The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele’s recent re-appointment for a second term in office by President Muhammadu Buhari and subsequent confirmation by the Senate is a significant development, which calls for comments in public interest.
By this appointment for a second term, Emefiele has become the only governor of the Central Bank of Nigeria to have secured a second term since the advent of democratic rule in 1999. Overall, most of the governors of the CBN served for five years or less except Mr. Paul Ogwuma who served for six years between 1993 and 1999; Dr. Clement Isong who served for eight years, between 1967 and 1975 and finally Mr. Abdulkadir Ahmed who served for 11 years between 1982 and 1993 under five different Heads of State from Shehu Shagari to Ernest Shonekan. With this second term appointment, Emefiele will only have Mr. Abdulkadir Ahmed surpassing him in duration, as the governor of the Central Bank of Nigeria.
While majority of economic and financial experts as well as political leaders have applauded the re-appointment of Emefiele, a few discordant voices have protested against the re-appointment citing a recent controversial cover up of an alleged N500 million loss by the apex bank. They even cited a certain video recording, which tends to lend credence to such allegations, which the bank has refuted, in any case. Given that the Senate has confirmed the re-appointment, it is believed that such allegations have been thoroughly investigated and dismissed, hence the confirmation it gave to the re-appointment. Political leaders and some economic and financial experts have commended the President for re-appointing the former managing director of a commercial bank to continue as the CBN governor, in the spirit of building national cohesion.
Away from the nomination, controversy and confirmation issues, the tenure of Emefiele can be aptly described as remarkable. First appointed by the last administration of President Goodluck Ebele Jonathan, the natural thing one would have expected is a measure of hostility towards his office by the Buhari administration given its general posture towards the last administration. In fact, the narrative of, “Can any good thing come out of Nazareth” has been copiously manifested by the current administration that Emefiele should be commended for successfully meandering through the corridors of two successive administrations, in the conduct of monetary policy and come out unscathed. He served these two administrations meritoriously as both of his past and present bosses appreciated his service. Also of note is the fact that Buhari has also made the point, by this re-appointment, that excellence should be supported irrespective of where it can be found.
Emefiele’s first term at the CBN witnessed a lot of innovations in the conduct of monetary policy. First is in the primary purpose for which central banks all over the world are established – the maintenance of price stability. This has been highly commended by many by his pursuit of a restrictive monetary policy stance. For instance, inflation has successively come down from about 18.72%, which it rose to in January 2017 to about 11% at present. The CBN under his watch, through the Monetary Policy Committee over the period kept the monetary policy rate at 14% since July 2016 except in March 2019 when it slightly reduced it by 50 basis points.
Besides, the maintenance of credit squeeze, though challenged by a number of economic opinion leaders as well as the former Minister of Finance, was the secret behind this taming of inflation over the period. This insistence on what is considered right for the sustenance of macroeconomic stability is one of the strong points of the CBN under Emefiele. This tight monetary policy stance also dried up cheap funds in pursuit of foreign exchange and thus helped to stabilise the foreign exchange market, in support of the deregulation policy put in place simultaneously. Another major achievement of the CBN under Emefiele is the ban on official foreign exchange allocation for 41 imported items as far back as 2015. This singular policy helped to promote an inward looking policy by encouraging local production. It also helped to strengthen foreign exchange stability, which saw massive accretion in Nigeria’s foreign exchange reserves from about $23 billion in 2015 to about $45 billion at present. Besides, the country’s import bill fell from $665 million to about $160 million.
It is also noteworthy that the governor overlapped into fiscal interventions, focusing on development finance as one of the planks of his stewardship at the CBN during his first term. Programmes such as the National Collateral Registry, the Anchor Borrowers and the Nigeria Incentive-Based Risk Sharing system Agricultural Lending, NIRSAL, were floated under his watch. These helped to provide credit to small scale businesses and the agricultural sector, in support of the government policy to promote local production and cut down on foreign importation.
Overall, the re-appointment of Emefiele will help to bring stability and certainty in the macro-economy quite unlike the advent of Buhari’s first term when uncertainty in the direction of economic policy scared away foreign investors and kept the economy in a limbo, which culminated in the economic recession that ensued subsequently. The second term of this administration stands to gain immensely from this posture of certainty in the conduct of monetary policy in the country.
In the main, now that Emefiele has secured a second term, there is the need to remind him that it is not yet “Uhuru”. A lot of work still lies ahead. He has to continue to support government on the fiscal side given the growing debt service payments to revenue ratio the country is currently facing. A more holistic approach needs to be adopted in the conduct of monetary policy that would also lead to massive job creation – to address the rising rate of unemployment in the system. Credit to the real sector is still insufficient and interest rates are still abnormally high. These are critical issues that the CBN governor should pay attention to at this time. In any case, the CBN should not lose sight of its core function of price stability and should never think of unnecessarily printing money to satisfy entrenched interests. The CBN chief executive should also allow those charged with fiscal policies to do their job this time: as we have repeatedly noted, price stability is the core function of CBN. He should also talk less this time as the CBN has never been and should not be a public relations arm of the Economic and Political Department in the presidency. CBN is a conservative and independent institution. And that independence should not be compromised at any time. We wish Emefiele safe journey as he begins his second term in office.
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