Economic Confidential

Public discourse recently focused on the charge by Dr. Obiageli Ezekwesili (Oby), a former Senior Special Assistant and Minister in Obasanjo’s administration, that the Yar’Adua/Jonathan Presidency had frittered away accumulated reserves of about $67bn since the change of baton in 2007.

The government has stoutly countered the accuracy of the alleged reserves balance of $67bn with statistics purportedly obtained from the Central Bank that total reserves was barely $47bn in 2007!

Dr. Ezekewsili’s charge does not really bring fresh information to national consciousness with regard to waste and corruption in public finance; however, in defence of her allegation, the former Education and Solid Minerals Minister could argue that, in view of fairly steady crude oil revenue over time, it would be reasonable to expect reserves to have presently risen above the ‘authenticated’ 2007 CBN balance. In reality, this may be so, but then, Dr. Ezekwesili would need to provide detailed and incontestable evidence of mismanagement of such fortuitous dollar inflows!

N10.6trn controversy: Oby Ezekwesili

Regrettably, the over $12bn Paris Club debt payment did not stimulate foreign direct investment as promised, while the power sector remains crippled, even after ex-President Obasanjo withdrew over $13bn from our reserves to upgrade capacity and transmission.

In fact, in an article titled “2006 Budget, Debt Management & VAT” (see http://www.lesleba.com/09012006.doc ), we noted as follows: “… the burden and impact of the current national domestic debt is worrisome; … over 70% of total domestic debts of N1,500bn consist primarily of borrowings with treasury bills and bonds….

Incidentally, the debt service charges increased by 18 percent from N186bn in 2005 to N220bn in 2006”. Consequently, we observed that “it is an anomaly for almost 70 percent of domestic debts to comprise treasury bills and bonds with coupon rates in excess of 15 percent for such risk-free sovereign debts”.

Incidentally, aside the external debt burden, there was little or no domestic debt to manage, until the establishment of the Debt Management Office (read as Debt Creation Office) in Year 2000! However, domestic debt inexplicably galloped after the creation of the DMO.

Consequently, we condemned government’s reckless monetary policy strategy in which most of the funds raised through treasury bills and bonds are simply sterilised with no direct benefit to the economy; besides, we noted that the protocol of unending liquidity mop up had also become a perennial obstacle to the operation of a conducive economic policy with socially inclusive growth. Indeed, no real growth is possible with double-digit inflation rate, and cost of funds to the real sector at over 20 percent!

Paradoxically, Dr. Oby Ezekwesili found nothing wrong with such shenanigans in our economic and monetary policies, and surprisingly acquiesced to their perpetration!

Indeed, one may rightly conclude that the seeds of our current horrid economic predicament were sown and nurtured in the years that Oby and her other celebrated indigenous co-travellers from the World Bank served in Obasanjo’s administration. Regrettably, they also had no answer to the rising scourge of unemployment!

Nigerians are accustomed to the culture of sitting public servants, who see nothing wrong with bad governance, but who quickly turn around to decry the same policies they condoned, once they left office!

The Obasanjo regime could never mirror the fabled Court of Camelot, where leaders designed and assiduously implemented exemplary policies that would enrich the people, as Oby and her comrades would want us to believe; the reality, of course, was that poverty actually deepened between 1999 and 2007!

Regrettably, there may also be no enduring positive legacy from her stints as Minister for Solid Minerals and later for Education. The unyielding decay in these sectors is probably indicative of her inability to make positive change even with the over N350bn allocated for education during her tenure!

The ‘Due Process’ office for which she was better known reportedly saved over N60bn from audit of hundreds of billions of naira government contracts; however, in view of the undisguised depravity in public finance, the World Bank guru should probably have done much better!

Oby may have mischievously misled Nigerians to believe that the greater the reserve balance, the better it is for the economy and the people; this may, however, not be so in a model in which CBN always claims the lion’s share of reserves. In reality, the bigger the size of CBN’s share of reserves, the weaker will be the naira rate of exchange, as higher CBN’s dollar reserves distort naira/dollar rate of exchange in favour of the dollar, as less dollars are curiously auctioned by CBN to chase the surfeit of excess naira created by CBN’s substitution of naira allocations for dollar-derived revenue. This weird payment system has disastrous implications for inflation and consumer demand, and ultimately deepens poverty nationwide. Obviously, this is not Oby’s business!

SAVE THE NAIRA, SAVE NIGERIANS!!