Emefiele: Mission to save Naira

On assumption of office over three years ago, Godwin Emefiele promised a central bank that will be professional, apolitical and people–focused. This he hoped to achieve by making the Central Bank of Nigeria the ‘model central bank delivering price and financial system stability in order to promote sustainable economic development’.

Today, Nigerians and the financial world have begun to see the manifestation of his vision, which he encapsulated in his 10-point agenda.

Emefiele came into office at a very stormy economic period. At the time, the economy had started showing signs of distress – the falling international price of crude oil, the militancy and vandalism of oil installations in the Niger-Delta region, among other challenges, and failure of successive regimes to diversify the mono-economy.

Thus, nettled by the drain of import bills on nation’s foreign reserves due largely to collapse of global commodity prices, Emefiele during one of the bank’s Monetary Policy Committee meetings in November 2015 sounded the warning that if Nigerians did not control their taste for foreign goods and desist from providing jobs for citizens of other countries, Nigeria might sooner than expected enter into recession. He was prophetic, but nobody took him seriously until the economy reclined into recession.

Emefiele, after serial unofficial devaluation of the Naira, made a bold decision to devalue the local currency on February 18, 2015 to N197 to the dollar, thus closing rDAS/wDAS forex market window, leaving the inter-bank as the only official window, yet the demand pressure continued in spite of the low accretion to the nation’s reserves. He didn’t stop at that. He redesigned and pursued with vigour initiatives to mitigate the collapse of the economy with schemes as the Agricultural Credit Guarantee Scheme (ACGS) Commercial Agriculture Credit Scheme (CACS), the N220billion Micro, Small and Medium Enterprise Development Fund (MSMEDF), Small and Medium Enterprise Credit Guarantee Scheme (SMECGS) and the Anchor Borrowers’ Programme (ABP) to mention but a few, all of which were capped with the suspension of 41 items from the official forex window on June 24, 2015.

Hell was let loose. Speculators and economic predators went on the rampage and did everything to weaken the Naira hoping that the local currency would experience further depreciation. Naira depreciated to as low as N560 to US$1. Nigerians went for Emefiele’s head, holding him responsible for the economic woes. Economic voodooists propounded all sorts of theories, but the unassuming Godwin Emefiele remained unperturbed. He was focused. He, along with his team, dipped into his wits’ bag and came up with some ingenious policies people never gave a chance to work out. He promised Nigerians that the speculators would get their fingers burnt. He was right. In June 2016, the CBN came up with a new framework for foreign exchange by creating the Financial Markets Derivative Quotation (FMDQ), a platform through which exchange rate would be market-driven.

In spite of the proactivity of the CBN in safeguarding the international value of the Naira, the activities of speculators and some noticeable failures in the market mechanism led to further depreciation of the Naira. Determined however not to budge, Emefiele, in the last meeting of the Monetary Policy Committee meeting of 2016, boldly announced to Nigerians that with all measures put in place by the bank, the economy would exit recession in the third quarter of 2017. He was booed and lampooned, but he was right.

Nigerians were seemingly unaware of his move nor what gave him that confidence, when in February 2017 he emerged with a new policy aimed at increasing availability of forex in the market, particularly to ease the difficulties encountered by Nigerians and the retail end-users in obtaining funds for foreign exchange transactions for personal travels, medical needs and school fees all of which fall under invisible category.

He also directed that all retail transactions must be settled at a rate not exceeding 20 per cent above the inter-bank market rate. He ensured that all backlog of matured letters of credit were cleared and settled shortly before the inception of the flexible foreign exchange rate regime. The CBN started providing forex to all commercial banks to meet the needs of both personal travel allowance (PTA) and business travel allowance (BTA) for onward sale to customers.

Shortly after, Godwin Emefiele came up with another master stroke policy. He enunciated two new forex windows for the Small and Medium Enterprises (SMEs) to enable SMEs import eligible finished and semi-finished items and another for investors and exporters which he tagged: Investors & Exporters’ FX Window.

According to Emefiele, the main objective of the windows was to boost liquidity in the forex market and to ensure timely execution and settlement of eligible transactions. These policies have created stability for the Naira and its value enhanced internationally. And indeed, as predicted by Emefiele, Nigeria exited recession in the third quarter of 2017.

When the Managing Director, International Monetary Fund (IMF), Ms Christine Lagarde, visited Nigeria in January 2016, she told Nigerians that no one but Nigerians could help themselves. And during the Annual Spring Meetings of the IMF and the World Bank in 2016, Nigeria opted for self-medication.

The ‘economic physician’ is Godwin Emefiele. Perhaps, as the good book, the Holy Bible says, ‘a prophet is not without honour except in his own country’. Probably that is what the Forbes Magazine saw in the award bestowed on the CBN governor at the sidelines of the just concluded IMF/World Bank annual meetings in Washington D.C, where he was honoured with the ‘2017 Forbes Best of Africa Innovative Banking Award’.

Given the determination with which Emefiele goes about saving the Naira, it is crystal clear that better days are ahead of the Naira, the economy and Nigerians as a whole.

Oyetunji, an economist, sent this piece from Abeokuta.