By Ben Wilkinson
The president’s public dressing down of Nigeria’s central bank chief over currency reform plan hints at deeper personal rivalries within Yar’Adua’s administration
Chutzpah, nerve, self-confidence – whatever you call it, Chukwuma Charles Soludo has got it.
In mid-August, the Central Bank of Nigeria governor announced with much fanfare a plan to redenominate the naira, Nigeria’s national currency, within a year restoring its value by two decimal points, making the new naira worth 100 old units.
But before the month was out, Soludo was forced to renege on the grounds that the proposal lacked formal constitutional endorsement by president Umaru Yar’Adua. The former academic was forced to issue a humiliating public statement acknowledging that his redenomination plan had been frozen and would only be revived if and when the head of state decided to do it. The Lagos media circled, with speculation rife that Soludo would be sacked.
Yet only a few weeks later, the central bank chief was bold enough to insist publicly that the currency plan – along with other aspects of his Strategic Agenda for the Naira programme – was simply “suspended”, pending discussions within the government economic team. Soludo, who has been keeping a low profile since the spat and declined to be interviewed for this article, would appear to believe he may yet win the policy argument.
In an interview with Emerging Markets before the spat, Yar’Adua said he gave his full support to the team of progressive technocrats led by Soludo at the central bank. He added that he strongly supports “a monetary policy that has price stability as its primary objective” and which pursues “an active transparent and predictable interest and exchange rate policy”.
Lagos bankers fear that a technical debate over an essentially second-ranking, if symbolic, proposal could become a proxy for public struggle over economic policy leadership. Comparisons are being made to June 2006, when then president Olusegun Obasanjo suddenly reshuffled his highly regarded finance minister Ngozi Okonjo-Iweala to the foreign affairs portfolio; the former World Bank official served a few weeks in her new post but then preferred to quit the government.
According to a Lagos banker who declined to be identified, “Like Ngozi, Soludo has learnt the hard way that the leadership can be aggrieved when government clout and international respect accrue to technocrats.”
Still in post
Soludo has remained in office, and there has been little to suggest that Yar’Adua has decisively taken against the governor following what one leading Nigeria analyst called “a near unprecedented public dressing down from a man who is otherwise the ‘quiet president’.”
But the situation is far from comfortable. Yar’Adua’s choice for finance minister – Soludo’s former deputy, Shamsudeen Usman – is, like the president, from the north. Another Lagos banker, keen not to become embroiled in the power struggles plaguing Abuja, commented that, “Soludo and Usman have a history – they are not great friends, and are seen by politicians to represent different regions.”
Soludo’s public opponent in the currency affair was justice minister Michael Aondoakaa, who formally declared a halt to the plan on the grounds that the president had not given formal written permission. Legally this seemed correct, but observers say procedural flaws could have been resolved in private.
Soludo has some strong cards to play, as architect of a regulatory overhaul that has hugely strengthened the Nigerian banking sector. One respected international bank analyst told Emerging Markets he was “a leader and a model for emerging markets worldwide”.
Soludo’s proposed agenda intends to make the naira the “currency of reference” in Africa. He has called for an inflation-targeting framework for monetary policy, measures to deepen the foreign exchange market and full IMF Article VIII current account liberalization. A senior official in Abuja observed that “West African countries have a long-term goal of monetary union... if Nigeria is to exercise the influence to which it aspires, the naira needs to be resolutely credible.” Soludo is seen as a guarantor of that credibility.
More battles are expected as the new administration hammers out its economic policy. Many bankers consulted by Emerging Markets agreed that Yar’Adua’s low-key calm has struck a chord with the public, but that it may not be the most effective tool in asserting presidential authority over warring policy barons. But, said one source, “Yar’Adua can now take a final decision on the naira in his own space and time.”