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The Globe and Mail

In Nigeria, two voices for economic reform

Nigeria's Central Bank Governor Lamido Sanusi and former World Bank chief Ngozi Okonjo-Iweala will spearhead the immediate future of Africa's third-largest economy, but how they deal with tensions between them will determine their success.

Ms. Okonjo-Iweala is expected to arrive this month to take the role of Co-ordinating Minister for the Economy and Minister of Finance, an expanded version of the role she held between 2003 and 2006 when she successfully secured Nigerian debt relief.

Sources close to the process say she negotiated clear terms on which she would be willing to return to serve in government, including being given broad powers over economic management and freedom from political meddling.

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She is a big personality, well respected internationally and her appointment was met with widespread optimism from foreign investors, diplomats and Nigerians, but Mr. Sanusi has an equally impressive profile.

Mr. Sanusi has spread his remit well beyond the fundamental role of the central bank, raising his public profile and laying out a blueprint for reforming the Nigerian financial system, an area Ms. Okonjo-Iweala will be wanting a strong hand in.

"It will be an interesting dynamic as they are both very strong characters," said Kayode Akindele, partner at Lagos-based advisory firm JMH-TIA Capital.

"The central bank has encroached on areas that have traditionally been the remit of the ministry of finance since Sanusi became governor and Okonjo-Iweala will want to take back the initiative in those areas."

Since taking over office two years ago, Mr. Sanusi was named central bank governor of the year by The Banker and was listed in Time magazine as one of the most influential people of 2011. Ms. Okonjo-Iweala has her own high-profile awards, named one of the world's hundred most powerful women by Forbes in 2006.

A month after taking office, Mr. Sanusi sacked the heads of nine banks in an unprecedented $4-billion bailout. The banks were deemed to be so badly capitalized they posed a risk to sub-Saharan Africa's second-largest economy.

In his latest bold move, Mr. Sanusi supported the nationalization of three Nigerian banks last week, well before a recapitalization deadline of September 30 set by the central bank and before the arrival of Ms. Okonjo-Iweala.

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The pre-emptive move has been supported by economists and market sources, who see it as bringing the banking crisis closer to a conclusion, but has also prompted a terrible week for banking stocks, although a feared run on the banks has not materialized.

"Although debate over the authorities' pre-emptive action continues, it is difficult to see the justification for not taking action ahead of the end-September deadline," said Razia Khan, head of Africa research at Standard Chartered.

"In stepping in early to safeguard a small number of institutions and guarantee their deposits, [they] may have protected the wider financial system. From this perspective, there were few arguments in favour of delaying intervention."

Fiscal and monetary policy priorities always throw up differences of opinion, particularly on the balance between keeping a lid on inflation, a priority for Mr. Sanusi, and the need for economic growth, a priority for most finance ministers.

Mr. Sanusi has been a staunch supporter of the local naira currency, pumping U.S. dollars into the financial system to curb depreciation. When asked about the naira in her screening, Ms. Okonjo-Iweala said she supported the action but also said it was not a long-term solution.

However, the pair share many common goals. Ms. Okonjo-Iweala has pledged to tighten fiscal policy and ensure the country "lives within its means." Mr. Sanusi was hauled before lawmakers last year to explain his own comments that parliamentary overheads were too high.

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Africa's most populous nation faces a long list of economic hurdles, not least opaque government spending, rampant corruption, import dependence, and the need to tame double-digit inflation while creating jobs and building infrastructure.

Ms. Okonjo-Iweala's return means she will need to work with not just Mr. Sanusi, but other successful reformers including Mustapha Chike-Obi, head of the AMCON state "bad bank," and SEC boss Arunma Oteh, who have turned Nigeria's financial markets inside out over the past two years.

Mr. Sanusi and Ms. Okonjo-Iweala clearly have the ability to drive forward reforms vital for Nigeria's future but they will need to quickly settle areas of potential conflict and mark out their territories or their combined strengths will go to waste.

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