The most flagrant characterisation of President Goodluck Jonathan until now was that he was weak but he has fired nine ministers and his powerful chief of staff in two weeks and yesterday, the president did the incredible, by sacking the governor of the Central Bank of Nigeria.
“The governor of the Central Bank does not work for the president, just as the chief justice does not work for the president, even if it is the president that has to select them and send their nomination to the Senate”, said a surprised Bismarck Rewane, a leading economist, in his first reaction to the removal of Governor Sanusi Lamido Sanusi, who recently made strong claims of non remittance of huge oil earnings against the Nigerian National Petroleum Corporation (NNPC).
Rewane’s reaction mirrored the sentiments around the world yesterday, with global CEOs appearing on international business television programmes, saying they could not contemplate such an action in their own countries.
According to Rewane who did not always agree with the governor, “the president must respect the checks and balances of our constitution and help build institutions instead of working to weaken them. Everywhere in the world, there is sanctity around the office of the Governor of the Central Bank.”
The president’s controversial action left foreign investors and other international business partners stunned with many wondering if they can truly bank on Nigeria.
According to the Financial Times Danbisa Moyo, a former Goldman Sachs economist, who sits on the board of several multinationals, she had been contacted by a number of US and European funds, saying they would be seeking to reduce their exposure to Nigeria, as a result of Sanusi’s suspension.
“Given the situation already, investors exiting emerging markets, the timing of this decision is particularly bad”, she said.
“A turmoil in Nigeria is likely to focus further attention in frontier markets”.
Razia Khan, analysts with Standard Chartered Bank, London said, “The nature of the suspension will come as a significant shock to foreign portfolio investors, whose willingness to invest in Nigeria was very much influenced by the transparency and anti-inflation credibility associated with Sanusi’s policies. This will be a significant negative for the Nigerian naira and Nigerian financial markets.”
The BBC’s Will Rose in Lagos says Sanusi’s allegations threaten to expose high level fraud in Nigeria’s notorious opaque oil sector. “Nigeria is one of the world’s biggest oil producers. To say that Lamido Sanusi has become a fly in the ointment for President Goodluck Jonathan would be something of an understatement.
“The reality is anyone who challenges the oil sector is striking at the heart of the vested interests that control the Nigerian state and one should be ready for the consequences”, Sanusi told BBC’s Focus on Africa programme.
His allegations threaten to expose high-level fraud in Nigeria’s notoriously opaque and corrupt oil sector. He says over a 19-month period, more than $1 billion was unaccounted for every month.
The controversy comes at a time when elections loom and some of the president’s senior officials are being asked some very awkward questions.
While Sanusi’s critics question whether he is using his job to harm President Jonathan’s chances of re-election, many Nigerians will think the president has chosen to suspend the whistleblower, rather than focus on stopping fraud”.
Samir Gadio, starategist, standard bank, London said, “This is a disruptive move which indicates that the CBN has de facto lost much of its independence.
“Clearly it is driven by political motives, given Sanusi’s vocal criticism of oil revenue leakages and the opaque fiscal system in Nigeria.
“If anything, this development will compound upside risks to USD/NGN by precipitating the foreign exit and a negative domestic positioning against the naira.
“Foreign investors are likely to be active sellers of Nigerian assets in coming days, subject to market liquidity constraints.
Angus Downie, head of economic research, Ecobank said, “Sanusi did a fantastic job as governor and it will be very difficult to find someone that can continue his line of effort in restructuring the banking sector and strengthening monetary policy to the next phase.
“He was due to step down in June but when something unexpected like this happens, it does raise concerns about what is happening with the direction of policy in Nigeria.
“The immediate reaction to Sanusi’s dismissal is a knee jerk reaction. This immediate fall in the naira would be expected in any emerging market or frontier market. Fundamentally, there’s no reason for the naira to fall further.
“You’ve got a very safe pair of hands that are taking over in the immediate period, Sarah Alade. In terms of the economic policy agenda, that’s her remit. She’s the deputy governor responsible for economic policy.”
Alan Cameron, Economist at Nigerian Stockbroker, CSL, said, “It’s not so much what it does to the CBN which we believe had a strong institutional foundation and skilled leaders, but what it says about the Presidency itself.
“If the Jonathan administration is willing to discard a safe pair of hands at a time when the currency is being tested anyway, it shows more political motivation than economic awareness.
“Speaking from the perspective of international investors, this is likely to go down badly.”