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ECONOMY: Aganga to the rescue?

By Les Leba

Dr. Goodluck Jonathan, the Ag President, has eventually established a working cabinet inspite of the political uncertainty surrounding the Presidency.

Nigerians who expected a radical departure from the crop of generally sit tight, do nothing, tell lies, and get rich quick Ministers must have felt disappointed when the cabinet list was first published!

For the political jobbers on the other hand, it seemed like a comfortable continuation of ‘nothing change, nothing spoil’, self before Nation culture of public administration.

In retrospect, it was probably foolhardy to expect anything different; you see, the ruling political class sees public service as business! They have never been known to make apologies for this and our leaders including a former Senate President have brazenly reminded us that assets and various properties were inevitably sold and the proceeds invested in a political future! Indeed Nigerians are charged as unrealistic for begrudging these cash and carry politicians the dividends of their investments!! God knows, the yield from such calculated self centred investments have generally exceeded the ‘normal’ expectations of what the ’real sector’ could ever provide!

The Ag President may not have been sufficiently materially endowed or politically indebted to significantly affect his progress to the Presidency, and for this reason, some Nigerians felt that he was divinely primed to take the bull by the horns and keep a date with history by limiting his cabinet appointment to tested, resourceful and patriotic Nigerians who have made integrity, their hallmark.

The reality of Jonathan’s betrayal of popular expectation is grounded on the fact that although Mr. Ag President may not have invested his personal savings or surplus as a teacher into a political future, he was no doubt a fortuitous beneficiary of immense political patronage! Indeed, Jonathan, has probably never won any election with himself as primary candidate! It is not surprising that his cabinet list revealed his character as a loyal team player; loyal, that is, to the party culture of es spirit des corp a la Ali Baba and the forty thieves! Critical analysts insist that such political culture is not peculiar to the ruling party alone but is a symptom of the inequities, injustice and oppressive corruption which are encouraged and nurtured by a defective federal Constitution which usurps the traditional rights of the federating units in an overt conspiracy to continue to rape the oil fields of the Niger Delta! Inspite of the Ag President’s origin from the region of pillage, party patronage and political benefactors will virtually make it impossible for Jonathan to attempt to redress the imbalance or indeed to surprise Nigerians with a cabinet made up of selfless actors!

However, a cursory examination of media reports on the quality of Jonathan’s cabinet, constantly throws up one particular minister as possibly the ‘saving grace’ in the motley selection! The new minister for Finance, Olusegun Aganga is promoted as a thoroughbred and internationally tested professional, with erstwhile responsibilities as Managing Director of one of Goldman Sachs finance conglomerates.  Aganga is an accomplished accountant who has practised his trade in leadership positions in at least 3 continents under the umbrella of one of the world’s leading Accounting firms! However, serious observers of the Nigerian predicament note that Aganga’s appointment is not entirely a novel development. These critics point to a long list of other such professionals in former federal cabinets with intimidating professional and international exposure, but who failed woefully at the end of the day to deliver the dividends of an economy run according to international best practices! Indeed, inspite of the involvement of these world acclaimed technocrats, Nigerian monetary authorities have in the last 30 years or so failed to bring about a conducive economic and enabling environment; for example, cost of borrowing for industrialists and commercial operators (including Small and Medium Enterprises) who are the agents of growth and employment, remain in double digits and have remained stuck between 17%- 30%!

In addition, and not surprisingly, inflation, spurred on by such high lending rates is yet to fall below 10% in over 3 decades! In otherwords, all the domestic and imported technocrats including the IMF sponsored superstars have kissed the dust in the critical area of price stability in the economy!

Disciples of a former IMF sponsored finance minister, may point to the controversial debt relief of the Paris/London Clubs as evidence of success of at least one such technocrat! In an earlier article titled “No! She did well’ in this column in 2006, we noted that countries which did not have the benefit of IMF superstars succeeded with 100% debt write off while Nigeria obtained, I think about 60% write off inspite of the reality that no one has satisfactorily explained how a debt of $17bn ballooned to over $30bn, even after we had repaid over $25bn! Incidentally, all the promises and expectations of improvement in social welfare as a result of debt relief have remained largely unfulfilled and most Nigerians would claim that life has become harder still even after debt relief!

Three years after the exit of the IMF surrogate we are, again confronted with a new debt profile which threatens to make the earlier debt burden of $35bn incurred over at least 15 years child’s play. Our local and international debts have once again resurrected after just 3 years with greater vigour; external debt now approaches $4.5bn while domestic debt is over N4trillion ($24bn) (with likelihood of approaching N5trillion by 2011); indeed, in a Punch report titled ‘Okonjo Iweala picks holes in 2010 budget’ (Punch 9/4/2010 pg – 2) the former Finance Minister appears alarmed at the huge domestic debt and warns that: “People might be tempted to claim that internal debts do not matter because we owe it to ourselves….. but, this is not fully true, because some of this debt, in the form of Treasury instruments could be held by non resident portfolio investors. For example, a 2008 IMF report on private capital flows to subsaharan Africa estimates that about 20% of Nigeria government debt is held by foreigners!” The punch went on to report that “she also argued that higher fiscal deficits financed by selling domestic bonds could crowd out private investment and that what the government does with the money is of utmost importance for a developing country like ours!” Needless to remind Nigerians, that the Debt Management (read as creating) office, DMO was created under the watch of the same former minister, and since its creation, the DMO has raised over N2000bn in debt for the main purposes of creating a vibrant bond market’ and setting a benchmark price for long term investments in the capital market, rather than the application of the funds for infrastructural or social welfare enhancement as now recommended by Dr. Iweala! So Olusegun Aganga, the new Finance Minister, has his work well cut out! Will he continue in the suicidal mission of accumulating  higher debt levels for largely intangible ‘benefits’ or will he have the courage to call the DMO to order before we are forced once again to go cap in hand to plead for debt write off or forgiveness!!

Furthermore, what will be Aganga’s response to CBN ’s perennial lock – in with liquidity mop up. Several economies world wide no doubt engage in liquidity mop up to modulate the economy, however week-in,-week-out liquidity mop up that has continued ceaselessly for the past two decades must be of great concern to any patriotic Nigerian! Should it be reasonable expectation that the new finance minister will identify the incessant and costly liquidity mop up as the major driver of high lending rates that have dominated our industrial landscape and instigated such high unemployment rate! Can we expect Agangu to recognise that the liquidity mop up operations of the CBN (which is under Finance Ministry Purview) and the bonds issued by the DMO both translate into direct competition with the real sector for available funds in the money market, thereby crowding out the possibility of industrial growth and more jobs!?

However, probably more  fundamental is the cause of the unyielding excess liquidity disease that has resulted in CBN ‘s monetary responses which continue to cripple the economy. Will Aganga have the sincerity to accept that excess liquidity is the direct result of Central’s  Bank’s capture of distributable dollar revenue and its unilateral determination of what is considers a “realistic” exchange rate for the Naira? Will Aganga admit that CBN ’s dominance in the forex market is akin to a disruptive monopoly as CBN controls over 80% of forex supplied to the market, while it also controls 100% of Naira supply!! Will Aganga also recognise that in the same manner that NNPC’s monopoly in the fuel market creates inefficiencies, rising prices and a parasitic chain, so also CBN ’s forex monopoly unnecessarily depreciates the value of the Naira especially with fortuitous increases in dollar reserves brought about by rising crude oil prices?

Will somebody also satisfactorily explain to Aganga why our own Central Bank is constrained to sell over $2bn every month to Bureau de Change, (BDCS) while the real sector competes for the dollars in the system with BDCS. Meanwhile, can some one also inform Aganga that the major patrons of BDC’s  for such huge dollar requirements are very often public servants who wish to launder money abroad. The other major beneficiaries of easy BDC dollars are smugglers of contraband who cannot obtain forex for their imports through the stricter commercial banks process!!

As a financial expert, these realities must be clear to Aganga, but does he have the courage to stand up on the side of the people or will he hide under the usual cover that what is happening with our monetary policy frame work is politically expedient?

Any wise guy who attempts to hoodwink the Finance Minister with a political excuse why dollar revenue can not be allocated directly to beneficiaries with the instrument of dollar certificates should be referred to section 162 of the constitution, which does not give CBN the right to substitute increasingly worthless Naira for distributable dollar revenue! The constitution allows all states & local government to maintain domiciliary accounts in any currency, be it dollars or sterling. It does not make sense for a third party to unilaterally substitute Naira allocation, such that states & Local government who wish to strategically operate their domiciliary accounts, are forced to go back to repurchase the dollars generally at a much higher price from banks and BDCs to whom CBN have directly auctioned their dollars!!

At the end of the day only the banks are the gainers!

Save the Naira, Save Nigerians!


Disclaimer

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