Godwin Emefiele: Soft, soft

If there is one government official to keep humble, it is the Governor of the Central Bank of Nigeria. If we want to divide the economy into two parts, namely the real and the monetary sector, the governor bears half. It is a favor from God and a responsibility that must be performed with utmost dexterity and humility. The CBN Governor, Godwin Emefiele, acknowledges the scope and authority attached to the assignment, but has yet to show the humility required for such a position.

He feels the assignment has given him power over the country he is supposed to serve. He is above the Nigerian institutions, the constitution and even the people. The National Assembly called him many times, but he ignored it with lame excuses. The Nigerian citizens asked him to reconsider his position on the currency exchange deadline given the shortcomings around the availability of the new currencies. He ignored them and instead offered ATM cards for local and foreign currency withdrawals. Does the public have accounts with the CBN?

Let’s review his performance of monetary management of the Nigerian economy. The premise is to present the central bank’s traditional functions and examine how it has performed. The traditional or basic functions are expected to be performed by every central bank in the world. The central bank is the only bank that can issue domestic currency. It acts as an adviser and banker to the government, just as it is the lender of last resort to other banks. The bank is the custodian of cash reserves and foreign currency or foreign exchange. It acts as the clearinghouse for interbank transactions between banks and the monetary policy issuer.

The four core mandate of the CBN has been formulated in this general context. The law establishing the bank is expected to issue legal tender in Nigeria; maintain foreign reserves to preserve the international value of the legal tender; promoting a sound financial system in Nigeria; and acting as a banker and providing economic and financial advice to the federal government.

The first primary and foremost purpose of the CBN is to produce Nigeria’s money and distribute it fairly across the country. It is not to produce Nigerian ATM cards. The distribution of the new currency is unfair. Most banks have collected old notes with no new currency to replace them. I went to a bank’s ATM late last week to withdraw money and also with the intention of breaking the old currency the bank was handing out before taking it out of the ATM. Unfortunately, the machine has no money to spend. And that is common everywhere. A cashless economy does not mean there is no money. The so-called cashless economies in developed countries have installed millions of ATMs outside banks, in shopping malls, train stations, bus stations, and so on. What are the ATMs supposed to dispense and why are they installed if they are 100 percent cashless? In those economies, ATMs operate 24 hours a day, seven days a week. No internet problems and no power problems either. Forcing people to go cashless is a cover for inadequacy and inefficiency. To the extent that currencies are not readily available, the governor of the CBN has failed in the first function.

The second basic function of the CBN under the law by which it was established is that it must hold foreign reserves to protect the international value of the legal tender. The official naira to dollar exchange rate in 2014, just after Emefiele took over CBN, was N165.15; while the black market rate was N190. What is the exchange rate today? The official rate is N440 and the black market rate fluctuates around N750. It cannot encourage foreign investment nor the repatriation of export earnings.

It was under the leadership of the CBN Governor that large amounts of new foreign currency were found in a flat in Ikoyi, Lagos through a whistleblower. Who is legally responsible for the custody of foreign currency? So, who should be questioned for the Ikoyi foreign exchange warehouse? During the 2015 intervention programs, it was reported (never denied) that Emefiele had distributed foreign currency to some commercial banks for intervention in distressed companies. There was no record of how the money was distributed or whether it was returned. After some notes from the late Henry Boyo and yours truly, the House of Representatives has set up a committee to look into the matter. Perhaps a report will come out almost five years later.

The CBN governor turned himself into a commercial bank manager by going out to give money to farmers as an intervention fund when the money could have been channeled through the Bank of Agriculture equipped to perform such a function. He later complained that the farmers were not paying back the money they had received. But according to him, the farmers liked him so much that they paid N100 million for his failed presidential form! Have they failed to repay the loans?

There was a display of massive branded campaign vehicles for the CBN Governor’s campaign as he was scheduled to contest the All Progressives Congress primary. Those vehicles were not produced in Nigeria and must therefore have been imported with hard-earned foreign exchange. The bank was more interested in financing foreign travel by government officials, importing exotic drinks and food, and encouraging itinerant activity in the foreign exchange market than providing money for the importation of raw materials and spare parts for industries. Still, the massive depreciation of the naira on one Aboki Bureau would impose the Change of students going abroad to study. Given the devaluation of the exchange rate under his wing, it is clear that the governor has failed again in the central bank’s second basic function.

Has the CBN promoted a healthy financial system? Instead of strengthening the financial system by encouraging them to be more innovative, the bank competes with commercial banks. As already mentioned, the CBN is engaged in retail banking in the name of promoting CBN interventions. The introduction of ATM cards by the CBN for any transaction is an anomaly; no innovation. Individuals do not bank directly with the CBN, so why do they need the CBN card? Until recently, I used my bank’s master card to collect foreign currency when traveling to other countries in Africa, Europe or elsewhere. So why do I need a CBN card to do the same? I will have to transfer money to the card for a fee and withdraw for another fee. What a financial loss!

The last important point is that the CBN acts as a banker and adviser to the government. All the CBN has done for the past three years is to fund the budget deficit by any means necessary and insure government bonds where there are shortfalls. Some of the results of these actions are rampant inflation and financial crowding out of the private sector. This has negative consequences for capacity utilization in industry, the fall in income in general and tax revenues, especially at certain levels of unemployment. The CBN’s monetary framework focuses on inflation, in which case inflation is assumed to be in a single digit. Today inflation is over 20 percent and the CBN inadvertently contributes to it. Only when someone has performed his functions commendably well will he be praised. The CBN governor should judge himself with the foregoing and humble himself. He must appear before the legislature, as stipulated in the 1999 constitution, and stop running for president for shelter.

The governor must accept deficiencies in currency distribution and extend the deadline by a few weeks. The current curtailment of spending due to the shortage of new currencies is detrimental to the economy. One of the measures of the performance of the economy in advanced countries is consumer spending. That is why they have placed ATMs in strategic places, including in shopping malls, so that even if you forget your card somewhere, you can still withdraw and spend cash from the machine. Consumer spending stimulates production and employment.