Two years of Emefiele in CBN saddle

CBN Governor, Godwin Emefiele

CBN Governor, Godwin Emefiele

On June 3, 2016, Godwin Emefiele, the Governor of the Central Bank attained his second anniversary in office. This is a tenure which has been hallmarked so far with the struggle to maintain the foreign exchange reserves, stabilise the rate of exchange of the Naira against the background of dwindling reserves as a result of persistent softness of the oil market and sustained speculative attacks. He also confronted political headwinds arising from the outcome of elections, the outcome of which has been more challenging because he had been appointed by the outgoing administration and was targeted by politicians who consider politics a do or die affair for which the spoils belong to the winners.

Governor Emefiele, as part of the Agenda for the Central Bank which he rolled out during his maiden world press conference just after his assumption of office on June 5, 2014, gave assurance of his determination to keep fidelity to his core mandate as the Governor; that is the maintenance of price and exchange rate stability, promised to work assiduously for the gradual but steady reduction on the prevalent level of interest rates, target accretion to the foreign exchange reserves while declaring his disavowal to currency devaluation in the prevalent circumstances of the economy and asserted that he would run a Central Bank that is apolitical, professional and people oriented

But the reality is that issues surrounding the depleting reserves and the management of the exchange rates have made priority claims on the attention of the governor almost making him neglect other also important issues which he outlined in the agenda under reference. When the governor came on board, the challenge of the falling oil price and, therefore, dwindling reserves was already with us and there has been no let up. Instead the situation had deteriorated that under the governor’s watch the rate of exchange first moved from N155 to N168 after which the Dutch auction system was abolished and the interbank market was introduced at the rate of N198 and, therefore, despite the governor’s well-advertised disavowal to devaluation, he had no option but to allow the currency to devalue under his watch.

And since the received wisdom is that the pegging of the Naira has accounted for the general contraction of the economy which has resulted to the economy witnessing negative growth rate in the first quarter of 2016 for the first time in about two decades, the Monetary Policy Committee had no option but to mandate the Central Bank to inject some flexibility into the determination of the rate of exchange. But flexibility in the determination of exchange rate is clear euphemism for devaluation. It is, therefore, difficult to envisage how the Central Bank can navigate this obstacle in the face of the clear opposition by the President for reasons that are historically correct to devaluation.

All concerned are now waiting with bated breath for the details of this promised relaxation of the determination of exchange rate with the fervent prayers that it would herald the much touted inflow of foreign exchange into the economy from autonomous sources, kick start productivity, reduce unemployment, mitigate rising inflationary pressures and allow critical stakeholders to reclaim their independence from the strangle hold of exchange rate management pressures.

The Central Bank has advisedly keyed into the promotion of credit to the MMSEs as a veritable platform for the promotion of growth in the economy by making available the N220 billion targeted fund. To contextualise this observation, a study conducted by the National Bureau of Statistics in 2010 highlighted the fact that at that time there were 17.2 million MMSEs in the country employing about 32 million people. And if this sector is given a boost so that each of these businesses employs just one additional person we would automatically be adding about 17 million jobs which would certainly make a whopping dent on the prevalent unemployment situation in the country.

The Central Bank recently upped the ante by introducing the Anchor borrowers’ scheme which was launched by President Muhammadu Buhari at Kebbi State which had since been extended to other states of the Federation aimed to achieve a viable agricultural base for the country with more integrated value chain to enhance food security, reduce imports and enhance productivity and, therefore, employment.#

The other major development which is noteworthy is the introduction by the Central Bank in conjunction with the Bankers’ Committee on February 14, 2014 of the biometric based unique Bank Verification Number (BVN) aimed at giving a boost to the effectiveness of the Know Your Customer principle on the part of the banks. This scheme is targeted at customer protection and for attaining growth in the volume of credit by addressing frontally issues relating to identity theft and generally offer protection to the banks through a reduction in the incidents of bank frauds.

It is also noteworthy that the Federal Government recently leveraged on this scheme to exhume a number of ghost workers in its employment! We commend the governor for his level headedness, his focus and for the avoidance of all manner of controversies as he continues to grapple with the challenging task of piloting monetary policy in the prevailing excruciating circumstances in the country.

• Dr. Boniface Chizea wrote from Lagos.

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1 Comment
  • Dele Awogbeoba

    In December 2014 (6 months before Buhari came to power) Emefiele
    started his misplaced policy of currency controls. Bloomberg’s article
    in January 2015 reports on this.


    operative part:

    “Nigeria, which produces the most oil of any African country, tightened rules on
    foreign-currency trading as the naira slumped and crude prices plunged.
    The central bank raised interest rates to a record 13 percent in
    November to stem outflows and Finance Minister Ngozi Okonjo-Iweala
    proposed cutting this year’s budget by 8 percent. Interbank trading
    dried up last month after the bank introduced the tighter rules.”

    This came in for criticism almost immediately by the international financial community which Emefiele tried to respond to.

    In January of 2015 (5 months before Buhari came to power), JPM had started
    to threaten to evict Nigeria from its index and with it huge amounts of
    FX inflows.


    Operative part:

    “Nigeria was placed on Index Watch Negative for JPMorgan’s local currency
    emerging market indexes on Friday after central bank measures in
    December reduced foreign exchange and bond trading, making it difficult
    for foreign investors to replicate the gauge, the New-York based lender
    said in an e-mailed statement. The regulator intervened after the naira
    fell to a record low soon after the announcement, according to Guaranty
    Trust Bank Plc.

    “We are very surprised at this action by the JPMorgan index team,” Emefiele said, adding that the central bank wasn’t consulted. “We want to stay in the index and we’re doing everything to make sure we do.'”

    By mid November 2015, Buhari had appointed his ministers and given them portfolios. Until then Emefiele was his only source of macro economic advice.


    Buhari’s special adviser on Economic matters was appointed in mid january 2016.

    By June of 2015, JPM had threatened to remove Nigeria from its Index.


    Operative part:

    “JP Morgan has threatened to remove Nigeria from its Government Bond Index
    (GBI-EM) by the year-end unless the Central Bank of Nigeria, CBN,
    restores liquidity to foreign exchange market to allow foreign investors
    tracking the benchmark to transact with minimal hurdles.”

    By July 2015, the Economist had got into the act of criticising Emefiele’s policy


    Operative part:

    “Whereas many investors were impressed by the previous CBN governor, Lamido
    Sanusi, who was sacked for exposing corruption, they fret about the harm
    being inflicted by the current one. Some wonder which would be worse
    for Nigeria: allowing him to serve the remaining four years of his term
    or undermining the independence of the central bank by sacking him.”

    By September 2015, Nigeria had been removed from the JPM index because of the Emefiele driven policies.


    Operative part:

    “JPMorgan Chase & Co. has excluded Nigeria from its local-currency
    emerging-market bond indexes tracked by more than $200 billion of funds,
    after restrictions on foreign-exchange transactions prompted investor
    concerns about a shortage of liquidity.
    The first phase of removing Africa’s biggest economy from the Government Bond Index-Emerging Markets, or GBI-EM, will take place at the end this month followed by a
    full exit by the end of October, the New York-based lender said in a
    statement sent to Bloomberg on Tuesday by spokesman Patrick Burton.
    Nigeria’s central bank under Governor Godwin Emefiele introduced several
    foreign-exchange trading restrictions from December to stem the drop of
    the naira amid weaker oil prices. ”

    In May 2016, after giving the CBN governor enough rope to act, Buhari eventually had to
    step in and influence the recent change in strategy. Osinbajo in May was
    the first member of the executive that realized that Emefiele needs to
    be subjected to much more oversight.


    Operative part:

    “Osinbajo told a Lagos business conference he hoped to PERSUADE the central bank
    to change some policies to improve foreign exchange supply as current
    supply management is not working well.

    “We believe there must be some substantial revaluation for the foreign exchange policy,” Osinbajo said. This would help boost foreign exchange supply and encourage
    capital inflows and a free flow of remittances, he said.”

    June 16 2016 (2 days ago), the economist further wrote:


    Operative part:

    “BARE shelves in supermarkets and soaring inflation would worry any
    central-bank governor. For Godwin Emefiele in Nigeria, the added twist
    is that both problems are partly his fault. The central bank’s policy of
    trying to maintain the value of the naira, Nigeria’s currency, in the
    face of a slump in the price of oil, which used to account for about 90%
    of the country’s export earnings, has failed miserably. Now it is being

    The CBN governor cannot be removed by the president
    without 2/3 support of the Senate curtesy of section 11(f) of the CBN
    Act of 2007.