In a not-too-surprising turn of events, President Bola Tinubu suspended Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), with immediate effect.
Most analysts had expected this to be one of the first decisions taken by the president immediately after he assumed office.
Mr. Emefiele resumed office as the Central Bank Governor on June 4, 2014, and was given a second 5-year term by President Buhari starting in June 2019. His current tenure was to expire in 2024.
Official Reason for his suspension
The suspension was announced through a statement issued by Willie Bassey, the Director of Information for the Secretary to the Government of the Federation.
- According to the statement, the action was taken in light of “ongoing investigations into the CBN Governor’s office and the planned reforms in Nigeria’s financial sector.”
- Tinubu had also mentioned in his inauguration speech that the central bank needed a “house cleaning” a clear signal that there was intention to remove the central bank governor.
Controversial Policies under Emefiele and why he may have been removed?
Whilst the official narrative of the government was that his removal was due to ongoing investigations in the office of the central bank, there were no further details explaining what the investigations were about.
- However, sources suggest the CBN Governor had been singled out for investigations over several policies that were implemented during his time as CBN Governor.
- Some of Emefiele’s critics point to his personal beliefs against free markets as the reasons for some of his heterodox and unpopular economic policies.
- They claim this posture may have been the reason why he so often aligned frequently with the Buhari administration who as president also believed in keeping a fixed exchange rate and giving our cash handouts to the poor.
Under Emefiele’s 9 year tenure, the central bank experienced several controversial policies that got his critics riled for years. These are some of the notable ones.
Naira Redesign – One of the major issues contributing to Emefiele’s suspension is believed to be his handling of the naira redesign policy.
- This policy aimed to enhance the security features of Nigeria’s currency and tackle the menace of counterfeiting.
- However, it was marred by allegations of mismanagement and poor implementation, drawing significant criticism from both experts and the public.
- The controversy also reached a boiling point when APC Governors led by Nasir El Rufai took the matter to the supreme court, and eventually won a judgment that forced the central bank to extend the naira redesign to December 2023.
- He is also thought to have stepped on many toes of surrogates of the then-presidential aspirant Bola Tinubu.
Attempted Presidential Bid – Emefiele’s failed attempt to launch a presidential bid has added fuel to the fire.
- Speculations surrounding his political ambitions raised concerns about his dedication to his role as CBN Governor.
- Critics argue that his focus on personal aspirations may have hindered his ability to effectively carry out his duties, eroding confidence in his leadership.
- Emefiele even went as far as going to court to get an order confirming his eligibility to run for office. Though he eventually did not run for office, the damage had already been done.
Handling of Forex Policies – If the naira redesign policy contributed to a downfall of his approval ratings in the eye of ordinary Nigerians, his controversial handling of Nigeria’s exchange rate policy got him low marks amongst the financial and business class.
- Under Emefiele, Nigeria also experienced the widest exchange rate disparity between the naira and dollar falling to as high as N305/$1.
- Despite the initial success of the Investor and Exporter window, Covid-19 forced Emefiele to abandon the working of that market, disallowing the markets to determine the price as he preferred an exchange rate that differed from reality.
- This further drove out foreign investors meaning Nigeria recorded one of the lowest capital importation figures under his tenure.
- Capital controls meant businesses could not access dollars to fund transactions and foreign companies struggled to repatriate their forex balances. There are also accusations that he reneged on forex swap deals damaging investor confidence in the country.
- He also rationed forex for personal and business travel allowances and limited spending on naira and dollar cards approved. These were all in a bit to control forex demand, which many thoughts were a wrong move.
The current president also mentioned a “house cleaning” at the central bank which points to some of the so-called “heterodox” policies implemented under Emefiele.
Ban on 41 Items– Another controversial policy aimed at controlling forex demand was the ban on 41 items, which prohibited access to foreign exchange for the importation of certain goods.
- This policy aimed to promote local production and protect domestic industries.
- However, it drew criticism from businesses and consumers alike, as it led to shortages, price hikes, and disruptions in the supply chain for essential goods.
- Many argued that the ban disproportionately affected small and medium-sized enterprises (SMEs) and hindered economic growth in the long run.
Ban of BDC – Another notable policy was the ban on Bureau de Change operators (BDCs), which are licensed entities that facilitate the exchange of foreign currency.
- The CBN under Emefiele’s leadership justified this move as an attempt to curb illicit financial flows and stabilize the exchange rate.
- However, the ban created a vacuum in the foreign exchange market, leading to an increase in the activities of black market operators and a scarcity of foreign currency, impacting businesses, travelers, and investors who relied on the services of BDCs.
- FX flows to BDC’s went from $13 billion in 2019 to zero in 2022.
- Furthermore, during Emefiele’s tenure, there were instances where the CBN froze the bank accounts of traders and dealers suspected of engaging in illegal activities or violating foreign exchange regulations.
- While the intention was to enforce compliance and combat financial crimes, these freezes raised concerns about due process, transparency, and the potential abuse of power.
- Critics argued that such actions lacked proper investigation, leading to disruptions in legitimate business operations and casting a shadow of uncertainty over the business environment.
Development Finance – During Emefiele’s tenure as the Governor of the Central Bank of Nigeria (CBN), the country experienced significant expansions in its money supply.
- While some of these measures were intended to stimulate the economy in response to fiscal pressures, critics argue that they were marked by poor implementation and nepotism.
- The money supply under Emefiele’s leadership surged to over N55 trillion, exacerbating Nigeria’s core inflation, which reached a record high of 20%.
- Although intervention funds were made available to various sectors, there was little to no accountability regarding their performance.
- Whilst the intervention funds helped avoid a double-dip recession, it heated up the economy as prices of goods and services rose.
CRR Debits – The Nigerian banking sector also bore the impact of Emefiele’s policies, particularly his monetary policy tightening measures that necessitated debiting banks of customer deposits, thereby denying them the opportunity to earn interest on those deposits.
- According to estimates from Nairametrics, the deposits held by the central bank as part of the Cash Reserve Ratio (CRR) amounted to approximately N13 trillion.
- Some bankers have accused the central bank under Emefiele’s leadership of indiscriminate CRR debits, alleging that the standard formulas for debits were disregarded.
- The CRR empowers the central bank to sequester up to 27.5% of customer deposits held by commercial banks, effectively restricting the banks from accessing the money. The CRR debits are derived via a complex calculation involving a balance between a minimum loan-to-deposit ratio banks are expected to achieve and what they have in their balance sheet as cash deposits.
- In addition to CRR debits, bankers were very circumspect about uttering public criticisms of the central bank fearing retributions.
Not releasing CBN’s Audited Accounts – During Emefiele’s tenure, the Central Bank of Nigeria (CBN) deviated from established precedents by failing to release its audited accounts since 2015.
- Critics argue that this lack of transparency in releasing audited accounts is likely attributed to concerns about the deteriorating balance sheet of the apex bank.
- The prolonged implementation of intervention funds, surpassing the provisions of Ways and Means, and the significant increase in the money supply may have negatively impacted the CBN’s balance sheet.
- Revealing these issues through the release of audited accounts could potentially undermine foreign investor confidence in the country.
- However, some critics contend that if Emefiele had chosen to release the audited accounts, the exposure of the problems could have prompted the government to take early action.
- By shedding light on the situation, the revelations might have prompted necessary measures to address the existing challenges sooner rather than later.
Finally,
The investigation into Emefiele’s office has shed light on a range of policy mishandlings and controversies.
These include mismanagement of foreign exchange reserves, ineffective monetary policies, and inadequate supervision of the banking sector. These revelations have further heightened calls for transparency and accountability within the country’s financial system.
To ensure continuity during this period, President Tinubu has directed Emefiele to immediately hand over the affairs of his office to the Deputy Governor (Operations Directorate), who will serve as the acting CBN Governor until the conclusion of the investigation and the subsequent reforms.
To supporters of President Tinubu’s decision to suspend the CBN Governor, it reflects his commitment to addressing the concerns surrounding the financial sector and implementing necessary reforms. The aim is to restore stability and regain public trust in Nigeria’s financial institutions.
As the investigation progresses, the nation eagerly awaits the outcome and the subsequent reforms that will shape the future of Nigeria’s financial sector. This suspension marks a critical juncture in the nation’s economic landscape, emphasizing the need for robust governance and responsible leadership in the central bank.
Nairametrics will continue to closely monitor the developments in this ongoing story and provide timely updates on the investigation and the proposed reforms.
DSS should compel NGX top management to release Emefiele’s records of capital market manipulations since his days at Zenith Bank. He is one of the largest manipulators and the records are there within the NGX Regulation. Another person is Femi Otedola. They should be behind bars. The low confidence afflicting the market today was the result of their actions. Management had always protected them at the detriment of small investors and the overall evonomy
Buhari left him cos he understood nothing. Tinubu suspending him is good, but I don’t see any positive outcome. Once the moise dies down they will let him go, Tinubu will not tackle corruption with his heart, he is just a typical politician, they favour lobbying.
Gullible Nigerians…smh
You don’t arrest or prosecute a central bank governor (who btw take decisions with other members of the CBN’s Board of Governors) because you disagree with his economic philosophy, policies or the effects thereof. That only happens in a POLICE STATE or BANANA REPUBLIC.