By Geoff Iyatse

Prof. Kingsley Moghalu, ex-deputy governor of the Central Bank of Nigeria (CBN) and a candidate in the 2019 presidential election, is not scared of testing the depth of any sea. His political-economic philosophies may be strange, yet he is not afraid of canvassing their adoption. In this interview with GEOFF IYATSE, at his country home after the Nnewi Investment Summit, where he gave a keynote, he shares his thoughts on Nigeria’s economy, the autonomy of the Central Bank, naira devaluation, political reforms and the leader Nigeria deserves.

What would you say made your time at the CBN remarkable?

I THINK it was remarkable for several reasons, one of which was a combination of competence of the people in charge, the personalities of the people at the helm, and the courage to meet the needs of the time. All these made the era remarkable. Sanusi Lamido Sanusi had a clear vision of where he wanted the Central Bank to go and to be. So, he decided that wherever there was an opening, he would go for people who shared the vision and are competent to occupy the position. It was on this basis that, when there was an opening for the deputy governor, he approached on behalf of the late President Umaru Yar’Adua and recommended me. He had reforms he wanted to execute, so he needed somebody that was independent and detached from the banking sector.

I was managing my risk and investment-consulting firm in Geneva, Switzerland, after a 17-year career at the United Nations. The global financial crisis had just happened, with the world going through the great recession. One of the things that prevented the great recession from metamorphosing into great depression was the resolute action taken by central bankers globally.

Some of them started quantitative easing, flooding the system with liquidity. We also did this, but through development financing. We did not adopt such conventional process as a bond purchase. We decided to do it in such a way that the real economy would be empowered. Also, about one-third of the 24 banks we had then were on the verge of collapsing. We decided to take drastic decisions to stabilise the system.

One of the decisions we took was the establishment of the Asset Management Corporation of Nigeria (AMCON) to buy off the toxic assets on the books of the banks, so that they could start lending again. We decided that some actions had to be taken to stop the culture of recklessness; hence some bank chief executives were fired. I was brought back to lead some of the reforms, such as corporate governance, management and structural reforms. For the first time, we moved away from the one-size-fits-all bank to international, national and regional banks. We even created non-interest banks.

Unlike in the 1990s, no depositor lost a kobo to the crisis. We decided from the onset that that would not be allowed to happen. What we did was not necessarily a permanent decision for all time. I had an issue recently with the tendency to support every failing bank. It is not a decision to make a permanent feature of bank supervision. It was necessary at that time because we wanted to restore confidence in the banking sector.

The Central Bank’s independence was also critical to our success. The Central Bank was independent of external influence. Sanusi and his team respected and protected that independence, not because politicians and external forces were not trying to interfere, but because we did not allow them. We had a worldview of making the CBN best in class around the world. Some of the reforms we embarked upon had not even been experimented by the western world.

I recall the governor of the Central Bank of Ireland asking me at a conference of the Official Monitoring and Financial Institution Forum held in Germany, ‘how should we protect our banking system?’ I take great pride in my role in that era as the deputy governor in charge of financial Services Stability. At the end of my tenure, I was exhausted, because I was working 14 hours daily for five years.

You said the decision to bail out banks should not be a sustained action. Do you think confidence building is not necessary today as it was during your tenure?   

Confidence building is necessary, but people need to be educated. We also need to take certain approach to prevent moral hazard. We don’t want a situation where banks continue to mess up, knowing that Central Bank will always come to their rescue. Banks are businesses, so they cannot behave irresponsibly, believing that the CBN will come to their rescue when they fail. This induces bad behaviour.

We can have a situation where the banks could be allowed to fail, if the CEOs want them to fail, but ensure that depositors’ funds are protected. In our case, we chose that the banks would survive, but that the investors lost their shareholding. Irresponsible CEOs should not create a situation where poor people lose their life-savings because they trust them to keep the money for them. In some jurisdictions, the creditors are protected first, but we decided that depositors should be the first set of people to be protected. There is what we call a living Will, which was a phase the reform never got to. I wish we got to that phase.       

How does the living Will work?

What this implies is, if you die, how will you be buried? It means banks should draw up their liquidation plan and specify in the plan what should happen to depositors, who put money in their care, what should happen to their creditors and what should happen to their shareholders. The Central Bank will review the plan and make some changes or ask the banks to do so, if it is not satisfied.

If I were to ask banks to make a living Will, I would insist that depositors must not lose their money, as it is not their fault that the banks are not well managed. Businesses will always fail, but banks’ failure can trigger a major problem in the economy. The living Will will be communicated to the public. Since all banks are not the same, it would be better each bank develops its unique living Will.

If your team had stayed beyond a single tenure, what would have happened? 

Assuming Sanusi got a second tenure and I was part of the management, we would have continued the reform. There were a lot of things we were doing. We would have made them an irreversible part of the culture.

Would you say the monetary policy was better managed in your days than now?

I don’t want to compare Central Bank managements. There were central bankers before Sanusi and I. There have been central bankers after us, and there will always be central bankers. What I can say is that we managed the monetary policy very well and reduced inflation to eight percent before we left office. That has never been achieved thereafter till date. We brought discipline into the system. People knew that real new sheriffs were in town.

You mentioned during your keynote address at the Nnewi Investment Summit that this is the best time to float the naira. If this is done, will the currency be worth anything?  

Every reform carries some pains in the short term. But in the long term, if the reform is successful, the people emerge better and stronger, whether it is targeted at the entire economy, the private sector or the public sector. The idea of painless progress does not exist. If you desire to meet your Maker, you are required to make certain sacrifices. This applies to all religions. If we float the naira, there will be short-term pains. However, we can plan responses to the shock. In the long term, the economy will stabilise.

This is a matter of detail the Central Bank can sit down with other stakeholders to plan. Over time, it will encourage people to create value-added products and export them to earn foreign exchange. It is more profitable to export than to import. In our circumstances, this is what we need to do. There is no free lunch. Populist economic thinking will lead nowhere. The economy is not going anywhere. It is not about a statement of good intention or political talk.

Those of us who have gone around the world have seen the discipline with which economies are managed to achieve prosperity. There is no such discipline here. It is just politicians trying to make the decisions that should have been made by the Central Bank. The CBN needs to have the courage to assert its independence. The President cannot continue to direct the Central Bank. It is wrong: that is what the Act says. The Central Bank Governor should brief the President periodically, but the bank shouldn’t be taking political instruction from anybody, because those giving those instructions do not have the technical competence. That is the reason central banks all over the world are protected.

However, I know there is tension between central banks and sovereign legitimacy all over the world. Even in the United States, President Donald Trump wants the Federal Reserve to do certain things, but the Fed maintains its stand. He wanted the interest rates to be lowered recently, but it was kept steady. They knew what he wanted, but did what was good for the economy. The tension is always there, how it is managed is what makes the difference.

Are Nigerians ready for the kind of economic discipline you are advocating?

We are not for certain reasons. First, we are not educated enough. Many people in the public sector, much less the average people, do not understand the monetary policy or fiscal policy. They don’t understand why the Central Bank takes certain decisions, which is the reason education of the public and government was something I pushed aggressively, when I was at Central Bank.

We would put more energy into educating the different aspects of the public sector and the public on central banking. They have to be economically literate. Since they are not, they assume that a strong naira is better than a weak one, because the former makes it easier for them to pay school fees abroad.

The reason we do not want to devalue the naira is that historically, devaluation has always stood alone. Other necessary policy actions are not always taken each time we devalue to ameliorate short-term pains. So, politicians assume that devaluing the naira is a terrible decision. Countries in Asia, Europe and America sometimes competitively devalue their currencies. This is because it is better for their economies. These are economically literate people.

School tuition fee payment is not the priority of other countries. Nobody wants to address the rot in the domestic education system, so that we do not rush to send our kids abroad. Fix the education system and very few people will worry about the cost of foreign schools.

Can we advocate a stronger tie between the fiscal and monetary authorities?

Yes, we can have them collaborate. But in doing so, we must remember that the monetary authority is independent. So, nobody should tell the Monetary Policy Committee (MPC) to raise or lower the interest Monetary Policy Rate (MPR). There should be an understanding of the overall national economic goal. There is no such thing today. It is possible to have a collaborative decision-making process, where monetary, fiscal, industrial, trade and investment policies flow into one another. What we have are silos all over the place.

Were you motivated by the desire to address these structural defects, when you joined the presidential race in 2019?

Yes, these were some of the changes I wanted to make. I would have made these changes because I am educated and informed. I know what I would like to see as the President. I would have set up my cabinet with these in mind. I know the person who would have been the most suitable for the Finance Ministry. I know those who would have been in charge of planning, investment, trade and others. I would be able to debate my agenda with the team members, such that the superior collective wisdom can prevail. This is the kind of leadership I would have championed.

It doesn’t mean the rich would become poor. The economy should be functional. Business people should be able to make profits. But we must also give opportunities to the poor to enable them come out of poverty. My primary concern is the poor.

Some people think your likes should have sought opportunity to serve in the Senate, where they can push for the reforms you canvass and make impact…

I understand the concern and the argument. But President Trump was never a senator, a mayor or governor. No law in the universe says if you have the requisite experience (and the experience does not have to be political), you cannot aspire for the highest office. In the Nigeria context, what transformational change has a senator brought? I am not sure you can remember any.

With the current Constitution, only the President has the power to execute the vision I have for the country. I went for the President because it is that office that is uniquely equipped to bring into existence the vision I have for the country. I am being very realistic.

There is a race for governor in Anambra State, but I am not running. It is not because being a governor or senator is not important. It is because the rot in the country, especially in the management of the economy and national diversity, is so deep that only the President can fix it. The current President has not shown any commitment or political will towards constitutional restructuring, even though it was in the manifestos of his political party. Those who said I should have aspired for the Senate did so based on conventional wisdom, which is not always applicable in all situations.

Do you have faith we will soon experience the kind of political change that can bring people with your philosophy to power? 

It depends on the people. It makes no difference if I have faith or not. The people will need to desire it. What I discovered when I contested was that the people are not ready yet. They complain about the system, but still vote for the system they complain about. Poverty is very high, so people think based on the emptiness of their stomachs and focus on immediate gratifications.

It is up to Nigerians to wake up and build the country they desire, using the democratic process. I have done my part by offering myself for service. Everybody should go and do their part. I have taken the risk – the risk of life, the financial drain of my resources. It is a huge sacrifice to run for the presidency, if you are not in the existing two big parties. There is nothing that says the structure will remain.

We were a one-party state with the Peoples Democratic Party (PDP) until the All Progressives Congress (APC) came. There is nothing that says only the two parties will remain with national structures tomorrow. People should not assume that everything is cast in stone. I don’t have a problem with PDP and APC remaining the dominant parities, but they have to reform to bring the real changes Nigerians want to see.

Are you running in 2023?  

I am doing so. For instance, I convene a non-partisan citizen movement known as To Build A Nation (TBAN). We are on the quest to collect one million signatures petitioning for electoral reform. This is a task that cuts across all political parties. It is an important task that cuts across all political affiliations. I don’t have to be a partisan politician to do this. I don’t need to hold any office either to contribute.

Is the electoral reform everybody is calling for a magic wand?

No, it is not. Constitutional reform, which is not also a magic pin, is very good for Nigeria. There are things that will happen, and electoral reform is the beginning. If we have an election, where people vote without fear of intimidation or being maimed, knowing their votes will count, there are chances that there will be a leader who will do what he promised during the campaign because he knows that he could be voted out.

Electoral reform is fundamental to the societal changes we are clamouring for. The citizens are empowered, when the electoral system is transparent. Each man or woman matters at the ballot booth. Unfortunately, we have an electoral system that is rigged to produce outcomes that are not the people’s will. What we have is ‘sellectocracy’ and not democracy. It is like what the holy book says: having a form of godliness but denying the power thereof. We are following a certain ritual, while the essence of the ritual is missing. Electoral reform is job number one.

Can this happen before 2023?

It can, if the National Assembly members are serious about it. They have promised, but seeing is believing. As a citizen, I wrote the Senate President and Speaker of the House of Reps demanding reforms in certain areas. My colleagues at TBAN are doing the same thing. If you are practising democracy, you must do it properly, otherwise you are pretending. Electoral reform is fundamental, and the only way to do this is to ensure that the voting, counting, collating and transmitting of the result are done digitally.

There are arguments that if the U.S. system could have been tampered with…

Let me interrupt you. Technology makes steady progress. We are not talking about an electronic, but digital process. When we were doing banking reforms, many people said what we wanted to do was not possible. Today, PoS and mobile banking have become the norm. We introduced the BVN and it has come to stay. We cannot have a defeatist mindset.

If the U.S. was tampered with, is it the one we are doing today that is better? We are 100 years behind the U.S. democracy we are talking about. It is a primitive system we are running today. There is no perfect democracy. The advanced democracies have challenges, but that must not stop us from moving forward.

No doubt our institutions are weak. What are your thoughts on balancing strong institutions with the strong man philosophy, which some say is suitable for people without discipline like Africans?

It is very important to build strong institutions. If you build only strong men, there will be no institutions because a strong man will not live forever. Institutions outlive their founders. That is the reason it is good to build strong institutions, whether it is in politics, economy or any other field. The institutions should have their laws, processes and procedures that can guide everybody. Is it good to have strong leaders? But the real test of a man is not how many people he slaps because they insult him. It is how many times he restrains himself from slapping the weak on the road when insulted. The definition of strength is the issue.

We can have strong leaders – strong in vision, strong in will to drive people towards achieving the vision. We have these in Singapore, Malaysia and several other countries. Strong institutions were developed in those countries at the same time. Sometimes, it takes a strong leader to build strong institutions. When strongmen imply empty dictators, who are focused only on themselves and cronies, it is not strength.

I am calling for strong leaders who have great visions for Nigeria and the strength of character to drive the vision and the capacity to build strong institutions. If I am the President today, my first job will be to make myself less powerful by supporting strong judiciary, independent Central Bank and a strong military. These will make my job easier. Nigeria is not working today because we want the President very powerful and everyone else very weak.

How do we practically address poverty in the land?

There is a saying – don’t show me the practice but the theory. We like short-gun approaches. That is what has kept us where we are. We cannot address poverty without identifying the forces that cause poverty. The issues: the absence of quality education and absence of skills among the youths to make them competitive in the job market. If you are jobless, you will be poor and hungry. The education system is critical for addressing poverty. Distribution of money is a shortsighted approach to tackling poverty. They will spend the money and remain poor. We must seek to know the structural foundation of poverty before we can fight poverty.

China took 700 million out of poverty in the past 40 years. It was not done being ‘practical’. You must have a philosophical and theoretical understanding of the problem first before working towards the solution. It is at the point of execution that you can talk about being practical. Nigerians need educated leaders, who understand what moves people from poverty to progress.

Education was what moved the West and China from poverty to prosperity. The laws of nature are the same in China, Japan, the U.S. and Nigeria. If we think we can continue to elect leaders who are not knowledgeable and competent intellectually and achieve progress, we are deceiving ourselves. We must look at the root cause of our problems. We have a problem with intellect.

Political education is very necessary. My campaign for the Presidency was political education. I won the presidential election not at the ballot booth, but in a long-term strategic way. There are many victories during an election. Many Nigerians are more enlightened because of the ideas I brought forward and the solutions I offered to address our problems. That is an achievement.