Soludo’s Prescription for Nigeria’s Sick Economy

Fri, Nov 20, 2015
By publisher

BREAKING NEWS, Cover, Featured, Realnews 3rd Anniversary Lecture


The Nigerian economy is the central theme of discussion for economists of opposite sides at the third anniversary of Realnews magazine in Lagos, on Thursday, November 19, with Chukwuma Charles Soludo, a professor of economics and former governor of Central Bank of Nigeria, leading the debate

By Olu Ojewale  |  Nov 30, 2015 @ 01:00 GMT  |

THE Nigerian economy is in quagmire. That was the verdict of professional and economic experts who attended the third anniversary lecture of Realnews magazine on Thursday, November 19. The event which held at the prestigious Oriental Hotel, Victoria Island, Lagos, was quite interesting as it provided platform for both those in government and outside the government circles to express their views.

Maureen Chigbo, publisher and editor of Realnews, in her welcome address, seemed to have set the tone for the discussion as she said the lecture was one of the ways the magazine could contribute to national development by providing a platform for professionals, scholars and prominent Nigerians to discuss and prescribe solutions to burning national issues. Chigbo gave an insight into the topic for discussion, saying that the global economic downturn had contributed to the nation’s economic doldrums. “As we are all aware, all the economic indices in country are not in the form most economic and financial experts will like them to be. The economic indicators ranging from depleting foreign reserve as a result of fall in crude oil prices, depreciating value of the naira, the double digit interest rates, high rate of unemployment, especially amongst the youth to inflation rates which is now on the increase, show that there is need for a rethink of the economic direction Nigeria is heading, especially in this new civilian administration that most Nigerians want CHANGE,” she said.

Chigbo noted that the bad economy was necessarily responsible for tension in the polity, especially among the army of the youth.

Supporting Chigbo’s observation is Mohammed Hayatu-Deen, chairman of the occasion and founder/chief executive officer, Alpine Investments Services Limited.  Hayatu-Deen, while commending Realnews for the opportunity to be a proud chairman of the occasion, said from the beginning the world was created there had been errors and opportunities to correct those errors and forge ahead. He said one of such opportunities was the day’s lecture.


Hayatu-Deen said it was important for every Nigerian to love the country and for the government “to tell the people where it is taking the people to.”  He expressed confidence on the ability of Chukwuma Charles Soludo, a professor of economics and former governor of Central Bank of Nigeria, CBN, whom he called a world renown banker to be able to do justice on the topic for discussion because of his vast knowledge based on experience on theory and practice. “He has discharged himself as one of the finest bank managers in the world and he is now an entrepreneur trying to cut into my space. I have no doubt that we are going get a good lecture,” Hayatu-Deen said.

Indeed, the iconic and erudite Soludo did not disappoint. He rose to the occasion as he dissected the nation’s foundering economy in a 21-page lecture titled: “Can A New Buharinomics Save Nigeria?”

For about two hours, the former CBN boss held his audience in rapt attention as he laid the blame of the current Nigeria’s economic problem at the doorstep of the immediate past government of former President Goodluck Jonathan and proffered solutions to the ailing national economy. He said former President Jonathan administration had the worst economic management team in history, which left Nigeria with an unprecedented rate of debt accumulation. He said he actually supported the All Progressives Congress, APC, because the past administration of the Peoples Democratic Party, PDP, was bankrupting the nation’s economy and without any indication that it has a solution on how to fix it.

In any case, he said the 16 years of the PDP in government could not be dismissed with a wave of hands because the party came to power at the time when Nigeria was a pariah state and when the external reserve was merely $5 billion. Since then, he noted the GDP of Nigeria doubled within the last 12 years, with average growth between six and seven percent, led by the non-oil sector.

He thus advised the current APC government to stop groaning and start work in earnest to double the size of GDP from the current $550 billion to $1.1 trillion in 12 -16 years, “and further half the poverty index, Nigeria will indeed be on course to be one of the largest 10 economies in the world by the end of this century.”


Soludo said this could be achieved bearing in mind that President Muhammadu Buhari had tried for 12 years in the past and failed before he was eventually elected president, which means he had something to offer Nigeria. While expressing the hope that the Buhari administration would deliver on its promise to change things for the better, Soludo said it was time for Buhari and his team to run at the speed of a 1000 kilometres per hour so as to pull the country out its current economic problems. He added that it was time also “to challenge the Buhari/APC regime not only to demonstrate that it can manage the economy better than the PDP but also that it can lay the foundation for sustainably shared prosperity in a post-oil economy.”

According to the university don, the present administration already has a good team of competent and capable individuals who can work together to deliver the goods. But he warned President Buhari against the mistakes of the past by recalling that as military head of state in 1984-85, Buhari also inherited economic crisis. But he handled it badly building on the “inherited a command and control economic policy regime and deepened it (capital, exchange, and price controls; import licensing; indiscriminate ban on imports, rationing of essential commodities; government ownership and control of so-called ‘commanding heights of the economy’—banks and insurance, telecommunications, airline, refineries, roads and transport, even manufacturing companies, etc). I recall that it was something like a criminal offence then to be in possession of foreign currency. Exchange rate, interest rate, petrol price and several other prices were largely fixed.”

He said the command and control structure, rather than fixing the economy, further led to distortion of the economy as well as the inability of the government to pay salaries, mass retrenchment of workers and edged the country on the brink of bankruptcy. “The economy imploded big time. Unemployment and poverty worsened. It did not work. The successor government faced little choice but to liberalise the economy under the structural adjustment programme, SAP, and Nigeria began the journey to a modern market economy. Of course, the journey has been chequered, and naturally is still a work in progress,” Soludo said.

He said it would be a big mistake to repeat the mistake of the past. He, therefore, called on the government to be more assertive. For instance, Soludo said the fuel subsidy, current fixed exchange rate regime, and the treasury single account, TSA, needed to be expertly handled.

He said the best time to remove the fuel subsidy was now and also sell the nation’s refineries, especially as Buhari road to government with tremendous goodwill and a perception that he is disciplined and incorruptible he stands a better position to convince Nigerians to take hard decisions that will propel the economy forward. He argued: “The fundamental case against subsidy removal is not economic: it is the fact that the citizens do not trust government to optimise the use of the proceeds for their welfare. If PMB does not deal with these issues NOW, I wonder when, if ever.”

Soludo, arguing in favour of sale of the nation’s refineries, said: “The huge benefits are not only economic, but also an anti-corruption move.” Besides, keeping the refineries were no longer sustainable in view of economic realities.

Soludo and Hayatu-Deen
Soludo and Hayatu-Deen

Similarly, the renowned economist warned against resuscitating the moribund Nigerian Airways. “One thing the economy cannot afford at this time of crisis is to invest scarce resources on prestige or white elephant projects when most federal highways are not motorable (certainly none in the South East is motorable) or when we need to be investing tens of billions of dollars per annum on critical infrastructure,” he said.

Speaking on implementation of the TSA, Soludo said it was a great idea. He, however, warned that the government could not afford to keep all funds in the CBN vault unutilised and starve the economy of the necessary liquidity.

For the Nigerian economy to be trusted, he advised that the independence of the CBN must be retained so as to repose credibility and confidence of the markets on the institution. Besides, he reminded the ruling APC of its promise in the campaign manifesto to ensure the CBN independence. He said that would be the only way to give the market confidence that the CBN would always act professionally and independently to ensure price and financial stability.

Another area of concern for the former CBN governor is the arbitrary list of banned items, which he said could have adverse effect on the economy haemorrhaging and create briefcase millionaires. He noted: “Oil rent is drying up and the new source of easy money is forex. With a black market premium of about 20 per cent a successful round-trip creates instant jackpot. Furthermore, if a group can get items in their sector ‘banned’, they will reap the monopoly rent instantly.

“If you stretch the logic of the ‘ban’, it will be difficult to justify allocation of forex for anything. After all, you can argue that denial of forex should ‘force’ Nigerians to produce just any good for that matter at home or patronise substitutes,” he said.

For the Buhari regime to succeed, Soludo said the government would need to come up with big ideas that would drive the desired change. First, he said the Buhari administration had the chance to lay the foundation for a post-oil economy, which he agreed would not be easy but doable. Second, he said, it would be “the first government challenged to embark upon disruptive economic change but without the external agencies of coercion and reward,” because Nigeria is currently free from the intrusive IMF/World Bank conditionalities. “The challenge is how we use such new found ‘freedom’ or ‘policy independence.’ Can we truly discipline ourselves to take tough choices or use it as license to be suicidal and take us back to the pre-debt relief era?” he asked.

[Front, L-R] Mohammed, Akinrinade and Adebawo during the Lecture
[Front, L-R] Mohammed, Akinrinade and Adebawo during the Lecture

Besides, the renowned economist said he believed God had given Buhari the opportunity to govern the country again so as to correct his past mistake and perhaps finally lay the foundation for a truly great country.

While awaiting the Buhari economic team to unveil its plan, he gave some tips on how to grow the economy. First, he said the economy was currently standing on a shaky ground because of Boko Haram insurgency, agitation for the state of Biafra, widespread kidnapping, tension caused by Fulani herdsmen and Oduduwa country.

He therefore argued that no sustainable economic progress could be achieved on the current insecurity. As such, he urged the government to tackle the insecurity and hold dialogues to resolve the conflicts where possible.

“Yes, it is time for a Commission to coordinate the open national conversation. I believe that the late Ahmadu Bello was right when he disagreed with Nnamdi Azikiwe, suggesting that we should rather seek to ‘understand’ rather than pretend to ‘forget’ our differences. I will add that we should work hard to urgently design institutions to address those differences/grievances in a transparent manner. It will be the first sign that we want to ‘build to last,’” he said.

He similarly wants the government to dismantle the dysfunctional unitary system that has been stunting the nation’s growth. “A national economy cannot be competitive if its constituent parts are not competitive. The last national conference report does not go far, but it provides a starting point. To jettison it without a better alternative will be a historic mistake,” he warned.

On the current market economy, he said: “Nigeria has come a long way in developing a market economy and still has a long way to go. If it is not broken, don’t mend it!”

Soludo illustrated his argument with a story told by former President Olusegun Obasanjo that he once narrated his conversation with the late Li Kuan Yew, former prime minister of Singapore. Obasanjo said he asked the late prime minister to explain the Singapore’s miracle to him. But Li Kuan Yew in response told the former president that there was no miracle: all they did was that they got a few things right and kept doing them for an extended period of time. “The ‘new’ Buharinomics must resist the temptation of most new governments to think that their mandate is to discredit and replace everything they met. Reducing uncertainties and cost of doing business as well as maintaining macroeconomic stability remain critical first steps. We must avoid ‘state overload’. In a regime of weak institutions, entrusting the bureaucracy with excessive discretion to pick winners is a breeding ground for corruption and crony capitalism. From Nigeria’s political economy and experience so far, it needs to become a slogan that “government in business is bad business”!

Inasmuch as it is good to have welfare package for the country, he argued that it should not be done in a hurry. Besides, he said the economy could not accommodate the proposed N5,000.00 monthly stipend the APC government promised to pay unemployed youths. “Government must avoid institutionalising the “dash” culture (a culture where people expect something for nothing).  Once you start, a welfare system is not easily reversible. While we struggle to wean Nigeria off the oil rent, we should not replace it with another entitlement culture,” he said.

Cross section of participants at the Lecture
Cross section of participants at the Lecture

The path to economic growth for the country, according to Soludo, is to declare a national emergency action on industrialisation, to create jobs for a rapidly growing population and millions entering the labour market every year. “We must maximize the potentials of every sector in job creation including the hitherto dormant solid minerals sector and then accelerate the transformation of agriculture. But the overarching emphasis of the APC manifesto on solid minerals and agriculture as its own ‘new economy’ is misplaced… If job creation is the central objective, both sectors won’t deliver much over the medium term,” he warned.

According to him, at the heart of the new Buharinomics should be a flexible exchange rate strategy that would bring about a stable (not fixed) nominal exchange rate and avoid an overvalued real exchange rate. “Our position is that Nigeria should maintain a flexible nominal exchange rate system that avoids an overvaluation of the real exchange rate. We have done it before, with great benefit to the economy. The de facto fixture of the exchange rate at N196 is a great mistake,” he said.

Soludo, in conclusion said the best time to effect the desired change was now. He said: “Some elected officials make the mistake of postponing fundamental changes until their second term. It backfires often. My advice is to install all the pillars of the disruptive change in the first year and do all the battles and bargaining with relevant interest groups. If the change is a credible one, by the third year, the pain might have turned into gain. With the full team in place now, we must now turn the page from the Book of Lamentations, and give the people hope that soon, they will start singing from the Psalms of David. For the rest of us, we can only work, watch, and pray that the new Buharinomics can indeed usher the change that Nigeria needs.” (see Soludo’s speech for more!).

However, Abraham Nwankwo, director general, Debt Management Office, speaking on “Supporting Nigeria’s Economy through Debt Management in Normal and Abnormal Times,” said it was erroneous to say all indices were on the downward trend. “Some indices are looking upward that is why we can be able to do a number of things. We can import and export. If we say we should not import certain goods because they are produced here in Nigeria, then how do we export our own goods to certain countries where they are producing similar products? That is the only way we can encourage competition,” he said. Nwankwo argued that the only way market economy could remain relevant is to allow everyone to compete.

Besides, he said for Nigeria to compete in the international market, government had been working hard to build infrastructure. “We all agree that building infrastructure is very key to our industrial development. That is why government has been concerned with power, roads, transport and development of other key infrastructures,” he said.

Similarly, Yinka Fakeye, a manager at the Federal Mortgage Bank of, who represented Gimba Ya’u Kumo, managing director of the Federal Mortgage Bank of Nigeria, commended Soludo’s paper, but he noted that the contribution of mortgage in the nation’s GDP had been downplayed. Fakeye, who spoke on “Boosting Revenue Generation through the Real Estate Sector in Post Oil Economy” said at the moment mortgage sector was contributing about 1.5 percent to the nation’s GDP. But if properly harnessed, he said the contribution could be raised to 35 percent. Fakeye argued that every home owner had capacity to create employment for hundreds of people as he would have access to loans to generate employment for others using his house as collateral. For one million home owners as much as 17 million employments, he argued, could be created.

Most people, who were at the event, think that the lecture on the economy which was done by Soludo was timely, thanking Realnews for creating such opportunity. They agreed that the federal government should pay heed to the recommendations in order to move the economy forward. Chima Okafor, a lawyer, who represented Chris Ngige, minister of labour and employment at the event, commended Soludo for the thought provoking lecture. His worry, however, is how to get the paper to the Buhari administration for consideration and implementation. “This is a paper that was not paid for. I will want Realnews to help us get the paper to the government for implementation,” Okafor said.

No doubt the well-attended lecture, which held the attention of the audience for about two hours, had a lot of messages for everyone, especially the Nigerian government. But how this would pan out to help the generality of the country is something Nigerians would probably like to cherish in the long run.

The occasion was also used to honour those who contributed immensely to the success of the second anniversary lecture of Realnews. They were inducted into the Realnews Hall of Fame. Inductees are Ngozi Anyaegbunam, chief executive, Media World, Joe I. Ezigbo, a professor of medical parasitology, and Benjamin Ezra Dikki, director general, Bureau of Public Enterprises, BPE.