Emefiele and the naira in troublous times

AS Nigeria’s Central Bank Governor, Godwin  Emefiele, navigates the controversies that have plagued the bank’s ongoing project of redesigning an increasingly challenged currency, there will definitely be bruises and thorns. The 62-year-old Agbor, Delta State-born banker appointed by the then President Goodluck Jonathan to the top job on June 4, 2014, is certainly no stranger to battles and controversy. The ex CEO/GMD of Zenith Bank Plc and University of Nigeria Nsukka (UNN), Stanford University and Harvard University-trained Wharton School of Business graduate has sought to stamp his authority on Nigeria’s money matters from day one, and is the first CBN Governor to be reappointed for a second term of office even if the naira has defied  the measures rolled out  for its good health.

Emefiele is justly credited with a string of interventionist measures, including flexible exchange rates (in interbank market) and promoting import substitution through development financing. Thanks to Emefiele, Nigerians can now apply for forex online. The 100 for 100 PPP programme provides financial support to 100 designated private sector enterprises every 100 days, and businesses can apply for up to N5 billion in funding. Indeed, since October 25 last year, the digital currency,  eNaira, has been touted as a significant step forward in the evolution of money, and Emefiele has sought to make it available to Nigerians. He has expressed a desire to sanction those falsely obtaining basic travel allowance for onward diversion to the black market, moved to ensure strict monetary control of the forex market, and warned against paying diaspora remittances in naira.

Intent on improving liquidity in the forex market and reducing the disparity between the black market and official I&E window, the bank under Emefiele announced new procedures for receiving  diaspora remittances. A variety of measures have also been rolled out to stimulate the economy and tackle unemployment. Again, Emefiele and his monetary policy committee have consistently raised the benchmark interest rate in a hawkish move targeted at curbing inflation while still cautiously guaranteeing economic growth. Working with the Bankers’ Committee, Emefiele introduced  Bank Neutral cash hubs where customers can make cash deposits and receive value.

Unfortunately, the CBN under him, like it was under his immediate past predecessor, has not confined itself to its job description. After Chukwuma Charles Soludo, the CBN seems to have lost its innocence under Governors who simply could not keep quiet and avoid the allure of politics. Following Soludo’s exit, Nigerians saw a CBN Governor purveying partisan rhetoric and speaking of a desire for kingship even while supposedly focused on monetary policy, and  a CBN Governor going to court to assert his right to participate in a presidential primary. Today, the bank is trusted by no one, except perhaps the government in power; it is severely panned by sitting governors, and seems to be incapable of articulating a position beyond the current political establishment. It has been either decidedly anti-government or overly pro-government.

The nation has had to contend with the ugly spectre of a CBN Governor making questionable donations to institutions, taking on the presidency and, in the converse, serving as its lackey. Per Edo Governor, Godwin Obaseki and many others, Emefiele’s CBN has been printing money for the Buhari government, enabling it to spend money that the country has not earned and rendering the naira increasingly worthless. This is another road to Zimbabwe and Venezuela.

In May this year, Emefiele came under fire when a group procured the N100 million presidential expression of interest and nomination forms of the ruling All Progressives Congress (APC) on his behalf. Although the CBN Governor rebuffed the bid, saying he would use “hard-earned savings from over 35 years of banking leadership to buy” his own nomination form  if he intended to heed the call to run, he took a 180-degree turn by proceeding to sue the Independent National Electoral Commission (INEC) and the Attorney-General of the Federation and Minister of Justice, asking the Federal High Court in Abuja to declare that he had a right to participate  in the APC primary election. And when probed over his unorthodox move, he uttered the most infamous statement ever made by a CBN Governor in Nigerian history, saying that Nigerians worrying about his reported ambition could go and die, and that he was having fun.

And justifying his refusal to sack Emefiele over his political ambition, President Muhammadu Buhari, in an interview with Bloomberg, said Emefiele was being hounded because he was following “a model outside of the economic orthodoxy.” And so when on October 26 Emefiele informed Nigerians of the CBN’s plan to redesign the N1,000, N500 and N200 notes, the spectre of politics hovered over him, and Edo State governor, Godwin Obaseki, has in fact labelled the move as a political one.  Ostensibly, Emefiele wants to battle inflation and hostage and ransom taking, and restore the naira’s prestige. The bank wants to suck back the N2.73 trillion currently said to be outside the vaults of banks, estimated at 80 percent of the total money in circulation, into the banking system. This will eliminate counterfeit bank notes as those holding them won’t be able to save them. The move will also reduce the quantum of illegal proceeds of crime contributing to inflation. Again, more and more people and businesses will resort to electronic transfers to eliminate the risk of receiving counterfeit money. All of this sounds good, but Emefiele and his CBN do not have the buy-in of such a critical office as that of the Minister of Finance, and seem to think that the mere courtesy of keeping the minister in the know would have eroded the CBN’s independence. Trouble looms with fiscal and monetary policy authorities working at cross-purposes, and there is the question whether the monetary policy called currency redesigning does not actually have fiscal implications.

Beyond this, the fact is widely acknowledged that Money Deposit Banks have, under Emefiele, denied customers forex remitted to them from abroad. Besides, the question is apt whether cashless banking, the ultimate objective of the CBN,  can be achieved with the poor power infrastructure in place in the country.

Besides, it is well known that a significant population of Nigerians have no bank accounts, and the CBN under Emefiele has not succeeded in reversing the situation. In June, the World Bank listed Nigeria among the seven countries that contribute to half of the global population of unbanked people put at 1.7 billion. It revealed that about 64 million Nigerians have no account with a financial institution or mobile money platform. If this staggering number of Nigerians have no bank accounts, and at least 42 million adult Nigerians live in rural areas lacking basic banking services, it follows that this must impact the quantity of funds passing through the banking system. The question, then, is what the CBN under Emefiele has done to encourage more Nigerians to open bank accounts. On this score, the auguries are grim.

On a daily basis, the media space is suffused with reports of exploitation by MDBs and the emptying of depositors’ funds by hackers with the banks more often than not being unwilling to help. Nigerians, including celebrities, have been known to stage dramatic episodes in banking halls over suspicious transactions on their accounts, and such disincentives to banking and saving have remained largely unaddressed. Besides, most of the DMBs seem to have ceded their core functions to POS operators as account holders confront non-functional ATMs without respite.

Nigeria’s poor productive/manufacturing base means that the naira will continue to suffer. And with the naira’s fate, it is impossible to have a positive view of Emefiele’s stewardship.