Prof. Soludo

The 2011 general election will mark a watershed in Nigeria’s history. It comes immediately after Nigeria bids farewell to the first 50 years of political independence (and 96 years of existence as a country) and will usher in the set of leaders that will lay the foundation for the journey to the next 50 years. Like every other election all over the world, the 2011 elections in Nigeria should be mainly about the economy. As Bill Clinton once said, it is the economy, stupid! Put differently, sound economics ought to be excellent politics. But, have we even realized this?


Our first 50 years had a chequered history as we struggled to forge a nation out of the disparate nationalities. The first few years of independence with the regional economies as the driving force saw spectacular growth of the economy. With oil came a new political economy based essentially on consumption- distributional politics rather than production. So far more than $400 billion of oil rents have been spent with modest progress. We seem to be saddled with an oil resource curse and a political economy that emasculates the future. We have gone through series of development plans, programmes, visions, etc. On paper, some were far reaching. We have also had the courage to implement some radical reforms. But, without a holistic systemic change and commitment to sustain reforms, we often take three steps forward and four backwards.

It appears that the future is foggy and serious discussions about that future—the new Nigeria in the next 50 years has not begun. The debate so far is about who would be President or so, and not about what they will offer. I am afraid that we may again conduct elections without any serious issues being canvassed and ‘winners’ will emerge. Our politics has degenerated. In the Second Republic, I recall the robust debates relating to the alternative ideologies and manifestoes of the five political parties during the 1978/79 elections. I remember specifically listening to Obafemi Awolowo in 1979 explaining how much it would cost to implement free education at all levels and free medical care, and how he would reconstruct public finance to squeeze out the money to implement them.
Not anymore! There are no alternative visions, no ideologies and no programmes that offer the voters clear choices about their future. Even my political party, the behemoth PDP, has no clear road map for the country. It has remained a platform to grab power, and I am not sure how many party members can coherently explain what the party stands for. Some of us joined it in the hope of changing it from within, and we have not given up. That is a separate issue for another day.

I am a strong believer in Nigeria’s future and in its God given destiny to lead the black race. If Nigeria does not make it, sub Saharan Africa cannot make it. It is not by accident that God has chosen to make us Nigerians. It is our collective duty to realize God’s purpose for Nigeria. That is why some of us have elected to devote the rest of our lifetime to work for Nigeria’s future.

But Nigeria’s future cannot be taken for granted. The challenges are herculean, and the next four years are critical. Given the population growth rate and if you believe the last census figures, there will be 161 million Nigerians this year, and 212 millions in 2020. By the time a child born this year turns 50 years in 2060, there will be 650 million Nigerians. At current GDP and population growth rates, Nigeria will still be a developing country in 2060 (below $11,000 per capita income). At current rates, it will only be in 30 years time (2040) that Nigeria will attain the current South Africa’s per capita income. The tragedy is that the country has no implementable plan to steer a different outcome. Under the current political economy, the Vision 2020 will remain what it is—a beautiful dream! Neither the investment levels nor the productivity (given the decaying educational system and poor skills) required to realize Vision 2020 will happen.

For Nigeria to take a shot at 2020, the economy needs to be growing at about 14- 15% per annum (more than twice the current rates of 6-7%). Even with improved efficiency, this requires annual investment rates of more than 40% of GDP (higher than total earnings from oil). With the cessation of hostilities in the Niger Delta, and oil price rising to about $79, external reserves ought to be growing. Rather, external reserves are depleting precariously to about $36 billion currently, with weekly sales at the WDAS running into hundreds of millions of dollars. Private capital inflows have largely ceased. The capital market is comatose and capital flight is back with vengeance! With private saving rate of below 20%, public sector dis-saving (borrowing), and huge net capital flight, the numbers on the macro economy do not simply add up. Add to this the surfeit of liquidity and misalignment of basic prices and the conclusion is self evident: sooner or later, something will have to give!

As I ponder the future, I am deeply worried. As a consequence of deliberate choices made by public sector managers and the constitutional/structural bottlenecks, the economy cannot generate the required investment to secure prosperity for all. In spite of the heavy external debt of $34 billion and oil prices ranging between $25- $50 during the Obasanjo’s second term, we managed to grow the economy at about 6 -7% per annum (from average of 2.8% in the 1990s). We started saving for the rainy day when oil prices reached $35 and by 2007, despite paying $12 billion to write-off the Paris Club debt in 2006, we had saved about $22 billion as ‘Excess Crude’.

In the last few years, oil prices have averaged $70 to $85 per barrel. What has happened? We have spent the $22 billion saved under Obasanjo, and now massively borrowing at an alarming rate (domestically and externally) during a period of unprecedented oil price boom, and yet the economy remains static at 6-7% growth rate. Recurrent expenditure of the public sector has more than doubled since 2004, leaving very little for investment. Recall that during the global financial crisis, we took a deliberate decision to allow the Naira to depreciate as part of the strategies to mitigate the effects of the global crisis. Today, that effectively means that governments at all levels receive (in Naira terms) about 27% more revenue from oil receipts than would otherwise. Indeed, but for this exchange rate change under this circumstance, there would not be more than 11 state governments that can still pay salaries on a consistent basis. With massive government borrowing during a boom and paradoxically very low levels of public investment, the private sector is stymied into a trap. Who has the strategy to unbind this trap?

Effectively, we are repeating the worst forms of the mistakes of the late 1970s to early 1980s: accumulated huge debts and raised government consumption to unsustainable levels during the oil boom which we could not sustain during the slump and hence led to the inevitable SAP. Sadly, we are going through the same cycle again, and if the current trend continues, we are doomed to a worst form of SAP in the future. God forbid! As it is, the economy and the future of hundreds of millions of Nigerians are hinged on a life support of a temporary oil boom. Our economy is still driven by the volatile primary commodity sector—oil, gas, and agriculture. With poverty incidence at about 50%, and urban youth unemployment at over 20%, we are sitting on a time bomb. The issue is not if the oil price will crash, but when. If oil price falls below $40 tomorrow, the economy will come down on its knees, with catastrophic consequences. Surely, the oil price will sooner or later crash, but Nigeria has no contingency plan.

The good news is that Nigeria has all the potentials to be great. There are huge idle resources that can be put to productive use. With economy-wide capacity underutilization at about 60% and oil prices at unprecedented levels, broadly shared growth rate of about 15% is possible. This is where the debate needs to begin. Candidates and political parties need to outline their visions of Nigeria in the next 50 years and HOW they intend to rapidly create a broadly shared and sustainable prosperity. The debate must begin! Can fundamental results be achieved by tinkering with programmes or will major changes in the political structure and Constitution be required? It is time the prospective candidates roll out their agenda, and HOW they intend to finance them! Nigerians will no longer be contented with a plethora of platitudes and wish-lists. Each candidate must tell us how he/she intends to finance each programme, the deliverables and timelines. More specifically, we need to know where they stand on critical national issues, even if they have no concrete plans on them. This is a necessary element of a democratic process.
Below, we outline some of the issues/questions we need answers from the prospective candidates.

The first issue we need answers to is how the candidates hope to reconstruct our public finance and put it back on the path of sustainability. How can they rein-in the obtuse and rapacious federal bureaucracy in particular, and the state bureaucracies, balance our budget during this period of oil boom, and yet spend at least 40% of the budget on capital expenditure as required by the Fiscal Responsibility Act? Personally, I am not convinced that we need more than 10 ministries and 10 ministers at the Federal level. They should explain to us their contingency plans in case oil price crashes tomorrow. Candidates should also let us know their views on, and framework for, borrowing (when to borrow, for what, and how it will be paid back?). Without clarity on these issues, much of the talk about government providing power/electricity and infrastructure on a sustainable basis will remain a joke as funding will always remain a binding constraint. In other words, candidates should tell us their plans to shrink the domain of the public sector to free resources to enlarge the domain of the private sector— to truly have a private sector-led, market economy. For example, I have always believed that company profit tax rate should not be more than 10% (down from the current 30% plus education tax of another 2%) especially at a period of oil price boom, and where the businesses provide their own infrastructure. For businesses to expand and create jobs, the tax rate needs to go down significantly. We need to debate this.

Second, Nigerians would like to know the plans of the candidates for reconstructing our political structures to create the new Nigeria with a new sustainable prosperity. Currently, we are running unitary-federalism, with a plethora of fiscally unviable states as the ‘federating units’, with the attendant wasteful duplication of bureaucracies all over the country. So far as everyone is spoilt with monthly allocations from oil rents, there is no incentive to recreate the prosperity engendered by the palm or cocoa plantations and groundnut pyramids of the old regions. Every village wants to become a state in so far as ‘allocations continue to come from Abuja to pay salaries’. Nigeria’s fiscal federalism seems to have its incentive system upside down, supporting a political economy based upon consumption- distribution rather than production. Should this continue?

Where do we stand on state creation? Should we create 8 states per zone as being proposed, or consolidate the existing ones into six regions with Abuja, Kano, Lagos and Port Harcourt as special territories as being proposed by some people? What do we do with revenues from exhaustible natural resources (oil, gas, solid minerals)? Some propose that we can create as many states as we want (perhaps until every village becomes a state), but that revenue from Federation Account should never be used for recurrent expenditure but only as matching grants to create wealth and productive capacity for present and future generations, such as only for infrastructure, security and education. Where do candidates stand on this issue? What kind of constitutional changes are required to create a functional fiscal federalism, appropriate devolution of powers from the centre to the states/regions, and ensure effective economic management? What is our plan for effective policing of the country to ensure security of life and property? Where do we stand on the proposal for state or regional police?

On specific sectoral issues, the questions are endless. Who has the strategy to achieve uninterrupted power supply over the 2011- 2015 period? Where is the strategy to ensure accurate population census with biometric data of every citizen? If the last census figure is correct, then Nigeria’s population is exploding without any plans for the children of today and tomorrow. Are we happy with the rate of growth of our population or will someone have the courage to propose a robust population policy? What is the magic wand to ensure that we have a free, fair and transparent electoral system where only votes count and all votes are counted? What is the new strategy to fight corruption? Where is the sustainable plan for the Niger Delta and the long term strategy for environmental sustainability of locations amenable to natural resource extraction? Since our current university system is a road to nowhere and producing largely unemployable graduates, candidates need to flesh out their plans to revolutionarise the sector for Nigeria to join the 21st century.

It is estimated that Nigerians have their wealth running into tens of billions of dollars stashed away outside the country, and capital flight has resumed. Who has the plans to reverse the trend? The Financial System Strategy 2020 (FSS 2020) was designed to make Nigeria Africa’s financial hub and an international financial centre by 2020. What is the commitment of the candidates to make this happen? How will the candidates address the various cries of marginalization by sections of the country, especially the South East? What are the plans for women and youths, as well as the physically challenged? How do we deal with huge but unrecognized national emergencies such as erosion and desertification?

Furthermore, the future depends on how we deal with the tripartite problems of poverty, urbanization, and unemployment. Candidates need to spell out how they intend to solve the pervasive poverty in the North (averaging over 70% compared to average of less than 35% in the South). To create high value-adding jobs and reduce poverty in the medium term require more than quadrupling of productivity in agriculture as well as mainstreaming of large-scale commercial agriculture. We need to hear the plans of candidates in this regard given the current irrigation level of less than 6%. More specifically, we need to hear from the aspirants how many jobs they can create over the four year period and the strategies to do so.

There is also the challenge of urbanization and urban renewal strategies. At about 5.3%, Nigeria’s urbanization rate is one of the fastest in the world, with the attendant urban decay, slums and urban unemployment, poverty and crime. What is the plan to stem rural-urban migration? In the medium term, what special strategies for the renewal of mega cities like Lagos, PortHarcourt, Aba/Onitsha, Abuja, and Kano which continue to receive the largest influx of youth population in search of non-existing opportunities? What are the strategies to provide safe drinking water to our population?

There are about 20 million housing deficit in Nigeria. What strategies do the aspirants have to unleash a housing boom and a mortgage system in Nigeria? Surely, this can create millions of jobs, and Nigerians need to know how.
Nigeria has one of the most inefficient ports in the world, and much worse than many other West African countries. What are the strategies to revolutionarise our ports and ensure that importers clear customs in 12 -24 hours over the next four years? Also where do the aspirants stand with respect to the proposed West African monetary union and common currency? Where do they stand with regards to the WTO and the Millennium Development Round, and the European Union’s Economic Partnership Agreement (EPA) vis-a-vis the Everything but Arms initiative of the EU? What about the West African common tariffs vis-a-vis the plans for the manufacturing sector? If the aspirants believe that our foreign policy should focus largely on commercial diplomacy, how many missions abroad now make sense, and what kind of ambassadors do we need?

The questions and issues are legion. The essence of this piece is to provoke debate. The next 50 years will make or break Nigeria. Next year marks the beginning of the journey. The current players have a duty to lay a solid foundation for the future. As things are, that future cannot be guaranteed without a big struggle. Those who know, and who have the capacity to contribute to the struggle for a new, prosperous Nigeria must stand up now to be counted! Elite indifference to the political process is not an option. Since we have adopted the U.S. style of state primaries for the President, can we also adopt the U.S.-style debates in various states among the aspirants of the same party? When will the debate begin? The world is watching, and Nigerians are waiting for answers.

Prof. Chukwuma C. Soludo, CFR
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If Nigeria does not make it, sub-saharan africa can't? How does what happens in Nigeria affect sub-saharan africa. Isn't ghana making it already.

Soludo spoke well.

Instead of addressing or at least acknowledging Soludo's advice, the FG came out the next day to castigate the messenger. Soludo may have contributed to the mess we now find ourselves in, the reality is Soludo spoke well here. Given his credential, he is still eminently qualified to contribute to economic discourse, his shortcomings notwithstanding.

Soludo has openned our eyes to many critical issues facing Nigeria. So many questions that need answers.
Our government agents have called him prophet of doom.
Unfortunately, many people don't seem to like Soludo, but at least, lets take the message and forget about the messanger.
The problem with the people in leadership of this nation is mental laziness.

I've read Goodluck Jonathan's Road Map to Power in details and i think our nation needs detailed road maps, such as that, on every issue raised by Soludo. Only then, shall we begin the journey of transforming this nation.

Even if Jonathan cannot address all the issues in his tenure, He should at least create this road map, anchored by law and well publised. By so doing, it will be difficult 4 successive government to ignore. After all, his power sector reform was packaged by Obj.

Whatever problem that has a solution plan, is half solved.

It's time to face issues and take actions that will shape our great nation.

totally flabbergasted Jonathan's team chose to actually castigate Soludo instead of coming out with a stronger rejoinder on HOW EXACTLY they are keeping up with the 2020 or whatever new plan they have, how exactly they will making the financial sector stronger and more transparent

perhaps Soludo use to bully him when he was a governor, a very weak one with no experience at the mercy of rejuvenated old guards

You would be right, except that Soludo had an ulterior motive i.e. angling to be someone's VP.

Jarus:

Instead of addressing or at least acknowledging Soludo's advice, the FG came out the next day to castigate the messenger. Soludo may have contributed to the mess we now find ourselves in, the reality is Soludo spoke well here. Given his credential, he is still eminently qualified to contribute to economic discourse, his shortcomings notwithstanding.

Soludo is not a good sell at the moment. Not sure anybody will choose him as vice.

Why is it that people can talk the talk but can not walk the walk.

Jarus:

Soludo is not a good sell at the moment. Not sure anybody will choose him as vice.

Why is that? Can you honestly say hand on heart that the Banking System Soludo met when he became CBN Governor is better than the one he left?

A country can not make progress if it can not honestly assess itself and take stock. Most of Soludo's record is being twisted because of politics but any honest observer know that Soludo did great things for Nigeria with his office as CBN Governor.

Ojuwku's role as well as the very effective TV series of attrocities committed by PDP in Anambra run by ABS Awka on behalf of the Obi administration was very effective in defeating Soludo. But that said he remains the best candidate and his electoral defeat is Anambra's loss. Soludo is still a great political asset and only novice and those blinded by sentiment will claim Soludo is a political liability.

@ Topic

This is the kind of serious issues we should be debating at this time, rather the debate has been about non issues. zoning, old age, evil bla bla bla.

50 years of independence is a very crucial time in our National life and the choices we make is very crucial for our next 50years and we must make them carefully. This is not about trying to alter Soludo's successful history as CBN Governor just for the sake of politics, this is about the future of Nigeria.

I will leave you with Obama's message to Africa about choosing between to paths. Nigeria must rise to the occassion.

THE PRESIDENT:  Well, I think you will have enormous support from the people of the United States when it comes to trying to create a structure and framework in Somalia that works for the Somali people.

     Now, the history of Somalia over the last 20 years has been equally heartbreaking, if not more so.  You have not had a effective, functioning government that can provide basic services.  It's been rife with conflict.  And now the entire region is threatened because of radical extremists who have taken root in Somalia, taking advantage of what they perceive to be a failing state, to use that as a base to launch attacks, most recently in Uganda.

And obviously the United States expresses its deepest condolences to the lives that were lost in Kampala -- at the very moment of the World Cup.  And it offered two contrasting visions. You have this wonderful, joyous celebration in South Africa at the same time as you have a terrorist explosion in Kampala.

     So we desperately want Somalia to succeed.  And this is another example of where our interests intersect.  If you have extremist organizations taking root in Somalia, ultimately that can threaten the United States as well as Uganda, as well as Kenya, as well as the entire region.

     So right now you've got a transitional government that is making some efforts.  I don't think anybody expects Somalia anytime in the next few years to suddenly be transformed into a model democracy.  Whatever governance structures take place in Somalia have to be aware of the tribal and traditional structures and clan structures that exist within Somalia.  But certainly what we can do is create a situation where people -- young people are not carrying around rifles, shooting each other on the streets.  And we want to be a partner with Somalia in that effort, and we will continue to do so.

And some of it is financial, some of it is developmental, some of it is being able to help basic infrastructure.  In some cases, we may try to find a portion of the country that is relatively stable and start work there to create a model that the rest of the country can then look at and say, this is a different path than the one that we're taking right now.

     But in the end, I think that this metaphor of the success of the World Cup and the bombing shows that each of you are going to be confronted with two paths.  There's going to be a path that takes us into a direction of more conflict, more bloodshed, less economic development, continued poverty even as the rest of the world races ahead -- or there's a vision in which people come together for the betterment and development of their own country.

     And for all the great promise that's been fulfilled over the last 50 years, I want you to understand -- because I think it's important for us to be honest with ourselves -- Africa has also missed huge opportunities for too long.  And I'll just give you one example.

     When my father traveled to the United States and got his degree in the early '60s, the GDP of Kenya was actually on partner, maybe actually higher than the GDP of South Korea.  Think about that.  All right?  So when I was born, Kenya per capita might have been wealthier than South Korea.  Now it's not even close.  Well, that's 50 years that was lost in terms of opportunities.  When it comes to natural resources, when it comes to the talent and potential of the people, there's no reason why Kenya shouldn't have been on that same trajectory.

     And so 50 years from now, when you look back you want to make sure that the continent hasn't missed those opportunities as well.  We want to make sure of that as well.  And the United States wants to listen to you and work with you.  And so when you go back and you talk to your friends and you say, what was the main message the President had -- we are rooting for your success, and we want to work with you to achieve that success, but ultimately success is going to be in your hands.  And being a partner means that we can be there by your side, but we can't do it for you.

Okay, thank you very much, everybody.  Thank you.  (Applause.)

http://uk.ibtimes.com/articles/40625/20100804/obama-s-speech-to-young-african-leaders-full-text.htm

I don't think anybody would dispute the fact that he did well. Still, like OBJ most of what was achieved during that period was made possible by luck (aka oil price increases).

Soludo's failing was that once the oil price became a problem he watched it all start to collapse under him, while pretending that everything was alright. I think he was lucky to have been replaced at that time because for some reason he was unwilling or unable to admit that our banking system was about to collapse!

If Soludo wants to join the presidential politics let him indicate so, rather than help faceless backers to attack the current government. When Don Duke talks, for example, we know clearly where he is coming from because he has revealed his interest in presidential politics.

mikeansy:

Why is that? Can you honestly say hand on heart that the Banking System Soludo met when he became CBN Governor is better than the one he left?

A country can not make progress if it can not honestly assess itself and take stock. Most of Soludo's record is being twisted because of politics but any honest observer know that Soludo did great things for Nigeria with his office as CBN Governor.

Ojuwku's role as well as the very effective TV series of attrocities committed by PDP in Anambra run by ABS Awka on behalf of the Obi administration was very effective in defeating Soludo. But that said he remains the best candidate and his electoral defeat is Anambra's loss. Soludo is still a great political asset and only novice and those blinded by sentiment will claim Soludo is a political liability.

koruji:

I don't think anybody would dispute the fact that he did well. Still, like OBJ most of what was achieved during that period was made possible by luck (aka oil price increases).

Soludo's failing was that once the oil price became a problem he watched it all start to collapse under him, while pretending that everything was alright. I think he was lucky to have been replaced at that time because for some reason he was unwilling or unable to admit that our banking system was about to collapse!

If Soludo wants to join the presidential politics let him indicate so, rather than help faceless backers to attack the current government. When Don Duke talks, for example, we know clearly where he is coming from because he has revealed his interest in presidential politics.

How does any of the issues raised above amount to an attack on the current Government. They are simply facts that was stated with the objective to ignite a National debate.

And by the way the notion that you can only contribute to national issues if you have Presidential ambition is simply ridiculous.

@mikeansy
The problem I have is Soludo's motive. Besides most of these issues apply equally well to his run at CBN and as economic adviser to OBJ. By all means let's have a debate, but nobody should pull the wool over anybody's eyes.

mikeansy:

How does any of the issues raised above amount to an attack on the current Government. They are simply facts that was stated with the objective to ignite a National debate.
And by the way the notion that you can only contribute to national issues if you have Presidential ambition is simply ridiculous.