28/02/14

The suspension by President Goodluck Jonathan of Central Bank of Nigeria (CBN) governor Sanusi Lamido Sanusi led the naira to fall sharply and investors to rue the volatility of Nigerian politics. But it was hardly a surprise, following years of controversy surrounding the highly talented and combative governor, and months of Sanusi’s increasingly public criticism of the management of the oil sector and government finances by Jonathan and his close ally petroleum minister Diezani Allison-Madueke. By naming names in the Senate, Sanusi was more or less directly implicating the ruling clique on Aso Rock in gross malfeasance.

In the Senate on 13 February, Sanusi specifically questioned Allison-Madueke’s maintenance of subsidies on kerosene, to the benefit of a small group of fuel traders, and claimed that agreements between a Nigeria National Petroleum Corporation (NNPC) affiliate and the privately held (by Jide Omokore) Atlantic Energy were used to illicitly transfer state revenue into private hands. Further putting the spotlight on leading lights in the oil trading community, Sanusi criticized the unaudited swaps of crude for refined products imports by the local Aiteo, Ontario Oil and Gas, Sahara Oil and Taleveras groups, and Netherlands-based Trafigura.

Sanusi has driven Nigeria’s economic reforms since his 2009 appointment by late president Umaru Mousa Yar’Adua, working tirelessly to clean up a fetid financial sector and influencing critical changes in other key sectors such as agriculture – and, he hoped, energy. Sanusi has a history of generating controversy – whether as the Islamist radical of his youth or as prize-winning banker whose clean-up strategy made a lot of enemies in Lagos and Abuja. 

His enemies in Abuja now include Jonathan, whose hold on the presidency is loosening as powerful northern elites argue that he should not stand for a second term, while popular criticism – fuelled by Sanusi’s accusations about missing oil revenue – is buoying up the opposition (AE 269). African Energy in January reported that, for only the second time since independence, the president did not present the 2014 federal government budget, with co-ordinating minister for the economy and finance Ngozi Okonjo-Iweala officiating in parliament while Jonathan handled the fallout from a crisis triggered by criticism of his performance by ex-president Olusegun Obasanjo and Sanusi’s claim that, between January 2012 and July 2013, NNPC had failed to transfer oil revenues worth $49.8bn to the Federation Account. This was not the first time Sanusi had questioned oil fraud (AE 232), and on 4 February the governor told a Senate finance committee that $20bn was outstanding of the near $50bn he claimed in December had missing. NNPC has denied all allegations of malfeasance.

With accusations flying in all directions, including claims that the governor had presided over a corrupt regime at CBN, Sanusi was suspended for alleged “various acts of financial recklessness and misconduct”.  This interpretation is contested by many admirers of the governor, scion of an aristocratic Kano family.

His deputy Sarah Alade was named as acting governor, while Zenith Bank chief executive Godwin Emefiele will succeed Sanusi when his term ends on 1 June. Jonathan also nominated First Bank of Nigeria chief financial officer Adebayo Adekola Adelabu as deputy CBN governor, to replace the retiring Tunde Lemo.

Jonathan told journalists on 24 February that his remit, under the 1999 constitution, only allowed him to suspend the governor while investigations continued; a two-thirds vote in the Senate is required to remove a CBN governor. Critics said the move was intended to reduce Sanusi’s potential political threat, as well as reducing the CBN’s autonomy. Sanusi told Bloomberg he would test Jonathan’s decision in the courts.

Markets, predictably, reacted negatively: the naira weakened to a record low of below $1=N169, while share prices and Eurobond yields fell sharply. But these indicators recovered as markets regained their composure, despite reserves of analysts such as JP Morgan’s Giulia Pellegrini, who commented that “negative market sentiment will likely keep the currency under severe pressure”.

In the way of such events, more bullish attitudes quickly became apparent; Emefiele’s appointment was welcomed. Okonjo-Iweala moved quickly by issuing statements to reassure investors that “tight fiscal and monetary policies” would continue, and has retained Washington-based lobbying firm Mercury to put over her message.

Never Sanusi’s closest friend, but a key ally in the administration’s reform drive (AE 216), Okonjo-Iweala has proposed a forensic audit of NNPC, which would maintain the transparency and oil sector reform campaign. This process has received little real support from Jonathan and has been stymied by Allison-Madueke’s lack of activity, at least since a wave of NNPC sackings in mid-2012, which were driven by public pressure (AE 235). 

In the run-up to the 2015 elections, Sanusi and Okonjo-Iweala’s wider political ambitions will come under the spotlight. Sanusi’s tenure at CBN saw Nigeria’s banking sector and macroeconomy progress towards a stability that would be hard to imagine five years ago. But the nation’s governance remains highly questionable – and, as ever, that is never more apparent than in the run-up to an election year.

This article was published in Issue 272 of African Energy