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Soludo’s solution was better

By Ochereome Nnanna
THOUGH not an economist, I was privileged to attend two briefings by the out-gone Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo and his successor, Mallam Lamido Sanusi.

Soludo spoke to media stakeholders in the CBN auditorium in Abuja and at the Vanguard Town hall Meeting in Lagos in March 2009. On the other hand, Sanusi discussed with editors a couple of days after he sacked the bank chiefs, and later on came to Vanguard premises to clear issues with the Newspaper’s editors.

Five months after what has been described as “Hurricane Sanusi” hit, it is now possible to review his reforms against the backdrop of the strategies his predecessor employed to tackle the financial system. Let me say, right off the bat, that both mean well and have the best interests of the financial system at heart.

I have not (yet) seen enough (if any) evidence of sectional agenda in Sanusi’s reforms. In the same vein, I am yet to be convinced that those who are maligning Soludo’s tenure have any concrete case against him. Many people are simply engaged in the impulse of throwing stones at someone just because he is no longer in office or due to his involvement in politics, which is his fundamental human right.

Again, both Soludo and Sanusi, being humans, have also not been above mistakes. Soludo bungled his supervisory and risk management function, allowing the top executives of the now troubled banks to abuse their offices and convert shareholders and depositors’ funds to private use.

Having built up a robust banking environment in Nigeria in a way that was unprecedented in any African country, whereby Nigeria banks shot from nowhere to be among the top 1,000 banks in the world, Soludo became so protective of these consolidated banks that some of his critics accused him of losing his ability to keep them on the path of rectitude.

Sanusi exposed the financial system to distress through the application of what appears like a military solution to a purely economic issue. After sacking and having the bank chiefs arrested and arraigned in court and rushing 420 billion printed Naira to meet the inevitable runs in the banks, public confidence, which is the mainstay of banking and financial systems, was completely eroded. Banks, even those adjudged to be “sound”, stopped lending, even to state governments.

International business transactions froze because it became difficult to open letters of credit. Banks have started retrenching staff and cutting down on pay packages for their work force. There is evidence that more printed Naira will be needed to support banks unless Sanusi is able to get the foreign investors he has been looking for to buy the banks built with the expertise and sweat of Nigerians.

In other words, Sanusi’s approach to his CBN job has created exactly the scenario that Soludo shouted himself hoarse trying to prevent. When he spoke both in Abuja and Lagos, Soludo emphasised his belief that the economy could not survive the collapse of the banking sector, as there was no source from which money could be taken to rescue banks as America and Europe were able to do.

Soludo’s protective approach made it possible for the economy to withstand the three major crashes that took place at about the same period: The crash of the crude oil prices, the crash of the stock market and the crash in the value of the Naira.

The open discount window that the CBN under Soludo created, which enabled banks to source short-term loans to support their shortfalls was similar to the method employed by the British Chancellor of the Exchequer, Alistair Darling.

The British Finance Minister made secret arrangements to lend money to troubled banks up to the tune of 61.6 Pounds Sterling. Darling kept sealed lips when the media and commentators were voicing their suspicions because, just like Soludo, he did not want to undermine public confidence in the country’s financial system.

If Sanusi had chosen to quietly persuade the erring bank chiefs to resign “voluntarily”, reconstituted the management of these banks and encouraged them to recapitalise while those who committed offences were handed over to the law enforcement agents, it was possible to, just like America and Europe exited their economic meltdown in record time with astute management, rescue ours without bringing the house down on everybody’s head.

It would not have been necessary to sell Nigerian banks to foreigners.

My own understanding of how the financial system is managed in other countries is that those given the responsibility to do so approach their work with utmost delicacy without compromising the objective of bringing to book those who may have broken the law while creating the problem.

I could not imagine Soludo openly calling people who are still undergoing trial “criminals who should be shot”. Why not allow the law to take its course while you go about your job of restoring the broken financial system?

We can do with a little more maturity while rebuilding public confidence in the banking sector.

OBJ denies!

FORMER President Olusegun Obasanjo’s denial of wilfully imposing an invalid person as the President of Nigeria at the Trust Dialogue in Abuja last week left me with goose-bumps.

Yar’ Adua was already going back to the classroom as a lecturer when Obasanjo offered him the PDP presidential ticket.

Obasanjo, who called presidential candidate Umaru on phone: “Umoru, are you dead?” in the middle of a campaign after Yar’ Adua was rushed abroad when he collapsed, now says: “I love this country so much that I cannot impose anybody who should destroy this country. God punish me if I did so”.

Did somebody say Amen? When Obasanjo made this phone call, was he talking to a man who was hale and hearty?


Disclaimer

Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.