In October the International Monetary Fund issued its World Economic Outlook (WEO) and Global Financial Stability Reports. The message from both reports was similar-the global economic contraction has stopped and growth, albeit slow and sluggish has started. The Fund expects the global contraction of 1percent in 2009, but expects 3 percent growth in 2009, which is low, by pre-recession standards. The recovery is stronger in emerging and developing economies, particularly the Asian duo-China and India, but major challenges lie ahead. Global imbalances that result in some economies accumulating huge current account surpluses while others have offsetting external deficits will have to be addressed; the recession has been fought essentially by fiscal expansion-the so-called “accommodative” policy stances embarked upon by Treasuries and Central Banks all over the world.
The world now has to carefully calibrate its easing of such measures; unemployment remains a major issue across the world; and the root cause of the problem-the financial sector-must be restructured to prevent the type of calamity Western bankers almost plunged the whole world into, with evidence that other economies, (such as ours) have similar work to do on their financial sectors though on a lesser scale. And the problems of poverty and social inequality have probably only gotten worse while the whole world battled to save bankers and their institutions. The GFSR confirms that systemic risks have been substantially reduced, but warns against complacency-the hard work of reform and re-igniting new and sustainable sources of growth and prosperity lies ahead.
The recent Pittsburgh, USA G20 meeting hosted by President Barack Obama reached similar conclusions as the IMF. The leaders of the world’s twenty largest economies agreed to work together to generate strong, sustainable and balanced global growth, to begin to shift back to private, rather than public sources of demand, and to pursue policies geared towards macroeconomic and price stability. The leaders also agreed to reform banking regulation to rein in the excesses that led to the global financial crisis. Policies canvassed include strengthening prudential oversight over “systemically important” banks; raising capital standards; tighter regulation of OTC derivatives, credit rating agencies, securitisation and hedge funds; instituting compensation standards; and protecting depositors and consumers.
Domestically economic prospects are of course much brighter. Oil prices have recovered rising above $70 per barrel and actually hitting $80 in recent days. The question of what the average and sustainable price for 2009 will be remains unclear, but the trend since the end of the first quarter has been clearly upwards. We must caution budget writers to be conservative in setting the oil price budget benchmark for 2010, given expectations that the global recovery will be subdued and the need to restore lost external reserves. We expect that the financial sector clean up will yield fruit in 2010 as confidence, locally and internationally returns and after the equity markets absorb the massive loan loss provisions that virtually all our banks are going to have to make.
But the substantive issues about the structure of our economy remain. External revenue is almost wholly dependent on oil exports, but oil output has declined every year since 2006-by 4.2%, 4.5% and 4.8% in 2006, 2007 and 2008 according to the CBN Report for 2008. On the other hand, the non-oil sector grew by 9.4%, 9.5% and 9.1% in the equivalent periods. Growth in agricultural output in the three years averaged around 7%, services almost 10%, finance and banking-5%, and not surprisingly the fastest growing sector of the Nigerian economy remains communications which grew by 32%, 28% and 37% in 2006, 2007 and 2008. It remains one of the abiding mysteries of our nation that we have refused to apply the lessons of telecommunications reform to other areas where similar approaches will bear results-power, solid minerals and perhaps agriculture. Unfortunately communications in spite of its phenomenal growth constitutes only 3% of our GDP. Imagine if agriculture, solid minerals and manufacturing were growing at similar rates as the communication sector.
The most depressing statistics about our economy however remains the contribution of manufacturing to output-4% even though growing according to CBN and NBS statistics at 9% in the last two years. The CBN also puts manufacturing capacity utilisation at 53%. Again imagine the results in employment generation and other economic indices if we could raise manufacturing output to 20% of GDP and increase capacity utilisation to 90%. We all know what it takes to do this-privatise power generation and distribution as provided in the Electric Power Sector Reform Act 2005 and encourage massive private investment in power, while directing the bulk of government spending into improving transmission. Unfortunately government remains unwilling to follow this path and has chosen instead government-led power strategy. I see no reason to think that strategy will succeed! The other constraints of manufacturing are also well-known-transportation and logistics, multiple taxation and charges, corruption and high interest rates and financing costs.
Tuesday, October 27, 2009
Leveraging the "Amnesty"
To the best of my knowledge, the word “amnesty” does not occur in Nigerian law. The Webster’s dictionary defines amnesty as “an act of pardon on the part of a government or authority, absolving offenders or groups of offenders”. Section 175 of the 1999 Constitution however gives the President (and Section 212 gives state governors a similar power) to pardon any person “concerned with or convicted of any offence” after consultation with the Council of State. State Governors are required to similarly consult with the state’s Advisory Council on Prerogative of Mercy. These provisions would seem to provide legal cover for the President’s amnesty programme for Niger-Delta “militants”. More importantly, contrary to the argument advanced by several people, including some legal practitioners, the inclusion of persons “concerned with” an offence and not just those “convicted of” same in the constitutional provision, would appear to negate the argument that only convicted persons may be granted amnesty. So the problem with the amnesty programme in my view is essentially not a legal defect.
Secondly in spite of all my reservations about the scheme, I must admit that it appears to have been an apparent success, at least in the short term. The fact that all the key “militants”-Henry Okah, Soboma George, Government Tompolo, Ateke Tom, Farah Dagogo, and even those with interesting nicknames- Boyloaf, Osama Bin Ladin, Busta Rhymes etc have signed on to the programme should be cheering news for proponents of the scheme and sceptics like us have been somewhat confounded. In the short term, it is undeniable that there has been a reduction or even a temporary cessation of violence, sabotage, destruction of oil installations and other “militant activities” in the region.
However the real problem with the amnesty programme is that it does not address the fundamental issues that led first to genuine agitation and then its “deregulation” to less-scrupulous persons and inevitable criminalisation by persons from the Niger-Delta. I have on several occasions in this column discussed these fundamentals. Some of these are the need to discuss and redress the defects in our federal structure, defects which manifest in different forms in separate parts of Nigeria. In the North, its takes a Sharia colouration with Hausa-Fulani Muslims wondering why they cannot be ruled by a system of laws based on their Islamic beliefs. In the Yoruba West, the discussion is about fiscal federalism, devolution of powers and allowing each state or region develop at its own pace. In the East, it is a similar need for a more devolved federation and regional identity. Where as in the Niger-Delta, the issues are not addressed they degenerate into Boko Haram, OPC and MASSOB!
In this regard, the Niger-Delta is hardly unique, except that the anger over transfer of oil wealth and development to other parts of the country, while they bear the residual costs of oil exploration is more intense. That leads us to the other fundamentals-the absence of development, the destruction of their environment, the call for “resource control”, unemployment and poverty, electoral reform and corruption. The region is justifiably angry that its remains undeveloped while its resources have been invested in Lagos, Abuja and other parts of Nigeria; Corruption means that even the limited available resources are diverted into private pockets rather than invested in the region; absence of credible elections means that elected office holders are not accountable to the people and cannot be removed by them; poverty and unemployment means that there are large numbers of angry and hungry young persons desperate enough to join in militant activity, and their communities are sufficiently impoverished such that their actions find quiet or even active support within the society. The destruction of the Niger-Delta environment further re-enforces poverty and unemployment as it severely limits economic opportunities in the two most readily available occupations in the region-farming and fishing.
The point really is while this amnesty programme has been an apparent success, such will be temporary and fleeting except we proceed to deal with these fundamentals. Now it should have been the other way round-deal with the fundamentals and then offer amnesty but in our peculiarly Nigerian government magic, we have done the amnesty first before wondering about how to proceed from there. It is obvious that little attention has been paid to what many have called a “post-amnesty plan” even (as was recently demonstrated with the ejection of militants camped in a federal government college in Benin) concerning simple logistics. Didn’t anyone know that school would eventually resume? Beyond the Benin example, it is clear everywhere that no one has a clear view of what follows. As my initial title for this article asked, “amnesty… and then what?”
The process is already defective, but can it still be salvaged? Will someone now begin to deal with these fundamental issues? Will a legitimate dialogue with not just Niger-Delta leaders, but also the entire country commence to discuss our federal structure? Will Gen Abbe, Timi Alaibe and others in charge of the process now articulate a clear way forward? Otherwise the next scenes are predictable-the “militants” drift one-by-one back into criminality and militancy? New war Lords take over from the retiring (and wealthy) chiefs and as the Bible says, the last condition may indeed be worse than the former!
Secondly in spite of all my reservations about the scheme, I must admit that it appears to have been an apparent success, at least in the short term. The fact that all the key “militants”-Henry Okah, Soboma George, Government Tompolo, Ateke Tom, Farah Dagogo, and even those with interesting nicknames- Boyloaf, Osama Bin Ladin, Busta Rhymes etc have signed on to the programme should be cheering news for proponents of the scheme and sceptics like us have been somewhat confounded. In the short term, it is undeniable that there has been a reduction or even a temporary cessation of violence, sabotage, destruction of oil installations and other “militant activities” in the region.
However the real problem with the amnesty programme is that it does not address the fundamental issues that led first to genuine agitation and then its “deregulation” to less-scrupulous persons and inevitable criminalisation by persons from the Niger-Delta. I have on several occasions in this column discussed these fundamentals. Some of these are the need to discuss and redress the defects in our federal structure, defects which manifest in different forms in separate parts of Nigeria. In the North, its takes a Sharia colouration with Hausa-Fulani Muslims wondering why they cannot be ruled by a system of laws based on their Islamic beliefs. In the Yoruba West, the discussion is about fiscal federalism, devolution of powers and allowing each state or region develop at its own pace. In the East, it is a similar need for a more devolved federation and regional identity. Where as in the Niger-Delta, the issues are not addressed they degenerate into Boko Haram, OPC and MASSOB!
In this regard, the Niger-Delta is hardly unique, except that the anger over transfer of oil wealth and development to other parts of the country, while they bear the residual costs of oil exploration is more intense. That leads us to the other fundamentals-the absence of development, the destruction of their environment, the call for “resource control”, unemployment and poverty, electoral reform and corruption. The region is justifiably angry that its remains undeveloped while its resources have been invested in Lagos, Abuja and other parts of Nigeria; Corruption means that even the limited available resources are diverted into private pockets rather than invested in the region; absence of credible elections means that elected office holders are not accountable to the people and cannot be removed by them; poverty and unemployment means that there are large numbers of angry and hungry young persons desperate enough to join in militant activity, and their communities are sufficiently impoverished such that their actions find quiet or even active support within the society. The destruction of the Niger-Delta environment further re-enforces poverty and unemployment as it severely limits economic opportunities in the two most readily available occupations in the region-farming and fishing.
The point really is while this amnesty programme has been an apparent success, such will be temporary and fleeting except we proceed to deal with these fundamentals. Now it should have been the other way round-deal with the fundamentals and then offer amnesty but in our peculiarly Nigerian government magic, we have done the amnesty first before wondering about how to proceed from there. It is obvious that little attention has been paid to what many have called a “post-amnesty plan” even (as was recently demonstrated with the ejection of militants camped in a federal government college in Benin) concerning simple logistics. Didn’t anyone know that school would eventually resume? Beyond the Benin example, it is clear everywhere that no one has a clear view of what follows. As my initial title for this article asked, “amnesty… and then what?”
The process is already defective, but can it still be salvaged? Will someone now begin to deal with these fundamental issues? Will a legitimate dialogue with not just Niger-Delta leaders, but also the entire country commence to discuss our federal structure? Will Gen Abbe, Timi Alaibe and others in charge of the process now articulate a clear way forward? Otherwise the next scenes are predictable-the “militants” drift one-by-one back into criminality and militancy? New war Lords take over from the retiring (and wealthy) chiefs and as the Bible says, the last condition may indeed be worse than the former!
Tuesday, October 13, 2009
Barack Obama's Nobel Prize
Conservative groups are for some reason always better organised and united in their attitude to power. Liberals and progressives on the other hand are usually critical of themselves, naive about the extents to which their opponents will go, and disunited. The consequence is often that right wing groups are more adept at securing and holding on to power in spite of progressives and liberals being more popular with the people. When occasionally, progressive or liberal politicians seize power, the right wing quickly regroups and mounts a vicious fight back and are soon back in power. Remember Monica Lewinsky and the “vast right wing conspiracy”? Remember the Iran-Contra scandal and the destruction of Jimmy Carter’s Presidency? Remember how Al Gore foolishly fell for right-wing propaganda that Bill Clinton was a liability such that he forsook his greatest electoral asset-a sitting, popular president-and ended up losing narrowly to George W Bush. Remember the truncation of “June 12” in Nigeria with progressives in disarray?
The other outcome is that conservatives then define the political agenda putting progressives on the defensive. I was reminded of this phenomenon as I watched the reaction to President Obama’s nomination as the winner of this year’s Nobel Prize for Peace. If the international (and even domestic media) is to be believed, Obama does not deserve the Nobel Peace Prize. I watched CNN as news of the award broke with Jonathan Mann as anchor. In those first minutes, it was clear as Mann and his colleagues broke the news what the right wing strategic response to the development would be-they would imply that the Nobel Committee played politics with the award; that Obama had done nothing to deserve the award; and that the Nobel Committee was stepping into US politics. The entire CNN reportage was carefully scripted to convince viewers of this point of view such that soon, that tele-guided logic was the prevalent opinion and most people imagined they had come to that conclusion on their own.
But is the evidence that Obama is undeserving of the award that uncontroversial? Actually in my view, no! To the contrary, the actual evidence is that Obama is a once-in-a-generation universal phenomenon that indeed has already had a significant positive impact on the prospects for world peace and global cooperation. On the day Obama was overwhelmingly elected President of the United States of America, by blacks, whites, Latinos, Jews, men and women, he earned a Nobel Prize. The fact that millions all over the world-in Africa, Russia, Europe, Asia and the Arab world prayed fervently for his victory was a significant achievement for peace and unity in the world. Before Obama was even elected President, he addressed a rally in Germany in which over two hundred thousand people were present. What was the import of that? Why did Europeans wish so enthusiastically for an Obama Presidency? Peace happens in the minds of men. It is not an event or ceremony!
The point is that Obama’s candidacy and eventual election so captivated the world because he offered a vision of a world where race, class, religious and other divisions would not be a barrier amongst people. He united the world behind his vision of unity and change. In seeking to play a different type of politics in which he refused to demonise and attack his opponent’s person, a politics in which he conceded that his opponents were patriots who wished to do their best for America, but in which he disagreed with them only on policies, he offered a new template for politicians all over the world. And he motivated a new generation of people, not just in America, but all over the world, to consider public service as a noble career.
And since his election, in spite of deliberate provocation from the right wing, Obama’s has refused to get drawn into the politics of hate and recrimination. His opponents have called him a liar, Nazi, African witch doctor, the anti-Christ; they have questioned his citizenship of America, they have carried guns to his rallies implicitly threatening him, yet Obama has stayed above the fray, pursuing his dream of a different type of politics. He has started a new conversation in the world-America is talking to North Korea with ex-President Bill Clinton even visiting to retrieve an American held by the communist regime; the Israelis and Palestinians are talking again, even if they will not find peace tomorrow; the United Nations is regaining relevance again with Obama personally attending the Security Council meeting at the recent UN General Assembly; Europe is happy with America again; even the Iranians are responding in their own peculiar fashion to Obama’s offer of discussions over their attempt to get the nuclear bomb.
Tensions between America and Russia have been defused as America has withdrawn its missile shield project and Russia has reciprocated with security measures of its own. Both countries have agreed on some token nuclear de-commissioning presaging more significant nuclear cuts in future. Since his election, Obama has re-inforced global economic cooperation with a remarkably consensual G20 meeting in Pittsburgh, USA agreeing on the framework for economic and financial reform. In Africa, Obama and his Secretary of State, Hillary Clinton have begun to speak the truth to African leaders about corruption, democracy, strong institutions, good governance and poverty-the real prerequisites to sustainable peace on the African continent. Obama has changed the tenor of global relations and has helped to pull the world back from the brink. He deserves the Nobel Prize for Peace.
The other outcome is that conservatives then define the political agenda putting progressives on the defensive. I was reminded of this phenomenon as I watched the reaction to President Obama’s nomination as the winner of this year’s Nobel Prize for Peace. If the international (and even domestic media) is to be believed, Obama does not deserve the Nobel Peace Prize. I watched CNN as news of the award broke with Jonathan Mann as anchor. In those first minutes, it was clear as Mann and his colleagues broke the news what the right wing strategic response to the development would be-they would imply that the Nobel Committee played politics with the award; that Obama had done nothing to deserve the award; and that the Nobel Committee was stepping into US politics. The entire CNN reportage was carefully scripted to convince viewers of this point of view such that soon, that tele-guided logic was the prevalent opinion and most people imagined they had come to that conclusion on their own.
But is the evidence that Obama is undeserving of the award that uncontroversial? Actually in my view, no! To the contrary, the actual evidence is that Obama is a once-in-a-generation universal phenomenon that indeed has already had a significant positive impact on the prospects for world peace and global cooperation. On the day Obama was overwhelmingly elected President of the United States of America, by blacks, whites, Latinos, Jews, men and women, he earned a Nobel Prize. The fact that millions all over the world-in Africa, Russia, Europe, Asia and the Arab world prayed fervently for his victory was a significant achievement for peace and unity in the world. Before Obama was even elected President, he addressed a rally in Germany in which over two hundred thousand people were present. What was the import of that? Why did Europeans wish so enthusiastically for an Obama Presidency? Peace happens in the minds of men. It is not an event or ceremony!
The point is that Obama’s candidacy and eventual election so captivated the world because he offered a vision of a world where race, class, religious and other divisions would not be a barrier amongst people. He united the world behind his vision of unity and change. In seeking to play a different type of politics in which he refused to demonise and attack his opponent’s person, a politics in which he conceded that his opponents were patriots who wished to do their best for America, but in which he disagreed with them only on policies, he offered a new template for politicians all over the world. And he motivated a new generation of people, not just in America, but all over the world, to consider public service as a noble career.
And since his election, in spite of deliberate provocation from the right wing, Obama’s has refused to get drawn into the politics of hate and recrimination. His opponents have called him a liar, Nazi, African witch doctor, the anti-Christ; they have questioned his citizenship of America, they have carried guns to his rallies implicitly threatening him, yet Obama has stayed above the fray, pursuing his dream of a different type of politics. He has started a new conversation in the world-America is talking to North Korea with ex-President Bill Clinton even visiting to retrieve an American held by the communist regime; the Israelis and Palestinians are talking again, even if they will not find peace tomorrow; the United Nations is regaining relevance again with Obama personally attending the Security Council meeting at the recent UN General Assembly; Europe is happy with America again; even the Iranians are responding in their own peculiar fashion to Obama’s offer of discussions over their attempt to get the nuclear bomb.
Tensions between America and Russia have been defused as America has withdrawn its missile shield project and Russia has reciprocated with security measures of its own. Both countries have agreed on some token nuclear de-commissioning presaging more significant nuclear cuts in future. Since his election, Obama has re-inforced global economic cooperation with a remarkably consensual G20 meeting in Pittsburgh, USA agreeing on the framework for economic and financial reform. In Africa, Obama and his Secretary of State, Hillary Clinton have begun to speak the truth to African leaders about corruption, democracy, strong institutions, good governance and poverty-the real prerequisites to sustainable peace on the African continent. Obama has changed the tenor of global relations and has helped to pull the world back from the brink. He deserves the Nobel Prize for Peace.
Beyond The Banking Tsunami
Now that the Central Bank has completed its special audit of the country’s twenty-four banks, it is necessary to do a post-mortem on the whole exercise. At the end of the CBN’s “stress tests”, ten banks were “indicted” by the regulators and fourteen certified fit. The fourteen “good” banks were First Bank, UBA, GTBank, Diamond, Sterling, Access, Skye, Zenith, FCMB, Fidelity, Ecobank, Standard Chartered, Stanbic IBTC and Citibank. Two banks, Wema and Unity (interestingly Nigeria’s remaining regional banks) were deemed by the regulators to have issues with capital and/or liquidity, but those issues were in the opinion of the bank obviated by other issues and both were given till June 2010 to raise capital. The remaining banks-Union, Oceanic, Intercontinental, Afribank and Finbank (in the first phase), and Bank PHB, Spring and ETB were deemed to be in grave condition and the executive managements were dismissed.
The CBN has injected a total of N620billion into these eight banks and has applied other sanctions (for instance the removal of a non-executive controlling director, Mike Adenuga in ETB) and criminal prosecutions against the erring bank CEOs, some other officials and some stockbrokers to signal a tough stance against financial malpractices going forward. I have always believed strong measures were required to restore transparency and professionalism in Nigerian banking (and to avert a more cataclysmic systemic crisis not too far in the future) and therefore we broadly support the Governor’s actions stated above. On the other hand, it was clear that the management of the first phase involving the audit of the first ten banks left the CBN exposed to plausible charges of breaching legal, constitutional and procedural requirements precedent to the actions embarked upon in relation to the banks.
More troubling was the involvement of the Economic and Financial Crimes Commission (EFCC) in pure debt recovery matters and the breach of banking confidentiality involved in the publication of debtors names in the national newspapers. As we have always maintained, borrowing is a legitimate (and desirable) economic activity and except where there are specific crimes such as insider abuse, diversion, false pretences, fraud, misrepresentation etc, a defaulting borrower can only be dealt with under our civil laws. One must acknowledge however that the unorthodox strategy has been effective in getting some of the difficult loans repaid. The other point about the management of the first round of the sector clean-up was the fact that a clear strategy for managing the systemic implications did not appear to have been put in place before the Governor’s action. Our strategy and policy consultancy, RTC has in its monthly business and economic reviews for the past three months anticipated the Governor’s actions and noted that it would entail some short term shocks and hoped that the bank would have a strategy in place to mitigate those dislocations.
Nevertheless the banking clean up was the right thing. The financial sector must be professional, transparent, sound and credible, locally and internationally for it to play its proper economic role in a modern economy. It was no longer possible for anyone to separate hype from reality in respect of our banks and all semblance of governance and risk management was being lost in a large proportion of the sector. By and large, the CBN’s measures should pay off in the medium to long term and perhaps sooner than we expect as investors and counterparties deal with the unindicted banks with increased confidence. The real policy challenge is what to do with the eight banks now under government control. A disturbing kite about nationalisation is already been flown! Given our history with nationalised banks in the 1970s and 1980s, this would be a severe error.
The CBN should move towards recapitalisation of these banks by their owners, a quick off load to other acceptable international private core investors or a merger or acquisition of these institutions by the stronger of the remaining 14 banks. The CBN can take deliberate steps to make these banks attractive to potential acquirers. Contrary to some opinions, I do not consider it necessarily undesirable if some of the banks are acquired by credible international banks. As we seek to become an international financial centre, some might even argue that such should be a deliberate strategy. Unfortunately given the confusion and law suits around the process, it is unlikely any foreign institutions would want to rush in until all clouds are cleared. It may be necessary for the CBN to accept a negotiated solution with the bank owners that preserves the regulators original goals. The bankers have an incentive to negotiate-avoidance or mitigation of criminal liability, and so does the regulator-its actions may strain under judicial review.
But after all these the substantive issues remain-strengthening regulatory capacity; improving governance, risk management, ethics, transparency and professionalism; deepening human capital, skills and competences in the industry; creating a macroeconomic environment conducive to lower interest rates; reducing inflation; diversifying our nation’s revenue base away from oil; improving foreign currency and reserves management; resolving the structure of financial sector regulation going forward; poverty reduction; and achieving sustained economic growth and development.
The CBN has injected a total of N620billion into these eight banks and has applied other sanctions (for instance the removal of a non-executive controlling director, Mike Adenuga in ETB) and criminal prosecutions against the erring bank CEOs, some other officials and some stockbrokers to signal a tough stance against financial malpractices going forward. I have always believed strong measures were required to restore transparency and professionalism in Nigerian banking (and to avert a more cataclysmic systemic crisis not too far in the future) and therefore we broadly support the Governor’s actions stated above. On the other hand, it was clear that the management of the first phase involving the audit of the first ten banks left the CBN exposed to plausible charges of breaching legal, constitutional and procedural requirements precedent to the actions embarked upon in relation to the banks.
More troubling was the involvement of the Economic and Financial Crimes Commission (EFCC) in pure debt recovery matters and the breach of banking confidentiality involved in the publication of debtors names in the national newspapers. As we have always maintained, borrowing is a legitimate (and desirable) economic activity and except where there are specific crimes such as insider abuse, diversion, false pretences, fraud, misrepresentation etc, a defaulting borrower can only be dealt with under our civil laws. One must acknowledge however that the unorthodox strategy has been effective in getting some of the difficult loans repaid. The other point about the management of the first round of the sector clean-up was the fact that a clear strategy for managing the systemic implications did not appear to have been put in place before the Governor’s action. Our strategy and policy consultancy, RTC has in its monthly business and economic reviews for the past three months anticipated the Governor’s actions and noted that it would entail some short term shocks and hoped that the bank would have a strategy in place to mitigate those dislocations.
Nevertheless the banking clean up was the right thing. The financial sector must be professional, transparent, sound and credible, locally and internationally for it to play its proper economic role in a modern economy. It was no longer possible for anyone to separate hype from reality in respect of our banks and all semblance of governance and risk management was being lost in a large proportion of the sector. By and large, the CBN’s measures should pay off in the medium to long term and perhaps sooner than we expect as investors and counterparties deal with the unindicted banks with increased confidence. The real policy challenge is what to do with the eight banks now under government control. A disturbing kite about nationalisation is already been flown! Given our history with nationalised banks in the 1970s and 1980s, this would be a severe error.
The CBN should move towards recapitalisation of these banks by their owners, a quick off load to other acceptable international private core investors or a merger or acquisition of these institutions by the stronger of the remaining 14 banks. The CBN can take deliberate steps to make these banks attractive to potential acquirers. Contrary to some opinions, I do not consider it necessarily undesirable if some of the banks are acquired by credible international banks. As we seek to become an international financial centre, some might even argue that such should be a deliberate strategy. Unfortunately given the confusion and law suits around the process, it is unlikely any foreign institutions would want to rush in until all clouds are cleared. It may be necessary for the CBN to accept a negotiated solution with the bank owners that preserves the regulators original goals. The bankers have an incentive to negotiate-avoidance or mitigation of criminal liability, and so does the regulator-its actions may strain under judicial review.
But after all these the substantive issues remain-strengthening regulatory capacity; improving governance, risk management, ethics, transparency and professionalism; deepening human capital, skills and competences in the industry; creating a macroeconomic environment conducive to lower interest rates; reducing inflation; diversifying our nation’s revenue base away from oil; improving foreign currency and reserves management; resolving the structure of financial sector regulation going forward; poverty reduction; and achieving sustained economic growth and development.
Wandering At 49?
There was a time when the Nigerian Police would arrest any young man walking on the streets and charge him for wandering! How did police officers differentiate between people who were on their way to or from work, or visiting friends or family, or perhaps someone who had gone out looking for employment, or a university undergraduate who was home on holidays and visiting his classmates? Our police officers then had that unique insight that enabled them distinguish between people who were “going” somewhere and those who were “wandering”. Implicitly taking a stroll was illegal, at least in poor neighbourhoods! Of course whenever the officers or their DPO was broke, the line between the two categories was liable to get blurred and any male walking the streets could be bundled into their vans and dumped behind the counter.
In my characterisation of Nigerian history and evolution of our political economy, I find certain periods that have a distinct theme. In 1960 to 1966 for instance, which I describe as the post-independence years, the key attributes are keen regional competition for economic development, (which other writers have described as “competitive communalism”) within a strong federal structure but which was eventually undermined by a ruinous struggle for political hegemony between the regions and their leaders. This was the first, but not the last example of politics getting in the way of economics in Nigeria. I have identified other peculiar periods-1966 to 1970 which was dominated by crisis and war; 1970 to 1979 which were the years of oil, soldiers, big government, powerful civil servants and profligacy; 1986 to 1990-the years of structural adjustment and economic reform; and 1999 to 2007 which for me was Nigeria’s second chance, with democracy, economic reform and international relations.
In my depiction, some eras however look very much alike-1979 to 1983 was characterised by weak leadership, policy stagnancy and drift (I called it “an interlude of drift”- a short period of civil leadership within two extended periods of military rule) under Alhaji Shehu Shagari and the National Party of Nigeria (NPN); on the other hand even though 1990 to 1999 featured several “leaders”-the last three years of General Ibrahim Babangida, the three months interim administration of Chief Earnest Shonekan, the five years of terror under General Sanni Abacha and the ten months transitional administration of General Abdulsalam Abubakar-for the nation it was similarly a period of drift and aimlessness. Each of those regimes was weak and unstable, though for different reasons.
Babangida had been scared by the April 1990 Orkar Coup and had fled to Abuja for safety. The Orkar Coup had also strengthened Abacha’s hand both because Abacha had essentially saved IBB’s life and while IBB hid away in Abuja, Abacha schemed and plotted and built a military constituency in Lagos that would later shove IBB aside. Of course Shonekan’s interim government was by definition inherently weak-It was neither a military government nor a civilian democracy, an illegitimate hybrid that would sooner than later give way. Abacha’s regime was also founded on multiple deceit-Abiola was told he would be helped to retrieve his stolen mandate, IBB that he would be protected, and many of Abacha’s military co-plotters wanted the office for themselves having bought the dummy that Abacha was not keen on ruling.
In the circumstances of his ascension to power, and his instincts and personality, it was clear Abacha could only sustain his hold on power by force. And of course after the death of Abacha and Abiola, Abdulsalam could only hope to run a transitional government of ten months only. What the 1979 to 1983 and 1990 to 1999 eras have in common is a nation that was rolling along aimlessly-politically and economically and in the process, social values were also been destroyed. I usually joke that if the United Nations had a Police Force that was empowered to arrest nations for crimes and misdemeanours, Nigeria in those years ought to have been arrested for wandering!
The question now is-how will the post-2007 years under President Umaru Yar’adua be characterised? So far, the signs do not look encouraging. In international relations, Nigeria has essentially disappeared from the global radar. Last week the United Nations was meeting, with President Obama presiding personally at the Security Council and virtually all world leaders taking the opportunity to stamp their impression on global audiences. We were absent. The issue of climate change was on top of the global agenda and the structure of the world’s response to this issue were been shaped, and we were not there. The G20 was meeting in Pittsburgh to agree on rules for a new global financial architecture, and we were not there. Meanwhile our Attorney-General was enmeshed in controversy over his perceived defence of persons with charges of corruption in local and foreign courts.
While a Vision 20: 2020 document was being presented many of our compatriots were wondering whether the political will to implement such a lofty vision was evident in the land. Our economy is drifting aimlessly along, paralysed by power failure, corruption and poor infrastructure. Kidnappers, armed robbers and assassins have free reign over the people. Unemployment is at an unprecedented high, irrespective of what official statistics says and 54 per cent of our people are officially in poverty. All our government-owned universities are shut as lecturers and government argue endlessly. And our democracy is subverted as elections are rigged and leaders are unaccountable. Is our nation wandering around after 49 years of independence?
In my characterisation of Nigerian history and evolution of our political economy, I find certain periods that have a distinct theme. In 1960 to 1966 for instance, which I describe as the post-independence years, the key attributes are keen regional competition for economic development, (which other writers have described as “competitive communalism”) within a strong federal structure but which was eventually undermined by a ruinous struggle for political hegemony between the regions and their leaders. This was the first, but not the last example of politics getting in the way of economics in Nigeria. I have identified other peculiar periods-1966 to 1970 which was dominated by crisis and war; 1970 to 1979 which were the years of oil, soldiers, big government, powerful civil servants and profligacy; 1986 to 1990-the years of structural adjustment and economic reform; and 1999 to 2007 which for me was Nigeria’s second chance, with democracy, economic reform and international relations.
In my depiction, some eras however look very much alike-1979 to 1983 was characterised by weak leadership, policy stagnancy and drift (I called it “an interlude of drift”- a short period of civil leadership within two extended periods of military rule) under Alhaji Shehu Shagari and the National Party of Nigeria (NPN); on the other hand even though 1990 to 1999 featured several “leaders”-the last three years of General Ibrahim Babangida, the three months interim administration of Chief Earnest Shonekan, the five years of terror under General Sanni Abacha and the ten months transitional administration of General Abdulsalam Abubakar-for the nation it was similarly a period of drift and aimlessness. Each of those regimes was weak and unstable, though for different reasons.
Babangida had been scared by the April 1990 Orkar Coup and had fled to Abuja for safety. The Orkar Coup had also strengthened Abacha’s hand both because Abacha had essentially saved IBB’s life and while IBB hid away in Abuja, Abacha schemed and plotted and built a military constituency in Lagos that would later shove IBB aside. Of course Shonekan’s interim government was by definition inherently weak-It was neither a military government nor a civilian democracy, an illegitimate hybrid that would sooner than later give way. Abacha’s regime was also founded on multiple deceit-Abiola was told he would be helped to retrieve his stolen mandate, IBB that he would be protected, and many of Abacha’s military co-plotters wanted the office for themselves having bought the dummy that Abacha was not keen on ruling.
In the circumstances of his ascension to power, and his instincts and personality, it was clear Abacha could only sustain his hold on power by force. And of course after the death of Abacha and Abiola, Abdulsalam could only hope to run a transitional government of ten months only. What the 1979 to 1983 and 1990 to 1999 eras have in common is a nation that was rolling along aimlessly-politically and economically and in the process, social values were also been destroyed. I usually joke that if the United Nations had a Police Force that was empowered to arrest nations for crimes and misdemeanours, Nigeria in those years ought to have been arrested for wandering!
The question now is-how will the post-2007 years under President Umaru Yar’adua be characterised? So far, the signs do not look encouraging. In international relations, Nigeria has essentially disappeared from the global radar. Last week the United Nations was meeting, with President Obama presiding personally at the Security Council and virtually all world leaders taking the opportunity to stamp their impression on global audiences. We were absent. The issue of climate change was on top of the global agenda and the structure of the world’s response to this issue were been shaped, and we were not there. The G20 was meeting in Pittsburgh to agree on rules for a new global financial architecture, and we were not there. Meanwhile our Attorney-General was enmeshed in controversy over his perceived defence of persons with charges of corruption in local and foreign courts.
While a Vision 20: 2020 document was being presented many of our compatriots were wondering whether the political will to implement such a lofty vision was evident in the land. Our economy is drifting aimlessly along, paralysed by power failure, corruption and poor infrastructure. Kidnappers, armed robbers and assassins have free reign over the people. Unemployment is at an unprecedented high, irrespective of what official statistics says and 54 per cent of our people are officially in poverty. All our government-owned universities are shut as lecturers and government argue endlessly. And our democracy is subverted as elections are rigged and leaders are unaccountable. Is our nation wandering around after 49 years of independence?
Right Wing Rage In America
Barack Obama was supposed to be the harbinger of “post-racial” politics in America. He was the candidate whose appeal transcended race, whose support base included Whites, Jews, Hispanics, Asian-Americans, Arab-Americans and African-Americans. After Obama, race was supposed to become irrelevant in America, his election having established that any American of any race or class could rise to any position in America. Post-racial my…foot! As it turns out, Obama’s election may even worsen rather than improve race relations in America, especially God forbid, if one of the gun-totting White activists attending his rallies eventually shoots at the first black President.
Is it the case that white racism in the US was only barely suppressed just below the surface since it was viewed as politically incorrect? Has watching a black man preside over America apparently so excited repressed racist sentiments that true instincts are now bubbling to the top? That in any event is the hypothesis offered by no less a person than Jimmy Carter, former President of America and a strong moral voice in US and global politics. According to Carter, the excessively “demonstrated animosity” towards Obama purportedly over healthcare, is really a mask for a deeper (and difficult to verbalise) matter-the unacceptably dark colour of his skin!
Even before the elections in November 2008, there were signs that the right wing, evangelical base of the Republican Party was uncomfortable with Obama’s person. The politically correct term for these people during the campaigns was “cultural conservatives” but since explicit racism was likely to backfire, they spoke about his Pastor (Jeremiah Wright); wondered if he was in reality a Muslim; claimed he had attended a “madrassah” (Islamic School now identified with fundamentalism and terror in Pakistan and Afghanistan) in Indonesia; questioned his links with “terrorists” (the only evidence of which was his fairly casual relationship with Chicago Professor William “Bill” Ayers); and Sarah Palin the Republican pit bull conjured to save John McCain’s faltering campaign accused him of being a socialist (even though it was the Republican President George W Bush who was nationalising banks, insurance companies and auto companies).
But since the election, Obama has graduated beyond Islam, terror and socialism. If Rush Limbaugh and the petulant right are to be believed, he is not a native-born American and he is actually implementing a plan to convert the US into a Soviet-styled socialist state. He is depicted in cartoons as a swastika-bearing Nazi and compared to Hitler, an African witch doctor, or even Satan himself. Some say he is the “anti-Christ”! A Republican Representative from South Carolina, Joe Wilson has acquired notoriety for proclaiming Obama a liar, right on the floor of Congress. Now even a speech by the US President to returning school children is an objectionable attempt by Obama to convert innocent children to his evil agenda, prompting some parents to withdraw their children from school on the day of the speech and some school districts to refuse to broadcast the speech. A peculiar kind of malady is evidently taking hold of the right wing in the US!
I watched on satellite TV a US Baptist Pastor actually pray that God should kill Obama; Protesters are carrying (and openly displaying) guns to rallies addressed by the President and I have seen several emotional and teary-eyed couples lamenting about the future of America under Obama, and saying they want their America back. The sub-text indeed seems like racism, or are we to believe all this angst is all because of healthcare reform? Isn’t the argument compelling for doing something about a system which leaves out the poor and people with “pre-existing conditions” from healthcare coverage, bankrupts those who suddenly require expensive treatment and on most accounts is more expensive yet less efficient than those of other developed nations? Clearly if you believe this is all about healthcare reform, then you’ll believe anything!
But then I doubt that it is all about race either. There is political strategy-cynical calculations by the Republicans who see healthcare as the issue on which they can “break” Obama (Van Jones, an African-American appointee (perhaps correctly) described them as “assholes”, but was then forced to resign by an over-careful Obama); then there is ideology-many Americans on the right have a genuine fear of government taking over their lives, not surprisingly given that the country itself was founded on notions of liberty and freedom; there are also genuine faith-based concerns by the Christian right who believe that left to the liberal (Democratic) left, America would become a nation devoid of any religious compunctions where abortion and gay rights and perhaps legitimised drugs would be the order of the day, reservations which even I share. And then there is the illogic of a predominantly white electorate voluntarily voting a patently black President and then turning against him precisely because of that.
But it seems undeniable that race is a huge factor as well. All these rational concerns are being allowed to develop into hysteria, I think, because of white fears that the notion of America as a white nation is slipping away, maybe irreversibly if Obama gets to spend eight years in the White House. Obama has wisely refused to get into an argument over race, which given American demographics he is guaranteed to lose. Whether or not it is true, Obama’s best bet is to remain the post-racial President!
Is it the case that white racism in the US was only barely suppressed just below the surface since it was viewed as politically incorrect? Has watching a black man preside over America apparently so excited repressed racist sentiments that true instincts are now bubbling to the top? That in any event is the hypothesis offered by no less a person than Jimmy Carter, former President of America and a strong moral voice in US and global politics. According to Carter, the excessively “demonstrated animosity” towards Obama purportedly over healthcare, is really a mask for a deeper (and difficult to verbalise) matter-the unacceptably dark colour of his skin!
Even before the elections in November 2008, there were signs that the right wing, evangelical base of the Republican Party was uncomfortable with Obama’s person. The politically correct term for these people during the campaigns was “cultural conservatives” but since explicit racism was likely to backfire, they spoke about his Pastor (Jeremiah Wright); wondered if he was in reality a Muslim; claimed he had attended a “madrassah” (Islamic School now identified with fundamentalism and terror in Pakistan and Afghanistan) in Indonesia; questioned his links with “terrorists” (the only evidence of which was his fairly casual relationship with Chicago Professor William “Bill” Ayers); and Sarah Palin the Republican pit bull conjured to save John McCain’s faltering campaign accused him of being a socialist (even though it was the Republican President George W Bush who was nationalising banks, insurance companies and auto companies).
But since the election, Obama has graduated beyond Islam, terror and socialism. If Rush Limbaugh and the petulant right are to be believed, he is not a native-born American and he is actually implementing a plan to convert the US into a Soviet-styled socialist state. He is depicted in cartoons as a swastika-bearing Nazi and compared to Hitler, an African witch doctor, or even Satan himself. Some say he is the “anti-Christ”! A Republican Representative from South Carolina, Joe Wilson has acquired notoriety for proclaiming Obama a liar, right on the floor of Congress. Now even a speech by the US President to returning school children is an objectionable attempt by Obama to convert innocent children to his evil agenda, prompting some parents to withdraw their children from school on the day of the speech and some school districts to refuse to broadcast the speech. A peculiar kind of malady is evidently taking hold of the right wing in the US!
I watched on satellite TV a US Baptist Pastor actually pray that God should kill Obama; Protesters are carrying (and openly displaying) guns to rallies addressed by the President and I have seen several emotional and teary-eyed couples lamenting about the future of America under Obama, and saying they want their America back. The sub-text indeed seems like racism, or are we to believe all this angst is all because of healthcare reform? Isn’t the argument compelling for doing something about a system which leaves out the poor and people with “pre-existing conditions” from healthcare coverage, bankrupts those who suddenly require expensive treatment and on most accounts is more expensive yet less efficient than those of other developed nations? Clearly if you believe this is all about healthcare reform, then you’ll believe anything!
But then I doubt that it is all about race either. There is political strategy-cynical calculations by the Republicans who see healthcare as the issue on which they can “break” Obama (Van Jones, an African-American appointee (perhaps correctly) described them as “assholes”, but was then forced to resign by an over-careful Obama); then there is ideology-many Americans on the right have a genuine fear of government taking over their lives, not surprisingly given that the country itself was founded on notions of liberty and freedom; there are also genuine faith-based concerns by the Christian right who believe that left to the liberal (Democratic) left, America would become a nation devoid of any religious compunctions where abortion and gay rights and perhaps legitimised drugs would be the order of the day, reservations which even I share. And then there is the illogic of a predominantly white electorate voluntarily voting a patently black President and then turning against him precisely because of that.
But it seems undeniable that race is a huge factor as well. All these rational concerns are being allowed to develop into hysteria, I think, because of white fears that the notion of America as a white nation is slipping away, maybe irreversibly if Obama gets to spend eight years in the White House. Obama has wisely refused to get into an argument over race, which given American demographics he is guaranteed to lose. Whether or not it is true, Obama’s best bet is to remain the post-racial President!
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