With President Yar'Adua more or less in retirement, and Acting President Goodluck Jonathan in full charge of the federal executive, it appears CBN Governor Sanusi Lamido Sanusi has lost the political backing of Aso Rock. The Acting President's recently re-appointed National Security Adviser, retired Lt Gen Aliyu Gusau wasted no time in criticizing Sanusi's reforms, blaming them for damaging the economy.
It is unclear whether Gusau was speaking indirectly for Acting President Jonathan or whether he was speaking for Jonathan's godfather Obasanjo (Gusau was Obasanjo's NSA too; in fact Jonathan seems to be resurrecting the careers of a lot of Obasanjo-era powerbrokers). Gusau could also have been speaking on behalf of major vested interests in big banking, big business and big politics, believed to be upset with CBN boss Sanusi's crackdown on their mostly parasitic relationship with Nigerian banking. And Gusau could be speaking for himself (or for whatever shadowy faction of Big Men he truly represents).
Quite a few players in the banking and equity trading industries echoed the retired general's criticisms. Like Gusau, these industry insiders have blamed Sanusi for the difficult situation facing Nigerian banks and the Nigerian Stock Exchange.
The truth is, the Nigerian banking industry and the Nigerian Stock market were in trouble BEFORE Sanusi Lamido Sanusi was appointed Governor of the Central Bank. The truth is, lax/negligent regulation of the financial and equity markets by the Obasanjo II Administration (of which Gusau was part), and borderline criminal stock market manipulation by industry insiders created an asset bubble that coincidentally (but separately) blew up the same time as we were hit by the Global Credit Crunch in 2008.
Indeed, between October 2008 and May of 2009, Nigeria's external reserves dropped from $61 billion to $47 billion because the immediate past Governor of the Central Bank, Professor Charles Soludo, pumped $14 billion from the reserves into the currency markets to defend the value of the Naira.
And the decline in banking industry share prices on the Nigerian Stock Market was responsible for a 37% drop in the All-Share Index, the steepest decline of any of the 89 benchmark indexes tracked by Bloomberg media.
All of this happened BEFORE Sanusi was named Central Bank Governor, and so NONE OF THIS can be blamed on Sanusi's actions since becoming Central Bank Governor. The Central Bank, reacting to retired Gen. Gusau's criticism, made just that argument.
The CBN's self-defence is backed by Lawson A. Omokhodion, who insists in this essay that Sanusi's interventions were designed to save the Nigerian banking from a mess of its own creation. These interventions include, a massive =N=620 billion ($4.13 billion) bailout for the most distressed banks, and a proposed Asset Management Company to buy up =N=1.2 trillion ($8 billion) in toxic assets held by Nigerian banks. Given the fact that the Eurasia Group estimated "bad loans" (a.k.a. toxic assets) on the books of Nigeria's banks added up to at least $10 billion, it is perhaps not a coincidence that Sanusi's $4.13 billion quick bailout and $8 billion Asset Management Company plan add up to a $12.13 billion intervention to cure the "toxic assets" problem of Nigerian banks.
It also makes you wonder about erstwhile CBN Governor Soludo's claim (published by Bloomberg a month after the same outlet had reported the Eurasia Group's estimate), that the toxic assets problems amounted to just $5.3 billion. Was this the same sort of official procedure under which Nigerian governmental agencies release casualty figures, after incidents of communal violence or police/army reprisals, that are so much less than the real casualty figures?
To a degree, General Gusau, and his supporters within the political class, the banking industry and the stock market, are playing politics.
In most countries in the world, citizens are enraged at the fact that taxpayer's funds are being used to bail out big banks; in these citizens' opinion, it is the big banks that created their own problems (and problems for the rest of their respective economies).
In Nigeria, there has not been much public reaction to the news that $12.13 billion is being pumped directly or indirectly into the banking industry. Part of this is due to the fact that Nigerian citizens perceive government money/funds and external reserves to be "oil money" and not taxes taken from the sweat of the citizens' brows, so no one feels like money is being directly taken from them (i.e. the people) and being given to the banks. Indeed, the attitude toward "government" and (more importantly) "government property" is almost a perfect illustration of Garrett Hardin's "Tragedy of the Commons" ... but that is a different discussion to be postponed till another day.
In fact, we the people are wrong to ignore what has happened, and what is happening to correct and/or ameliorate some of what happened.
In this, the Gusau Crew (if I can call them that) are adopting first-strike politics, using propaganda to plant the idea in the minds of Nigerian citizens that all of the problems were caused by Sanusi Lamido Sanusi. Effectively, they want to coopt the citizens into their Crew by convincing the people that any pain felt by the economy or by the citizens is to be blamed not on the Crew but on Sanusi.
Within the context of Nigerian politics, it is not difficult for this brand of politics to work. There are certain people who were immediately inclined to dislike Sanusi because of the difference between his geographical region of origin (and his religion) and the same criteria for his predecessor. For some, it was the difference between those criteria for the man who appointed Sanusi, as compared to the same for the man who appointed Sanusi's predecessor. For many of those with this sort of visceral dislike of Sanusi, it didn't help that he and the president who appointed him were from the same region and same religion. Before Sanusi so much as uttered a word, or did anything, these people were already accusing him of being part of a regionalist and religionist plan to destroy the banks because (in the view of these sectionalists), the banks were dominated by people from other regions and religions. Indeed, when Sanusi forced the resignations and dismissals of certain CEOs, the ethno-religious warriors kept saying Sanusi did it because he wanted to install his kinsmen in charge of the five affected banks in place of people from other socio-cultural groups, when in fact Sanusi was exactly regulatory sanction on five banks that were collectively responsible for 40.81% of all toxic assets in the Nigerian banking industry.
General Gusau (rtd) is a ex-military strongman from the part of the country that should ostensibly be pro-Sanusi, if the ethnic/religious propaganda suffusing the Nigerian political marketplace had any credence.
The truth is Sanusi has stepped on powerful toes from all over Nigeria, regardless of region or religion. The powerful plutocrats who dominated and still dominate the commanding heights of the Nigerian economy enjoyed a cozy, mutually-lucrative, quid-pro-quo relationship with the Obasanjo II administration. Sanusi embarassed a lot of them by exposing to the public the "bad debts" they owed Nigerian banks, as a way to force them (via the court of public opinion) to make good on their debts. He also revealed how the executives at major banks dominated by a small coterie of shareholders based around a particular family, pulled a variation of the Bernard Madoff fraud, enriching themselves along the way (as Madoff did) often by directly transferring customer deposits to themselves (by spending it on themselves and their expanding personal asset portfolios). The banks not so much "lent" as "gave" money to their business and political contacts; and they gave large amounts of "margin loans" to speculators (and to themselves) for the purpose of buying their own stock, and hence pushing their stock price up.
No doubt a few innocent parties were inadvertently subjected to public scorn they did not deserve, indeed, in response to the publication of the list, I said
(This) is not an ideal or optimal way of doing things. One would rather there were civil lawsuits that would produce clear rulings on whether Loan XYZ was non-performing, that could then either force the adoption of a structured payment plan or authorize the seizure of assets subsequent to legally defined default. There are corporate heavyweights on the list that might not have liquid assets to pay back their loans, but do have other assets than could be seized to defray at least a portion of the debt -- the rest may have to be written off. Maybe in some way the process could establish a distinction between businessmen and bankers who are true entrepreneurs, and businessmen and bankers who exist only by virtue of exploiting the many loopholes in the Nigerian political and economic system. In other words, I wish this were more constitutional and legalistic, with a more systemic approach toward solving the toxic asset dillemma.
It is extremely unfortunate that more sophisticated, more accurately targeted methods were not used, but in the Nigerian context there was probably no other way to pressure the mega-powerful plutocrats to make arrangements to pay up or to restructure their debts so they could eventually pay up. Those affected by Sanusi's actions, including some of the most powerful players in Nigerian business, hate his guts.
And then you have the thousands of bank workers who have been sacked since the Sanusi reforms began. Within the political context, they blame Sanusi for their lost employment, when in fact the economic factors that made them redundant existed BEFORE Sanusi came to office. As stated above, the precipitous drop in the value of Nigerian banking shares led to a 37% drop in Nigeria's All Share Index. After years of expanding their staff totals during the (at least partially artificial) boom years, Nigeria's banks from 2008 onward were clearly struggling, and were always going to have to think of cutting costs (including payroll).
Those bank workers who have lost their jobs blame Sanusi, because the effect of some of his reforms was to force the banks to make accurate public statements about their financial status. Previously, the numbers released by some banks were not reflective of the banks' true financial position. When banks were forced to face up to their true economic health, and to make provisions for their losses and bad loans, they were forced to take appropriate cost-cutting steps they would have otherwise pretended they didn't need to do.
To a large degree, driven by the lack of formal employment opportunities in the Nigerian economy, there is a philsophy among sections of those lucky enough to be formally employed that they should be kept on the job even if the corporate entity they are working for experiences a financial/commercial collapse. In the private sector (like the banking industry), this philosophy is less powerful, but in the public sector, moribund parastatals like the Railways, NITEL and the Steel Complexes nevertheless boast thousands of staff. Indeed, even as federal, state and local governments are running deficits and running up debts to meet their recurrent costs, civil services at all three tiers remain over-staffed.
Regardless, you can't blame Sanusi Lamido Sanusi for the job losses.
These are testing times for the CBN governor, and he does appear to have lost the support of Aso Rock. Will he concede ground to his powerful enemies, and step back from the necessary reforms and sanitization of the banking industry?
Time will tell.
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