A magazine for Africans and friends of Africa...Our Voices, Our Vision, Our Culture

Was It A Scam?: Charles Soludo & Nigeria's Failed Experiment With Polymer Notes
By Salisu Suleiman
If you have ever listened to Professor Chukwuma Soludo bring abstract economic concepts to life with PowerPoint slides extravagantly peppered with charts and projections, you’d understand how he managed to get himself appointed Chief Economic Adviser to former President Obasanjo, and later governor of the Central Bank of Nigeria (CBN).
Those who knew him cautioned that beneath his stylish swagger lay the fundamental insincerity of a used-car salesman, but Soludo’s intellect and poise swayed even skeptics. One report claims that once while briefing Obasanjo on Nigeria’s economic prospects, the former president instinctively began to applaud – so persuasive was Soludo.
As soon as he was appointed CBN governor, Soludo embarked on ‘reform’ of the banking sector and also came up with the idea of polymer notes to replace paper under the guise that polymer was more durable. Despite objections from those who argued that polymer had only been used in a few instances with mixed results, Soludo awarded contract for the production of polymer notes to replace the 50, 20, 10 and 5 naira notes.
However, just last week, the CBN revealed plans to replace polymer notes with paper. What needs to be discussed is whether Soludo awarded the contract to save Nigeria money, or if it was to line his own pockets, as allegations of draft have trailed the contract. Even the lame duck Economic and Financial Crimes Commission (EFCC) interrogated Soludo in January this year following allegations of breach of contract and bribery by Securency, the Australian company that produced the polymer notes.
Meanwhile, the linchpin of Soludo’s policies – the banking sector consolidation – ended in a debacle. His position was that no Nigerian bank was reflected in the top 1,000 banks in the world, and that our banks needed to merge or increase their paid-up capital to a minimum of N25 billion or $200 million. Whatever the merits of the policy, its implementation probably played a part in the near collapse of Nigeria’s financial sector. Even if the policy was well-intentioned, Soludo seemingly turned a blind eye to unethical banking practices.
In the end, only about a third of the 20 banks that emerged post-consolidation survived without state handouts. Obviously, the allure of controlling the consolidated assets proved too much for some top bankers who embarked on unprecedented looting sprees: the former managing director of defunct Oceanic Bank, Cecelia Ibru, was convicted of stealing N191 billion from the bank; Intercontinental Bank’s Erastus Akingbola probably has better lawyers because the case of the N164 billion he allegedly stole from the bank is still in court, while that of Francis Atuche, who allegedly stole N16 billion from Bank PHB, remains unresolved. Many of the young and middle level banking staff that lost their jobs are still job-hunting.
It probably cost Nigerians about N2 trillion to rescue the banks, but Soludo, whose job was to supervise them, was never indicted for this negligence. He was so impervious that when the stock market was beginning to spiral out of control in 2008, he assured Nigerians that there was no cause for alarm; with the global economic crisis growing, Soludo again assured that Nigeria would withstand the shock and when experts raised concerns about the health of Nigerian banks, Soludo said his consolidation of the banks was working perfectly and that the banks were solid.
Soon, it became clear that Soludo was sitting on a pile of fools’ gold, but even as the turmoil in the banking sector was unraveling, the CBN governor was pursuing another idea – the decimalization of the naira. The proposal would have knocked off zeros from the naira to help manage inflation, stabilize the naira and enhance its exchangeability. Thankfully, the CBN gave up the idea following widespread criticism.
Considering the less than stellar results of Soludo’s other policies, it is not inconceivable that had the decimalization misadventure gone ahead, the naira might have become as useless as used ‘pure’water bags and just as irksome. The decision by the Yar’adua administration not to reappoint Soludo turned out to be one of its most constructive, because even Sanusi Lamido’s detractors now admit that he managed to halt the rot in banks.
As soon as he got the boot, Soludo jumped fully into politics – this was familiar ground; in pursuit of Obasanjo’s third term bid and that failing, the 2007 presidential elections, some allege that Soludo, as CBN governor, minted and handed over N50 billion to the PDP in return for the VP slot. Whatever the probability of that claim, his Anambra governorship ambition which was brokered by Tony Anenih ended ignominiously.
True, President Jonathan’s economic policies (if there are any) have worsened things for Nigerians, but looking at the comatose state of the Nigerian stock market, near collapse of some post ‘consoludated’ banks and now, the CBN’s decision to replace the polymer notes which cost Nigeria billions, it is clear that Soludo’s economics were hardly better than the polymer notes he forced on Nigeria; smooth, suave, salient but ultimately, short of substance.
This article was originally published on the author's blog.