THE NATION MONDAY, FEBRUARY 2, 2015
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NIGERIA DECIDES
to Okonjo-Iweala: tell Nigerians njo sacked you as finance minister
• Dr. Okonjo-Iweala
• Soludo
evaluating a public officer’s stewardship: the evaluation by his employer; the satisfaction of the public he served; and the hard facts of performance. As I will show on these three counts, I am convinced that I left a world-record of public service, and a thousand Okonjo-Iwealas cannot re-write that history. I served Nigeria under two Presidents (Obasanjo and Yar’Adua) and as my immediate bosses, below are their written testimonials of my record. Said President Obasanjo (December 2004): “Charles Soludo is a true Nigerian. He is the sort of Nigerian that we all know we can rely on. Among his numerous virtues is COURAGE. I have found in him a man who can take tough and realistic decisions, stand his ground, educate others on the salience of his decision, and work very hard to ensure that the decision is efficiently and effectively implemented. His dedication to duty is first rate. His leadership qualities are admirable and his willingness to listen and learn is simply infectious. Prof Soludo has within a short time emerged as one of the leading lights of our nation. Not because he has a godfather but by sheer hard work, loyalty, dedication to duty, commitment to the nation, creativity, and undiluted association with the reform agenda….” President Yar’Adua (May 2009) had the following to say about the CBN under my leadership: “… the CBN has performed creditably well in delivering on its core mandates. This is especially even more so in the last five years. Most people would agree that without the successful banking consolidation and effective management of our foreign reserves, the current global crisis would have shaken the financial system and our national economy to their foundations with calamitous consequences”. N the President’s special letter of commendation after the comple tion of my tenure of office, President Yar’Adua (June 2009) had the following to say to me: “As your tenure as Governor of the Central Bank of Nigeria comes to a glorious end, I write on behalf of the Government and people of Nigeria to place on record our debt of gratitude to you for your dedicated service and uncommon sense of duty over the past five years. I am confident that your worthy antecedents in the CBN and in prior appointments in the service of our nation remain sources of inspiration to an entire generation. As I wish you even more astounding successes in the years ahead, it is my fervent hope that you will readily avail us of your distinguished service when the need arises in the future”. To the best of my knowledge, President Obasanjo has not changed those views even after ten years. The views of my two bosses, not the emotional outburst of an angry person desperate to get even, are what count. How did Nigerians evaluate my public service? Unfortunately, we do not have scientific opinion polls on job approval ratings for individual public officers. But if the public opinions of individuals and organised groups (labour, employers, depositors, borrowers, stake-
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holders of the financial institutions, newspaper editorials, investors, etc) as expressed in thousands of newspaper/ magazine clips during and after my tenure are anything to go by, then 82 per cent of the public largely agree with the sentiments expressed by my two bosses. Your views belong to the other 18 per cent which is okay. After all, no one is perfect. Five Nigerian newspapers and magazines simultaneously named us “Man of the Year” in one year— unprecedented in Nigeria’s history. I do not talk about hundreds of awards and recognitions by various segments of our society (during and even after service) for “Excellent Public Service”. I was particularly touched by the historic award by the staff union of the CBN and the tears in the eyes of many as thousands of the staff gave me a standing ovation as I walked the aisle after my brief farewell speech. Certainly, the international community (investors, bankers, scholars, donors, media, etc) took serious notice of the revolution in Nigeria’s monetary and financial system. I am recipient of five international awards as global and African Central Bank Governor of the Year, not to mention dozens of other recognitions (even after leaving office). The London Financial Times described us as “a great reformer”. Even as the global economic and financial crisis raged in 2008, the United Nations (UN) General Assembly appointed me to serve on the Commission of Experts to reform the international monetary and financial system. You don’t appoint someone who has ‘mismanaged’ his national financial system to reform the global system. For eight years until 2012, I served on the Chief Economist Advisory Council (CEAC) of the World Bank, and together with two Nobel Prize winners in economics and other experts we met periodically and advised two presidents and two chief economists of the World Bank, and in 2011, I served on the External Advisory Group of the International Monetary Fund (IMF). Again, these are not positions for ‘mis-managers’. Since I left office, I have been advising countries and central banks; and there is hardly any two months I don’t consult/advise on banking/financial and monetary policy. I have given these illustrations to make the point that for every one OkonjoIweala’s attempt to rewrite history, there are thousands who disagree. Now, to some skeletal facts of our stewardship! I will be brief as I have a whole book to tell my story. As chief economic adviser, I had advised that our banking system could not support the private sector-led economy envisioned under NEEDS. When I assumed office
at the CBN, I inherited 89 rickety, mostly family banks (all of which put together were not up to the size of number four bank in South Africa). Many were insolvent, with depositors’ money trapped, and 20 more about to collapse. To get a credit of $300 million probably required all the banks to syndicate it. For me, there was a national emergency. I drafted a 13point reform agenda, discussed and agreed all the specifics with the President, and his deputy; as well as my management team at the CBN, and we swung into action. President Obasanjo promised 100 per cent support and actually delivered 1000 per cent - which was decisive. I apologise to you Madam because I did not brief or inform you about it. We just wanted to keep it confidential given the sensitivity of the announcement. It is on record that you never supported it. T was both a revolution and a war and most people thought it was “impossible”, but thank God we succeeded. For the first time in Nigeria’s history, a policy of that magnitude was announced and deadline kept with precision. We were courageous to revoke the licenses of 14 banks, including those of my friends, in one day. The FT-Banker concluded that the scale, precision, and cost of the transformation were unprecedented in the world. Before then, Malaysia had the least cost of banking consolidation at five per cent of Malaysian Gross Domestic Product (GDP). It did not cost Nigerian taxpayers one penny. Twenty-five new, stronger banks emerged but the powerful idea behind consolidation ignited something even more powerful—-‘the race to the top’. Banks raised more capital and even banks like the First Bank, Zenith and GTB, among others that did not merge with others went on capital raising several times. The consequence was higher levels of capitalisation and within two years, 14 Nigerian banks were in the top 1000 banks in the world and two in the top 300 (no Nigerian bank was in the top 1000 before I came). Even after I left office, still nine banks were in the top 1000. Our vision was to have a Nigerian bank in the top 100 banks within 10 years. As I see the new Access Bank; Zenith, GTB, Fidelity, Diamond, UBA, FBN, FCMB, Skye,Stanbic IBTC, Union and Ecobank, among others, I cannot but feel that we have taken giant steps forward. Deposits and credit soared (from barely N1.2 trillion to over N7 trillion); new technologies (ATM and e-banking) boomed, and banks had 57,000 new jobs; mega businesses emerged (ask any major operator in the Nigerian economy their experience with banking and cred-
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‘ Introducing austerity measures and soon to immiserate the citizens, our public finance is haemorrhaging to the point that estimated over N30 trillion is missing or stolen or unaccounted for, or simply mismanaged— under your watch! ‘
it before and after Soludo —the Dangotes, Arik, MM2, oil and gas operators and others); capital market boomed and dominated by the banking sector. It was a new dawn for the Nigerian private sector. I have heard Alhaji Aliko Dangote twice say that he would not be near as big as he is today without the banking consolidation. Many other stakeholders still say it today. Foregn Direct Investment (FDI) and portfolio inflows flooded into Nigeria. The world celebrated, and one single transformative idea has changed the face of the private sector and economy forever. Banks became Nigeria’s first transnational corporations with about 37 branches outside of Nigeria. Nigeria survived the global crisis because of this, and it is the banking sector that has largely been powering the economic growth you claim (compare banks trillions of naira credit for investments in the productive sector with your government’s miserable expenditure on critical infrastructure and investment; much of your borrowing – bonds – is from the banks). Your privatisation of power sector, several Public-PrivatePartnership (PPP) projects on infrastructure are now possible because of the mega banks. Today, Nigerian banks syndicate multi-billion dollar loans— unthinkable before. Madam, if the consolidation was ‘mismanaged’, there would not have been any bank to start with in the aftermath of the global crisis— as President Yar’adua correctly pointed out. Even you, during a recent presentation at the Banquet Hall in Abuja, advertised consolidation as a historic achievement. How can you recognise a ‘mis-managed’ project as an outstanding achievement? As we say in Igbo, you can’t cover the moon with your palms. Let me be clear: the quantum size of the new banks following consolidation presented challenges of risk management and supervision. We deployed all we had and overworked the CBN staff. The carry-over of bad loans from the consolidated banks was quickly cleaned up. To the best of my knowledge, we instituted stringent regulatory and supervisory regime (consistent with best practices at the time). We even had resident examiners in the banks and required bank Managing Directors (MDs) to personally sign their reports to CBN. I recall that the former MD of GTB complained of “regulatory intrusiveness”. To our credit, non-performing loans (NPL) came down from 22 per cent in 2003 and 2004 to six per cent as at 2008. Anywhere in the world, a central bank that brought NPL from 22 per cent to six per cent over a four-year period does not look like one with a loose supervisory regime. Name other developing countries that performed better, Madam. So, on point of fact, Madam lied. Yours was a reckless assertion without basis by a Finance Minister. The banks in Nigeria were supervised by the CBN and NDIC, but other institutions— international firms which audited them, international rating agencies which also examined their books, capital market operators since most were listed companies — all had oversight. I put on record that there was never any information/report of infractions by any bank which was brought to my attention and which we did not act upon decisively during my tenure. I heard the comment that some of the bank MDs were my friends. Well, my response is that perhaps as CME, you should kill all your friends operating in the economy or become their enemies. For the record, my successor audited all the banks and none of my so-called friends was indicted. It speaks volumes. Indeed, it is also a fact that the alleged personal criminal infractions (including lapses in corporate governance Madam alluded to) by some bank CEOs were found out, only after they had been removed from
office. My successor told me that the comprehensive audit of the banks did not reveal such infractions. Of course, you must be God or have a special tip-off from inside to get to such information while the MDs are in office. Unfortunately, all over the world, no financial system has succeeded in routing out all criminal behaviours by the operators. So, Madam, I challenge you to provide one shred of evidence that ‘there was no separation between regulators and regulated’ or be honourable enough to retract your reckless statement. HAT happened? The unan ticipated and unprecedented crisis of 2008/09 hit the world. More than 40 United States (U.S.) and European banks either collapsed or were shaken badly (remember the Lehman Brothers, Fannie Mae and Freddie Mac, Wachovia, HSBC, Lloyds TSB, Citibank, Goldman Sachs, even UBS and others) and hundreds of billions of dollars were spent to bail them out. The contagion effects spread like a wild fire, destroying national stock markets and banks. The nascent (big) banks in Nigeria faced sudden multiple shocks— liquidity, exchange rate, oil price, capital market ant others. As oil prices collapsed, loans to oil and gas became non-performing overnight; loans to the capital market became non-performing overnight; etc. Our first priority was to save the entire banking system and the economy from systemic collapse. I assured Nigerians that no bank would be allowed to fail, and not many people know what it took to achieve it. Once we had navigated through the unexpected /unprecedented turbulence, we laid out a comprehensive plan to clean up the debris which we presented to stakeholders in Lagos (March 2009). I had pleaded with the Senate to pass the AMCON Bill which we sent to them in 2004. But I had a comprehensive plan to finish the cleanup with or without AMCON by the end of 2009, including second round consolidation and a N500 billion fund (my book will detail all these). I left behind an 11volume document of the Financial System Strategy 2020 (FSS2020) which has remained the policy roadmap for the CBN/financial sector since I left office. I have two analogies for our experience. Ours was really like an airplane that was cruising and suddenly meets an unexpected and unprecedented turbulence. After the pilots and the crew succeed in navigating through the potential crash and probably land the airplane, people look in and start blaming the crew for the broken tea cups, chairs, and drinks that fell during the turbulence as evidence that the crew never kept the airplane clean or serviced it. My second analogy is that of a sudden earthquake in a region it was never expected and some houses collapsed. All of a sudden, the housing authority is to blame for not requiring earthquake-proof foundations for the houses. Well, my legal experts call it force majeure, an act of nature! To be fair, after every crisis, there are lessons (and my book will detail what, with benefit of that experience, we should have done differently). Risk management— which has always been there— now took a new centre stage all over the world following the crisis. But for anyone to suggest that CBN under me, for one minute, took its eyes off the ball is, to say the least, ludicrous. The U.S. financial system literally crippled the world costing America hundreds of billions of dollars but no one has suggested that Alan Greenspan is no longer the great maestro! AMCON is a big topic (which I will address at a later date) but her claims show either ignorance or mischief. She claims that N5.7 trillion of AMCON funds was used to rescue banks and the ‘bond issued’ as ‘cost to taxpayers’. Re-
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