Yar’Adua under pressure to renew Soludo’s tenure as CBN’s governor

Even as concerned Nigerians have continued to express their dissatisfaction with the policy flip-flops that had characterized the official pronouncements of the Governor of Central Bank of Nigeria, Prof. Chukwuma Soludo, since countries around the world started reporting the impact of the global financial meltdown on the economies, there are emerging indications that President Umar Yar’Adua has come under intense to reconsider the renewal of the tenure of the CBN Governor for another five years term in office.

Sources in Aso Rock, Abuja, the national seat of political power, confided that the President may likely not want to rock the boat in the light of the roiling global financial crisis as to contemplate his refusal to renew the tenure of office of the CBN Governor, yet, investment experts and economists argue that the CBN Governor may have unwittingly driven Nigeria into the near state of economic chaos that it has undeservedly found itself.

An editorial statement by Proshare Nigeria, an investment focused website, aligns the misgivings of the Nigerian elite class when it asked in the headline to the statement: Is the CBN abreast of the financial situation of Nigerian?

“We normally do not recommend the criticism of individuals or agencies responsible for controlling certain arms of the economy,” the statement noted.

“…However, the recent pronouncements of the Central Bank governor have raised some concerns,” it added.

“In late 2008, the CBN Governor, Professor Charles Soludo, stated in several public pronouncements that the Nigerian economy was not in any way impacted by the world global economic crisis.

“At the time of these pronouncements, it was very surprising to see how very well meaning and enlightened Nigerians believed the governor’s statements.

“Additionally, most of the newspapers in Nigeria were very willing to report his statements as factual without any investigative or analytical work of their own.

“In the current era of globalized economy, it was shortsighted to believe that the world economic crisis which was gripping the United States, Europe, Asia, and Russia, would not impact the Nigerian economy. There are several world and domestic events that would have given even the non-economist the inkling that the Nigerian economy was already in an economic downtrend or will soon be experiencing an economic crisis.”

Providing details to buttress its submission, the Proshare Nigeria raised the following points:

“From April 2005 through August 2008 the price of a barrel of petroleum traded at very lofty prices rising from $60/barrel to slightly touching $150 per barrel intra-day. However, towards the end of August 2008, the price per barrel began to decline and by December 2008, the price of a barrel of oil was trading between $38 and $48. At that point the price had violated N46.00k, the bench mark price for the Nigerian budget. This meant that the excess crude proceeds were going to become a thing of the past. Additionally, since approximately 90% of Nigerian revenue is derived from petroleum, it follows that our revenue will be impacted and the foreign reserve will not be replenished at the rate of the previous 3 years.”

The Proshare Nigeria statement further asserted that,“the Nigerian stock market which had performed exceptionally for the 3 years prior to March 2008, had fallen into a funk. From March 5, 2008 through December 16, 2008, the stock market index had lost approximately 38,286.2, or 57.7%. The prolonged downturn in the market has resulted in extensive losses to the portfolios of many investors and the CBN estimated that combined losses of Nigerian banks in the stock market was approximately N900 billion. This loss caused several banks to tighten their credit requirements and curtail all margin loans. Additionally, due to the tightening of credit requirements and the declining market it became tough for corporation to raise funds from the market.

“The economic crisis in Europe and United States caused several foreign investors and institutions to recall their funds from Nigerian Banks and sell their equity holdings and subsequently drying up liquidity.

“Again, as our Naira began its decline in December 2008, the CBN Governor made comments that the devaluation was caused by currency speculations by some individuals and certain banks in the country.” The statement added.

“The Governor noted that the CBN was aware of the individuals responsible for the devaluation and the CBN will do all in their power to ascertain the speculators are punished. However, several weeks later the CBN made an official statement that they are responsible for the devaluation of the currency.”

Insisting that recent events have confirmed that the CBN does not have an appreciate grasp of the issue confronting Nigeria in the face of the global financial meltdown, Proshare Nigeria affirmed in the statement: “At this juncture, it is beginning to look like the CBN does not really have a clue about the problems confronting the Nation. First Nigeria was not impacted, and then later Nigeria was impacted. Then speculators were responsible for the currency devaluation, later the CBN was intentionally letting the currency fall.

“This pronouncement and missteps does not send good signals to Nigerians and foreign investors because what these pronouncements and subsequent contradictions show is that either the CBN does not understand the economic problems confronting the nation or they have intentionally decided to confuse or misrepresent the facts to the nation. These types of inconsistencies will eventually result in a great loss of confidence, because what it indicates is that if the CBN is unable to determine what the problems of the economy are, a solution may not be forthcoming or formulated to fix it.”

Proshare Nigeria contended that the confusion consequent to the public pronouncements of the CBN Governor over the extent of the effect of the global financial meltdown may not be unconnected with the CBN Governor’s game plan to get his tenure renewed at the apex bank.

“The actions from the CBN with regards to the recent decisions/ pronouncements may be related to this issue of a new term.” The statement said. “If this is true, subject to approval from the senate, then we can infer why the CBN governor made the decision on the devaluation. We stand to be better enlightened/corrected,” Proshare Nigeria concluded.

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