How Nigeria was plunged into recession, by CBN

Godwin Emefiele

Godwin Emefiele

• Admits failure of some monetary, fiscal policies
• Says $66b was frittered away funding BDCs

A failure to save for the rainy day as well as poor monetary and fiscal policies were partly responsible for the country’s current recession, according to the Central Bank of Nigeria (CBN).

The CBN Governor Godwin Emefiele who disclosed this at an interactive session with media managers in Lagos at the weekend noted that a number of external factors, particularly the crash in global oil prices, also contributed to the nation’s economic woes.

“I must confess that what is happening today is a result of a global crisis in the sense that we’ve seen commodity prices dropping, we’ve seen geopolitical tensions all around the world,” he said.

Emefiele recalled that when it was very buoyant, Nigeria frittered away about $66billion or an average of $6billion per annum funding Bureau de Change (BDCs) operations over 11 years period, beginning from 2008, when the country’s foreign reserves stood at $62billion, and oil price about $120/barrel. He said such funds could have been kept for the rainy day or invested in infrastructure development that would have buoyed economic activities.

Emefiele said if the government heeded his advice to sell off some of its equities in oil and gas assets, Nigeria could make up to $20billion that could stimulate the economy and boost spending.

According to the CBN boss, efforts at jump-staring the economy are being circumvented by the banks that are flouting the policy on lending to the real sector by diverting CBN proceeds into buying treasury bills and bonds for higher yields instead of lending to businesses.

Explaining how Nigeria got into such a dire situation, the worst in 29 years, Emefiele recalled that not only did the country indulge in frivolities, including high taste for imported products, the waste in the system began much earlier dating back to the discovery of oil in commercial quantities in the mid-1950s.

“If we had held strongly to our potential in agricultural sector and in the same vein held strongly to the potential that we have because we found oil in Nigeria, our story would have been different today,” he argued.

Apart from abandoning agriculture revenues for petro-dollars, he said, successive government failed to plan with the proceeds from export sales, which compounded issues for Nigeria, unlike Norway, which invested its fishery and oil proceeds in a Sovereign Wealth Fund now worth about $873 billion.

The CBN governor said: “Unfortunately, we didn’t plan this way for our people, and that is why we are where we are today. I will give you a few examples .In September 2008, Nigeria’s FX reserves stood at $62billion. What did we do with $62billion at a time crude price was almost $120 per barrel?

“What we could have done was to save the money, if we couldn’t save the money, invest it in infrastructure and in industry that will grow productivity and wealth of our people.

“At that time, the Central Bank went about licensing Class A, Class B and Class C Bureau de Change. In 2005 the CBN was amongst a few central banks in the world allocating dollar cash for bureau de change operations, and by the time it was stopped in January 2016, the CBN had disbursed $66billion to fund cash operations of BDC in Nigeria. What that meant in 11 years is that we spent $66billion funding operations of BDC, which came to an average of $6billion in a year.

“If we had thought of other ways to utilise our reserves in 2008, when it was as high as $62billion, certainly we will not be where we are today.”

Emefiele also noted that the continued fall in the price of oil at the international market is not helping matters, with reserves on a free fall.

“Between August and September 2014 up till this moment, which is about two years, we have seen a consistent drop in prices of crude to the extent that by March 2015 precisely, our reserve had dropped to $31billion, at that time crude price had dropped to $48 per barrel. At that time too, the country’s receipt from export of crude dropped to $1.3billion. At the same time, the demand for forex, the demand for import had remained high.”

On taking proactive measures that could have checked the recession, the CBN governor hinted that Nigeria may have been misled by its foreign allies when it adjusted its currency.

The currency adjustment hiccups notwithstanding, Emefiele disclosed that the flexible exchange rate policy is yielding fruits by fetching $1billion in the last three months.

“I feel confident that if we continue the way we are going, managing the situation in a way that encourages foreign investors and all those who have foreign currencies to bring them in to support our economy, there will be more inflows of foreign exchange into the system,” he said.



42 Comments
  • ogechi udoka

    I am in support with this present administration, but there should be at least a limit to our sufferings. Will the citizens die first before this happens?

    • William Norris

      You support this government, really? Your suffering is just beginning.

      • KlasJ

        If she is against this government, will there be immediate stop to the suffering?

        • Fair listener

          Ask am again, maybe he never hear well

        • Okoro Tonye

          If she doesn’t support them, they will get the feedback that many are unhappy, and perhaps adjust their policies

          • Wole

            can you mention two or three of the policies that need to be adjusted?

          • Okoro Tonye

            I should tell you ? Why should i waste my time doing that for you ? Go and study.

          • Wole

            Yes, if you are so sure of what you are saying, you can tell us the policies and what was wrong with them. It is a simple question. The time you spent in replying is just about enough to tell us the policies if you know them

    • Okoro Tonye

      Support them with suffering in silence

    • Famer Domain

      Ogechi Udoka,
      If you are a foreign student abroad, Please endure and face your studies despite the hardship, get good result and look for a serious man over there to marry pls my sister

  • ogechi udoka

    Please ohhhhh, foreign students are dying due to the very high exchange rate, since the beginning of the year the govt promised things will go back to the way they were and even better after the second half of the year, but it has only worsened to an unbearable extent, we have to live while the change is made pleaaassssseeeee.

    • Okoro Tonye

      There are plenty universities in Nigeria, come home and enrol. Knowledge is one.

  • Francis Uwaechi

    We are not investing in research despite the abundance of our resources. A strong economy is built by transforming the specialist knowledge of these raw materials into financial gains. As a nation, we have been blinded for far too long by the ready liquidity provided by crude oil, it is time to step away from that comfort.

    • Okoro Tonye

      What we need is electricity, not research. All previous research results are gathering mould and dust somewhere.

      • Ayoola Babalola

        Research will give you better ways of generating, sustaining and increasing your energy capacity. What we fail to realize as a nation is that what you use, see and appreciate today were all products of research including the electricity you just mentioned.

        • Okoro Tonye

          I agree, research is important, but we can leapfrog to save effort and resources by using available research results. Russia simply stole US nuclear energy research in the 1940s. The US/Russia captured and carried home German scientists.

  • Okoro Tonye

    Complete nonsense! It’s not as a result of any global economic crisis, for there is nothing like that. The only countries suffering presently are commodity-dependent economies like Nigeria. You are simply going back to 1983 excuse that was sold to Nigerians.
    This CBN governor is simply parroting Okonjo-Iweala’s recent comments on the economy.
    The recession was caused by : 1)Artificially pegging the dollar at NGN197; 2)Long delay to assemble a team in a time of economic crisis.
    Stop this language-dressing and stop allowing yourself to be over-ruled by politicians. YOU CAN RESIGN TO PROVE YOUR POINT. Assuming you know what you are doing there. Afterall, you are a banker, not an economist.

    • Wole

      Tonye, you an economic illiterate, simple. I will like you introduce your educational and career profile to all readers on this platform before you castigate the CBN Governor. I don’t want to join issues with you on the trash you gave as your reason for recession because obviously you have never been in any economics class in your life, if you ever went to proper school.

      • Okoro Tonye

        Thank you ! I notice that what you come on this platform is simply to insult people. Where-in lies your education ?

        • Wole

          You just did the same thing by insulting the CBN Governor

          • Okoro Tonye

            Apologies to CBN governor if I came across as insultive.

  • Elder (Dr.) Chukwuma Nwaonicha

    In my opinion, the economic recession including the current hardship in the Nation is triggered by many factors, such as the National financial crisis, an external trade imbalance and Nigerian Leaders Kleptocracy over the years, among others. In other words, the rescission had more to do with governance and fiscal policies. In recent times, especially as there was lack of spending from the public sector, no dollar inflow, therefore little investment. Thank you.

  • agbobu

    SAY IT LOUD THIS HARDENED ROBBER GOODLUCK JONATHAN AND HIS GANG OF THIEVES MUST FACE
    JUSTICE AND BE TRIED FOR THEIR VERY MASSIVE LOOTINGS AND STEALING OF OUR
    NATION’S MONEY AND WEALTH AND IF FOUND GUILTY AFTER DUE LEGAL,
    VERIFIABLE AND DILIGENT LEGAL PROCESSES, MUST BE EXECUTED OR BE SENT TO
    PRISON FOR THE REST OF THEIR VERY WRETCHED LIVES. THIS WILL SERVE AS A
    VERY STRONG DETERRENT TO OTHERS WHO WILL WANT TO BEHAVE LIKE GOODLUCK
    JONATHAN AND HIS GANG OF THIEVES.

  • ade

    He did not mention CORRUPTION as the cankerworm of Nigeria with $34billion dollars allegedly, in the wife of the Ex-Presidents account. “The Ostrich buries its head in the sand and because he cannot see others, he said others cannot see him.” Who is fooling who?

    • real

      Where and how do you get the sum of $34 billion pls?

      • ade

        Apologies for my error, it is not $34 billion but $31.4million. But type in:”Patience Jonathan EFCC”, into google search engine and read what comes up.”

        • real

          I know the story but let us wait for the outcome.
          The figure you mentioned is just more than yearly budget of Nigeria.
          The present admin spend 475 million monthly to fly airfoece plane

      • Omo Delta

        $34Million

  • Famer Domain

    The cause of our predicament is known 1. Corruption 2. Over reliance on crude oil 3. Bad economic policies ( both Fiscal and monetary) 4. Lack of political will to lift Nigerians out of poverty through obnoxious policy of subsidy instead of refining fuel locally .The major one is neglect of industrialization and agriculture and mad importation of everything food and fuel which depleted our foreign reserves and local jobs .
    We train people on modern agric techniques and allocate 500 acres for interested persons pls contact us for investors and partners or as farmers

  • Ayo

    Emefiele’s policies contributed to to the problem. He needs to keep quiet or resigned.

  • olayiwola

    Political CBN governor!! He is hitting back at his predecessors who has criticized him!!!! What is the way forward, the past has been over analyzed! Selling assets without changing the structure of this Nation is nonsense. The clamor for power at the center makes it expedient for politicians to sacrifice the present and future for a possible windfall from the federal revenue!!! And if we all chose to play the Ostrich by looking for scapegoats, the momentum of the structural imbalance will wipe away more than we could have done by dialogue!!!!!!!

    • Uche

      “Selling assets without changing the structure of this nation is nonsense”

      Olayiwola, you offered the most congent argument on the Nigeria’s predicament – and coming from a Yoruba man, it is heartwarming in view of your kinsmen’s 360 degree turnaround from their avowed stance on political restructuring.

      Emefiele is just playing to the gallery. He is lamenting on how successive administrations abandoned our agricultural sector in the wake of petro-dollars and engaged in unprecedented waste and frivolities without concomitant investment in our infrastructures and local capacities. He should have further by pointing out that it was the unitary system of government imposed by the military that decimated Nigeria and without the political restructure of Nigeria – which according to Buhari is non-negotiable – no economic solution will extricate her from this death knell

  • Francis Uwaechi

    That is a short-sighted argument. Technology drives large economy, with research comes the innovation for steady power supply. What percentage of our national income goes into novel science? Should we not have a research council or a think tank that advises government on policies? We believe in quick fixes with no consideration for longer term solutions and that is the problem.

  • Humble Zayon

    MR. EMEFIELE, YOU ARE STILL BASKING IN BUHARI’S BLAME-GAME GALLERY! PROFFER SOLUTIONS TO WHAT HAD ALREADY GONE BAD AND EVEN WORSE SINCE YOUR BOSS, “THE OWNER OF NIGERIA”, WHO APPOINTED YOU TOOK OVER POWER FROM JONATHAN OVER ONE AGO! IF YOU DO YOUR WORK WELL WITHOUT DISSIPATING ENERGY ON BLAMING, AS YOUR BOSS WOULD WANT YOU DO, IN FACT, NIGERIANS WOULD HOLD YOU AT HIGH ESTEEM. NIGERIANS ARE DYING IN THEIR NUMBERS BECAUSE OF HARDSHIP WHICH ONLY BEGAN SINCE BUHARI BECAME PRESIDENT. NIGERIANS DO NOT CARE ABOUT WHAT BUHARI WISHES TO DO WITH JONATHAN AND HIS LOOTING-STARS; THEY ONLY CARE ABOUT WHO GETS THEM OUT OF THE PRESENT SUFFERINGS!

    • Tonnero

      Emefiele was appointed by Jonathan not Buhari. Understanding what went wrong is not the same thing as blaming. The same Nigerians who clapped for looters deserve to suffer some punishment so they can learn. You cannot behave badly and expect there will be no consequences.

      • abodes_124

        The looters are laughing and you are punishing the ordinary citizens and telling them they deserve it? Wake me up when you convict the first looter.

  • Minotaur

    CBN Governor Godwin Emefiele should resign he has no plan to kick start the economy
    Where is his monetary policy that he has submitted to NASS
    Nigeria economy need trouble shooting capable leadership – Gone are the old days people sit and occupy office chair
    Dynamic changes in technology will continue to punish those who approach todays economy with 90s way of doing business

  • ola

    The blame game!

  • abodes_124

    Words from a Central Bank governor carries a lot of weight. When he talks sense the nations financial institutions and affairs are strengthened . When he talks nonsense confidence is sapped.. One indicator will be the value of the Naira in the open market in the next few days. Let us watch.

  • Tantolorun

    The CBN governor himself, apart from aiding politicians to loot the treasury under his watch (he has the key to the treasury), made some nasty policies that nailed the coffin of the Nigerian economy, If a policy is not working, there is no crime in reversing such, instead the CBN governor is strong headed, insisting the policies are the best for the country. How do you want to follow policies that works in other countries with Nigeria. Until Nigerians make Made-in-Nigeria laws and economic policies, we may never get it right. Nigeria is a peculiar nation, whether we believe it or not. America or Europe never had Africa in mind when they formulated their laws and policies, and of course, it works for them. As of the moment, its like Nigerian leaders are making the country live another Nations’ lives. There is a need for a national identity.

    • Okoro Tonye

      I concur ! Beautiful comment

  • JoshBiggs

    The constant talking about how we got here won’t help us out. It’s high time we started talking about the most pragmatic way to get out of this mess

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