The Presidency — By Prince Emeka Obasi
Business Hallmark March 22 – 28, 2010

The basic temptation, especially for those who feel as deeply affronted by Mr. Sanusi’s shenanigans as I do, would be to let him stew in his own juice. After all, he has pretended to be Mr. know all. But that would be the wrong approach and for quite obvious reasons. The issue of the economy is of common interest and affects everyone. Indeed, it is central to the well-being of the citizenry. Everyone of us is involved. So it will amount to an irresponsible abdication of responsibility for us to even adopt a wait-and-see attitude.

For these and more reasons, we must help Sanusi to succeed, in spite of himself.

The first order of business is to expand the economic management team. Luckily for us, the two lame ducks in the Ministries of Finance and National Planning have been removed. Even if they are to be brought back to the cabinet, certainly it should not be to such sensitive portfolios. It is possible that Messers Mansur Mukhter and Shamsudeen Usman are qualified and experienced, but in their previous appointments, they proved unable to add much value. What was worse, they abdicated their responsibilities and allowed Sanusi to appropriate the economic policy formulation and implementation processes. Ag. President Jonathan should appoint experienced and dynamic professionals to man those Ministries.

That will expand the economic and finance team of the Federal Government. In addition, he should also set up an Economic Advisory Board, made up of tested professionals, including former Central Bankers and Finance Ministers. These bodies will work in tandem with Mr. Sanusi or the CBN and fashion out sound monetary and fiscal policies for the country.

CBN’s policies are chaotic, shallow and inconsistent. About five years ago, Mr. Chukwuma Soludo disrupted the financial system with his hastily packaged consolidation programme. That programme sowed the seeds of the present crisis. Today, Mr. Sanusi has jettisoned consolidation and has launched a new programme, banning universal banking and categorizing banks. All these inconsistencies are wreaking havoc on the economy.

This space is inadequate to enumerate the inadequacies of Mr. Sanusi’s plan, but let us say for the records, that it is fatally flawed by reasons of its shallowness and is therefore doomed to fail. Like Mr. Soludo, Sanusi has misdiagnosed the problems of the economy and the causes of the banking crisis. So his preferred solution is thus irredeemably flawed.

The problem of the economy is not a monetary issue. It is fiscal, simple. It is a waste of time to apply micro-economic approaches to solving macro-economic problems. The Nigerian economy is not productive. The lack of productivity is a consequence of multiple issues. No fundamental solution of our economic challenges will be achieved without effectively tackling the issue of our lack of productivity.

When an economy does not produce it functions as a mere trade financier, currency speculator and money changers. No amount of tinkering by successive Central Bank Managers can change the situation. In the end, it will all amount to garbage in, garbage out!

For instance, there was no need for the high drama which characterized the intervention. In an industry that is normally sensitive and confidence-driven, adopting a dramatic pose of such high decibels complicated an already difficult situation.

He did not need to sack the bank executives in order to inject money into the system. The two issues could have been treated separately. The appointment of top managers in those institutions was totally unnecessary. What it shows is that ab initio, CBN had decided to take over those banks but was only hindered by the relevant statutes.

By appointing new management who are not answerable to the boards, CBN created a legal puzzle: to wit, who do these banks belong to? In other words, who owns them? Is it the CBN, the new management or who? A simple question to ask is, does the fact that the CBN lent money to the banks vitiate their ownership structure? Is the CBN under its act allowed to own Banks under any guise?

The CBN keeps talking about selling the banks, but it has never satisfactorily explained in what capacity. Can anyone legally sell another man’s property, even as a regulator?

Perhaps it is important to explain here, especially for the benefit of laymen, that a bank is actually a limited liability company. Some of them trade their shares on the stock market as public limited companies. Like any other corporate organisation in a market economy, their fortune is determined by market forces. In other words, their success or failure depends on a range of micro and macro-economic factors.

But Governments intervene in banks occasionally because of their strategic role in the financial system and the economy. It is part of the core duties of the CBN to regulate banks and ensure their financial health. The recent economic crisis buffeted banks very badly and Governments all over the world rallied to save the financial system. In almost every part of the world, there was a broad consensus that the greed and recklessness of bankers contributed greatly to the crisis.