There was drama at the Vanguard Economic Summit held in Lagos yesterday, when the former Governor of Edo State, Adams Oshiomhole accused the keynote speaker and a former governor of the Central Bank of Nigeria, Prof. Charles Soludo of allocating millions of dollars to two new generation banks during his tenure “few days before the nation’s currency was devalued.”
Oshiomhole alleged that Soludo used the tactics to enrich the promoters of the two banks whose names he didn’t disclose.
But in a swift response, Soludo declared that Oshiomhole “lied,” and explained that as at the time of the 2008 financial crisis, the CBN had built the reserves to unprecedented level and so had the liberty to defend the Naira.
He said further: “We decided in the interest of the economy that we must allow the economy to adjust in other to save our reserves and for the economy not to go into a recession. Now, the adjustment of the exchange rate, there were three times weekly bidding by banks and only the successful banks at each bids were allocated forex, even if it was one bank, two or three banks.
“We had market makers and Charles Soludo was never part of the bid. There was offer and counter offer during these bids and the market then determines the cut off for the successful bids. So, when two banks succeeded or one bank, the governor did not know and we did not make and direct allocation. Every bid produced different exchange rates and there were different winners at every bid.”
Oshiomhole has earlier advised the CBN not to bow to suggestions by some economists and financial market commentators that it should allow the Naira to freely float in the foreign exchange (forex) market.
The former labour leader, while speaking as one of the panelists at the economic summit titled, “The Hard Facts to Rescue the Nigerian Economy,” said “there is no such thing as a free market,” just as he opined that every nation has a central bank that manages their currencies.
“I have seen how the International Monetary Fund (IMF) lamented how China refused to allow its currency to float. Whether we like it or not, in spite of their outright rejection of IMF’s prescriptions by rigidly managing their exchange rates, the Chinese economy has enjoyed sustained growth. Now, if we resort to complete market tools, will that enhance supply in the forex market?
“The fact is that we also have to deal with the demand side. The truth is that you are dealing with speculative demand, not real demand. So, in my view, if you say the market should take charge, it won’t work.
“But by common sense, the word parallel means biologically, things that can’t meet. So, for me it is insulting for people to say that the real exchange rate should be based on the parallel market rate. For me, it doesn’t do much to our credibility,” he said.
Earlier, in his keynote address, Soludo faulted the federal government’s recently launched Economic Recovery and Growth Plan (ERGP).
He sought to know if the plan was for a post-oil economy that Nigerians had been waiting for.
The former CBN governor said: “Will it finally do it? First, we must commend the federal government for this effort. But let me raise two or three questions. Whose plan is it? Ownership would determine whether the plan is just a public relations document or whether it would be implemented.
“More fundamentally, to what extent is the ERGP consistent with the APC manifesto? People make promises, produce fantastic manifestos and after the election, nobody opens the page anymore. But we must hold every government accountable. If only they implement 25 per cent of what they promised us, we would be on the road to Eldorado.
“The APC manifesto promised a conscious plan for a post-oil economy. So, is this plan that plan? The APC manifesto promised to halt Nigeria’s drift to a failed state with a conscious plan for a post-oil economy for Nigeria and it promised to restructure the country to achieve that. All previous plans since 1960 promised to diversify away from oil.
“So how is the ERGP different? Where is the new structure in the country to deliver the new plan as promised by APC? How would you translate to a post-oil economy when the plan was designed to depend on it? Or are we trying to repeat the same thing?
“The plan as packaged is a good effort. But in terms of our expectations, as a plan for transition to a post-oil economy as promised by the APC, it is a missed opportunity. It is a generic plan and in several aspects resembles the NEEDS document that was designed for a different era.
“It is a plan to consumer the oil and commodity rent, and not one to restructure in other to replace them. With rising oil prices, the economy would recover, not because of the plan. I am willing to bet that no much would happen to the structure of the economy at the end of the plan.”
Continuing, he pointed out that the economy is in crisis and requires all hands to be on the deck to be able to come out of the present situation.
He said the foreign exchange controls had wreaked havoc on business confidence and private investments, with massive capital flight that drove the macro economy into recession.
But Soludo reiterated that most macro-economic variables have worsened in the last two years under the present government.
But in his reaction, the Minister of Solid Minerals Development, Dr. Kayode Fayemi, outlined the objectives of the ERGP, saying it did not come out of the blues. According to Fayemi, the ERGP focuses on how to restore the economy for sustainable growth.
On his part, the Director General of the Lagos Chamber of Commerce and Industry, Muda Yusuf, pointed out that in order to get the economy out of recession, there was need to bring in more private sector investments.