Former CBN Deputy Governor, Moghalu Blames Emefiele For Nigeria’s Forex Crisis

…Says CBN Under Emefiele Political, No Longer Independent

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A former Deputy Governor of the Central Bank of Nigeria, Prof Kingsley Moghalu has said that the apex bank’s governor, Mr Godwin Emefiele, should be blamed for the crisis rocking the foreign exchange market in Nigeria.

Moghalu stated this on Thursday in an article titled, “The Nigerian economy: Between the federal ministry of deficit and debt, and the central bank of politics.”

He said that under the leadership of Emefiele, the CBN has lost its independence as the apex bank sees itself as a quasi-fiscal agent, using its ability to print money for the government of the day.

In the last few years, the nation has relied heavily on the CBN’s deficit financing, with the debt peaking at N19trn as of June 2022.

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The CBN had been struggling to maintain the value of the naira in the foreign exchange market without much success.

The naira depreciated in the parallel market by N150 as the exchange rate rose to N710 per dollar on July 30th, 2022 from N560 per dollar on the 31st of December 2021.

As a result of this, the gap between the official exchange rate and the parallel market exchange rate widened to N281 or 65.5 per cent per dollar at the end of July from N189.95 or 45 per cent at the end of June. 

The CBN had made numerous attempts to defend the Naira, but the currency has massively declined in the second quarter of 2022.

To defend the Naira, the Central Bank had introduced a slew of regulations, from barring the sale of dollars to BDCs to the RT200 scheme, which is designed to provide an N65 rebate on export revenues.

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Nonetheless, the CBN intervention comes at a cost in terms of Nigerian foreign reserves, which have not been growing at the expected rate despite high oil prices.

On a year-to-date basis, the reserve has lost $1.37bn from $40.52bn in December 2021 to $39.16bn in June 2022.

In the month of July alone, Nigeria’s foreign reserves depreciated by $80.25m despite oil boom and the Central Bank’s aggressive policy to attract dollar into the economy.

The drop in forex supply contributed to the downward trend in the value of the local currency at the official market, amid the CBN’s interventions.

Emefiele had in recent times been attacked about some of his policies and utterances which experts said has a way if impacted the financial market negatively.

For instance, he had put the blame of the declining value of the currency on different stakeholders.

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In 2018, Emefiele said that the huge appetite of Nigerians for importation was responsible for the declining value of the Naira. He thereafter placed a ban on Forex accessibility for importation of 41 items.

In July 2021, he also came out hard at Bureau De Change (BDC) operators accusing them that their illegal forex trading was having a negative impact on the Naira.

In September 2021, Emefiele blamed Aboki FX for the naira depreciation the country had suffered then and threatened to arrest the brain behind the forex intelligence firm. Despite this threat, the naira still continued to perform woefully against the dollar in the foreign exchange market.

Early this year, the CBN governor again blamed the Naira depreciation on activities of those involved in money laundering, financing of terrorism as well as politicians.

Early this week, he shifted the blame to the Nigerian National Petroleum Company Ltd, claiming that the National Oil Company failed to remit foreign exchange into the coffers of government.

However, investigations by THE WHISTLER showed that contrary to his claims, a whopping sum of $2.7bn was remitted into the NNPC account with the CBN within the first six months of this year.

But Moghalu in his piece stated that the inability of the CBN to play its role as an independent manager of the economy has made it possible for those with “vested interest” and incompetent political leaders to be “killing” the economy.

He said, “It’s not often I agree with Nigeria’s Minister of Finance Zainab Ahmed. Not because of anything but because I fundamentally disagree with what I consider her fiscal mismanagement of Nigeria. But at least she recently gave an honest assessment of how broke-assed Nigeria is now.

“As for my dear beloved Central Bank of Nigeria and its Governor, the less said the better. For that, I believe, is the ultimate calamity. Why? Normally, the Finance Minister directly answers to the President.

“Where a federal government is not reform oriented as in the President Obasanjo era, the Minister can be subjected to negative political pressure if he/she is not a strong, respected and accomplished personality like Ngozi Okonjo-Iweala, of whom politicians were wary because she wasn’t exactly into one-chance bus travel masquerading as ‘fiscal management’.

“Moreover, President Obasanjo protected her and her reforms. President Goodluck Jonathan strongly backed her, even if ‘parallel other activities that were kept beyond her remit, eg in the petroleum sector, went on.

“But where a central bank is truly independent, as the CBN was in our time, it can serve as a check, in the national interest, on the worst excesses of profligate politicians that often dot Nigeria’s landscape of high-level public appointments.”

He added, “In the current scenario, the leadership of the Bank evidently does not believe in the concept of central bank independence in its operations. Rather, the Bank asks ‘how high?’ once the Presidency says ‘jump’ . It sees itself as a quasi-fiscal agent, using its ability to print money, for the government of the day.

“This is what the rent-seekers and parasites that benefit from this situation justify as ‘unorthodox’ central banking (as in, of course, central banking in Zimbabwe and Venezuela).

“Well, what’s the result today? Between a mismanaged fiscal space and a deeply compromised central bank that has sold its soul to politicians and private sector profiteers, the wheels have come off the Nigerian economy.”

Moghalu stated further that its an irony that the CBN is printing money for the government through “illegal ways and means lending’ only to start pretending to be fighting inflation by raising Monetary Policy Rate.

He stated, “If the CBN is busy printing money for the government through illegal Ways and Means lending, and then pretends to be fighting inflation by belated raises of the Monetary Policy Rate and what one commentator aptly termed a ‘dubious’ cash reserve ratio policy on commercial banks, how can we fight inflation successfully?

“Please don’t tell me that ‘inflation is a global phenomenon’ just as some will mischievously or ignorantly refer to the levels of debt to GDP ratios  of advanced, productive economies.

“There is a difference between real global challenges and us fundamentally killing our own economy with our own hands in the service of corruption, vested interests, and incompetent political leaders.

“The combined fiscal, monetary and forex calamity superintended by the Federal Ministry of Finance, Budget and Planning, on the one hand, and the leadership of the CBN of the past 7 years, on the other, is a tragedy for Nigeria that could have been avoided. The effects on the lives of the average Nigerian are truly sad to see.

“This is a cautionary tale for the next President of Nigeria. If we want to renew and revive Nigeria’s economy, the right politics will be to do the right thing. Let institutions that are statutorily independent be so. Let competence govern critical aspects of our national life. After all, when the positive results come eventually, the political leader will take the credit too.”

The former CBN Deputy Governor in his article further argued that the problem is not an absence of competence in economic management in Nigeria but an absence of competent political leadership.

“The CBN is the greatest repository of fine, competent technocrats in the Nigerian public sector today. Other agencies of government have in the past relied heavily on the Bank for the secondment of competent personnel.

“The same caliber of economists and technocrats are still there. The politics at the top has tied their hands,” he concluded.

ENDS

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