Soludo, CBN Governor Photo: Sun News Publishing

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Nigeria’s Central Bank Governor, Chukwuma Soludo has said that Nigeria will not go into debt to meet maturing financial needs. This was disclosed to journalists at the ongoing Nigerian Investment Conference in New York, U.S.A.

Soludo said: “Nigeria, benefited from debt forgiveness by the big industrialized nations, is not likely to jump back into the international credit markets so soon. The question is not whether or not Nigeria needs money. Nigeria obviously needs money. The question is how best to get money. But we have a strong preference for equity, rather than debt.”

This was clearly against the position of Nigeria’s Finance Minister, Dr. Shamsudeen Usman, who said while unfolding the government's plan in Abuja on Monday that Nigeria will borrow. According to Usman "We have seen from the presentation of the Islamic Development Bank, what funds are available on long-term (40 years) and in the case of IDB it is zero interest. But even the World Bank and others also have interest free loans with only administrative charges. So what are we doing?

"They are willing to give us more, we have the capacity to take more, we need more, so what are the problems? We have to identify them because $3 billion since 1999, if I tell you our needs, just the Federal Government alone. We are talking of huge infrastructural projects: the power plants, we are looking for billions of dollars to get power going. Imagine what will happen to this economy if we have sufficient power. Just imagine if you close your eyes and you cannot remember when last light went off unexpectedly. Now we need billions of dollars to do the railways, we need billions of dollars to do the roads, we need billions in so many areas to provide for food security and these are funds that are available and cheaper.''

While insisting on the desirability of increased loans, Usman maintained that the Nigerian development challenges are enormous. He said: "There is private sector debt which is very welcome... there is not a lot of enthusiasm for public sector debt, never."

Soludo argued that the appearance of China, with its money and know-how, has been welcomed by African nations. China's hunt for raw materials globally is leading it to pour billions of dollars into much needed infrastructure projects in exchange for access to raw materials.

"I think China has gotten the rest of the world to be on their toes. China is there to do business. They are filling gaps that the other Western nations wouldn't otherwise do. They provide a diversity of funds and we now know we have alternatives," he said.

While speaking on the suspended currency reform policy, Soludo said, the policy remains suspended for as long as it is possible to dialogue with the government. "For now all aspects of the strategic agenda for the naira remain suspended. The redenomination would have cut two zeros off of prices starting August 1, 2008. We are talking about a four point agenda. There is the redenomination; there is the share of the impact of excess crude; there is the inflation targeting, and the current account convertibility," Soludo said.

Asked how long the suspension would remain in place, Soludo said: "As long as it is possible to finish the dialogue that is required with the government. The economic team was supposed to have considered this and that has not happened. They announced they have not been able to meet due, I believe, to scheduling problems."

It would be recalled that Nigeria's Attorney General, Michael Aondoakaa froze the currency plan only a week after its announcement, saying it violated the law because the president had not given written approval for its implementation.

The naira has risen significantly as Nigeria's oil wealth has ballooned along with record high crude oil prices. The Nigerian apex bank uses open market operations and the sale of foreign exchange to regulate monetary policy. On monetary policy direction, Soludo said the CBN would continue to run a "hands off" approach to the value of the currency. “The exchange rate of the naira remains market determined and will remain so. And depending on the fundamentals the market exchange rate will move one way or the other. I am not going to speculate about any value," he said.

After a presentation to investors, Soludo and his fellow panel members were challenged to make and keep a promise for one year from now. Soludo promised to keep inflation in the single digits, even the low single digits, "to keep price stability." Nigeria’s inflation slowed to 4.8 percent year-on-year in July from 6.4 percent in June, the Nigerian Bureau of Statistics reported in August.