SIR: Say all you like about how CBN governor, Godwin Emefiele nurtured and degraded (or destroyed) the Naira or how his policies stimulated or strangled the nation’s economy, it would be unfair not to hand him his flowers for being decisive in preventing the country’s financial institutions from total collapse, failure to which would have, in effect plunged the country in a bigger economic crisis and recession than that which is being faced currently.
By banning Nigeria’s financial institutions from carrying out crypto currency and crypto currency-related transactions, the Emefiele-led CBN has saved banks and other financial institutions from exposing shareholders’ and depositors’ funds to loss, which might have led to the total collapse of the sector. His pragmatic leadership and accurate risk assessment meant that the $4 trillion lost to the sudden collapse of the crypto market in 2022 is not constituted of funds from any of Nigeria’s financial institutions. All individual accounts in any local Nigerian bank that are found to be involved in any crypto-related transaction have been directed to be closed by the CBN, or risk being sanctioned heavily by the regulator.
Proactive risk management entails anticipating a crisis and nipping it in the bud with the necessary mitigant before it crystallizes. It is easy for people to underrate the impact of proactive and visionary risk management techniques if it is employed in time, and a disaster or crisis is averted. This is because people could not have tasted the consequences or impact of the crisis since it was averted, anyway.
To give the CBN heroics more contexts, one of America’s biggest banks, Silicon Valley Bank (SVB) failed in late 2022 more or less as a result of the collapse of the crypto currency market. SVB was the banker for most tech companies in America, which in turn invested heavily in uninsured (crypto currency) deposits. The tech boom of 2020-21 created a façade of success and growth, with share price of SVB growing by about 700%. Because the tech-crypto space had the distinct feature of zero regulation and stock value volatility, the global economic recession of early 2022 and the rise in inflation rate meant that SVB’s corporate clients withdrew their funds heavily, thus, depleting their cash reserves.
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Imagine for a second if this had happened in Nigeria. The Central Bank of Nigeria, at that that time, was pressured to allow crypto currency transactions in the country’s financial system.
Another context is when FTX, a global crypto currency exchange company, which had over a million users, created what will be regarded as the biggest domino effect in the crash of the crypto currency market, which led to the loss of about $4 trillion in investors’ funds. What is most bizarre about the inevitable collapse was that the company was owned by 29-year-old MIT graduate who managed the global company from the comfort of his Bahamas ‘luxury home office’. The decentralization and lack of regulation of FTX, which was highlighted as the reason of the crypto ban by CBN in Nigeria, ultimately led to the collapse.
Emefiele as an individual and as a public servant might not have met the minimum requirements the citizens have set out for him, by any performance parameters. His decisiveness and ‘stubbornness’ in enforcing the crypto currency ban in Nigeria definitely saved the country’s financial institutions and ultimately saved the economy from total collapse. For that, he has my flowers.
•Aliyu Sulaiman,
Katsina.