Godwin Emefiele in three years as the governor of the Central Bank of Nigeria (CBN), has encountered several hurdles but still continue to wriggle the nation’s economy through by ensuring macroeconomic stability for the nation. As these efforts are being commended, it is clear he needs to do more, BAYO AMODU and BUKOLA IDOWU report.
Receiving the award of the Vanguard Personality of the Year 2016, Central Bank of Nigeria Governor, a former managing director of Zenith Bank Plc, Godwin Emefiele early this year remarked humorously that the blame for a reduction in the number of meats in the pot of soup and the high price of vegetables in the market is being laid on the apex bank.
That was indicative of the popularity of the CBN in recent times as it struggled with a depreciating currency, high interest rate, skyrocketing inflation, rising non-performing loans and low business confidence all within a receding economy.
When he took office in 2014, following the disquiet circumstance leading the ouster of former Governor of CBN and current Emir of Kano, Sanusi Lamido, he was fully aware of what he wanted to do in re-positioning the apex bank, the enormous challenges ahead of him notwithstanding.
On assuming duty, at his maiden press briefing in Abuja, Emefiele revealed a 10-point agenda aimed at repositioning the nation’s economy where he also promised to create a central bank that is professional, apolitical and people-focused.
“My vision for the bank would be anchored on 10 agenda, which would help the apex bank reduce poverty, create jobs and ensure macro-economic stability,” he said.
In his three years at the helm of the apex bank, Emefiele and his team have had so much to contend with in these years, particularly the headwinds that saw the economy plunge into a recession. Emefiele faced rising inflation, high interest rate, rising unemployment, dwindling foreign reserves, a highly volatile and weak foreign exchange as well as financial stability.
These were the very battles he set out to conquer when he took office on June 5, 2014. His maiden speech laid out his goals of pursuing a gradual reduction in key interest rates, and include unemployment rate in monetary policy decisions; pursue lower inflation rates; maintain exchange rate stability and aggressively shore up foreign exchange reserves.
He also set out to achieve financial stability, safety, and soundness by pursuing risk-based and sector-specific supervision, macro-prudential measures, and addressing issues relating to information asymmetry via collateral registry. He also aimed at focusing on engendering economic development and job creation with new financing instruments for investments in SMEs, agriculture, manufacturing, oil and gas, and the power sector.
In the last three years, the CBN had battled these issues facing more criticisms and hurdles than any other. Inflation which was at single digit of near seven per cent had soared to nearly 19 per cent, benchmark interest rate which was at 12 per cent when Emefiele assumed office has been kept at a high of 14 per cent and unemployment has been on the rise.
Also foreign reserves had dwindled to around $28 billion, non-performing loans and capital adequacy in the banking industry had become an issue once again and most of all, the naira had depreciated to an all-time low of over N500 to the dollar.
Most of these challenges were resultant of the decline in government foreign exchange revenues. Oil which contributes close to 80 per cent of the revenue of the country suffered a major setback in 2014, the very year that Emefiele assumed office. From over $100 per barrel which it sold through 2010 to 2013, the price crashed to $27 just as production output substantially declined.
On his assumption, the monthly forex inflows into the CBN was about $3.6 billion, but in the aftermath of the sharp drop in oil price, made worse by falling production volumes in Nigeria, the monthly forex inflows fell to less than $700 million per month. Yet, the demand for forex from the market continued to be about $4.8 billion monthly.
With a shortfall in dollar inflow from oil, the CBN chief decided to take proactive steps in confronting the daunting challenges, which included dwindling dollar acreage. Tough decision was inevitable if the economy must cope in the face of dwindling foreign exchange inflow. He took decisive action never imagined in entire history of the bank. On June 24, 2015, through a policy pronouncement, the CBN excluded 41 items and services from accessing forex through official window.
The move was indeed targeted at encouraging local production of the affected items. The CBN said its reason for the policy was the need to among other things, conserve forex, and ensure stability of the forex market, efficient and transparent utilisation of forex as well for optimum benefit to be derived from goods and services imported into the country.