The Central Bank of Nigeria (CBN) has been in the eye of the storm in recent times, culminating in the suspension of Governor Sanusi Lamido Sanusi. Ibrahim Apekhade Yusuf in this report examines some of the contending issues.
THE Central Bank of Nigeria (CBN), established by the 1958 Act of Parliament, as amended in 1991, 1993, 1997, 1998, 1999 and 2007, is perhaps facing its toughest battle since it became operational some 55 years ago.
The apex bank was envisioned to be one of the most efficient and effective of the world’s central banks in promoting and sustaining economic development and whose overriding mission is to be proactive in providing a stable framework for the economic development of Nigeria through the effective, efficient and transparent implementation of monetary and exchange rate policy and management of the financial sector, has performed its functions not without some hiccups, especially in the recent past.
Road to CBN reform
With the benefit of hindsight, by far the first attempt at reforming the CBN came in form of the promulgation of Decree of 1991, now an Act of the National Assembly of the Federal Republic of Nigeria, which sought to provide for the continuance of the CBN with a Board of Directors consisting of the governor, four deputies and five non-executive directors.
Besides, the Act charged the Bank with the overall control and administration of the monetary and financial sector policies of the federal government with statutory mandates to issue legal tender currency, maintain external reserves, safeguard the international value of the legal tender currency, promote monetary stability and a sound financial system in Nigeria, act as banker and financial adviser to the federal government.
Interestingly, the nation’s monetary policy is best understood from the stance of the mandate set for the apex bank which include but not limited to the maintenance of the country’s external reserves to safeguard the international value of the legal currency, promotion and maintenance of monetary stability and a sound and efficient financial system in Nigeria, acting as banker and financial adviser to the federal government as well as acting as lender of last resort to banks.
Contentious 2007 CBN Act
In the view of many pundits, unlike many past reforms, the 2007 CBN Act, which gave unfettered powers to the apex bank, may have literally pitted the bank against some powerful forces out to clip its growing wings.
No longer at ease with CBN autonomy
It is the contention of many that the 2007 CBN Act requires some amendment as it is now a subject of acrimony among the different tiers of government, especially the National Assembly and the executive arm.
Mazi Okechukwu Unegbu, a trained lawyer, arbitrator and stockbroker, is one of those who believe that the CBN is in dire need of some makeover.
Unegbu, who sits atop as Managing Director/Chief Executive, Maxifund Investments and Securities Plc, while emphasising that autonomy is very important, however, stressed that a situation where a lot of power was concentrated in the hands of the CBN governor was not good for the system as it could be subject to abuse.
“For instance, there is this story of separation of powers. It is bad when you have the CBN governor as the Chairman/CEO of the Board at the same time. If power is concentrated in one hand, it can be abused. That’s why I said that if we’re making laws, we must take cognisance of the environment in which it is operating. I don’t see the reasons for the hullabaloo that is going on at the moment.”
Matthews Awodehun, a financial expert, agrees with Unegbu as he would want the CBN Act to be subjected to a serious surgical operation.
“There is need to strengthen the CBN and we must put necessary measures that would ensure that whoever becomes the CBN Governor does not use the CBN to pursue what might be perceived in some quarters as religious or political interest as we have seen in the recent past.”
How the bubble burst
The CBN under Sanusi Lamido Sanusi, who has been placed on suspension by President Goodluck Jonathan last Thursday, after reportedly squealing that billions of petrodollars was missing from the coffers, had spearheaded bank reforms and acknowledged making powerful enemies among vested interests in a country where corruption is endemic.
Sanusi said he received death threats and frequent warnings that he would be fired after he took on bank CEOs who had stolen billions of deposits and who he said had bought political protection or were themselves politicians. He called his move, just after taking office in 2009, “a decision that would pitch us against powerful economic and political forces.”
That was before he took on the powerful Nigerian National Petroleum Corporation (NNPC), which denies his charges of missing billions.
Sanusi has said corrupt vested interests keep what should be a wealthy country impoverished and are at the heart of 90 percent of the problems confronting the country, from a north eastern Islamic uprising and deadly ethnic strife to a dearth of jobs, education and health care.
“We don’t have development because vested interests continue to rape this country and take the money out, and the only way you’re going to move from potential to reality is to stop preaching and ask yourself how can we overcome the fear of vested interests and how can we confront them,” he told an audience of young people at a TedX forum in Nigeria’s capital, Abuja, in August.
Last year, Sanusi reported that $50 billion worth of oil sold by the NNPC had not been paid to the government. The Senate Committee on Finance last week ordered an independent forensic audit into the missing money, now said to amount to about $20 billion. The Finance Ministry said missing receipts recovered in an audit accounted for the rest of the missing money.
Jonathan named a deputy governor to act in Sanusi’s place but also immediately sent to the Senate the name of another banker he proposed as the new custodian of the nation’s federal reserve, making clear that he has effectively fired Sanusi.On Thursday, the naira dropped from $163 to $169 when Jonathan’s statement became public, financial analysts said. The Central Bank briefly stopped trade in its fixed income and bond market.
Economist Bismarck Rewane warned of “a very difficult time” for the naira and Nigeria’s financial market in the near-term. In the long term, he said it raises questions about the future independence and autonomy of the Central Bank.
Such actions make investors jittery and encourage capital flight, political economist Adeola Adenikinju of University of Ibadan said, pointing to investors dumping the naira Thursday.
Rewane said the suspension from a position held in high reverence increases uncertainty as Nigeria prepares for a presidential election in February next year.
A statement from presidential adviser Reuben Abati said Jonathan has noted reports from the Financial Reporting Council and other investigating bodies indicating that Sanusi’s tenure “has been characterised by various acts of financial recklessness and misconduct.”
Local media had reported in December that Jonathan had demanded that Sanusi resign, and that the governor had refused to leave before his tenure expired.
Nigerian accounts on Twitter hummed with the news, with many saying Sanusi was being punished for fighting corruption, and others hoping his suspension would lead him to making even greater revelations.
“When you fight corruption, corruption fights back,” the Enough Is Enough Nigeria project tweeted.
Expectedly, reactions have continued to trail the nomination of the current Group Managing Director of Zenith Bank Plc, Mr. Godwin Emefiele, for the position of Governor of the Central Bank of Nigeria (CBN) by President Jonathan as a school of thought believes he is a round peg in a round hole while some others hold the view, and very strongly too, that he would be a ‘yes-man.’
At separate interviews with industry experts, most of them shred eloquent testimonies to what they described as Emefiele’s sterling qualities as a banker.
To many of these analysts, there is going to be a different dynamics with the coming of an Emefiele.
Dr. Austin Nweze, a political economist at the Pan Atlantic University, Lagos, said by the nature of the CBN, the character and personality of those who sits atop the agency speaks volume of how the economy would be managed either for the better or worse.
“The CBN job requires a certain personality that is less talk but more work because if you talk too much, there is every tendency for you not to do your work as well as you should do it. Take a look at the United States of America, where the likes of Alan Greenspan served as chair of the Federal Reserve Bank from 1987 to 2006 and later the mantle of leadership was passed to Ben Bernanke, who handed over to Janet Yellen early this year, you can say in all that these personages concentrated on the job rather than the glamour attached to it.
“So to that extent, I think Emefiele comes across as someone who knows his onions and he is a right man for the job. He rarely speaks in public and that is the character of a CBN governor. Since he took over, he has been able to sustain the winning streak of Jim Ovia, who many thought his exit was going to affect the fortunes of the bank. But things have been on the upward swing under Emefiele and that tells you a lot about his sincerity of purpose and tenacity. He is in the mould of Joseph Sanusi, (a onetime governor of the apex bank). Although his choice came as a surprise, his choice is safe for the economy if you consider other options. He is the best among all the devils that were being touted as those in line for the CBN top job.”
Mr. Tola Adekoya, Director, School of Banking Honours, Lagos, also concurs with Nweze.
Adekoya, a trainer of bankers with three decades experience, said of Emefiele’s appointment: “Unlike Sanusi, ordinarily, Emefiele is not a young man. So, we should expect more maturity, a much more refine regime under him. Bankers are supposed to be conservative but Sanusi played to the gallery behaving more as a politician than a banker. So, it’s good riddance to bad rubbish. Emefiele won’t be a lackey of the president because the CBN is not political. He would do his job as it is supposed to be done.”
Chief Timothy Adesiyan, Executive National President, Nigeria Shareholders Solidarity Association, established in 1985, believes he is a round peg in a round hole. “He is a cool-headed banker thrown into a purely academic exercise these years… He is a shrewd banker… He would not drag the CBN into politics as his predecessor did …With his kind of pedigree, we have no doubt that he would deliver the goods…The growth fundamentals at Zenith Bank speak volume of the kind of person the new CBN boss is. Under him, we have seen a steady growth and which shows there is a good succession plan in Zenith Bank.”
However, how to resolve what some have described as faux pas of having about three people as CBN governor is still unclear. After announcing Sanusi’s suspension, Dr. Serah Alade was announced as acting governor and on the same day Emefiele’s name was sent to the Senate for confirmation. Does it mean that Sanusi has already been pronounced guilty and that Alade would serve till June when he was supposed to end his tenure? Or if confirmed, Emefiele would have to wait till Sanusi’s tenure is over before assuming office?
It is a conundrum waiting to be unwrapped, by who?
