Emefiele’s many battles leave him weaker and the economy more vulnerable

Embattled governor of the Central Bank of Nigeria, Godwin Emefiele is back at his desk and appears to have been given considerable respite from his traducers, but his many troubles have left him weakened and Nigeria’s economy more vulnerable.

There is a good chance, according to sources, that the so called “Cabal” some of whom have seen their personal fortunes skyrocketed lately, have moved to calm things by persuading Emefiele’s employers to bear with him still further.

“The cabal has moved in, and he has been let off,” one source told BusinessDay last night. “Contrary to some reports that the deputy governors were called in to the DSS, they are all at their desk and none of them was interrogated.”

While the respite is palpable, questions continue to swirl about how the governor’s many troubles have made the beleaguered economy in Africa’s most populous nation even more vulnerable with concerns such as expected damage to investor perception.

Attacks on Emefiele have long been coming, starting with his unorthodox foreign exchange management style which has seen the national currency, the Naira plumet in value from under N200/$1 at the parallel market when he resumed to N745/$1 today.

The parallel market is seen as a true mirror of the value of the Naira. Emefiele handling of the relationship with the countless BDCs has been poopooed especially given that he initially said the apex bank would not supply the BDCs FX. He did. And when the CBN made a flipflop eventually, the Naira value collapsed and the gap between the official and the black-market rates widened further leading to more opposition against the bank’s policy of multiple exchange rates.

It was his brushes with the DSS and the allegations of financing terrorism and other economic crimes linked to national security that seem to have brought matters to a head

There is also Emefiele’s belligerent handling of his relationship with leaders of investor groups like the chambers of commerce and the Nigerian Economic summit group, NESG. He has also been attacked for the apex bank’s capture of the fiscal space through its direct interventions.

Emefiele has also been attacked over the controversial ricer pyramids which have now varnished into thin air. His troubles accentuated when it was revealed last year that Emefiele had taken membership of the ruling APC and that he sought to enter the presidential race while still holding office, a reputation which he occupies by himself.

The worrying ways and means lending by the central bank have also been a major reason why the public is asking questions about Emefiele’s handling of his job. In the last one week, the Financial Times and Bloomberg have both featured stories questioning the legality of the borrowing which today stands at $53bn.

President Buhari seeks to turn the borrowing into long term bonds, but the parliament is dithering. In an article titled “Nigeria’s $53bn wayward means”, the Financial Times says, “the problem is that the kicker in Section 38 of the Central Bank Act states in plain language that “no repayment shall take the form of a promissory note or such other promise to pay at a future date or securitization by way of issuance of treasury bills, bonds, certificates or other forms of security which is required to be underwritten by the Bank”.

That would seem (at least legally if not in practice) to preclude turning the now $53bn pile of debts into a long- term, low-cost (for Nigeria) bond.

However, it was his brushes with the DSS and the allegations of financing terrorism and other economic crimes linked to national security that seem to have brought matters to a head.

Read also: Emefiele’s many battles leave him weaker and the economy more vulnerable

On December 27, 2022, it emerged that the DSS had been in court via an ex parte application marked FHC/ABJ/CS/2255/2022 and in which the secret police sought an order to arrest the CBN governor over alleged acts of financing terrorism and economic crimes of national security.

While the DSS may have backed off, neither the government nor the secret police has disowned that suit and the weighty allegations contained in it. Therefore, the damage done to confidence in the Nigerian economy might be a long term one.

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A professor of economics at the Lagos Business School, Bongo Adi points to the damage that Emefiele and the economy has suffered, saying he had become extremely wary about the conduct of the CBN governor in recent months and that it would take some time before confidence returns to the market and the CBN.
Adi spoke about the irrationality of the market and noted that speculation essentially drives the market.

He wondered what else could put the economy on information overdrive than a report that the CBN governor had been accused in court by the secret police of misadventure.
For the economics professor, it does not matter whether the information is speculative or true.

He explained: “when such information is in the public, people begin to create all manner of scenarios and imagine all possibilities, including corruption.

When you have such a situation, it will put the rumour mill on overdrive, and it will certainly affect everything. There will be a run on the currency.”