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Sanusi Fights Nigerian Elites as Naira Policy Draws IMF Ire

Lamido Sanusi, governor of the Central Bank of Nigeria. Photographer: Chris Ratcliffe/Bloomberg
Lamido Sanusi, governor of the Central Bank of Nigeria. Photographer: Chris Ratcliffe/Bloomberg

June 23 (Bloomberg) -- As a teenage Marxist, Lamido Sanusi remembers confronting his grand-uncle, the Emir of Nigeria’s northern city of Kano, about political power and how it can be abused, during chats in the palace courtyard.

As central bank governor, Sanusi is challenging authority again: firing the chief executives of ailing banks, criticizing lawmakers for overspending and rejecting advice from the International Monetary Fund to weaken the currency.

Following Goodluck Jonathan’s election victory in April, Sanusi is now looking to help revive Nigeria’s moribund electricity industry in the face of union opposition to the sale of utilities, while pressuring lawmakers to invest more in road and rail links and spend less on government running costs.

“Maybe I’m too outspoken for my own good,” Sanusi, 49, said in an interview in his Abuja office, where a framed photograph of him and the Emir hangs on the wall and a prayer mat lies on the floor. “It comes from my family. Our fathers and uncles relied on us to tell them the truth, because most people tell them what they want to hear.”

Sanusi is carving out a wider role for the central bank in a campaign to boost the economy of Africa’s most populous nation after 50 years of corruption, wasted oil revenue and political instability. About 60 percent of Nigerians live on less than $1.25 a day and the government has to import fuel, even though it pumps about 2 million barrels of crude a day.

Rate Policy

Nigeria, Africa’s top oil producer, ranks 134th on a list of 178 nations on a corruption index compiled by Berlin-based graft monitor, Transparency International.

Named as central bank governor of the year for 2011 by London-based The Banker magazine, Sanusi has helped make Nigeria one of Africa’s fastest-growing economies. The economy will expand 6.9 percent this year, the IMF forecasts, and 8 percent according to the government.

A growing middle class and oil wealth may help Nigeria’s economy overtake South Africa to become Africa’s biggest by 2023, according to Razia Khan, head of Africa economic research at London-based Standard Chartered Plc.

To make that happen, Sanusi has maintained below-inflation interest rates to help ailing banks such as Finbank Plc and Oceanic Bank Plc and kept the naira close to 150 to the dollar to ease pressure on inflation and encourage investment. That has depleted gross foreign currency reserves, which slid to $32.89 billion today from $33.65 billion the week earlier.

IMF Criticism

The IMF said on Feb. 17 that his interest-rate policy contributed to inflation surging to 15.6 percent the year earlier. The bank should abandon its multiple objectives of trying to boost lending for infrastructure, and focus on price stability, it said. The key interest rate is currently 8 percent, below May’s inflation rate of 12.4 percent.

“If the IMF says to me it’s not my role, then whose role is it and who is doing it?” the governor, dressed in a pin-striped suit and red bowtie, said in the interview in March. “As long as the Central Bank of Nigeria Act has given it as one of its functions a developmental role, it’s really up to me to decide whether or not to use those powers.”

Sanusi also rejected the IMF’s criticism that his policy of currency intervention has led to an overvalued naira, saying that companies needed good road and rail links and a reliable electricity supply to become competitive, not a weaker naira.

Sanusi is proposing a central bank guarantee on pensions held by commercial banks, thus freeing up about $13 billion that they can use to lend to power projects. Last year, the central bank lent 200 billion naira ($1.3 billion) to state-owned Bank of Industry, which it made available to commercial banks at 1 percent interest for lending on to small businesses.

Investment Needs

The pension plan is part of a bigger campaign to persuade the state to invest more money in infrastructure and spend less on itself. Sanusi was hauled before the House of Representatives in December after he angered lawmakers by criticizing the 136.3 billion naira that he said parliament spends on itself.

The country’s electricity industry generates a 12th of the electricity of South Africa, while its population is three times the size at 150 million. Now, the government is preparing to sell six transmission and 11 generating companies this year, with Nigeria’s Dangote Industries Ltd. and India’s Tata Group and Essar Group among potential bidders, according to the Bureau of Public Enterprises. Sufficient power supplies would enable the economy to grow 10 percent a year, Sanusi says.

“The governor speaks his mind and that’s a good thing,” said Celeste Fauconnier, Africa analyst at Rand Merchant Bank, a unit of FirstRand Ltd. in Johannesburg. “He is fast-tracking the reforms that the president has set out. We see Nigeria as booming in the next five years.”

Too Much

Some analysts are concerned Sanusi is trying to do too much.

“As laudable and as good-natured as those quasi-fiscal operations are, it leads to confusion,” said Sebastian Spio-Garbrah, managing director of New York-based DaMina Advisors LLP, a frontier-market risk adviser. “Sanusi’s view is that a developing country shouldn’t focus on pure monetary policy. It’s a problematic view as it complicates monetary policy.”

Sanusi has never shied from commenting on government policy. In his first week on the job in June, 2009, he said the state should focus on improving power supplies and transport links, just two of the priorities on the government’s seven-point economic agenda.

Within two months, he had fired the chief executives of eight lenders after an audit found evidence of mismanagement and reckless lending that had resulted in $10 billion of toxic debts on banks’ books.

‘War Room’

To avoid news of his plan leaking, he formed what he called a “war room” at the Eko hotel in Lagos. As he tells it, he cut outside contact for three days as he plotted with his four deputy governors, financial advisers from Deutsche Bank AG and legal advisers.

Then-president Umaru Yar’Adua was only told of the plan a day before Sanusi hauled the chief executives of all 24 banks into the central bank’s Lagos office on Aug. 14 of that year. He dismissed six of them and immediately dispatched replacements with armed guards to their head offices.

“These were people at the time that were totally untouchable,” Sanusi said. “We had to take them by total surprise and use maximum force. Lagos was like a war zone that day. All the new CEOs went with truckloads of mobile policemen just in case anyone tried to play games.”

Weak Credit

Two years later, Sanusi is still trying to recapitalize some of the banks. After pumping 620 billion naira into the system and creating a state-owned company to buy the bad debts of lenders, some bailed-out banks, including Finbank and Oceanic Bank, have returned to profit. Still, credit to private industry fell 1.6 percent in May from the year earlier, the central bank said on June 21.

“Sanusi is not someone who holds back,” said DaMina Advisors’ Spio-Garbrah. “He’s outspoken, he’s controversial. But his biggest achievement was to stabilize the Nigerian financial system. He made the kind of changes no other country was willing to do.”

The governor says he retains a deep appreciation of his roots in the predominantly Muslim city of Kano. Sanusi, who has three wives and 12 children, regularly leads prayers at the central bank’s congregation and has a prayer mat in his office for when he doesn’t.

With a degree in Islamic Law from the International University of Africa in Khartoum, Sudan, the governor has published religious papers in the past, including a 2001 critique of the conviction of a woman in northern Nigeria to stoning by an Islamic court.

“I’ve grown up in a generation that’s been consistently frustrated by the seeming inability to turn the great potential of this country into reality,” Sanusi said. “I’ve spent my life talking about what policy makers need to do, what leaders need to do. And today I find myself in a leadership role. It’s up to us, isn’t it, to decide whether we’re going to be a failure or realize our potential?”

To contact the reporter on this story: Nasreen Seria in Cape Town at

To contact the editor responsible for this story: Andrew J. Barden at

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