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Emefiele: Navigating Four Stormy Years At CBN



CBN Governor, Godwin Emefiele

SAM DIALA spotlights Godwin Emefiele’s four-year tenure as 11th Central Bank of Nigeria Governor since June 3, 2014.

Godwin Emefiele, Nigeria’s 11th central bank governor, will occupy a unique place in the history of monetary policy evolution any day.   He is adjudged the scapegoat for the steep price Nigeria had to pay for her policy actions and inactions before and during Emefiele’s tenure. These trends manifested in the prolonged uncertainties that dotted the nation’s macroeconomic space for a long time before Emefiele undertook the task of cleaning the Augean Table.

Since his appointment June 3, 2014, Emefiele has been the epicentre of Nigeria’s turbulent macroeconomic environment shortly before, and intensified after the change of government on May 29, 2015. He was first caught up in the political cross-fire between the ruling Peoples Democratic Party (PDP) and the opposition All Progressives Congress (APC) at the time over the control of the centre. Being an appointee of outgoing President Goodluck Jonathan of the PDP, and having the task of protecting the central bank from the raging fury of politicians, Emefiele must have found himself a pilgrim on a journey of grave uncertainty.

Besides, the dust raised by the suspension of his predecessor, Sanusi Lamido Sanusi,  by President Jonathan, about four months earlier was yet to settle. Emefiele thus had battles to fight both within and outside the Central Bank. This compounded the tension across the country over happenings at the apex bank, as the President Muhammadu Buhari did not appoint his ministers for six months. Emefiele was to play the role of “de facto” fiscal policy superintendent in addition to the traditional responsibility of monetary policy matters. His challenge was aggravated  by the President’s vow not to tamper with the value of the Naira and the N97 per litre fuel pump price, while existing realities showed they cannot be left as no-go areas.

Emefiele’s maiden world press conference in Abuja, where he outlined his 10-point agenda, provided insight into his days ahead at the bank. This showed he was well equipped for the battle and is no stranger to internal dynamics as well as extraneous environment that impact on the Bank. Until his appointment at CBN, Emefiele had traversed the length and breadth of Nigeria’s banking and financial services industry generally. He was the managing director/chief executive officer of Zenith Bank, a foremost Nigerian Tier I bank among the priority rated league – before his appointment.

“I am indeed delighted to share my ideas on creating a central bank that is professional, a central bank that is apolitical, and people-focused. A central bank that spends its energies on building a resilient financial system that can serve the growth and development needs of our beloved country, Nigeria”, Emefiele told his audience at the crowded press briefing.

After scanning both global and domestic economic environments, Emefiele harped on the vision of building a people-focused central bank that would deliver effective price and financial system stability as well as promote sustainable economic development.   He was succinct in articulating the vision: 

“This vision draws inspiration from our understanding of the multiple mandate of the Bank to pursue both price and financial system stability as well as provide complementary developmental functions by creating an environment for Nigerians to live better and more fulfilled lives. In order to realise the CBN’s vision, therefore, I believe we must start with championing policies that promote the sustainability of our hard-earned macroeconomic stability.”

Grappling with the tumbling value of the Naira, spiraling inflation and contracting Gross Domestic Product (GDP) amid other negative macroeconomic fundamentals was a great challenge for Emefiele, who had thrown his weight behind President Buhari’s stand not to devalue the Naira. The slight tinkering with  the local currency (about 8 per cent depreciation) in November 2014 had been considered by observers as the first salvo towards imminent outright devaluation. But Emefiele insisted that the Naira would not be devalued.

It was a question of time. The economy slipped into recession in the first quarter of 2016, in response to the drop in oil prices in the international market as well as attacks on oil facilities by Niger Delta youths in the region, which contracted domestic volume production. Scarcity of foreign exchange and sharp drop in foreign investment compounded the situation as foreign investors took their flight. On a daily basis, the media beamed its searchlight on the CBN, while featuring Emefiele’s name and photographs became a routine task for reporters and their Editors.

It was time to roll up the sleeves. On February 18, 2015, the CBN closed the rDAS/wDAS Forex market leaving the Interbank as the only official market. The measure commenced with Naira depreciated rate of N197/$1 from N155/$1. This worsened the pressure on the local currency while demand for dollar sky-rocketed. All eyes were on Emefiele as manufacturing companies and other forex users lamented the biting effects of Dollar scarcity with grave impact on the already bad unemployment situation. The increased demand pressure on forex compelled the CBN to shift ground and announced the introduction of flexible exchange rate on May 15, 2016; and unveiling of the guidelines June 15.

The actual implementation of the new forex regime commenced June 20, 2016 with settlement of outstanding forex commitments; while spot and future contracts  began on June 27, 2016.  The development resulted in a sharp devaluation of the Naira initially to N250/260 to $1. The new framework design for management of forex by CBN also involved trading foreign currency in the inter-bank market through the platform of the Financial Markets Derivatives Quotation (FMDQ).

Emefiele announced that the new forex system would be purely market-driven, using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book. He added that the CBN would participate in the forex market through periodic interventions either to buy or sell forex as the need arises. The bank also introduced the non-deliverable over-the-counter (OTC) Naira-settled Futures, with daily rates on the CBN-approved FMDQ Trading and Reporting System. The move was to help moderate volatility in the exchange rate by moving non-urgent forex demand from the Spot to the Futures market.

Emefiele and his team continued with the battle to save the Naira as the measures in the new forex regime failed to save the local currency from continued depreciation.  The nefarious activities of speculators and failure of adopted market mechanism compounded the problem. The Naira peaked at an all-time high of N520/$1 in February.  This prompted the CBN to take drastic action by introducing the multiple forex system.  The system created the Inter-bank/Wholesale, Invisible, Small & Medium Enterprise (SME) and the Investors/Exporters’ windows. The Bureau De Change and Parallel market segments also existed in the new forex regime.

This has brought great stability to the forex market, leading to remarkable acreage in foreign reserve (about $47.3 billion in April, 2018) and rise in capital inflow – $12.2 billion in 2017, representing increase of $7,104.4 million or 138.7 per cent, compared with the figure recorded in 2016. There is also improvement in purchasing managers index (56.7 per cent as at March, 2018) as well as rally in stock market capitalization. The CBN has maintained its weekly intervention in the forex market to the tune of over $18.1 billion since February, 2017.  The economy exited recession Q2 2017, while inflation has dropped to 12.5 per cent in April 2018, from a high of 18.72 per cent in January 2016.

These are benefits of sustained efforts by the Emefiele-led CBN which had in June 2015 excluded 41 items from being imported with forex accessed from the official forex market.  Under Emefiele, activities of the Bureau De Change (BDC) operators have been brought under control to check the excesses by some of their members which reportedly led to the continued depreciation of the Naira over the years. The bank has also been actively involved in its periodic OMO interventions through which it mopped up excess liquidity to curtail inflation and boost investors’ confidence in Nigeria’s fixed income securities such as Treasury Bills and Bonds.

These square with Emefiele’s remarks in his maiden press conference concerning Exchange Rate Policy. “Our key goal here (Exchange Rate Policy) would be to maintain exchange rate stability. In view of the high import-dependent nature of the economy and significant exchange rate pass-through, a systematic depreciation of the Naira would literarily translate to considerable inflationary pressure with attendant effect on macroeconomic stability. Therefore, under my leadership, the Bank will continue to focus on maintaining exchange rate stability and preserve the value of the domestic currency.”

The Bank has intensified its sector-focused intervention funds which commenced in 1976. These include the Agricultural Credit Guarantee Scheme (ACGS); Commercial Agriculture Credit Scheme (CACS); N220 billion Micro, Small and Medium Enterprise Development Fund (MSMEDF); Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), Power and Aviation Intervention Fund (PAIF); the Anchor Borrowers’ Programme (ABP) for revolutionizing agriculture and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), among others.

“Some of the Central Bank’s developmental functions will include credit allocations and direct interventions in key sectors of the economy such as Power, Agriculture, MSME, Oil & Gas, and Health. While playing an active developmental role, the CBN will not only operate within the law and its mandate but will also be transparent about what it believes as strategic and appropriate interventions”, Emefiele said on assumption of duty four years ago, adding “Going forward, we propose a business approach to funding SMEs, which requires the strong involvement of the private sector. The new framework proposed will combine the profit motives of the private sector and the development objectives of the government.”

Notwithstanding the turbulent operating environment, Emefiele has focused on quality central banking system which touches the cashless policy, banks supervision, payments system, financial systems stability, development financing, reserve management, financial inclusion strategy, development financing and other financial institutions.

It is on record that he has added fillip to the activities of the CBN Consumer Protection Department in boost confidence in the financial service system. The CBN hinted in February 2018 that over N55 billion had been refunded to customers overcharged by commercial banks. The successful execution of the Bank Verification Number (BVN) project has brought remarkable efficiency, reliability and transparency in bank transactions. The CBN says 31 million bank customers have been captured in the BVN project. 

Emefiele’s philosophy of ‘Produce, add value and export’ (PAVE) impacts positively on his performance which earned him many awards both locally and internationally, such as the Silverbird Special Achievement Award  and the Forbes Achievement Award.

Experts agree that Emefiele’s four years at the CBN, though turbulent, brought great relief to Nigerians generally, the economy and the financial services industry in particular. Joe Uwaleke,  Professor of Finance and Capital Markets,  Nasarawa State University, Keffi, said Emefiele’s tenure at the CBN has been largely successful especially in the areas of forex stability, drop in inflation rate and sectoral intervention funds.

“Godwin Emefiele’s tenure has been largely successful given the downward trend in inflation rate and relative stability in exchange rate. The story of the country’s exit from recession cannot be complete without giving credit to the role played by the CBN in hastening the exit from a recession that many predicted would last longer than it did. The introduction of the Investors and Exporters window by the apex bank in April 2017 played a major part in improving liquidity in the forex market as well as boosting investors’ confidence in the economy.

“The growth in the agricultural sector even during the period of economic recession is not unconnected with the CBN’s Anchor borrower programme which many agree is a success story. Today, rice imports have dropped on the back of improved production in rice production. Generally speaking, the CBN’s interventions as part of its development function are helping to gradually diversify the economy away from oil. The growth in foreign reserves was not only as a result of the recovery in crude oil price and production but equally due to the innovative demand management strategies put in place by the CBN under the leadership of Godwin Emefiele,” Uwaleke said in an e-mail response.

Nigeria’s Senate Minority Leader, Godswill Akpabio, described Emefiele as a humble, silent achiever who had done his best to maintain the global integrity of the Central Bank and to make the Naira stable. He spoke at the Silverbird Awards ceremony in February, 2018.

Citing developmental initiatives by Emefiele-led CBN, the Chief Executive Officer, Forbes Corporate Council on Africa, Florizelle Liser, said the body is happy to see the work that is being done.  “Many of our members welcome it as an opportunity to see how they can trade more with Nigeria and invest more in Nigeria. So, we thank you (Emefiele) for your efforts. We note that you have a number of agricultural related businesses and seen that there is large support for agricultural development in Nigeria at this stage,” Liser said at the presentation of the Forbes Award to Emefiele in Washington in October 2017.

Emefiele had said in 2014: “The CBN will revisit the goals and implementation of our intervention programmes in the Agricultural Sector, in order to ensure that high value addition is obtained from funds provided… Interventions in the sector will now be driven towards improving productivity in areas with high domestic demand, where opportunities exist to improve domestic supply, such as rice, fish, wheat and sugar and conservation of foreign exchange. These four commodities constitute a huge proportion of our food import bill of N1.3 trillion annually.”  The result is the continued growth of Agriculture as a major contributor to the GDP according to the National Bureau of Statistics (NBS) quarterly reports.

Experts however draw attention to the “undesirable fallouts” of the multiple exchange system which is believed to be a silent promoter of corruption and other unethical practices. Bismarck Rewane, chief executive officer, Financial Derivatives Limited, an advisory firm, maintains that while the current forex system under Emefiele has improved liquidity, it remains a rent-seeking avenue for some privileged few.

While giving credit to Emefiele’s ability in managing the CBN, Uwaleke suggests diviserification of the CBN intervention fund towards the capital market, human capital development, education and health to complement government’s efforts:

“On the management of the CBN, I score the Godwin Emefiele above average in view of the fact that unlike many of his predecessors, he surmounted a difficult challenge of implementing monetary policy during a period characterized by stagflation, high inflation with negative growth in real GDP. My advice is that he should also begin to consider interventions in human capital development especially education and health as a complement to government’s efforts. Also, given that the capital market is the barometer for the economy, any intervention geared towards boosting liquidity in the capital market will help maintain financial system stability.”





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