Interview with Nigeria’s Central Bank Governor, Sanusi Lamido Sanusi

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“Africans cannot but take their destiny into their hands,” Mr. Sanusi said in an interview on Nigeria and Africa’s economic situation and prospects.

Question: Mr. Sanusi, your keynote address was on “Growth prospects in Africa after the crisis,” in your estimation is the crisis over in Africa?  

Answer:  The consequences of the recent financial crisis on African economies were not as catastrophic as the previous ones although various countries are still smarting from the crisis. With the help of the monetary and financial stimuli as well as the slowly improving financial conditions, I am happy that growth is resuming gradually in 2010.  

Question: How would you explain Africa’s exceptional capacity to mitigate the impact of the global financial crisis?

Answer: The global nature of the crisis and its widespread impact called for international and multilateral actions that helped in the efforts of Africa countries to come the downturn. In addition the low integration of their economies to global financial markets, many African countries had since the mid-1980s pursued sustained economic reforms with steady economic growth for over two decades.

Consequently, after decades of low economic growth, Africa achieved impressive rates of economic expansion, as average GDP growth rate rose substantially between 2001 and 2009. With the global financial crisis, however, economic growth in Africa began to slow down in 2008. Average growth rates fell from about 7 percent in 2007 to about 5.5 percent, which is still appreciably high relative to some decades ago.

Question: What advice would you give to African countries against future financial and economic crisis?

Answer: Africa escaped the devastating impact of the recent financial and economic crisis through improved economic management, progress in governance and through various public and private sector reforms. We continue to hope for rising commodity prices, reduction in armed conflict, not to forget increased international support to our countries. There is no reason why most African countries should still depend on very few primary agricultural and mineral commodities for their exports while importing mainly manufactured goods. “We import what we have and export what we don’t have”.  Efforts at diversifying our economies away from primary produce have remained largely unsuccessful. Greater effort should be made to improve the state of critical economic and social infrastructure to support robust growth on a sustainable basis. The African industrial base is still very weak and largely dependent on imported raw materials and technology, thereby compromising competitiveness. If Africa can deepen its current reforms in more productive areas, improve its share of global market, Africa will be better armed for any future financial crisis. The challenge, therefore, is the ability to manage one when it shows up, utilizing lessons learnt from the recent crisis as the building blocks for the development of policies and strategies that would ensure sustainable economic growth across Africa.

Question: In your presentation, you seemed to be hard on your own country, Nigeria, as an example of African failure, why?   

Answer:  It was more convenient for me to draw examples from my own country than any other country.  In doing so, it was easier for me to emphasize what we all know obtains in all African countries. Do not forget that despite what I said about Nigeria, it still accounts for over 50 percent of West Africa’s GDP and one of the key economies in Africa. Nigeria has recently come out of a banking crisis which was caused largely by poor risk management, inappropriate speculation on untenable petroleum situation and, of course, poor governance issues. The weaknesses and missing links in Nigeria are symptomatic of the financial systems across Africa as a whole. From the Nigerian experience, I endeavored to highlight the politically motivated disconnect between the allocation of savings and the real economy. I brought to bear, given the audience I had before me, the whole feeling and sentiment behind the conference itself. From the banking perspective I outlined the broad African failure to recognize limitations of the banking system when it comes to delivering concrete economic development. I raised some relevant issues for our sober reflections notably: when will Africa adopt human face value-chained programmes? When will Africa cease to look for grass-root investors from outside the continent? How long will Africa as a whole continue to remain subjected to the economic situation outside the continent?

Question: Finally, what do you mean when you say you are not a conventional Central Banker?

Answer: Yes, I don’t have any apologies for being regarded as a non-conventional central banker, but I have what I can call banking common sense to know what the population wants the banking system to do. It is a question of risk perception. Anyone willing to take risks, you will agree with me, is also a visionary. It is not enough to say we are pursing economic growth for its own sake without concomitant improvement in the welfare and employment of the population we are banking for. For example, we know conventionally that our economies are not yet well integrated and that poverty is still prevalent but we have positive projections of economic growth. Sometimes, the economic growth we record arise merely because a country like China is growing or simply because we have had abundant rainfall in a particular season, but we remain at the level of conventional optimism and forget that the growth is not as a result of coordinated investment programs.

Question: What are the distinctions between conventional and non-conventional central banking

Answer: The challenges facing the Central Bank of Nigeria and its counterparts elsewhere in Africa are not just the conventional responsibilities of controlling the nation’s total money supply or implementing the county’s monetary policy and interest rates. By regulating and supervising the banking industry as a whole the CBN is also involved in ensuring effective corporate governance, fostering systemic stability that should maintain public trust and overall confidence in the banking system.

I need not recount the issues that prompted the CBN to remove and prosecute the managing directors of some Nigerian banks recently. So, non-conventionality is justifiable in our case by the persistence of generalized corruption and massive public sector bureaucratic burden that should be confronted to stimulate the right business environment that can make private investment the driver of sustained economic growth and poverty reduction in our country.  

Conventional economic theory requires, for example, that countries concentrate production in those areas they have a comparative advantage, but my common sense tells me that no country has ever developed through exporting primary goods. Moreover, we have done nothing to improve our agricultural output. Agricultural productivity in Nigeria today is still where it was in 1960, while less than 1 percent of GDP is ploughed back into agriculture. The situation is also true of most African countries.

As a non-conventional central banker, I am consequently obliged to step out to ensure an investment policy that builds on the comparative advantage we have. At the end of the day, we must realize that there is no external saviour coming to save Africa.  At the end of the day, certain things must be done to move forward as it is a very small group of people that are holding Africans to ransom.  It is unacceptable that in Africa, arguments are not economic but political. As a non-conventional central banker, we feel compelled to think also about what we can do to fix power supply in a country like Nigeria that spends several trillion nairas just to import generators. We need to stop being taught how to think be it conventional or non-conventional. Maybe we should start teaching the world how to think.

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