A few months ago, Sanusi Lamido Sanusi could do no wrong. In the eyes of the international commentariat, he was a no holds barred central bank governor with a snappy dress sense. He had whipped the Nigerian banking system into shape by shaming wrong-doers and forcing the banks to pay for their own bailout. He won plaudits from Nigerians from all walks of life for his honesty and competence. He seemed to personify what Nigeria’s rapidly growing civil society and youth movements are demanding: good governance.
But January was an unpopular month for Sanusi, with protestors threatening to burn down his house after the fuel subsidy removal. In a recent talk at the London School of Economics (LSE), Sanusi affably acknowledged his new-found unpopularity by asking the mainly Nigerian audience to give forewarning before they threw shoes at him.
How did Sanusi go from a loved to a hated figure? Some have sought explanation by calling him a betrayer of the masses while others have blamed populists for whipping up the masses’ financial and political illiteracy. Neither is true. Sanusi remains consistent in his political-economic project. And it is a class project.
Nigeria’s economic problems are well-known: it exports raw materials and imports finished products; there is a heavy reliance on oil, crowding out investment in other sectors of the economy such as agriculture, manufacturing and retail; the long-term investment that does take place in these sectors is poorly coordinated with other necessary infrastructure investments; and corruption abounds in both the public and private sectors.
All this has led to what Sanusi calls de-industrialisation. Others might call it chronic under-development in the midst of riches.
In his LSE talk, Sanusi referred to this form of economic activity as a “perpetual stage of primitive accumulation”. In other words, Nigeria’s economy is structurally deformed not just because of bad policies that can be corrected, nor is it solely because of external actors – slave traders, colonialists, international capital, or the Bretton Woods institutions. Whilst both analyses have some truth to them, the first explanation creates a false neutrality around Nigerian governance, and the latter removes the agency of much of Nigeria’s domestic elite.
Sanusi argues that Nigeria’s ailments can be fixed with improved policy and presents the banking industry as living proof. However, this call for better policy mystifies the real target of Sanusi’s ire and analysis: rent-seekers (namely, those who manipulate the social or political environment to get a larger share of fixed wealth rather than creating new wealth).
Nigeria’s economy is deformed because it is actively deformed by a group of people who benefit from its deformation. One could extend Sanusi’s phrase “banks don’t fail; they are killed” to the entire economy: “Nigeria’s economy didn’t fail; it was killed”.
Free market economists would have no trouble calling out many of these public sector killers – governors, senators, ministers, senior civil servants – but Sanusi goes beyond this failed and simplistic ‘public-bad, private-good’ dichotomy by calling “70% of so-called entrepreneurs rent-seeking parasites”.
Whether by accident or design, Sanusi is a crisis manager. He became governor of the Central Bank of Nigeria (CBN) in June 2009 when the Nigerian Stock Exchange was the worst performer in the world, oil was at only $40 per barrel, and the Nigerian banking system was about to implode under its own weight of bad debts, mismanagement and fraud.
Sanusi found that there was a “complete disconnect between bank balance sheets and the real economy”, that money was chasing rent not profit. To turn Nigeria around, the government and CBN needed an “overarching vision to reverse de-industrialisation” to turn a rent-based economy into a capitalist one, and to reward long-term productive investment that would increase productivity and the means of production rather than short-term rent-seeking.
Reforming the banking sector and credit system – what David Harvey has called the “central nervous system” of capitalism – was the place to start. And Sanusi’s success in increasing accountability and incentives for responsible practice has been impressive.
Moving commercial banks out of the short term investment areas, for example, has opened the space for private equity, venture capitalists, pension and mutual funds to enter it, shifting lending patterns away from high leverage “deposit-equity swaps” and asset price chasing, towards long-term productive investments.
Sanusi sees this process as investing in sustainability, the real sector and women, three things he sees as the “future of the continent”. And it’s working. By bringing down bank overheads through the sharing of services, costs should drop by 30% by 2014, which should lead to lower interest rates. Firm handling of banks’ lending policies allows the CBN to target the sectors it wants to promote. Lending to agriculture, which accounts for 42% of GDP, was less than 1% in 2009, now it should reach the Central Bank of Nigeria’s (CBN) target of 7%. In 2009, he subsidised lending to small businesses with a 200 billion naira ($1.27 billion) fund and a maximum interest rate of 7%. 12,000 jobs were saved and production in those firms went up 12-15%. He made banks sign up to minimum environmental standards for their borrowers, recognising that the “oil industry has done a lot of environmental damage”. He has set up a further fund for companies owned and managed by women so that they can borrow at single digit interest rates, and a programme is being brought forward to increase women’s representation in the boardroom and senior management.
Sanusi’s opposition to the fuel subsidy fits perfectly into this overarching schema.
Removing the fuel subsidy is not an IMF plot. Sanusi has frequently clashed with the fund over devaluation of the Naira, calling those in favour of devaluation “agents of international capital in its rampage against all barriers set up by sovereign states to protect the integrity of the domestic economy”. Nor is it neo-liberalism being forced onto Nigerians by an uncaring banker. Sanusi’s analysis of the subsidy is sound, even if the government’s actual handling of its removal was woeful.
Sanusi has no ideological opposition to subsidies per se. At December's town hall debate on subsidy removal he stated that “ideologically, everybody who knows development knows that you have to subsidise some things. The question is, do you subsidise consumption or do you subsidise production? Do you subsidise the poor or do you subsidise middle-men and rent-seekers?”
Rent-seeking through false accounting and smuggling was certainly taking place. In 2011, 24 million litres per day were imported on top of Nigeria’s daily consumption of 35 million litres. This fuel never reached Nigerian petrol stations.
Effectively then, Nigeria’s fuel subsidy was subsiding all of West Africa (the missing 24 million litres per day), further evidenced by the fact fuel prices in neighbouring states also rose after the January 1 Nigerian subsidy removal. Nigeria was subsidising fuel consumption at home, its neighbours and refineries overseas. It drove rent-seeking and had to go.
Sanusi has said that the struggle between profit and rent is not a struggle between classes but a struggle within one class. His argument in favour of production is an attack on vested interests and to be successful in creating a “patriotic national bourgeoisie” Sanusi will need to separate, not just economically but politically and socially, the interests of profit from those of rent. The elite will have to bifurcate, with a class struggle between the two parts.
This process will be extremely difficult, if not impossible, should it remain an elite-only struggle. Historical figures who have attempted to rule in favour of an emerged or emerging productive capitalist class have never ruled for them alone. Bismarck may have represented the interests of German industrial capital, but he also doggedly supported the Prussian monarchy and aristocracy – rentiers par excellence. Nasser, likewise, paved the way for some capitalist development in Egypt, but also the creation of monopolies and an enormous military with tentacles in every sector of the economy.
Once feudalism as a social system had declined, rent and profit jostled in the same system, with large crossover between those who lived by rent and those who lived by profit. In his 1988 essay, The Bourgeois(ie) as Concept and Reality, Immanuel Wallerstein convincingly demonstrates how individual capitalists crave to become aristocrats. This goes beyond the desire to live like old feudal barons in large country houses and attend the same high society functions, but to live off their money in the same way. An extremely understudied part of modernity is the fusion of rent and (normal) profit into one dominant economic, social, political and class constellation.
Sanusi’s statements about ongoing primitive accumulation imply that this accumulated capital, stored in Dubai houses, fast cars, and Lagos boat clubs, could be converted into investment in manufacturing, agriculture and infrastructure – kick-starting fast-paced and broad-based development. This follows the logic of British industrialisation, which took funds from primitive accumulation – such as slave-worked plantations in the Caribbean – and invested them in industrial production in England’s northern boom towns, spurring the industrial revolution.
This option may not be open to Nigeria. English plantation owners had far fewer options for what to do with their profits from slavery. Nigeria’s asset holders have a much wider variety of options, from conspicuous consumption to chasing domestic and global asset bubbles. Indeed, this rent-seeking that Sanusi decries may not be primitive accumulation as previously understood. David Harvey’s term “accumulation by dispossession” may be more accurate – accumulation by rent and theft, running happily alongside productive “normal” profit making.
Furthermore, creating a “patriotic national bourgeoisie” has been tried before from the top down. South Africa’s post-apartheid attempt to create black productive capitalists failed profoundly. Many black South Africans with political pedigrees or connections have become extremely rich, but, broadly speaking, have not done so through bringing new goods to market or revolutionising productive processes.
Whilst Nigeria evidently has a great number of genuinely productive business people with the ethic that Sanusi is trying to create (30% of them by his reckoning), many “new” capitalists will take money without improving productivity.
During the fuel subsidy furore, Sanusi often repeated that his job is not to be popular. He should be technocratic and do what is right. This is laudable. However, it suggests he may be blind to the necessary role that the popular classes must play in forcing Nigeria’s development path in a different and better direction. Indeed, Occupy Nigeria and the fuel subsidy protests are a required step in this process.
Occupy Nigeria started with opposition to the fuel subsidy removal but quickly broadened out to bring in other grievances about government waste, corruption and poor service delivery. The fuel importers are now being investigated, and the reinvestment programme will have some labour and civil society oversight. This is a good start.
In order for fuller transparency in government spending and private sector dealings and a thorough coordinated development plan to be introduced, enormous pressure from below is required. For Sanusi and Finance Minister Ngozi Okonjo-Iweala to bring down the current cost of government so that the reinvested subsidy money – an amount that both say is unsustainable to spend – can be spent on development rather than plugging borrowing gaps, they will need a fire lit under their seats by popular movements demanding that rent seeking is reduced.
With this popular support – essentially formulated against the current elite, which overlaps politics and business – Sanusi would have more room for manoeuvre. For example, the CBN has a programme that reduces the cost of borrowing for power companies, which is critical to development. The CBN lends to banks at 1% so that they can then lend on to the power companies at 7%. What is this tasty 6% difference in Sanusi’s language if not rent? The banks are receiving 6% on funds lent to them by the state simply due to their position in the current economic constellation. A stronger civil society that demands investment in the power sector, threatens with strikes and civil disobedience perhaps targeted at the banking sector, would allow Sanusi to achieve a far lower spread, one closer to the banks’ actual due diligence and oversight costs. This would really be when production starts to win over rent.
In his 2002 article, Buharism: Economic Theory and Political Economy, Sanusi seems to eschew politics. He argues instead for developing civil society and educating the population so they can demand a better deal, stating that “anyone who rides a tiger ends up in its belly, and one man cannot change the system from within”. Without the masses, Sanusi, for all his obvious success and good works, could end up a big cat’s breakfast.
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