent decisions to increase the presidential fleet of jets, as well as construct a banquet hall at the Villa costing N2.2bn. In contemplating the still-raging public storm that greeted Sanusi’s reform proposals, we encounter what this writer has elsewhere described as the ‘tragedy of reforms without reformers’ denoting a mindset which assumes that political leaders can manifest an opulence which will make American billionaires green with envy and yet call on the populace to tighten further their already tight belts beyond their survival margins. Querying Sanusi’s own moral credentials, for example, the National Assembly spokesperson, Victor Ogene, argues that not only has Sanusi jerked up the CBN workforce to 6,000 from 5,000, but that the CBN budget for last year is double that of the National Assembly. Cited, too is the IMF’s statement that for every N100 spent on services and projects in Nigeria, N80 ends up in the private pockets of corrupt officials and their cronies. In other words, Sanusi’s reformism, if it is a genuine one, should have commenced not just at the institution he oversees, but at the entire ensemble of governmental institutions, ethos and racketeering that increasingly define the current administration.
One can further illustrate the contradictory and superficial nature of Sanusi’s panacea with reference to the issue of workforce downsizing which he advocates. Initially downsizing was viewed globally as a quick-fix by distressed corporate and governmental organisations; a lower wage bill was expected to translate to a smarter institution more efficiently run and task-oriented. Study after study has shown, however, that the expected yields from downsizing, construed narrowly as job layoffs, hardly materialise. As one human resources expert once wittingly quipped, “Downsize, Rightsize and Capsize”. For example, a recent survey which appeared in the Wall Street Journal found out that of 1,000 United States firms which downsized, only 46 per cent had reduced expenditure; 32 per cent had a bulge in profit; 22 per cent had increases in productivity; and 22 per cent successfully reduced bureaucracy. Beyond these dismal statistics is the more disturbing fact that downsized organisations often went down with profound human resource ailments arising from survival syndrome and insecurity of those who were untouched by the exercise much less of the deleterious effects of throwing more workers into an economy already reeling from high unemployment. In the case of governmental institutions in Africa, retrenchment, as it is popularly called, is often followed by backdoor swelling of the workforce through several unmanned entry points and is hardly attended by reduction in running cost. Thus, what the right hand surrenders, the left hand retrieves by stealth.
In the same manner as management experts are increasingly emphasising corporate reinvention rather than downsizing, merely calling for a reduction of the workforce addresses only a tip of the iceberg of footloose spending that characterises the Nigerian government. More to the point is the urgency to challenge the way and manner in which governmental businesses are conducted which would include an investigation of the myriad loopholes through which funds meant for development are illegitimately diverted. Such a project which would be a genuine transformation agenda as opposed to an oratorical one will seek to change the ethos of windfall spending and ingrained indolent and unaccountable culture which facilitates the easy looting of the treasury by those at the top as well as the retooling of the workforce and supportive technologies. This, of course, would mean that those championing such reforms will manifest the sacrificial values which would convince the rest of the nation that they mean business. It is only in this context that piecemeal suggestions like reducing the admittedly bloated political superstructure will indeed make sense. Needless to say that initiating and sustaining that limited reform programme would require strong and disciplined leaders who can stay the course. Leaders who advocate one thing and do another are hardly candidates for any such political and economic transformation.
The furore and outburst at Sanusi’s suggestions, one suspects, constitute a referendum of sorts on an administration perennially calling for sacrifices from the hard-pressed citizenry but insists on maintaining for its own members a luxurious and insensitively affluent lifestyle. To sustain such prodigality, the administration, apart from increasing taxes and removing subsidies, has gone wildly aborrowing to the tune of 2.57tn in two years as The PUNCH revealed on Tuesday December 4, 2012. These are the real reasons one fears for the uproar against Sanusinomics.
Nigeria’s relative macro-economic stability of the past decade has been aided by the groundwork of reforms embarked upon by two-term finance minister, Ngozi Okonjo – Iweala and Central Bank of Nigeria (CBN) governor, Sanusi Lamido Sanusi.
In 1995, Nigeria’s inflation rate was a vertigo inducing 75 percent, while the naira which was at virtual parity with the dollar in the early eighties had tumbled to N21/ $1 by 1999, a more than 400 percent devaluation, according to a BusinessDay analysis of available CBN data.
This was of course in the official market, which met less than a tenth of dollar demand; in the parallel markets where the naira exchanged for N88/$1(in 1999) the rate of naira devaluation was much higher, at over 640 percent, between 1980 and 1999.
“Macro stability in the past decade has resulted fundamentally from the fiscal reforms put in place by Okonjo-Iweala in her first term (in particular, capping the deficit at 3 percent of GDP), and more recently, from the tighter monetary policy regime put in place by the
CBN,” said Razia Khan, regional Head of Research, Africa, at Standard Chartered Bank, in an email response to questions.
In the 20-year period (1980 – 1999) the CPI averaged 25.8 percent. This compares with the 2000 to 2010 period, when inflation averaged 11.9 percent, while the naira has moved from N110/$1 in 2000 – to N157/$1 in 2012, a 42 percent devaluation in ten years, and a testament to the relative macro-economic stability in the latter period.
The reforms have aided the development of the domestic bond market as well.
Moribund until 2003, the domestic bond market today finances much of the FG budget deficit, and some long term infrastructure projects.
This has eliminated the so called ‘ways and means’ (money printing) deficit financing, rampant in the eighties and nineties, and a major source of inflation.
Nigeria’s bond market development has benefited from the lifting of the 1 Year holding period restriction on FGN bonds by Sanusi last year, and a hike in interest rates, leading to attractive yields, and ultimately, the addition of Nigerian Bonds to JPMorgan’s GBI-EM and the Barclays EMLC index.
“It is very unlikely that foreigners would be showing the interest they currently show in Nigeria’s bond market, in the absence of reassurance on these reforms,” said Khan.
The size of the domestic bond market in 2011 was N9.5 trillion ($60 billion), made up of AMCON bonds (57.42 percent), FGN bonds (37.21 percent), Sub nationals (3.58 percent) and Corporate bonds (1.79 percent).
The value of transactions in the domestic fixed income market is up four folds since 2006, reaching a value of N14.7 trillion at the end of 2010, from an almost negligible level in 2000 according to data from investment firm, Vetiva Capital.
“The launch of the Primary Dealers Market Makers platform in 2006 ensured some broadly consistent trading activity in on-the-run bonds, and two-way quotes over-the-counter,” said Samir Gadio, an emerging markets strategist at Standard Bank.
Meanwhile, the nation’s yield curve has extended from 3 months to 20 years, with 3year, 5 year, 10 year and 20 year bonds, routinely issued by the Debt Management Office (DMO).
According to Khan, the important building blocks needed before this could become possible, were put in place by Okonjo-Iweala and Sanusi.
“As a result of the increased flow from offshore investors, the Naira is stable. This has helped too, with macro-economic stability, and acts as a check on policies that should continue to guarantee stability”, he said.
Nigeria last week got an upgrade and new coverage of its sovereign debt, as Standard and Poor’s (S&P) upped it to BB- and Moody’s initiated coverage at the equivalent level, due to progress on reforms.
*Unemployment rises to 23%
*Retains MPR at 12%
*Gross Domestic Product (GDP) grew by 8.68
Output and Prices
Provisional data from the National Bureau of Statistics (NBS) indicated that real Gross Domestic Product (GDP) grew by 8.68 per cent in the fourth quarter of 2011 up from 6.64, 7.72, and 7.40 per cent in the 1st , 2nd and 3rd quarters, respectively. The overall GDP growth rate in 2011 was estimated by the NBS at 7.69 per cent, marginally lower than the 7.87 per cent recorded in 2010. This projection is based on the estimated Quarter III and Quarter IV growth rate of 7.40 per cent and 8.68 per cent respectively. The 2012 Budget proposal assumed a growth rate of 7.2 per cent. This is in line with the latest World Bank forecast of 7.1 per cent growth for Nigeria in 2012. The Committee noted with satisfaction, the good 4 performance of non-oil activities including agricultural and services sectors as well as the recovery in crude oil output in 2011, particularly in the fourth quarter. In the Committee‟s view, the opportunity to build on the robust non-oil growth with further investments in infrastructure and manufacturing and processing activities should be utilized in order to mitigate any negative impacts from the likely external shocks during the year.
The Committee also noted the NBS survey data on the rise in the unemployment rate to 23.9 per cent in 2011 from 21.4 per cent in 2010. The latest unemployment rate is considerably higher than the 12.3 per cent recorded in 2006 by the NBS survey, which suggests that the consistently high output growth during this period had failed to create adequate employment for the growing labour force. In view of this, the Committee recommends that in addition to the structural reforms being currently pursued, emphasis should be placed on technical and vocational education in order to produce a labour force that is compatible with the current stage of the country‟s development.
In 2011, the Inflation rate fluctuated within the lower double-digits range during the early part of the year, but moderated thereafter. The year-on-year headline inflation rate, which was 12.1 per cent in 5 January 2011 rose to 12.8 per cent in March, before moderating to 10.2, 10.3, and 10.3 per cent in June, September, and December, respectively. Similarly, food inflation rose from 10.3 per cent in January 2011 to 12.2 per cent in March and thereafter moderated to 9.2, 9.5, and 11.0 per cent in, June, September, and December, respectively. Core inflation also rose from 12.1 per cent in January to 12.8 per cent in March stabilizing at 11.5, 11.6, and 10.8 per cent in June, September and December, respectively.
The headline inflation rate stood at 10.3 per cent in December 2011, by far the lowest since December 2008 and lower than the average of 12.75 per cent during the period 2001-11. Food inflation, at 11.0 per cent in December 2011, was lower than its level in the preceding three years. Similarly, the year-on-year core inflation declined in
2011. At 10.8 per cent in December 2011, core inflation was marginally lower than the 10.9 per cent in December 2010 and 11.2 per cent in December 2009. The Committee noted that both food and core inflation have remained high exerting immense pressure on the headline inflation rate. The Committee was therefore of the view
that while the focus on growth continues to be a key imperative, the containment of inflation equally deserves immediate attention. It noted that the inflation outlook in the short- term will be impacted by the anticipated fiscal injections in relation to the proposed 2012 budget, the recent partial deregulation of pump price of PMS, and 6 new tariff regimes on certain food imports. The Committee has also noted comments indicating possible plans by the National Assembly to revise the budget benchmark price of oil from $ 70 per barrel to $75 or even $80 per barrel. Such a measure would significantly increase expenditures especially given the already high oil output assumptions.
In addition, it would reduce accretion to the Excess Crude Account (ECA) and increase the inflationary pressure already in place on the supply-side. In the event of this happening, the likelihood of further tightening during 2012 increases. The Committee would like to reaffirm its commitment to price and exchange rate stability and its determination not to pursue an accommodative policy stance. The Committee therefore, strongly supports the recommendations of the Executive for a benchmark price of a maximum of $70 per barrel.
External Sector Developments
Foreign exchange reserves amounted to US$ 32.64 billion as at end December 2011, more or less flat relative to the US$32.34 billion as at end December 2010, despite the higher oil price in 2011. Notwithstanding the high prices of Nigeria’s reference crude oil (Bonny Light) which averaged US$106.32 per barrel for the year, the
limited accretion to external reserves was due to the high demand for foreign exchange in the market. The Committee noted that pressure on the exchange rate emanating from the high demand reflected the import-dependent nature of the economy, probably compounded by the activities of speculators. The reduction in
arbitrage opportunities in the oil marketing sectors combined with stronger controls in foreign exchange practices have already led to a noticeable moderation in foreign exchange net demand. The official wDAS rate (inclusive of 1 per cent commission) moved up from N151.62 per US$1 in January 2011 to N154.45/US$1 in June and
further to N158.21/US$1 in December 2011. The volatility in the official rates, however, was limited with the coefficient of variation being 9 1.28 per cent for the year as a whole compared to 0.32 per cent in 2010. The Committee commended the CBN for its efforts at establishing stability in the market. It also urged the CBN to strive to
eliminate speculative demand for foreign exchange. The Committee also noted that as at January 24, 2012, the exchange rate was N158.57/US$1, while the foreign exchange reserves amounted to $34.18 billion on January 27, 2012, which could finance over 6 months of imports of goods and services. The outlook for oil prices in the short-term as well as the forecast demand/supply balance, suggest that the current exchange rate band should be retained while still achieving moderate continuous accretion to reserves
The Committee’s Considerations
The Committee is pleased that ahead of most African countries, Nigeria had been proactive by responding to the threats of inflation induced by fiscal spending and global food, fuel and other commodity prices as well as to the challenges of financial stability. The Committee observed tat the mandate of the Bank was largely
achieved, as inflation was contained within tolerable levels and the exchange rate was generally stable throughout 2011. The resolution of the banking crisis during the year was also commended. Against this background, the Committee welcomed the stated fiscal stance of the Federal Government as part of its programmed movement 10
towards fiscal consolidation. The increased share of capital expenditure in the proposed total expenditure in 2012 is an important signal of the commitment of the Federal Government to improve the productive capacity of the economy. The Committee finds the current environment to be conducive for improved cooperation and coordination between fiscal and monetary
The Committee acknowledged that the decision to remove the fuel subsidy was a major development that took place since its last meeting in November 2011. It commended the Federal Government on the partial removal of subsidy on Premium Motor Spirit (PMS), which it noted will have salutary effects on the external reserves and exchange rate as well as on investment in oil and gas downstream sector. It further commended the Federal Government for the commitment towards the passage of the Petroleum Industry Bill (PIB) which, it believes, would further complement the benefits of the fuel subsidy removal. On the other hand, it recognized the possible
negative impact of the partial removal of fuel subsidy on the general price level and hence inflation in the short run. In this regard, it underscored the need for the speedy implementation of the palliative measures and entrenchment of social safety nets for the more vulnerable groups. However, the long-term benefits far outweigh the likely short term costs as far as inflation is concerned. 11 Furthermore, the Committee commended the fiscal authorities for the benchmark crude oil price of $70 per barrel as proposed in the 2012 budget and advocated for its retention as any upward revision would tend to undermine macroeconomic stability.
The Committee considered the need to sustain the high output growth that the country has seen in recent years partly because of the slowdown in the advanced and other emerging economies and partly because of the need to generate employment in the economy. However, to help generate new jobs, it would be essential for the Federal Government to move quickly with the structural reforms such as (a) power sector reforms, (b) implementing the agricultural sector transformation programmes and the associated value chain, and (c) refocusing attention to the provision of technical and vocational training to bring about skills development that would match the needs of the economy. The Committee underscored the need for maintaining price stability in a manner conducive to the achievement of employmentgenerating growth. In this connection, it observed that the announced increase in import duties on some food items by the end of June 2012 would exert further pressure on food prices which would
compound the effect of increased transportation costs induced by 12 the partial removal of the fuel subsidy on the general price level and the associated inflation expectation.
The Committee noted that historically, upward adjustments in the price of PMS have tended to have a short-term impact on the rate of inflation. A review of previous instances of adjustment in fuel prices shows that without exception, each instance is accompanied by an increase in the rate of inflation followed almost immediately
by a moderation in the short - to - medium term. Staff estimates indicate that inflation in the first two quarters of 2012 would range between 11.0 per cent and 14.5 per cent, and then moderate steadily towards the single digit zone by late 2013. Real interest rates are therefore likely to remain positive on a trend basis, even if the
rate of inflation were to rise briefly above the MPR in the second quarter. Finally, the Committee recognized the current security challenges and Government’s efforts to find a lasting solution through dialogue, economic measures and enhanced intelligence. It expressed confidence on the ability of Government to resolve the problem.13
Decisions In the light of the above, and considering the clear impact of previous tightening on the rate of inflation and exchange rates up to December 2011, the Committee unanimously decided as follows:
1. Retain MPR at 12.0 per cent with interest rate corridor of +/- 200
2. Retain CRR at 8.0 per cent;
3. Retain minimum liquidity Ratio of 30.0 per cent; and 4. Retain the Mid-point of exchange rate at N155/US$1 with a band of +/-3.0 per cent.
The Committee also resolved to watch closely developments with respect to the fiscal stance and to respond appropriately if, and when, the need arises.
Sanusi Lamido Sanusi, CON
Central Bank of Nigeria
January 31, 2012
It is beginning to look that Sanusi Lamido Sanusi, the executive governor of Central Bank of Nigeria (CBN) is stepping into a pathway of perplexing contradictions. At the time that International Monetary Fund (IMF) recommended for Nigeria to devalue naira, Sanusi was insisting that there is no need for the devaluation. He did everything he can to make it absolutely certain to every one listening that there is no logical financial reason to devalue the already malleable and soft naira. Most Nigerians were singing his praises that Nigeria has gotten a financial leader that cannot be intimidate by overbearing IMF, a leader that is not willing to be genuflecting to the international financial institutions. But apparently not, the CBN chieftain is doing Texas-Two Step backward dance.
Sanusi has begun to sing a new tune; it is no more the IMF asking him to drink the bitter liquid of devaluation. The CBN titan has chose to do it for the public good as it appears to keep the economy floating as the bulwark to the anticipated nosedive of oil price, with subconsequent lower foreign reserve. The reason that is more plausible is to appease the international financial powers who are probably breathing per irately down his neck. The naira has been devalued up to N160 to $1 but the devaluation will not stop there. Go and mark this, it is a slippery slope and the devaluation will continue. But interestingly, Nigeria does not have the requisite dollar reserve to satiate the demand that comes with the devaluation.
Finacial Times of London wrote: “Nigeria devalued the naira on Monday as falling reserves, caused by weak oil revenues, forced its hand. The central bank announced the naira would be pegged to the dollar within a target range of N150 to N160, up from a bracket of N145 to N155 per dollar. The bank wants to converge the official forex rates with the interbank rate and narrow arbitrage trading opportunities – the chance for investors to profit from the two different rates"
David Kahone of Financial Times further reported that, "The main reason for Nigeria’s decision to devalue, according to Renaissance Capital, the Russian investment bank, is a fall in its reserves brought about by lower than expected oil production in 2011 and a low projected oil price in 2012. Africa’s biggest oil producer derives some 75 per cent of its revenues from oil and is revising down its benchmark oil price in the 2012 budget to $70 per barrel from $75 per barrel – not an insignificant shift"
The apparent devaluation will not bring about any affirmative result that compelled CBN in first place to devalue naira. Nigeria had passed through this path before and it did not make a difference nor did it change the economic paradigm of the nation in good trends. The problem with Nigerian economy is beyond the application of monetary policy and in this case the devaluation of naira. Nigeria has major structural problem that cannot be rectify by artificial depreciation of the naira. The problem with country's economy is over reliance on oil and by thinking that the party will last forever. The idea of diversification is a lip service given by policy makers as the country is busy chasing a shadow that is merely a mirage. A nation cannot become economically independent by exporting one commodity with a weak currency which will eventually attract IMF's neo-liberal policies. As the country implement neo-liberal policies, it will not stop with devaluation of naira, the shrinking of spending on social program will follow put including the removal of fuel subsidy and banning of importation of many essential commodities. The government will balance the budget on the back of the poor people of Nigeria and suffering will geometrically increase.
The major contradiction coming form naira's devaluation is threat it posed to stabilizing inflation and the further erosion of domestic value of naira. Devaluation is another method of creating more money in the circulation especially with the weaken naira. With devaluation and subsequent enormous soft naira in circulation the prices of food, goods and services will go up; that will make the ugly hand of inflation to rigidly standout and making it more difficult to rein in inflation. Then CBN will restore to further mopping of the liquidity by tightening monetary tool, thereby jacking up interest rate which will conversely slow down the economic growth. No matter from which perspective or angle one looks at the naira devaluation its benefit is quite limited and there is no optimum quantifiable outcome. One thing it can do is to discourage importation, but Nigerians are already addicted to foreign products and travelling abroad; surely Nigerians will find a way to circumvent it and continue with their addictions.
The price of oil and foreign reserve have the propensity to be gyrating cyclically and using naira's devaluation to stabiles the economy is not logical at long term. It should be a tactical response to a momentarily problem but it is not strategically plausible to become the panacea. Nigerian economy is standing on a dislocated table that can be easily be pull down by forces of the market. The economy is growing at above 7 percent but without infrastructure and security the growth may not be sustainable.
CBN's chief Lamido Sanusi may do the public good and world economy good by devaluation that will make oil cheaper. It can be accepted for a short time but Nigeria may not necessarily be the beneficiary because Nigeria does not have arrays of commodities and finished products to export. This boils down on the lopsided economy and portrays how weak the manufacturing and agricultural sectors are in the country. The source of country's earning of foreign exchange must be expanded beyond oil export by diversification of the economy. This must be made perfectly clear to the policymakers that Nigeria cannot devalue her currency to a successful economy.