Central Bank

You've probably heard by now that the Central Bank of Nigeria, the National Deposit Insurance Corporation and the Asset Management Company have "nationalized" four banks.

I've been an advocate of forthrightly and determinedly fixing the mess in our banking industry ... but I hope someone, somewhere is keeping a tally of the cost. We've spent billions so far, and it looks like we will spend billions more.

I am on record, on this blog, as saying the Federal Republic could probably afford to spend $10 billion (=N=1.5 trillion). At the time, this seems the most trustworthy estimate for the amount of "toxic assets" on our banks' books. This being Nigeria, I am not sure what we have spent so far; I would like to know if we have breached the $10 billion barrier -- because if we have, my opinion on the continued bailout will change.

In other Central Bank news, Sanusi Lamido Sanusi, the Central Bank Governor, wants =N=2 trillion in pension funding unlocked so it can be used as capital to finance infrastructure projects.

Let me choose my words correctly.

The thing about Sanusi is he is a politicians masquerading as a Central Banker. Wait, wait, before you get the wrong idea, I mean it in the best way possible.

When he was first appointed to head the CBN, I was happy about the appointment.

Most public figures in Nigeria are "blank"; as a citizen, you have no idea what is in their mind. We shouldn't be surprised, because most of them don't have anything in their mind beyond the acquisition of money, power, women or some combination of the aforementioned. I am frequently dismayed by the realization that people in positions of economic and political power do not seem to have spent so much as one second thinking deeply about the issues.

When they are forced to express an opinion, they just regurgitate, as though it were fact, one of several colloquial assumptions that float around in Nigerian public discourse. The decisions we make, and actions we take, based on these assumptions have generally led us down the wrong path. Yet, no one ever truly interrogates these assumptions, or subjects them to empirical analysis.

Sanusi, on the other hand, was someone for whom I could say I had some idea of what his thought-out opinions were on the issues. I had been reading his essays and transcribed speeches for years before his CBN appointment. Sometimes I agreed with him, sometimes I did not, but you could always tell that he was thinking and not simply regurgitating.

He always sounded like a politician (hence my comment above, which was meant, as I say, in the best possible sense). He never, too my knowledge, wrote about the intricacies of the banking system or of national/continental/global finance. It was mostly sociopolitical and sociocultural commentary, and his comments on economic issues were less the data projections of a banker and more the talk of a politician advocating a development agenda.

Thus, I am not surprised that Sanusi has been using his CBN position to interject himself in economic policy areas that lie outside the constitutional remit of a Central Bank governor.

He has intervened in the Agricultural industry. He has intervened in the Electricity industry. And he is intervening in Infrastructure. And while I am still for the most part supportive of his interventions in the Banking/Insurance/Finance sector, I will be honest and tell you that I think some of his actions should have been policy decisions of the federal executive and legislature in tandem ... and not the decision of a single man.

I'd like to say that Central Bank governors are not elected, and that certain kinds of decisions are appropriately left to branches of the government that are elected ... but it is a difficult argument to make when those branches of government are intellectually moribund. Whatever is "constitutionally" proper, the unfortunate "practical" reality is if Sanusi waits for the Aso Rock and the Assembly to generate/initiate and legislate/approve strategically necessary initiatives, he (and we the people) will be waiting forever.

But this, ironically, is my problem with Sanusi's desire to unlock the pension funds for the purpose of infrastructure investment.

Entities like the IMF and World Bank are wrong when they say we should make the investment environment suitable for "foreign investors".

Our strategic priority is, was, and will always be making the investment environment suitable for domestic investment. Nigeria will not be saved or transformed by outside investors; if anything those foreign investors will only arrive in bulk to join in chopping after we Nigerians have already done all of the heavy lifting of economic transformation.

As such, it would of major benefit if we could unlock pension funds for investment in capital infrastructure.

The problem is Nigeria's political, constitutional, legal and policy framework are ... problematic. The way we handle major infrastructural projects, even in supposed showcase states like Lagos, is ... problematic. Our regulatory framework is ... problematic. Our law (and contract) enforcement is .... problematic. Our system of documentation and data-gathering has produced a country that thinks all of its football players are over-aged, and that doubts every Census that has ever been held.

In fact, Sanusi knows the environment is problematic. If he didn't, he wouldn't be trying so hard, and so often to bypass the Federal Government and essentially dictate Nigerian development policy from his perch at the Central Bank. Everything that Sanusi does is a loud announcement of his lack of confidence not only in the executive and legislature, but in the judiciary too. Heck, Sanusi has become the judge, jury and .... the man who sacks errant bank bosses who should probably be behind bars.

Do we really want to pour our PENSION funds into such an environment?

George W. Bush, the ex-president of the United States, suggested investing his country's pension assets in the stock market. Had his plan succeeded, the US social security fund would have taken a massive hit. Yes, this is a simplification of what Bush planned, I know, but you get why I am concerned.

We shouldn't put the cart before the horse.

Reforms first. Investment later. Without the reforms, the investment will likely be wasted.

Sanusi should have run for President. And he and his allies should have built a multi-ethnic political faction to fill enough Assembly seats and state governor's mansions to put a reform agenda squarely in practice ... as a prelude to subsequent massive investment in infrastructure.

PS: It has not escaped my attention that the =N=2 trillion that Sanusi is seeking to unlock for Infrastructure is roughly equivalent (when converted) to the $12 billion that Nigeria gifted the Paris Club in exchange for what was called debt cancellation. I have argued (in less detail on this blog; in greater detail elsewhere) that Nigeria would have been better off spending that money on Infrastructure, using it to leverage even more investment than the $12 billion corpus. Alas, in Nigerian "democracy" there is no real debate about issues; things just happen without anybody inquiring empirically as to whether there is a better thing we could have done with the resources. Say to anyone, "but this is a waste", and they will say to you "Well, if they didn't spend it on XYZ, it just would have been stolen anyway." Which says a lot. All said and done, Nigeria borrowed something like $19 billion from the Paris Club, but paid the Paris Club something between $55 billion and $60 billion -- this being Nigeria, the exact numbers are unclear.