Olusegun Aganga, Goldman Sachs outfit, and the Nigerian economy II By Iroabuchi Onwuka

There is nothing wrong for the newly appointed Nigerian minister of finance, Olusegun Aganga, to sound familiar notes from Piguo on ‘financial stability’. There is nothing particularly wrong in indicating the need to inject 500 billion Naira into the international fund market. There is nothing wrong in staying awake to the deficit in Nigerian budget, a budget that was only passed a few weeks ago. But there is something wrong with Aganga providing no alternative to this ‘Well’ of economic ideas that do not necessarily apply in times like this. There is something wrong with a Finance Minister talking about 15% deficit in the 2010 Nigerian Budget. The question that remain to be answered is where could the Finance Boss get the number and how did he arrive at the conclusion? Barely a few weeks ago, Nigerian Senators were still haggling over the issue of appropriation, and Senate President David Mark was still observing the clause by clause analysis of the budget. If Olusegun Aganga is any current with Nigeria economy and condition of its operation, he should have acquiesced on the nature Nigerian budget, let alone laud the society of 15% deficit. This commentary by the newly appointed Finance head explains the mind construction of the young man, for it seems that he is intent on using familiar lines from his years at Goldman Sachs to explain the condition of your economy. In essence, he embodies what I might call Goldman Sachs’ ‘financial pneumonia’ for high rates, exploiting their financial products for the benefit and detriment of every business institution whatsoever. This fever seethes with attitude over new Nigerian economy, for the Nigerian National Assembly only passed the 2010 budget during the last week of March and first week of April 2010. Am yet to understand the source of the quotation of 15% deficit. The number and the percentage in many ways has a way of repeating itself in many businesses of the world and this issue of deficit only lead to financing from other International Sources include Goldman Sachs.



The Nigerian budget and financial analysis came down 4, 080 trillion to 4, 416 trillion, several trillions away from what it was a few years ago. Joint Venture cash calls came to 7 billion, Gross Domestic product is 5.47%, Sales of public and government property is about 9 billion naira and need for privatization causes received 107.208 billion and consolidation program came down to 309.13 billion and Consolidated Reserve Fund N4, 608, 616, 278, 213 only of which 10, 279, 158 . All of these came down to a supposedly inflation rate calculated at 11.2%. Given the Continuous time slide of the Nigerian Naira, there is a possibility that the % rate of Nigerian Inflation is much more than that. The budget also retained other figures like Domestic borrowing, provisioned for 897.3 billion and International investment around 500 millions. We have not started yet with the expenditure and as such the retained figures bring in the aggregate expenditure and retained revenue from last year. Perhaps the issue of the 15% deficit would have been arrived at from the mispricing of Nigerian crude oil or the expected returns from the overall National venture. Retained Revenue and aggregate expenditure comes down to 3.086 trillion. Aggregate expenditure (4.608 trillion), statutory transfers (180.2 billion) Debt service (497 billion) and non debt recurrent (2.077 trillion) and capital expenditure (1.853 trillion) and deficit/surplus (1.521 trillion). These figures were lifted from several sources including a recent article by Nzeshi Onwuka and by BBC Vendor; Monitoring Africa. The staggering size of the figure quoted hear is considered unprecedented given the new fonts of the national project in the works of the many Nigerians.



The debt structure and restructure which Nigeria under this International title awarded to Aganga are forced to acquire is nothing else than Bank Securities for International countries, where IMF ‘International Monetary Fund’ Bank Securities and International Credit facility is just another term for lending to International markets like Nigeria. This gift is usually from a large deposit of empty pause…a way of authorizing your Investment action with the backing of your government and their financial power houses or institution. Yet it must be said that the profit from this kind of relationship is usually in terms of baiting, where a thing or two about trading and short selling explains baiting a ammunition for collapse and for failure to maintain your obligation. It must be said that Hedge fund management and company that are counting on this your demise are usually part of the International Business Community. They will deliver Short Term but they are certain that Long Term, you will default on your obligation and the functional value emerging from CDO’s will gradually implode.



Nigeria’s Sovereign Wealth is supposed to have dwindled to $46 billion from 60billion and when defaults begin to mount in the country, these funds will disappear. Short term borrowing equal high risk environment and such environment have their major benefactors which include Goldman Sachs. In other words ‘you suckers’ and your Naira will only experience one movement and one movement only in the International markets, a downwards movement only due to International competition Nigerian economy now assume. On the other hand, US dollars or the European Euro – the ‘Gatorade’ of World bank and IMF will only experience one thing in Nigeria and one thing only, real time appreciation of their unit of trade fair. Nigerian economy is too weak to produce almost anything, the economy in terms of productivity and business community is not even a blip on International Radar. Nigeria is by percentage not the most industrialized in West Africa let alone Africa, and by percentage, Nigeria is not the real symbol of West Africa market. Therefore, Nigeria domestic markets cannot dog the challenge from Europe, and as far as IMF is still intent on dividing Africa into blocks of trade, Nigeria on the West Side of the fence has little chance to escape. In the international markets, Nigeria therefore serve as ‘lamb to the slaughter’ a fact that is made more sinister by the new burden of International recognition and exposure of Olusegun Aganga.



Nigerian interests rate differential with major economies of the world is not that certain, and comparison is not that easy to achieve and as such little can be expected by way of growth of the Nigerian unit of exchange; the Naira. Many Nigerians may or may not be aware that the nominal Inflation of the country is well over 12%, a percentage rate by itself a colossal disaster given the seriously nonexistent Hedge for the Nigerian Naira. The capital appreciation of businesses doing business in Nigeria is beyond available econometrics, and those seeking to introduce themselves in Nigeria cannot be counted upon as a tool for gauging investment rate. For that we can only expect internal restructure of Nigerian market dynamics as the only protective device and for financing the minimalist return rate in domestic market which is only Long Term reverting. By this we mean that long term escape route in Nigeria is to be hijacked by International powers, for it seems that the IMF and World Bank are likely to assure that much of the continuous time profit from Nigerian Interest rate is soaked in the Nigerian debt repayment. The wider the gap between Nigeria and a Super Currency such as the US, the wider the percentage required to service the loans. The end result of this International indebtedness is the lack of alternative of financial institution, which is more than likely to lead to a choke in profit transfer. By that we lean too close to the probably theory of ‘sudden death’ syndrome of Nigerian Banking society, a very likely condition given the inevitability of non performing long term debt already evident in the country. Non performing debt as far as long foreign rates apply is a very likely scenario for Nigeria. Nigerian’s hedge and defensive strategy will gradually self destruct by ‘short waves’ of Inflations, a causality mainly due to International rates applying to Nigerian market directly and indirectly. These foreign rates, earn their way through any economy in the world and force its unit of exchange on such host, to undisputable degree that only cripple and clutch the Nigerian domestic unit of exchange.



Eventually Nigeria will pay a much huger price and will have to give up on any structured debt financing since the ‘actual’ rate - usually International in tedium - will like exceed the ‘conceptual’ rate of the economy which is usually Domestic. Short term note, Aganga’s appointment may be looked as an asset to the society but long term, this appointment of Aganga and his association with Gold Sachs outfit will damage domestic businesses. Judging from the perspective of a market research expert, I could say that the market factors currently available in Nigeria and the school of thought that Aganga is representing lead to one probable conclusion and one conclusion only, that Nigeria’s long term association with Goldman Sachs, World Bank, and IMF will not benefit Nigerian business society and economy. Whatever may be the interpretation for this elevation of the man Aganga, whatever may be the expected hedge for Nigerian Naira, we can be certain that Aganga’s promotion and decoration is not without consequences and reason, and his role as the polar tug of the Nigerian financial Cabal is not without International dragnet and puppetry.



Aganga Olusegun references about Nigerian economy which we have cited, which does not exclude Nigerian economy needing ‘resource allocation’, fans flames of a man wonder with little more than his training at Goldman Sachs. We are therefore expected to be weary of what the man thinks of his role and position. We are expected to say that man parries himself as an advisory to the Fragile Union with no real long term strategy for the country’s domestic market. We are expected to say that his current tilt obliges the interest of Goldman Sachs so to speak. Therefore his commentary is probably a ‘put up’ by his compeers and perhaps indirectly so given the training at Goldman Sachs. He was called by many Nigerians an economic czar and a progressive which may all be the case, but from what he had said so far he is probable a lingering novice at the edge of the world financing or an economic Hit man from the stables of Goldman Sachs. I am certain that unless adaptability is part of Aganga’s hidden ingredient, he is not that credible and attention on the probability of disappointing Nigerians is very possible. I sound out my warning on the vise of his lapses evident in his public statement, lapses which we can be summarized as a first level money market econometrics, lapses which he should amend and lapses not there to tear him down. I sound out this warning since experience with ‘epic of financial’ in 2008, where many of us were not loud enough in getting the attention of Nigerians and of CBN chair in matters arising from the Nigerian Stock market, especially in the year leading to the crash of financial economy. Nigerian domestic markets under the heavy weight condition of a Goldman Sachs will remain crippled long term. In a sense, drawing too close to a Goldman Sachs outfit is not a very easy engagement without serious network solution at home. If this concern is no avail, we should be worthy of the point that Nigerian Interest rate differential with respect to Europe will even at this point remain a problem for most businesses.



If capital appreciation of Nigerian unit of exchange is only inverse of a ‘super currency’ such as the dollars, ‘you suckers’ should disabuse your mind about any lingering hint of attracting or retaining foreign investors. Capital appreciation to the benefit of this host nation is not possible without interest rate differential pegged to the major currencies. For the real war of International Banks is to be measured by the ‘decision function’ of existing financial institution and from many market statistics most elemental of which is the interest rate. Capital appreciation if perforce through policies like Sanusi’s recent engagement will lead to a Robert Shilling’s ‘Irrational exuberance’ of Nigerian financial. In one sweep of market language, Nigerian economy will only point to an ‘extreme’ in the runway of Global macro. Such improbability of an ‘extreme’ may prove Nigeria a ‘maximum risk’ environment and as such unattractive to investors comfortable with long term investment. But spin off of asset attract International Vultures, spin off assets attract short sellers in the guise of International financiers, all of whom may short list themselves as lenders in the open Long term window but gradually permitting a short term borrowing that will cripple the long term view of the country or the long term borrowers. That’s to say that IMF and World Bank are baiting on the collapse on Nigerian economy in the years that the debt will last.



Credit facilities in Nigeria is very weak and almost nonexistent. Local Security Underwriters will therefore be forced in the ‘Long Term’ to confront the issue of super currency which Aganga now heads. In markets if not in financing, ‘Actual Capacitor’ for long term financing of major projects in any economy, for instance in Nigeria, should ram on the existing Stock markets and market direction, and when this is not the case, it gives away the indirect fact that ‘foreign capacitors’ and rate are currently overweight in such economy like Nigeria. As rate count on rate, we view the whole appointment and decoration from the ‘negative’ probability stand point, that Aganga Olusegun may be a Nigerian, and may be the Financial Minister and a good fellow but ultimately, he is a ‘negative externality’ to Nigerian economy. On this inability to spot and forward on Nigerian Naira, Market Nigeria will continuously ‘defy all principles of economics’.