As keynote for Columbia University’s student-led 2012 African Economic Forum, on April 13, Lamido Sanusi, the famed Nigerian Central Bank Governor, delivered a vision of development grounded in four key economic components: infrastructure development, value chain management, women’s financial empowerment, and capital markets for small and medium enterprises.
Not surprisingly, given his track-record as a financial whistleblower, Sanusi emphasized the need for sound institutions to support efficient markets. Upon taking his post in 2009, Sanusi’s took a no-holds barred approach to cleaning up the banking sector in Nigeria. in the wake of the global financial crisis, Sanusi immediately ousted senior management for fraud at eight of the nine banks bailed out by the government.
In his address to the AEF, Sanusi delivered a deadpan interpretation of the industry clean-up effort, “if you see a man on the side of the road with his throat slit, and someone says ‘ the man died,’ you avoid looking for the murderer. Banks don’t fail, they are destroyed. In Nigeria we say our banks are too big too fail, but bankers are not too big to jail.” His sweeping actions made financial history as the “Sanusi Tsunami.” The governor’s controversial visibility and astuteness won him the favor of the Forbes Africa as its 2011 most influential person of the year.
During his keynote, Sanusi described the major issues facing the Nigerian economy are largely issues of waste and inefficiency in the country’s commodities markets. With characteristically bold delivery, he described Nigeria’s relationships with its export partner countries, including China, as colonial due to the extractive nature of these trade relations.
He reported that, in addition to its crude oil reserves, Nigeria boasts bountiful production of agricultural crops such as tomatoes, cassava, and cotton. Yet the country does not manufacture value-added products from these key commodities; rather, export partners such as Italy and China sell items like tomato paste and cotton textiles to Nigerians made from that country’s raw goods. This same export-import imbalance between raw goods and value-added manufactured products holds for its petroleum supply, so that the country is not capturing the true wealth value of its most valuable product.
Worse still, Nigeria loses nearly 40 percent of its tomato crop between the farm and the market due to poor infrastructure for transport and storage. Ideally, states with agricultural surplus should be able to move bounty to states in desperate need of food and commodities, but poor infrastructure only magnifies the tragedy of famine and poverty on the continent. Sanusi characterized this considerable waste as a result of insufficient infrastructure as one of the major challenges to be overcome by economic development efforts on the continent.
Ambassador Amina Salum Ali, African Union emissary to the US who also spoke as keynote to the conference, reiterated the great need for infrastructure and value chain management that would improve inter-African trade on the continent. Ali dubbed Africa the “bread basket for the word”, with 60 percent of the world’s arable, uncultivated land.
Sanusi went on to decry “structural adjustment” as a period of deindustrialization throughout Africa. “African countries accepted free trade before they were ready for competition,” he remarked, contrasting premature trade liberalization in many African countries with US, German and Chinese protectionist policies that laid the groundwork for their later economic competitiveness in a liberalized global economy.
According to the governor’s analysis, structural adjustment measures created disincentives for investors to create manufacturing sectors in African countries. Without the benefit of manufacturing economies, most labor has remained tied to the agricultural market. Few high value jobs markets have been created, and poverty-level incomes hinder domestic demand.
Consequently, Sanusi’s vision for a thriving Nigerian economy depends on two key factors: “first-class” infrastructure and technical education and assistance to ready its labor force for a manufacturing economy. He described the chain of development beginning with the need for increased electric capacity to attract industrial manufacturing to create jobs and income that could lead to a rapid increase in domestic demand. The result, he believes, would lift Africans out of poverty.
Essentially, Sanusi proposes that improved value chain management focused on reducing waste in commodity markets and increasing the value of exportable goods will significantly boost rapid growth throughout Africa. However, growth in the local manufacturing sector will require investment in small and medium enterprises.
Currently, Sanusi reports that such home-grown businesses lack access to needed financial support. Whereas major multinational banks tend to lend to major multinational corporations, and micro-credit institutions lend to the poorest of borrowers, there exists no sizeable middle range within the Nigerian banking system to support mid-sized businesses and entrepreneurs. He reminded the audience that 70 percent of jobs are created by SMEs but these businesses are not finding the reliable funding.
Sanusi punctuated his closing remarks with his commitment to advancing women’s leadership in the country’s financial management sector. He announced that the Central Bank is launching a fund this year for women to access loans at a single digit interest rate, sending a signal to private banks to prioritize women’s entrepreneurship.
Furthermore, the Central Bank has launched a campaign to encourage bank CEOs to commit to increasing the number of women in top management 40 percent by 2014. Leading by example, Sanusi has committed the Central Bank itself to a goal of hiring 50 percent women as managing directors. Sanusi hopes that this effort will shift perceptions of women’s role in the male-dominated economy, and encourage the free flow of resources into women’s arenas.
Regardless of Sanusi’s campaign against corruption and fraud, he can’t clean up government ranks alone. Sanusi beseeches Nigerian citizens to collectively hold them accountable. “Civil society holds political society in check.” He chides himself on his own candor with the press as unconventional behavior for a central bank governor, but beseeches more Africans to tell their stories of success, rather than allowing stories of disease and famine to dominate the Western interpretations of Africa.