(C) NIGERIA: AMBASSADOR AND CBN GOVERNOR DISCUSS

S E C R E T SECTION 01 OF 04 ABUJA 002165

SIPDIS

DEPT FOR AF/W, INR/AA

E.O. 12958: DECL: 11/03/2018
TAGS: EFIN ECON PGOV EINV PREL NI
SUBJECT: (C) NIGERIA: AMBASSADOR AND CBN GOVERNOR DISCUSS
ECONOMIC CLIMATE, YAR'ADUA'S LACK OF LEADERSHIP, AFRICA
FINANCIAL CORPORATION

REF: A. ABUJA 2123

B. ABUJA 2146

C. ABUJA 2141

D. ABUJA 1735

E. LAGOS 0315

Classified By: Ambassador Robin R. Sanders for reasons 1.4. (b & d).


1. (S) Summary: Ambassador had the rare opportunity to have
an hour long substantive luncheon with Nigeria's elusive
Governor of the Central Bank (GCBN),Professor Charles
Soludo, while she was in Lagos November 1, 2008. The key
points Soludo made centered on Nigeria's financial stability
and President Yar'Adua's leadership. On the financial
situation the CBN Governor noted two factors: Nigeria had
weathered the global financial crisis because he had
maintained the policy of not letting foreign banks own
Nigerian banks; and, because 18 months ago Nigeria's banking
sector had gone through major overhauling, scrutiny and
oversight, putting it in a better position than most
countries that had not executed an in-depth review of their
banking and attendant regulatory sectors in the last decade.
On the political front, Ambassador took the opportunity to
note USG concerns about the direction and leadership of
Nigeria over the past 18 months highlighting that the country
seemed adrift, seeking Soludo's views on this as well as
soliciting information about the Africa Financial Corporation
(AFC) investigation. (Soludo not only created the AFC, but
also serves as Board Chairman). The CBN Governor, who is
normally reticent in addition to being elusive, said that he
was highly disappointed in the current leadership of Nigeria
-- underscoring that not only was President Yar'Adua "slow,"
but that he did not seem to be able to manage the "political
forces around him such as the Attorney General," who
continually sought to under cut democratic principles. He
did give Yar'Adua credit -- despite his lack of speed -- for
trying to do the right thing and being seriously analytical
about what he wanted for Nigeria. During this same session,
Ambassador heard more comments from those around Soludo that
President Yar'Adua's transplanted kidney is failing and that
the First Lady and others in the Villa are trying to wait for
the Supreme Court decision before taking him to Germany. The
pending cabinet reshuffle also appears to be coming to
fruition as the new ministerial list has been forwarded to
the State Security Service (SSS) for vetting. End Summary

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Nigeria's Banking Sector: Holding its Own
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2. (C) Ambassador was invited to attend the November 1
private briefing for Nigerian journalists given by Nigeria's
Central Bank Governor (GCBN) Professor Charles Soludo, on the
state of Nigeria's banking sector. This was then followed by
a private hour-long luncheon with the GCBN. During the GCBN
briefing to Nigerian journalists, Soludo emphasized that
Nigeria had been cushioned extensively from the global
financial crisis because there were very few foreign banks
operating in Nigeria (telling the Ambassador later at lunch
that he saw Citibank being on the periphery of Nigeria's
banking sector). He added that the country's banking sector
not only was "sound but also that no banks were failing, or
about to fail." Soludo underscored that the Nigerian banking
sector had already gone through a revamping and overhauling
18 months ago with the bank consolidation. He did note,
however, that there was one bank -- Springbank -- that had
caused the CBN some concern, but that the CBN immediately had
discussions with Springbank and things were now back on
track. Nevertheless, Soludo added the CBN would continue to
closely watch Springbank as well as all banks and other
elements connected to the country's banking sector.


3. (C) Soludo then highlighted to journalists that he had
wanted to have the briefing with them given the number of
inaccurate press articles he had seen recently not only about
Nigeria's banking sector, but also about the state of the
Nigerian Stock Exchange (NSE),and the role of the CBN in
general. He explained that the NSE was making a "correction,"
just as stock exchanges around the world had done, and that

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the CBN had no intention of overstepping its role by trying
to pump up share prices, or purchasing banks. He highlighted
for the gathered Nigerian journalists that the role of any
Central Bank, such as Nigeria's, was to "preserve the
Commonwealth, by ensuring not only that the country's
currency was sound, but to also preserve the value of
Nigeria's currency at home and abroad." Professor Soludo
highlighted that it was key for the journalists to appreciate
the role of the CBN, emphasizing that the positive outcome of
the financial crisis was the "expansion and tightening" of
the number of banking institutions now being regulated as
well as "the increase in the number of institutions which now
fall under a depositors, insurance framework, including in
Nigeria".


4. (C) Soludo then provided a few additional facts regarding
what he called "Nigeria's bankable public." The Governor
stated that in the last three years the number of Nigerians
who have moved into the formal "bankable" sector of the
population had risen from 13 million to 27 million
depositors. In response to a few questions from the floor,
the GCBN said in wrapping up his briefing, that the global
financial crisis had not yet turned into a "global currency
crisis," hence Nigeria was still preserving most of its
foreign reserves in U.S. dollars, adding that the crude oil
budgetary benchmark was officially dropped from $69 to $45,
which would naturally have an impact on the reserves going
forward.


5. (C) Soludo commented that "about 80 percent" of Nigeria's
roughly $60 billion in foreign reserves are being maintained
at the Bank for International Settlements (BIS) in
Switzerland, while others like J.P. Morgan, Deutsche Bank and
Bank of England are managing from $9-10 billion or more of
Nigeria's foreign reserves. The Governor explained that the
BIS managed the largest share of the reserves as a holdover
from lingering fears from the Abacha years in order to
protect it against any litigation that could arise (Note:
Abacha was the military dictator who brutally ruled Nigeria
from 1993 to 1998, until his death under mysterious
circumstances). On the postponement on the common year
accounting rule that the CBN was to put in place this year
requiring all banks to adopt the same fiscal year, Soludo
explained that he canceled the policy because "people
attributed the downturn in the NSE to the common year
accounting policy," noting he wanted to "prove that one thing
had nothing to do with the other."

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Political Points: Yar'Adua Leadership, and the AFC
-------------- --------------


6. (S) Following his briefing for Nigerian journalists,
Ambassador had an hour long luncheon with the CBN Governor,
which mostly focused on key political points and the current
tenuous political atmosphere in Nigeria. Ambassador began
the luncheon by noting the USG concern with the lack of
direction in Nigeria and the seeming disorganization in the
government. She also asked him about his relationship with
President Yar'Adua, the Africa Financial Corporation (AFC)
investigation, and whether he would stay on as CBN Governor
when his term ends in May 2009. (Note: The AFC was the
brainchild of Soludo created as an alternative to the African
Development Bank, but with the goal of focusing on investment
in West Africa. Soludo is the AFC's Board Chairman.)


7. (S) Soludo began by stating that he could "understand why
the U.S. or any other country would be concerned about
Nigeria, as he too was very disappointed in the lack of
direction of his country, and slowness and lack of leadership
shown by President Yar'Adua." He added that in his view
there were anti-democratic forces who wanted to maintain
their power and influence on government, and could and do
influence Yar'Adua by giving him bad advice. The Governor
said he thought Yar'Adua tried to do the right thing and had
the country's best interest at heart, but that "he was too
slow, and was too trusting of those around him". Soludo
pointed the finger at Nigeria's Attorney General (AG) Michael
Aondoakaa as the "worst" person in the cabinet who was the

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main culprit of misdeeds in the Yar'Adua administration.


8. (S) He then turned to connect this viewpoint to the AFC
investigation, emphasizing that the entire thing was an
effort by the AG to ensure that a northerner, someone he
could control, be appointed as CBN Governor. Soludo said that
the AG was not able to control the CBN, and wanted Soludo out
in order to put someone in place that he not only could
manipulate, but would also allow him to use the CBN as his
personal bank. In the end, the GCBN said there was no wrong
doing found and that the USD480 million that was placed in
escrow during the investigation was in the processes of being
reinvested in the international financial sector. The
Professor added that he was a well-respected economist and
could easily return to his previous, more lucrative, life in
the private sector as a renowned consultant. Therefore why
would he risk his reputation on anything like embezzling or
misusing funds from the AFC, which was what the AG was
accusing him of doing. (Note: The AG is known to try to steal
anything that is not tied down, and there seems to be no end
to his desire to amass personal wealth through illicit
enrichment.)


9. (S) The GCBN said that after the AFC investigation ended
he went to see Yar'Adua. He claimed that he told the
President that he was prepared to step down at anytime when
he was no longer trusted to do his job in the best interest
of the country. Soludo said that Yar'Adua noted the mistakes
that had been made, underscoring that the GCBN had done a
good job to date, and that he wanted him to remain.
Ambassador then asked whether Soludo would stay on if asked
to do so after the end of his term in May 2009. Soludo was
pensive before answering. He commented that Nigeria is a
"special country" when it comes to things like this. "Even if
I did not want to stay on, but was asked to do so," Soludo
said, "I would really have no choice. When one is offered
something in government and it is turned down, it is viewed
as unpatriotic and then the entire society makes you pay for
it and people can become quite vicious," he summed up. In
closing, he said he had just had a conversation with his
family in London about this very issue, and that they all
were nervous for him, if in the end, he decided not to accept
an offer to stay on as GCBN pass his five year term. Soludo
left the lunch on his way to the airport as he said he was
going to look at the financial systems in Dubai and Singapore
for ideas on best practices for Nigeria.

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Comment
--------------


10. (S) It was a rare occasion for the GCBN to be that frank
and open. He is usually extremely cautious and reticent, and
very seldom provides his views on the politics of Nigeria or
other members of the cabinet. It was also clear that he was
very concerned about the short and medium term future of the
Yar'Adua administration, and was disappointed in the
President's leadership style and the direction of the
country. He was not optimistic that the political atmosphere
would change unless Yar'Adua made some real changes
concerning the people around him such as the AG.


11. (S) There were others close to Soludo right after the
lunch that noted -- in an almost casual manner -- that
Yar'Adua transplanted kidney was failing and that other
alternatives where underway such as testing whether
Agricultural Minister Ruma's brother, Jahana, would be a
match for Yar'Adua as Ruma himself had been. We have heard a
lot about the possibility that Yar'Adua has lung cancer.
However, we also noted in ref C that others in the diplomatic
corps, such as the well connected Portuguese Ambassador who
has been in Nigeria for six years, have raised the notion
that the President's transplanted kidney is failing, causing
his current health crisis. We will continue to follow this
issue. In addition, the pending cabinet reshuffle appears to
be coming to fruition. Yar'Adua has finally sent his new
ministerial list to the Nigerian State Security Service (SSS)
to ensure that his new crop of ministers have no embarrassing
skeletons in their closets. End Comment.

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Sanders