The Buddha’s of the Baminyan Valley in the mountains of Afghanistan are some of the world’s most spectacular and ancient treasures. Standing at 174 and 125 feet apiece respectively on the mountain side 131 miles North East of Kabul, the two figures rank among the tallest Buddha sculptures in the world and are included among the world’s historical sites of interest by UNESCO. When the Taliban came to power, they decreed the treasures an abomination against Islamic belief and simply strung dynamite charges around the Buddha sculptures and blew them up. The outrage in both the Moslem world and around the rest of the globe was spontaneous and unanimous. UNESCO has since commenced an expensive restoration of the Buddha’s. But the Taliban always insisted that all their actions, including their subsequent hosting and sponsorship of terror, were in the national interest.
The dynamites that deformed the Buddha’s of the Afghan mountains are the equivalents of the spate of incoherent and sometimes contradictory reforms that Mr. Sanusi has instituted since his ascension. On balance if we weigh what Sanusi has destroyed and what he has positively reformed in his tenure to date, we are likely to tilt in the direction of a harvest of controversy. Hardly a day passes without some controversial declaration tumbling out of the Central Bank only to be followed by some more incendiary utterance by the governor himself. Sanusi never misses an opportunity to be present at events where he will get an opportunity to make some lengthy rambling speech. More often than not, these undigested elocutions contain the seeds of some confusion for both the financial system and the polity at large.
When at the inception of his tenure, he moved against the errant banking chieftains the public was largely in favour of his rampaging crusade. He showed the EFCC the way into the vaults and private chests of the bad guys. We welcomed the actions to recover compromised funds but had reservations about the dramatic execution which had the immediate impact of eroding confidence in the system. But by and large, it was correct to bring the roguish bank chiefs to book through the legal system.
He has recently opened a constitutional debate on the nomenclature for his non -interest banking proposition. I see nothing wrong with non- interest banking or even Islamic banking, if we must call it that. But there is something constitutionally wrong about calling it ‘Islamic’ banking. I am not aware that the other banks in the system are described as practicing ‘Christian’ banking. And in any case, money does not lend itself to theocratic inanities. Money is money. It is amoral. Those who do not have it want it. Those who have it want to keep it and grow it. You either have it or you don’t. All sensible people who have money and want to grow their wealth irrespective of what day of the week they worship know what to do when it comes to banking. In a free market system, money comes with all the evil and good of the system. To smuggle theocratic morality into the domain of capital is futile and illiterate.
Strictly speaking, there is nothing wrong with this non-interest banking. In a democratic society, people need a wide spectrum of options in terms of where to keep their money in order to optimize their value or grow their wealth. Mr. Sanusi is not compelling anyone to take their money to any bank in particular. Rightly or wrongly, there is a huge segment of our populace who as a result of their faith would be more comfortable with the non-interest banking option. We cannot exclude this large segment of our populace from the financial system and lock away their wealth from working for us all. Most of the problems Mr. Sanusi is having with the new proposition are the result of a failure of communication.
Quite easily, Mr. Sanusi may go down as the most talkative and political Central Bank Governor in Nigerian history. He simply talks too much and most of what he says is either politically sensitive or inimical to the national economy. He is either openly criticizing the governments that appointed him or he is propounding some hair brained or pedestrian solution to some critical national problem.
Of course, no one can deny Mr. Sanusi his right to freedom of expression as a citizen.
The problem is that once you are a central bank governor, what you say has implications for the larger society and the economy in particular. Central Bank governors are the economic and financial equivalents of communal oracles. When they speak the economy immediately reflects the direction of their thought. An oracle that pronounces on everything every time soon becomes ordinary and loses its aura and mystique.
So sensible CBN governors reserve their comments until the odd once in a year or so when they must speak on monetary policy. I cannot imagine Ben Bernanke or Alan Greenspan in his days at the Fed volunteering a comment on matters such as Afghanistan or the appropriateness of Sarah Palin’s dressing or in fact whether Obama should worry about all of America’s problems simultaneously or selectively. But Sanusi, recall, set out by challenging Yar’dua’s 7 point agenda. Ordinarily, his elevated office ought to define a higher level of candour and circumspection in matters of public commentary than he is currently displaying. And that is a pity.
For instance, Sanusi is reported to have said that the weak banks in the system have until September to recapitalize or be liquidated. No one in their right mind will continue to leave their deposits in these banks after that comment as September approaches. Yet these banks are supposed to raise additional capital! There was also an open expression that if foreign buyers cannot be found for these weak banks, they may be nationalized! It is difficult to reconcile between Sanusi’s avowed nationalistic fervor and his initial willingness to auction off the weak banks first to foreign interests. And for the leader of a CBN in a country that subscribes to free market rules to threaten nationalization of so many banks even as a fall back position speaks volumes.
The toga of central bank governor is no license for anyone to further destabilize the economy or inject mischief into a polity that is already riven by unnecessary sectarian and regional contradictions. Intemperate utterances and that kind of verbal incontinence and recklessness that should at best be found in beer parlours should have no place in the vocabulary of a central bank governor. But if Sanusi insists on his present talkaholic style, he should resign his job and join the political fray. There he will be free to canvass his views, test his ideas and market his obsessions. More critically, his insistence that his interest-free banking proposition is Islamic banking is heating up the polity. If this matter gets out of hand, Mr. Sanusi must be ready to bear personal responsibility for any untoward outcomes.
But some of Sanusi’s outbursts have served some use. For instance, it took one of his unguardedly courageous public outings to draw attention to the financial terrorism of the National Assembly. But a few legislators transcended their collective guilt to remind the CBN governor that his own organization was not being run in accordance with best practices. Not much was heard from Sanusi after that.
In his line of duty, the CBN governor has to travel abroad. But at some of those times, some of the trips are avoidable and could at best delegated to the avalanche of deputies and directors that drench the CBN’s bloated bureaucracy. Recently, reports of profligate and lavish spending by Sanusi’s handpicked bank chiefs became public. Some of them were buying bullet proof vehicles and running up bills in assorted bloated perquisites. When the leader of your bank or your church begins to need bullet proof vehicles, know that your financial security and the certainty of your salvation are in jeopardy.
Sanusi seems to court media attention as a deliberate policy even though it must be conceded that his job exposes him to media spotlight. The man may be new to this business of media attention and the resultant racketeering in dubious honours and awards. The media is in business to make money. Anyone who will give advertising patronage can get as many silly awards as possible. The roguish bank MDs and moguls that Sanusi chased away were themselves lavishly honoured, awarded and decorated in the same London hotels that have since embraced Sanusi.
Beyond the man’s personal style, the effects of his reforms on the economy are self-evident. We see severe curtailment of lending and the resultant shrinking of the economy. We see job losses everywhere: the banking sector, trade and commerce, manufacturing, oil and gas, real estate and even telecommunications, all of which were growth sectors before Sanusi’s ascension. There has followed a corresponding decline in standards of living and an increase in begging among even dignified looking Nigerians.
As we speak, the Naira’s value has reportedly remained stable in the books of the CBN. But following the pegging of foreign currency allocations to BDCs at $250,000 per week, a severe shortage of foreign currency in the parallel market has forced the exchange rate to nearly N170 to the dollar by last week. In the last two weeks, some days witnessed three consecutive declines in the value of the naira in the parallel market. To professional economists and bankers (the same people who have systematically wrecked the economy) this may not mean much.
But the parallel market happens to be the window that provides the foreign exchange that keeps this economy going. The small trader on their way to China, Dubai or Malaysia requires this market to ensure a steady supply of goods that keep the economy going. The informal sector of small to medium scale traders, service providers and cottage manufacturers remains the primary engine that drives this economy. It is because of them that we have not yet trooped out to demonstrate because of shortage of basic supplies.
I am not an economist. But I can smell fraud from a long distance. Plain common sense tells me that if the gap between the official rate and the parallel market keeps widening, we are squarely back in the realm of round tripping and arbitrage. Banks, well connected individuals and fraudulent business men armed with copious documentation will make fortunes from arbitrage and speculation. It is already happening.
Mr. Soludo, with all his last minute lapses, strove hard to achieve a convergence and hence stability in the exchange market. But Sanusi has reversed that significant gain and brought back Abachanomics, the existence of two officially sanctioned exchange rate windows. Incidentally, goods are priced at the going parallel market rates, not the silly so called official exchange rate which the financial elite create for themselves to oil the machinery of looting.
As we speak, most honest businesses cannot access credit. People whose working capital support has been frozen are routinely dragged to the EFCC even when it is CBN policies and regulatory summersaults that have ruined their businesses. Businesses are shutting down and firing their staff. Fired staff cannot find startup funds to actualize their dreams. Those still in employment cannot find loans to buy the things they need to live well and continue to be productive.
Once Sanusi took over and sacked the erring bank chief, there was a massive firing of bank staff across board. For every bank staff that lost their job, an estimated 10 other Nigerians lost hope and livelihood either as family members, dependents or vendors of some services demanded by these bankers (food vendors, garment retailers, dry cleaners, used car merchants, mechanics etc.). Those still in employment have suffered devastating loss of pay, morale and general interest. Marketing staff are sent out to hunt for deposits from customers in return for near zero interest and no possibility of either a loan or overdraft or plain decent service. People have lost confidence in the banks with the result that most of the money in circulation is under people’s mattresses and used for cash transactions in an increasing regression into primitive modes of transaction.
Sanusi has recorded some achievement. No other central bank governor in our national history has presided over such a large scale migration of people from employment to unemployment, from purchasing power to poverty, from relative activity to inactivity and from business growth to business decline. Of an estimated 1,000 micro finance banks licensed by his predecessor, close to 50% have either gone under or exist merely in name.
Understandably, and quite reasonably too, the banks have made progress in recovering monies lent mostly to crooks in the first place. But the percentage of new businesses that these banks have supported is miniscule and yet they are declaring profits mostly from provisions previously made for loan defaults.
The central bank under Sanusi is reportedly venturing into areas that were hitherto alien to central banking. Not even the commercial banks have been so daring as to want to go directly into these: poultry, independent power supply, real estate buying, procurement and distribution of ATMs etc. There is an increasing incursion into areas of social service and commercial ventures that no CBN should be found looking at. Who is going to regulate the CBN if the regulator becomes an operator?
In the entire Sanusi regime, my lay man’s eyes see an excess of risk management with scant economic insight. Mr. Sanusi is a banker of fairly reasonable even if controversial experience, not an economist strictly speaking.
For quite some time, the impression has grown that the presidency allowed the CBN to dictate both fiscal and monetary policies. And the principal purveyor of both has been the rather autocratic CBN governor himself. Since the President is yet to articulate his own economic agenda, the impression that has gained ground is that Sanusi is speaking and acting for Jonathan or derives his confidence from a perception of the President’s relative indecisiveness on economic matters. If Jonthan does not rein in Sanusi now, he risks being seen as culpable in the imminent meltdown of the Nigerian economy.