Summarized 20 points from Charles Soludo on the Economy Danger

– NigerianEye published a very long article titled ‘Buhari vs Jonathan, Beyond the elections’. The article was written by former Governor of Central Bank of Nigeria, Charles Soludo, where he x-rayed the chances of Gen Buhari and President Jonathan in next month’s general elections, the mistakes of the past, and most importantly the challenges that lie ahead.

Below is a summary of yesterday’s article, pointing out 20 important points he raised;

1) Neither president Jonathan nor his major challenger, Gen. Muhammedu Buhari, has a well-thought programme to tackle the different challenges in the country, despite the promises made
“Let me admit that the two main parties talk around the major development challenges—corruption, insecurity, economy (unemployment/poverty, power, infrastructure, etc) health, education, etc. However, it is my considered view that none of them has any credible agenda to deal with the issues, especially within the context of the evolving global economy and Nigeria’s broken public finance,” he said.

2) ‘Both parties (PDP and APC) are missing the golden opportunity to sensitize the citizenry about the enormous challenges ahead and hence mobilize them for the inevitable sacrifices they would be called upon to make soon. Each is promising an El-Dorado (after elections)’

3)’They (PDP and APC) are not telling us how much each of their promises will cost and where they will get the money. None talks about the broken or near bankrupt public finance and the strategy to fix it.’

4)He also accused the presidential candidates of APC and President Jonathan of promising Nigerians what they cannot deliver because of the reduction in the revenue accruing to the country as a result of the fall in oil price.
‘I heard one of the politicians say that the problem of Nigeria was not money but the management of resources. This is half-truth. The problem is both. No matter how efficient a father (with a monthly salary of N50,000) is at managing the family resources, I cannot see how he could deliver on a promise to buy a brand new Peugeot 406 for each of his three children in a year. Even with all the loopholes and waste closed, with increased efficiency per dollar spent, there is still a binding budget constraint.’

5) ‘I have tried to cost some of the promises by both the APC and the PDP, given alternative scenarios for public finance and the numbers don’t add up. Nigerians would be glad to know how both parties would fund their programmes. Do they intend to accentuate the huge public debt, or raise taxes on the soon to-be-beleaguered private businesses, or massively devalue the naira to rake in baskets of naira from the dwindling oil revenue, or embark on huge fiscal retrenchment with the sack of labour and abandonment of projects, and which areas of waste do they intend to close and how much do they estimate to rake in from them, etc?’

6) What Nigeria is going through now is a consequence of our deliberate wrong choices.
‘We have always known that the unprecedented oil boom (in both price and quantity—despite oil theft) of the last six years is temporary but the government chose to treat it as a permanent shock.’
‘ I assumed office as Governor of CBN, the stock of foreign reserves was $10 billion. The average monthly oil price during my 60 months in office was $59, but foreign reserve reached the all-time peak of $62 billion (and despite paying $12 billion for external debt, and losing over $15 billion during the unprecedented global financial and economic crisis) I left behind $45 billion.
Recall also that our exchange rate continuously appreciated during this period and was at N117 to the dollar before the global crisis and we deliberately allowed it to depreciate in order to preserve our reserves. My calculation is that if the economy was better managed, our foreign reserves should have been between $102 –$118 billion and exchange rate around N112 before the fall in oil prices. As of now, the reserves should be around $90 billion and exchange rate no higher than N125 per dollar’
“As I write, the Naira exchange rate to the dollar is N210 at the parallel market. What a historic performance! Please save your breathe and save us the embarrassment.”
‘So far, the Government’s response to the self-inflicted crisis is, at best, laughable. They blame external shocks as if we did not expect them and say nothing about the terrible policy choices they made’

7) This is the only government in our history where rapidly increasing government expenditure was associated with increasing poverty.
‘The poverty incidence and unemployment are at all-time high levels. According to the NBS, poverty incidence grew to 69% in 2010 and projected to be 71% in 2011, with unemployment at 24%.
This is the worst record in Nigeria’s history, and the paradox is that this happened during the unprecedented oil boom.’
‘No other president earned up to 50% of the amount of resources the current government earned from oil and yet with very little outcomes; no other president had the rate of borrowing; none had significant forex earnings and yet did not add one penny to foreign reserves but losing international reserves at a time of boom; no other president had a depreciating exchange rate at a time of export boom; at no time in Nigeria’s history has poverty reached 71% (even under Abacha, it was 67 -70%); and under no other president did unemployment reach 24%.’

8) Jonathan’s record on the economy is a clear ‘F’ grade.
‘My advice to President Jonathan and his handlers is to stop wasting their time trying to campaign on his job record. Those who have decided to vote for him will not do so because he has taken Nigeria to the moon’
‘As one reviews the laundry list of micro interventions the government calls its achievements, one wonders whether such list is all that the government could deliver with an unprecedented oil boom and an unprecedented public debt accumulation’
‘If we appropriately adjust for oil income and debt, then this government is the worst in our history on the economy. All statistics are from the National Bureau of Statistics.’
‘Despite presiding over the biggest oil boom in our history, it has not added one percentage point to the growth rate of GDP compared to the Obasanjo regime especially the 2003- 07 period. Obasanjo met GDP growth rate at 2% but averaged 7% within 2003- 07. The current government has been stuck at 6% despite an unprecedented oil boom.’

9) The government’s economic team is very weak, dominated by self-interested and self-conflicted group of traders and businessmen, and so-called economic team meetings have been nothing but showbiz time.
10) My thesis is that the Nigerian economy, if properly managed, should have been growing at an annual rate of about 12% given the oil boom, and poverty and unemployment should have fallen dramatically over the last five years.

11) Private businesses will come under a heavy crunch soon. Having put economics on its head during the boom time, the Government now proposes to increase taxes during a prospective downturn and impose austerity measures.
‘If oil prices remain between 40- 60 dollars over the next two years, the current policy regime guarantees that foreign reserves will continue the precipitous depletion with the attendant exchange rate depreciation, as well as a probable unsustainable escalation in debt accumulation, fiscal retrenchment or taxing the private sector with vengeance’

12) The poor choices made by the current government have mortgaged the future, and the next government would have little room to manoeuvre and would inevitably undertake drastic but painful structural adjustments.
I worry about regime stability in the coming months, and I do not envy the next team.

13) The seeming crisis is not destiny; it is self-imposed

14) We expected that the next government after Obasanjo would take the economy to the next level. So far, we have had two great slogans: the 7-point agenda and currently, the transformation agenda. They remain empty slogans without content or direction.

15) Neither the APC nor the PDP has a credible programme for employment and poverty reduction.
‘The APC promises to create 20,000 jobs per state in the first year, totalling a mere 720,000 jobs. This sounds like a quota system and for a country where the new entrants into the labour market per annum exceed two million. If it was intended as a joke, APC must please get serious. On the other hand, President Jonathan targets two million jobs per annum but his strategy for doing so is a Job Board— another committee of sort. Sorry, Mr. President, a Job Board is not a strategy. The principal job Nigerians hired you to do for them is to create jobs for them too. You cannot outsource that job, Sir. Creating 3 million jobs per annum under the unfolding crisis would task our creativity and audacity to the limits.’

16) I heard one politician argue that once we fix power, private sector would create jobs. Not necessarily! Well, this government claims to have added 1,700MW to the national grid and yet unemployment soars. Ask Greece, Spain, etc with power and infrastructure and yet with high unemployment.
‘it is estimated that more than 60% of graduates of our educational system are unemployable. You can understand why many of us are amused when the government celebrates that it has established twelve more glorified secondary schools as universities’

17) None of the parties/candidates has any grand vision about African economic integration, led by Nigeria
‘There is no programme on how to make the naira the de facto currency of ECOWAS or the international financial centre that can attract more than $100 billion per annum. Where is the strategy for orchestrating the revolutionary finance to power the economy during this downturn? For President Jonathan’

18) If Buhari wins, the honeymoon will be brief and the pressure will be immense to magically deliver a ‘new Nigeria’
‘If he wins (Buhari), the honeymoon will be brief and the pressure will be immense to magically deliver a ‘new Nigeria’ with no corruption, no boko haram or insecurity, jobs for everyone, no poverty, infrastructure and power in abundance, etc. As a first point, Buhari and his team must realize that they do not yet have a coherent, credible agenda that is consistent with the fundamentals of the economy currently. The APC manifesto contains some good principles and wish-lists, but as a blue print for Nigeria’s security and prosperity, it is largely hollow. The numbers do not add up.
Thus, his first job is to present a credible development agenda to Nigerians.

19) If Jonathan wins, then God must have been magnanimous to give him a second chance to redeem himself
‘Most people I know who support Jonathan do so either out of self-interest or fear of the unknown. As a friend summed it: the devil you know is better than the angel you do not know. One person assured me that we would see a ‘different Jonathan’ if he wins as he has been rattled by the harsh judgment of history on his presidency so far. I just pray that he is right’

20) Advice to president Jonathan if he wins.
‘President Jonathan must know that it (transformation agenda) remains an empty slogan. His greatest challenge is how to save himself from the stranglehold of his largely provincial palace jesters who tell him he has done better than God, and seek out ‘enemies’ and friends who can help him write his name in history.’
‘I take liberty to tell you this brutal truth: if you are not re-elected, there is little to remember your regime after the next few years.’

Taken from Nigeria info facebook page

About cknaija

cknaija@twitter.com
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