The Cash Reserve Ratio Comedy in Davos – Dominik Umosen

Only a rendezvous as detached and historic as Davos, high in the Swiss Alps is befitting enough to unveil an economic comedy in which an allegedly clueless government woos investors, on one hand, and, on the other, a key economic payer like the helmsman of a first generation bank scares potential investors away with tales of an unholy mix of economic incentives back home, including a prohibitive 75 per cent Cash Reserve Ratio, CRR, which banks are required to deal with in their mandate to re-flate the economy for optimum competitiveness. It is a tall order that was made even taller by the comedy enacted in Davos when Pres Goodluck Jonathan passionately appealed to investors and the Managing Director of First Bank,, Mr Bisi Onasanya jammed this presidential appeal with a most subversive argument that the prevailing 75 per cent CRR regime imposed by the Central Bank of Nigeria, is anti economic growth and re-generation.

For much of last week, Davos provided a scenic backdrop for world economic leaders and policy makers to compare notes and calibrate competing economic agendas, including Africa’s which is still battling to escape from the backwaters of under-development and its allied impairment. In addition to a powerful official delegation that was led by none other than the president himself, a formidable team of high-profile businessmen also represented Nigeria at the carnival for global business and policy leaders, including the richest man in Africa, Alhaji Aliko Dangote.

At the event, President Jonathan made a brilliant effort to sell his country to the world. For example, he enumerated several gains of conscious policies by various governments since independence to position the country for sustainable economic relevance, including the unprecedented privatisation initiative of his administration which, he said, has now entrusted the critical power sector in the universally-acclaimed private sector. According to the president, the projected dividends of privatising the power sector are enormous and would pay off handsomely because global experience has shown that there is no alternative to private initiative in achieving optimum efficiency in business endeavours.

Highlighting the Dangote phenomenon as a befitting testimony of private initiative in business, Pres Jonathan reminded his audience that from a net importer of cement only a few years back, the country suddenly transformed into a net producer of the product, thanks to the initiative of visionary businessmen like Dangote. But this brilliant sales pitch by the president was almost marred by the comedy of sound economic argument in a wrong place by the First Bank MD which was anything but anything but complimentary to the supposed investor-friendliness of the Nigerian economy. This scenario aptly replayed the proverb of how an audience abandoned the relevance of the message to crucify the messenger for his poor judgement of timeliness.

According to Oresanya, a downward review of the 75 per cent CRR is necessary if enough funds were to be freed for banks to lend to the real sector, thereby facilitating their traditional role as agents and lubricants of economic growth. At 75 per cent, too much funds, he argued passionately on the Swiss mountains, would be tied up at the regulatory bank, leaving little or not enough in banks for them to play their traditional economic roles in a developing society like us. The First Bank MD’s observations invariably refocused attention on some fundamental contradictions in the economy, especially the disproportionately high recurrent over-hang in the 2014 national budget which experts have described as a cost-serving exercise that scraped too close to the bone.

Unless the First Bank M.D. deliberately set out to embarrass the president which is highly unlikely, it is difficult to justify the choice of Davos as venue to pummel the CRR, considering its intimidating strategic importance in the business world. And because the possibility of a comedy of this magnitude should have been envisaged  and checkmated the first instance, it becomes natural to ascribe criminal blankness to the public relations naivety that inspired this ungraceful situation. A forum where the president actively drummed up support for his country and her economic aspirations and went out of his way to woo investors for this purpose was hardly the best place where a critical economic player and helmsman of a foremost financial institution as First Bank should have chosen to unveil a contradictory economic model to what was trending. Most-sensationally contradicting the trending report of Nigeria’s economic viability and investor-friendliness, even if unwittingly, amounted to a grossly disharmonious comedy by the First Bank chief executive and it is even better that he did not conceive the farce in the first instance.

It is a good thing that the sheer dynamism of the president’s arguments against some of the absurdities that hamper seamless interaction between African countries, including having to go through Europe in order to access another African country, helped to deflect, substantially, any damage that might have been wrought by the discord and contradictory messages rendered by Pres Jonathan and Oresanya in Davos.  Apart from the president’s strong argument for the need to add value to traditional exports like mining resources and hydro-carbons from the continent, the former Managing Director of Zenith Bank Plc, Mr Jim Ovia connected brilliantly with millions of Nigerian travellers by condemning their harassment at foreign airports, including fellow African countries, as undue and a straight-forward case of xenophobia which he urged the Federal Government to reject categorically.

Of course, criticism of the massive CRR regime did not come across as strange to analysts. What did and continues to be interpreted as untactical was his choice of venue for such criticisms. Certainly, trying to reconcile television footages of Mr President sweet-talking investors into coming to Nigeria, perhaps to invest and, at the same time, aligning that with the First Bank M.D high-lighting the profile of a supposedly hostile economic environment back in the country, amounted to a huge challenge of etiquette. Rubbishing the same economic model relied upon by the number one citizen to make his passionate case for foreign investment in the country was one hell of a step too close to the edge of political self-damnation, was how an analyst described the comedy.

For one thing, Oresanya’s tactical blunder in Davos suggests that there was little or no conscious effort by the Nigerian delegation to project a common purpose ahead of statements before investors. If there was any understanding of a common message, even if symbolically, for the rest of the world, there is no way the MD of the oldest bank in the country would have sensationally undermined Pres Jonathan’s message of a country flowing with milk and honey and, more so, atop the scenic snow-capped mountains of Davos.

Without doubt, it is established that achieving this desired unanimity must not necessarily be through laborious sacrifice like investing in rocket science but as one of those informal side-kicks that could easily be perfected on the boring fight from the sizzling-hot continent. There is no evidence that this precaution was taken, otherwise this comedy of etiquette in high places might not have been enacted in the snow-capped Alps simultaneously as when the home-country of political neutrality was hosting desperate efforts to resolve a harvest of more grisly comedies in Syria.

Luckily for Nigeria, other events at the summit thankfully exerted influences that proved both extenuating and mitigatory to this tragic comedy. For one thing, it is providential that the country is hosting a global economic summit in May this year. This will not only re-affirm the country’s hot economic potentials but also play-down on  distractions like resurging criticisms of the CRR regime by  other credible economic players than the First Bank boss. That providential intervention might, however, not be sufficient explanation for the fashionable over-hang of prejudice, including the CBN governor’s disparaging assessment of the country’s external reserves build-up as well as moves by the  Federal Government to stabilize confidence in the floundering national economy.

   The views expressed above are solely that of the writer and not necessarily that of or its associates.

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