ROTIMI DUROJAIYE writes that the former Governor of the Central Bank of Nigeria, Godwin Emefiele, placed the country’s economic fortunes on a precipice.
The Central Bank of Nigeria at the weekend confirmed the resignation of Godwin Emefiele as its governor, three months after being suspended from office by President Bola Tinubu.
Emefiele was thereafter quizzed by officials of the Department of State Services who later charged him to court.
Following his suspension, the Federal Government appointed Folashodun Shonubi, the Deputy Governor (Operations Directorate), to oversee the affairs of the apex bank.
In a statement by the Director of Information at the office of the Secretary to the Government of the Federation, Willie Bassey, the government said Emefiele’s suspension from office was due to an ongoing investigation of his office and the planned reforms in the economy’s financial sector.
However, on September 15, President Tinubu nominated Olayemi Cardoso as the new CBN Governor, pending his confirmation by the Nigerian Senate.
“President Bola Tinubu has approved the nomination of Dr. Olayemi Michael Cardoso to serve as the new Governor of the Central Bank of Nigeria (CBN), for a term of five (5) years at the first instance, pending his confirmation by the Nigerian Senate,” presidential spokesman, Ajuri Ngelale, said in a statement.
Corroborating this, the apex bank issued a statement on Friday, announcing the assumption of office by the acting governor.
The bank’s Director of Corporate Communications, Isa AbdulMumin, said Cardoso will act as governor pending his confirmation by the parliament.
“He had no vision for the monetary policy of the country. He had risen to the top of his career as a yes-man to those who put him in position”
“Dr. Olayemi Michael Cardoso, recently nominated by President Bola Ahmed Tinubu, has on Friday, September 22, 2023, formally assumed duty, in an acting capacity, as the Governor of the Central Bank of Nigeria (CBN), pending his confirmation by the Senate. This follows the resignation of Mr. Godwin Emefiele as Governor of the Central Bank of Nigeria (CBN),” the statement said.
The bank also said that the “Deputy-Governors-designate have also assumed duty, in acting capacities, sequel to the formal resignation of Mr. Folashodun Shonubi, Mrs. Aishah Ahmad, Mr. Edward Lametek Adamu, and Dr. Kingsley Obiora as Deputy Governors of the CBN.”
Cardoso was the former chairman of Citibank Nigeria. He is a distinguished leader in the financial and development sectors with over 30 years’ experience in the private, public and not-for-profit organisations.
With diverse corporate governance experience, Cardoso has also sat on the boards of Nigerian subsidiaries of Texaco and Chevron and chaired the board of EFInA, a financial sector development organisation supported by the Bill and Melinda Gates foundation.
He served in government as Commissioner for Economic Planning and Budget for Lagos State, where he championed the financial reform process which led to the state’s development of independent tax revenues.
On June 9, 2023, President Tinubu suspended Emefiele. The following day, the secret police confirmed the erstwhile top banker had been arrested and was in its custody for interrogation.
The charges were not immediately made public, but a government press release cited “an ongoing investigation of his office and planned reforms in the financial sector of the economy” as reasons for the suspension.
Appointed in 2014 by then-President Goodluck Johnathan, Emefiele became the second-longest-serving governor of the bank after his tenure was renewed by former President Muhammadu Buhari.
Buhari’s administration between 2015 and 2023 led Nigeria into two recessions.
Inflation hit an 18-year record high of 22.22 percent, and the country’s debt profile soared to more than $150bn, also a record and more than three times the debt left by the previous government, according to the Debt Management Office.
Emefiele served under Buhari for eight years, overseeing Nigeria’s biggest economic downturn.
EMEFIELE PLAYED OUTSIDE THE RULES
“He had no vision for the monetary policy of the country. He had risen to the top of his career as a yes-man to those who put him in position,” the lead partner at SBM Intelligence, Cheta Nwanze said.
By convention, central bank governors operate in the shadows, maintaining a distance from politics.
But analysts said Emefiele played an outsized role in both politics and the economy as the governor of the apex bank.
“The phrase I will use to characterise the CBN in this period is all-powerful,” said Michael Famoroti, the head of intelligence at business and economic insights firm Stears and former chief economist at Vetiva Capital.
“For the first time in Nigeria’s economic history, we have a central bank that was essentially the most powerful form of economic authority in the country … That [power] is normally between the Ministry of Finance, the budget office or the presidential economic council.”
But Nigeria’s economic fortunes would put the country on a precipice, and Emefiele’s status would become stratospheric.
In 2015, as foreign reserves took a hit, the CBN placed 41 items including staple commodities like rice, cement and clothes on foreign exchange restriction.
The idea was not only to encourage local production of these products, but also to prevent the importers of these commodities from accessing the increasingly scarce United States dollars in the official market.
But the move backfired as it precipitated a black market for US dollars and multiple exchange rates, which analysts said has wrecked the naira and pushed ordinary Nigerians to buy the greenback at higher rates while the sellers enjoy the arbitrage.
“This was a critical point. There was so much pressure on the system and the black market started operating as a separate market with a life of its own,” said Wilson Erumebor, senior economist at Nigeria Economic Summit Group.
To arrest the slump of the naira, Emefiele took several unorthodox steps. He ordered the cutting of trees where black market vendors worked in the capital; placed a ban on crypto currency trading, a burgeoning alternative initiative popular among young people hedging their money against rising inflation; and banned a website that reported the value of the dollar in the black market, among several other measures.
The CBN’s weekly circulars over the years became prominent among Nigerians as more items were banned or tighter restrictions were imposed on financial transactions, earning the governor the moniker “Emperor Meffy”, a corruption of his name.
“People were not sure of what the policy direction would be on the exchange rate.
What is the next policy that will come out tomorrow? What will be banned tomorrow? All of those inconsistencies created panic in the market and people started moving to the unofficial market,” Erumebor said.
Inflation kept rising year after year and with the naira losing value, statistics show Nigerians became poorer. Some 133 million of the country’s 220 million people now live in multidimensional poverty – where they are not just monetarily poor, but also have less access to education and basic infrastructure services, according to a 2022 report from the National Bureau of Statistics.
External factors like the COVID-19 pandemic and the war in Ukraine have no doubt impacted the economy and contributed to inflation, but experts argue that the direction of the monetary policies from the CBN also led inflation to rise from single-digit increases (between 6 percent and 9 percent in 2014) to permanent double-digit increases of 22 percent and higher so far this year.
The CBN under Emefiele, lent the government N22.7 trillion naira ($49bn) under the Ways and Means Advances clause that can be activated only if the government has a temporary revenue deficiency.
The move led local media to dub the apex bank as a “printing press” for the government.
Moreover, the CBN Act only allowed for a loan of five percent of the government’s previous year’s revenue, but the bank illegally exceeded the benchmark every year, sometimes up to 30 percent. This contributed to inflation, experts say.
At the end of President Buhari’s tenure, the National Assembly changed the law to allow the loan to the government to be up to 15 percent and converted the loan into a 40-year bond.
The governor was one of the most influential members of the Buhari administration, during which the central bank made significant economic interventions, some of which were controversial.
These include propping up the naira, lending huge sums to the Federal government through Ways and Means (as a lender of last resort), extending credit to multiple sectors through the Anchor Borrowers Programme, and other ancillary interventions.
Analysts were, however, worried about some of his policies that gave undue attention to development finance and excessive regulation of banks at the expense of price stability.
Section 38(2) of the CBN Act 2007 provides that lending to the government should not exceed 5 percent of the previous year’s actual revenue.
Findings further showed that with respect to revenue accruals, lending to the Federal Government should not have exceeded $450 million but had spiked to $49.2 billion.
This development, among others, led to Moody’s downgrading of the Nigerian economy to B3 rating, driven by the significant deterioration in Nigeria’s government finances and overburdening debts.
An economist, Kelvin Emmanuel, said that one implication of the development was that it put intense pressure on lending to small and medium enterprises.
“You notice that cash supply deposits are higher than the production outlook of the economy. When so much cash is chasing a few goods without commensurate production and services, it creates a problem.
“Basically, we printed $49.2 billion out of thin air when the window says you can give only $450 million. You can see the wide margin. The apex bank violated its own Act. This is part of the major reason the economy is in a mess. The wider implication is that lending to the real sector is now extremely difficult,” Emmanuel said.
He added that when there is so much paper money that is not backed by assets, it inadvertently spikes prices and inflation, and suffocates lending to the small and medium enterprises.
“The lending rate of 18.5 per cent is as a result of this kind of over-bloated cash into the economy not being tied to specific assets. The banks will now have to put their own mark-up and will lend around 27 and 28 per cent,” he said.
The CBN’s guidelines limit the amount available to the government under its Ways and Means Faculty of 5 per cent of last year’s revenue.
However, according to Fitch Ratings report in January 2021, “the Federal Government’s borrowing from the CBN repeatedly recorded around 80 per cent of FG 2019 revenues in 2020.”
Besides the CBN Act, the Fiscal Responsibility Act of 2007 provides a threshold and the guidelines for national and sub-national borrowing.
Section 41 (1) (a) and (b) of the FRA stipulates that borrowing shall only be for capital expenditure and human development, be on concessional terms with low interest rates, and be for a reasonably long amortization period.
The FRA also requires legislative approval for borrowing, as well as stipulates that the government should ensure that the level of public debt as a proportion of national income is held at a sustainable level.
CONTROVERSIAL ANCHOR BORROWERS PROGRAMME
The lion’s share of a N1 trillion ($2.1billion) loan extended to rice farmers, under the so-called Anchor Borrowing Programme was not largely repaid, an official who worked as a facilitator in the scheme confirmed.
“The scheme is fraught with lots of repayment challenges as the political class’ undue interference dragged down the success of the policy,” a development economics and consultant to the British Department of International Development, who consulted for the policy, Celestine Okeke, said.
At a point, many of the farmers, especially in the northern region of Nigeria, clearly declared to Emefiele they would not be able to repay the loans because of herdsmen attacks on and destruction of their farms.
President Tinubu had given Monday, September 18, as the deadline for the recovery of the funds.
It was learnt that over N1.1 trillion was disbursed by the CBN to the beneficiaries of the ABP since its inception, but only a little above N546 billion was repaid.
With the directive by President Tinubu, it is expected that over N577 billion would be recovered from defaulting farmers and officials who diverted the money.
CONTRADICTORY BANKING REGULATIONS
Emefiele also came under fire for subjecting banks to contradictory regulations.
For instance, lenders must hold 32 per cent of deposits as reserves — far more than their counterparts in South Africa and Kenya, as the regulator battles to contain inflation — banks were being forced to extend 65 per cent of their deposits as loans to stimulate credit.
Emefiele also left the interest rate unchanged, well below the annual inflation rate for too long, critics contend.
The CBN was unable to rein in consumer prices until they skyrocketed to an 18-year high of 22.22 per cent in April.
“When we cut things down to the basic level, the Central Bank has been funding the government for the last couple of years to the point that without that Central Bank financing the government would not have been able to meet its liabilities,” Famoroti said.
But Emefiele’s reputation would go beyond his monetary policies. As Nigeria’s economy hit new lows in the past six years, it became difficult to separate Emefiele from politics as he became more prominent.
When thousands of youth took to the streets to protest police brutality in October 2020, the Central Bank ordered the freezing of the bank accounts of select protest leaders without a court order.
HIS PRESIDENTIAL AMBITION
But Emefiele’s ambition would lead to a squashed, unprecedented attempt for the presidency in May 2022 in contravention of the country’s constitution, which states that a Central Bank governor, to protect the independence of the Central Bank, cannot participate in partisan politics.
“I think that the real disaster of Emefiele was not necessarily in monetary policy, but in the destruction of the independence of the central bank,” said SBM Intelligence’s Nwanze.
“In the foreseeable future, the office will be a political tool and that really is Emefiele’s legacy.”
In May 2022, former President Muhammadu Buhari officially wrote Emefiele, and other political appointees seeking to contest the 2023 general elections to resign.
Buhari officially communicated to the affected officers through a circular issued by the then Secretary to the Government of the Federation, Boss Mustapha.
“Mr President has observed the intention by some members of the Federal Executive Council, heads of extra-ministerial departments, agencies, parastatals and other political office holders to contest the upcoming presidential, gubernatorial, national and state assemblies` elections,’’ the circular read in parts.
Buhari had at a Federal Executive Council meeting directed his appointees who have indicated interest in vying for elective positions to resign.
However, to clarify confusion in certain quarters regarding the fate of the appointees who were not cabinet members, Mustapha said Buhari had further directed that heads of extra-ministerial departments, agencies and parastatals of government, among others, to resign.
“Consequently, Mr President has directed that the affected office holders aspiring to run for various offices in the 2023 General Elections, should tender their resignation on or before Monday, May 16.
“For the avoidance of doubt, this directive affects all ministers, heads and members of extra-ministerial departments, agencies and parastatals of government, ambassadors as well as other political appointees who desire to contest for elective offices,’’ SGF said.
According to him, for smooth running of the machinery of government and foreign missions, the affected ministers were to hand over to ministers of state where they exist or to the permanent secretaries, where there is no minister of state.
“Ambassadors shall hand over to their Deputy Heads of Mission or the most senior foreign officer in line with established practices.
“Similarly, heads of extra-ministerial departments, agencies and parastatals are to hand over to the most senior directors/officers as may be peculiar to the organisation, in line with the service wide circular No. SGF.50/S.II/C.2/268 of December 4, 2017,’’ he said.
“Analysts were, however, worried about some of his policies that gave undue attention to development finance and excessive regulation of banks at the expense of price stability”
CURRENCY REDESIGN
Emefiele’s biggest undoing turned out to be a widely criticized currency redesign.
In February 2023, Emefiele changed the design of the higher denominations in the build-up to the general elections, invalidating the old currency within a period of six weeks. The official reasons were to bring excess cash back into the banking system and institute a cashless system in line with the introduction of the ill-fated eNaira, its digital currency, in 2021.
“The argument was not really clear. The complaint was that too much was outside the banking system. But why should we be so worried that we have cash outside the banking system when cash in circulation against the gross domestic product appears to be the lowest when compared with other countries that have made so much progress with cashless policies?” Erumebor asked.
With elections around the corner, the currency redesign was deemed political.
Government officials said the move would void stockpiles of money believed to be in the custody of politicians to be used to sway voters.
The plan backfired and led to a naira black market. The policy was later suspended, but not before it had spurred crises within the banking system.
According to an SBM report, the cashless policy had a widespread impact as people and businesses could not access cash coupled with several internet downtimes.
Prices of goods and services shot up in urban centres between December 2022, when the policy kicked in, and the time of national elections in March 2023. The consequences were especially severe in rural areas, where people without access to banks could not buy basic items.
NEW CBN LEADERSHIP WILL BOOST NAIRA – TONY ELUMELU
Meanwhile, Nigerian tycoon, Tony Elumelu, has assured that the new leadership at the CBN will help restore confidence in the nation’s currency.
“The reason people are accumulating dollars is not because they need it now, it is because of lack of confidence,” Elumelu said in an interview with Bloomberg TV in New York at the weekend.
“The new Central Bank team is “very capable” and will be able to bring confidence,” he said.
Elumelu, who is the chairman of United Bank for Africa Plc and the biggest shareholder of Transnational Corp. of Nigeria Plc, the nation’s biggest conglomerate, said there’s panic because Nigerians don’t know where the currency will settle.
“The missing link has been poor leadership and I believe that we all know there’s so much private global capital, seeking the right investment destination,” Elumelu said.
EMEFIELE ENTERS INTO PLEA BARGAIN WITH FG
Emefiele was said to have entered into a plea bargain strategy with the Federal Government.
The former CBN boss and his his-co accused, Saadat Yaro, have reportedly opted for a plea bargain to settle with the Federal Government, which led to an indefinite shift in their arraignment in court.
The Federal Government had filed a 20-count charge bordering on alleged breach of procurement laws and contract inflation on the suspects, to the tune of N6.9 billion.
However, the arraignment scheduled for August 4, 2023 by a High Court of the Federal Capital Territory was not stated on the cause list of the court.
Similarly, Emefiele and Yaro were not in court neither was any unusual security presence observed around the court premises.
It was gathered that the arraignment was shifted at the instance of the former CBN Governor to enable all parties to come to an agreement on the plea bargain.
