Tuesday, 1 May 2012

Examining the economics of Sanusi By Bayo Ogunmupe

Rationalising Sanusi's moves

By Bayo Ogunmupe
PRESIDENT Umar Yar’Adua replaced Charles Soludo with Lamido Sanusi as the Central bank governor in 2009. Since then Sanusi had performed creditably as an economist, patriot and CBN governor. He had whipped Nigerian banks into shape by shaming the corrupt and forcing the banks to pay for their own bailouts.
  Sanusi won accolades from around the world. However, January 2012 was an unpopular month for him, with protesters threatening to burn down his Kano home after his successful campaign for the removal of oil subsidy. In a recent lecture at the London School of Economics, Sanusi acknowledged his newly found unpopularity, warning the predominantly Nigerian audience to exercise restraint through striving to understanding the issues before throwing shoes at him.
  Unfortunately, our people do not understand that we are importers of manufactured goods and exporters of raw materials because of corruption and incompetence of our leaders. That was what Sanusi sought to rectify, which caused the anger of the ignorant. While trillions of naira were being siphoned form the treasury through fake oil subsidy, Sanusi sought and succeeded in exposing the oil subsidy fraudsters. There was no way Sanusi could explain to the people for he himself is a bourgeois. Exasperated by the wanton profligacy, Sanusi went to town with curing its source rather than merely treating it. All these have led to what Sanusi calls the de-industrialisation of Nigeria. In his LSE lecture, Sanusi referred to the current state of affairs in Nigeria as a primitive accumulation of wealth by our leaders. Thus, the Nigerian economy isn’t just structurally deformed because of bad policies, it is so also because of external pressures, slave raiders, neo-colonialists and the Bretton Woods institutions, which is why an Okonjo-Iweala as president of the World Bank isn’t the panacea to our economic woes.
  Indeed, Sanusi argues that the solution to our economic problems lies in ethical policies that are prosecuted by men of integrity. He presents his banking reforms as living proof of the way forward. But the real target of Lamido Sanusi is the rentier class, namely those who manipulate the social and political environment to get a larger share of fixed wealth rather than creating new wealth. The Nigerian economy is deformed because it is actively scarified by the rentier class who benefit from its deformity. One could extend Sanusi’s analogy: “banks don’t fail, they are killed,” to the entire Nigerian economy, meaning, the Nigerian economy didn’t fail, it was killed. Economists see these public sector killers as governors, senators, civil servants and ministers. Which is why 70 per cent of our so-called business moguls are fronts for looters. They are parasites of the Nigerian state. They are not creating wealth, they are only keeping it in trust for the treasury looters.
  Sanusi’s greatness lies in his being an ethics scholar, rather than a traditional banker and economist. He was appointed Central bank governor in June 2009 when the Nigerian Stock Exchange was at its lowest ebb in performance and oil was 40 dollars per barrel. Moreover, the Nigerian banks were about to collapse at the time. Then, Sanusi discovered a disconnect between bank balance sheets and the real economy. He found that money was chasing rent, not profit. To turn the country around, the government and CBN needed an overarching vision to reverse the pauperization of Nigeria, to turn this rent based economy to a neo capitalist system.
  Thus, in his banking sanitisation policies, Sanusi’s success has been outstanding. He restored accountability to the banks, moving commercial banks out of the short-term investment areas, and opening space for private equity. By bringing down bank overheads through the sharing of services, costs have dropped by 30 per cent, leading to lower interest rates. This enabled increased lending to agriculture which now accounts for 42 per cent of GDP, it was less than one per cent in the Soludo era.
  In 2009, he subsidised lending to small-scale businesses by N200 billion with 7 per cent interest. That measure saved 12,000 jobs and production in those businesses going up by 15 per cent. Then, he set up a fund for companies owned by women so that they borrow at single digit interest rates.
  Sanusi’s opposition to fuel subsidy fits perfectly into the industrialisation scheme. He sees supporters of devaluation of the naira as agents of international capital agitating against sovereign states to protect the integrity of the domestic economy. Sanusi’s anti-subsidy stance is economically sound, if even the government handling of it has been woeful.
  Ideologically, Sanusi believes in subsidising the poor rather than the elite as we are doing at present. In 2011, 24 million litres of oil were imported on top of Nigeria’s daily consumption of 35 million litres which never reached Nigeria. Effectively then, Nigerian fuel subsidy was subsidizing fuel consumption at home and its neighbours in Benin Republic, Togo, Ghana, Cameroun and the Sahel states to the North. Sanusi’s postulation is that the struggle between rent and profit isn’t class struggle. It is merely the exploitation of the people. His support for the local production of goods and services had been seen as an attack on vested interests and the support for the creation of a patriotic national bourgeoisie. Sanusi’s criticism of on-going primitive accumulation of money via oil subsidy scam, pensions scam and the like stored in Dubai houses, fast cars, and Lagos boat club could be converted into investment in manufacturing and infrastructure, kick-starting an industrial revolution. That was the way Britain started her industrialization which took funds from capitalists and invested them in productive enterprises in England, spurring the industrial revolution.
  This option isn’t open for Nigeria, for the English plantation owners had fewer options then than using their profits from slavery to enrich the motherland. In the Nigerian case however, the Nigerian rentier class has a much wider variety of options: from conspicuous consumption to chasing domestic and foreign assets accumulation.
  Indeed, our mindset is deadlier than bombs. It is self evident that while Christians are being targeted because of who they are, Muslims are being hit because they are not supporting actions that are inimical to the their cause. Which was why during the fuel subsidy furore, Sanusi was branded an enemy of the people, though he was working to salvage the people from the stranglehold of subsidy scammers.
  Thus, the Nigerian Spring, also known as Occupy Nigeria, started with patent opposition to oil subsidy removal. This quickly broadened out with other grievances such as the waste in governance, corruption and poor service delivery. The fuel importers are now being investigated and the subsidy palliatives: Subsidy Reinvestment and Empowerment Programme (SURE) is being reorganized. All these go to curb the excesses of the rentier class, putting extra budgetary expenditures under closer scrutiny.
  Indeed, it is praiseworthy that Sanusi has been able to put up a programme that reduces the cost of borrowing for power companies. The CBN now lends at seven per cent, which is a six per cent gain from the rentier class. We should therefore continue to eschew violence and strengthen our resolve to clean Nigeria of corruption by demanding better deals from government through mass action and support for patriotic public office holders like Lamido Sanusi.


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