State of the Economy: Soludo challenges Aganga to a TV Debate.

By Emele Onu, Thisday

Former governor of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, has challenged Minister of Finance, Dr. Olusegun Aganga, to a televised debate over the state of the economy.

In a newspaper advert published Monday, Soludo stood by his claims about the state of the economy and defended his record as CBN governor between 2004 and 2008.

In the open letter to Aganga, Soludo said: “If you are convinced that you know what you are talking about in respect of the economy, and/or that you are sure of what you said about my regime, I challenge you to a 2-3 hour televised national debate on these issues. Indeed, within the month of February 2011, I will publish a synopsis of the highlights of my tenure at the CBN – just for the record – and I will challenge you to debate them live on national TV with me.”

Aganga, while reacting to claims on the economy by former Vice-President Atiku Abubakar, had been quoted as insinuating that Soludo should be in jail for his role in the economy during his tenure as CBN governor.

Soludo accused the minister of trying to defend the indefensible on the economy, declaring: “By trying to respond to the former Vice President (Atiku Abubakar), you ended up avoiding 90 percent of the weighty issues raised in that letter; and by attempting to provide laughable excuses, you make people shudder in disbelief.”

“On a positive note however, I must congratulate you, if what DG- DMO was quoted as saying is true that the Federal Government has now agreed to borrow or issue bonds only for specific projects. At least, you have taken the first step out of at least six components of what must constitute a sensible debt strategy for Nigeria instead of trying to defend useless debt-to-GDP ratios,” he added.

Soludo chided the minister for defending debt accumulation “on the basis that countries like US, UK, and European countries undertook ‘stimulus packages’ and ran high deficits during the crisis makes us a laughing stock. Hon. Minister, these countries you cite were all in recession and the Treasury had to bailout their banks by recapitalizing them. Except if your figures are wrong, Nigeria was neither in recession nor did the Ministry of Finance spend a kobo to bailout banks”.

He further wrote: “If the figures you bandy on GDP growth (at over 7.5%) is right, then Nigerian economy must be ‘booming’ and the idea of a ‘stimulus package’ and hence high deficit is a contradiction in terms. This is Macroeconomics 101, sir! Please stop shocking Nigerians by trying to excuse the depletion of our foreign reserves at a time of export boom on the grounds that what is left would still meet more than three months of imports. This is new Economics by your Economic Team.

“Perhaps, you should become economic adviser to China and all other countries to fritter away their foreign reserves until it can finance three months of imports, and for Nigeria, when oil price crashes we can then use water to pay for imports. Nigerians expect you to sit down and find solutions to the other issues and stop the shadow boxing. Congrats also for setting up a Committee to review public finance. These are part of the issues we raised in our earlier article in September 2010. I can notice other feeble actions being taken. That is how it should be in a democracy.

“But you must get serious, Hon. Minister. When you look Nigerians in the face and point to flattering comments on Nigeria’s prospects by some people in some conferences as your proof that Nigerian economy is doing well, it does not make you look well informed; especially in the face of hard evidence to the contrary. As you were busy blaming people for ‘talking down the economy’, the UNCTAD report released in Geneva on January 17, 2011 slammed you again with a red card: foreign direct investment (FDI) into Nigeria dropped by 62% in 2010 (from $6 billion in 2009 to $2.3 billion in 2010)—again the worst in many years, and even worse than during the global crisis. While developing and transition economies increased their FDI inflows by 10% in 2010, Nigeria’s FDI fell by a whopping 62%. During our tenure, FDI was more than doubling every year, and even at the peak of the global crisis in 2008, stood at about $8.5 billion. Do you get the point, sir? The international investors are sending a strong message to you, Sir. You need to get your act together.”

Soludo also criticised the Eurobond issued by Nigeria, questioning the pricing which he said was unfavourable to the country.

He said: “Before you issued Nigeria’s $500m Eurobond, Atiku indicated that it would only be oversubscribed because ‘… you are offering foreigners attractive returns on the bond…’. You got angry. Now, who is right: you or Atiku? Think about this, Hon. Minister: Nigeria’s debt-to-GDP ratio is about 17% (using your numbers, and external debt less than 3%), with proven oil reserves of about 36billion barrels and high oil price and output, strong GDP growth as you claim, and yet the yield on the bond is as high as 7% (higher than South Africa at 5.5%; Ghana at 6.2%, etc). Mr. Minister, can you point to other countries with similar ‘fundamentals’ that are priced as risky as Nigeria?

“Put differently, are you not worried that even with the ‘fundamentals’ and high return to investors, the bond is not oversubscribed more than 10 times? The point, Hon. Minister, is that given Nigeria’s potentials, there is no reason (other than mismanagement) why even at 6% or less, the bond would not be oversubscribed more than 10 times. Did you read the front page of the London Financial Times last week, specifically the January 21, 2011 edition, regarding your economic management? What further proof do you require to know what the international community thinks of your handling of the Nigerian economy?

“Again, in the said publication, you spent so much energy trying to convince Nigerians that the AVERAGE interest rate on Nigeria’s debt is 7%. Haba, Hon. Minister! With a total debt stock of $34.6 billion (domestic and external), your total debt service payment in 2010 at N542 billion ($3.61 billion) and yet you claim the AVERAGE interest rate is 7%? Even after adjusting for amortizations and new issues, you know that you cannot be right; otherwise publish the amount for debt repayment and we will see who is right at the end of the year! Enough said! You continue to bandy GDP growth rates which essentially show the obvious: we are lifting more barrels of crude oil, and the weather has been very clement to spur agricultural growth! You clearly lie with the GDP figures. Hon. Minister, seven years before 2010 is 2003- 2009, and NOT 2004- 2009: so your figures are wrong, sir. The fact remains that over a seven year period up to 2009 (that is, since Obasanjo’s second term and because data for 2010 are still estimates), GDP growth rate (appropriately adjusted for the oil sector) has been the worst under you as head of the Economic Team, at a time of oil boom!

“By the way, Hon. Minister, are you aware that the Presidential Advisory Council (PAC) now agrees with our position on your budget? Several newspaper editorials and informed analysts agree with us as well. The PAC has just called on you to reduce recurrent expenditure to 40% (down from the current 114% of estimated revenue). Certainly, Hon. Minister, there is a strong message both Nigerians and international community are sending to you. Just listen!”

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