Africa

Nigeria: Investors nervous after central banker suspension – and they’re right

By Simon Allison 25 February 2014

For those nervous about Nigeria, Lamido Sanusi was a comforting, reassuring presence at the helm of the central bank. He is the country’s Trevor Manuel – a steady pair of hands implementing much-needed banking reforms and fighting corruption. But now he’s gone, sacrificed by a president more intent on consolidating his own power than protecting the Nigerian economy. It’s not a good sign. By SIMON ALLISON.

When it comes to attracting foreign investment, Nigeria is a hard sell. Yes, the economy is booming, but we all know that this growth is disproportionately, almost grotesquely, reliant on an unsustainable oil boom. Then there’s the corruption, the political instability, even the (unfair) stereotypes of Nigerian businessmen as scam artists and fraudsters – all contribute to a feeling that investing in Nigeria, while perhaps lucrative, is only for the very brave.

As of Thursday last week, potential investors are going to have to be even braver.

In an unexpected (and possibly illegal) move, President Goodluck Jonathan summarily suspended Lamido Sanusi, the head of the Central Bank of Nigeria. In his not quite six years in the position, Sanusi garnered widespread domestic and international respect for his reform of the banking sector and his tough stance on corruption. He was perceived to be an island of sanity in an ocean of chaos; the one steady hand on the tiller of the Nigerian economy. To investors, he performed much the same reassuring, confidence-instilling role for Nigeria that Trevor Manuel performs for South Africa.

Now he’s gone, and those investors are scared. CNCB Africa canvassed banks and stockbrokers for their reaction to the news, and a few sentiments came up again and again: that Sanusi’s suspension raised concerns over the independence of the central bank; that it will put more pressure on the naira; that monetary policy is going in the wrong direction; that President Jonathan is trying to warn off other anti-corruption crusaders. Of greatest concern was that the decision was prompted by something other than economic considerations: “If the Jonathan administration is willing to discard a safe pair of hands at a time when the currency is being tested anyway, it shows more political motivation than economic awareness. Speaking from the perspective of international investors, this is likely to go down badly,” concluded Alan Cameron, an economist at Nigeria’s CSL Stockbrokers.

The presidency has acknowledged none of these concerns, explaining only that the decision was motivated by various, unspecified acts of “financial recklessness” during Sanusi’s tenure. Analysts are baffled about what these might be. The ruling People’s Democratic Party, meanwhile, has backed Jonathan’s decision, and warned opposition parties not to “politicise” the issue.

This is typically disingenuous. Sanusi’s term as Central Bank governor was up this June, at which point Jonathan could have replaced him without causing too much of a fuss. That Jonathan chose to end it now means that he’s clearly trying to make some kind of point. He’s playing politics.

The pair’s relationship is thought to have irrevocably broken down towards the end of last year, when Sanusi accused the state-run Nigerian National Petroleum Corporation of failing to account for US$50 billion (Sanusi later revised this figure downward to $20 billion – still an enormous sum). Jonathan wasn’t happy, perceiving the criticism of the NPCC as criticism of his own administration, and quite rightly too. After all, the NPCC – certainly the largest single contributor to the government budget – has not been properly audited since 2005, a sorry state of affairs that reflects poorly on Jonathan.

But rather than properly investigating the allegations, Jonathan brushed them off and has chosen to play the man instead, despite possibly not having the authority to do so (Sanusi was appointed by parliament, not the president, so it’s unclear if Jonathan is even allowed to suspend him. Sanusi has already indicated he’ll take legal action against his suspension, presumably on these grounds).

At the same time, Jonathan is going after the most potent symbol of Nigeria’s anti-corruption drive. In the run-up to what is likely to be a tightly-fought election in 2015, the significance of this cannot be overlooked. The ruling party is hemorrhaging politicians to the upstart new opposition coalition. Is Jonathan telling the ones who remain that, under his continued leadership, they’ll be safe from scrutiny and accountability? It certainly looks like it.

Writing for Think Africa Press, James Schneider and Lagun Akinloye observed: “Sanusi was a fly in [Jonathan’s] ointment. He was too independent, too outspoken and refused to speak from a pre-approved script. That is why he had to go. But Sanusi is not the main victim of Jonathan’s pre-election politics. Nigeria itself is now poorer for having lost a bank governor whose successes will be taught in central banks across the globe. And the much promised radical development of Nigeria will be put on ice as elite interests and political power considerations colour every move in government from now until elections.

For Sanusi’s part, he’s playing it diplomatically. Although he will challenge his suspension in court, he has been careful not to lay blame at the feet of the president himself (although his description of Jonathan is the definition of a back-handed compliment). “When you sit with President Jonathan himself he appears a nice simple person who is trying his best to do his best,” he said in an interview with AFP. “His greatest failing obviously is that he is surrounded by people who are extremely incompetent, who are extremely fraudulent and whom he trusts.”

Although diplomatic, it’s a brutal assessment – and it won’t give skittish investors any reason to change their mind. DM

Read more:

  • “You Can’t Suspend the Truth”: Worries for Nigeria over Sanusi’s Ouster on Think Africa Press

Photo: Nigeria’s Central Bank Governor Sanusi Lamido Sanusi attends the World Islamic Economic Forum in London October 30, 2013. REUTERS/Stefan Wermuth

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