A hard road to travel

Over dinner some 20 years ago, Asiwaju Bola Ahmed Tinubu, then governor of Lagos state, narrated a story I find fascinating till today. After the very public falling-out with his deputy, Mrs Kofoworola Bucknor-Akerele, in 2002, he said he started scouting for her replacement. He wanted a “technocrat” — as we say in Nigeria. Specifically, one with knowledge of the economy. I don’t know what was going through Tinubu’s mind, but I should guess he wanted to focus on politics while his deputy would co-ordinate policy. Different names came up and he started talking to them one by one. One of them was Mr Olayemi Cardoso, who was his commissioner for economic planning and budget.

Tinubu said he liked the prospects of Cardoso stepping up to the plate. He invited him for a meeting on, I think, a Sunday. When Cardoso got to Tinubu’s residence, he saw a swarm of party members and politicians — men, women, youths and all — sitting outside the gate and within the premises. Tinubu said when he made the offer to him, Cardoso asked: “Is this how people will be flocking my house if I am deputy governor?” Tinubu replied: “It goes with the terrain.” Cardoso shook his head and gave Tinubu an instant reply: “Count me out, sir.” This story got me laughing uncontrollably because that is exactly what I would say. In the end, Mr Femi Pedro, a seasoned banker, got the job.

Therefore, when a very strong rumour started flying around in 2023 that Cardoso was going to be appointed either minister of finance or governor of the Central Bank of Nigeria (CBN), I was sceptical. Why would anyone want to be CBN governor at that point in time? Inflation rate was in the skies, wiping off value everywhere; exchange rate was going insane without any asylum ready to rein in it; and the lending rates were a pain in the neck for businesses. The stability of these rates — which can define the level of macro-economic sanity in a country — is the primary responsibility of the CBN. It is a job that can wake up insomnia. That was why I initially doubted Cardoso would want the job.

Why would someone who could not imagine coping with the weekly congregation of a few dozens of party supporters at his residence be interested in handling the macro-economic headaches affecting over 200 million Nigerians? But that is just one way of looking at it. Maybe it is raw politics he couldn’t handle. Maybe he was more comfortable with policy. Maybe being CBN governor is a different kind of challenge that suits his skillset and temperament, compared to politics that could be convoluted. Regardless of my analysis, Cardoso took the job and has now spent a year and a half on the hot seat. But how has he handled the job so far? If he is stressed, it is not written on his face.

With a top team of four deputies — namely, Mr Philip Ikeazor, a former bank MD; Mr Bala Bello,  former ED of the Nigerian Export-Import Bank (NEXIM); Mrs Emem Usoro, former ED at UBA; and Mr Muhammad Sani Abdullahi (the man we call Dattijo), former commissioner for budget and planning in Kaduna state — Cardoso set out his agenda as a “return to conservative monetary policy”, “transparency”, and “bold corrective measures”. Among other things, he sought to reform the forex market to eliminate arbitrage by introducing a transparent trading mechanism. He toned down the development finance policy and announced a new capitalisation requirement for the banks.

Lately, the CBN has been receiving a lot of plaudits for its conservative approach to monetary policy which has boosted investor confidence and enabled substantial stability in the capital and money markets. I’ve read very positive reviews by both Nigerian and foreign analysts on the deepening of reforms and the restoration of confidence in the financial system. The banking sector might have experienced worse crises in the 1990s leading to bank failures, but the naira redesign fiasco and the failure of electronic payment systems in the run-up to the 2023 elections did a lot of damage to the confidence of customers. Some are still suffering the PTSD. Nigeria went really close to ground zero.

The forex market was also a nightmare. The official rate was around N425/$ and the black market was roughly N750/$ when Tinubu assumed office. The interim CBN management introduced the policy of “willing buyer willing seller” in a quickfire attempt to address the ailments and close the gap between official and parallel markets. The removal of the official peg nearly sank the economy as the markets went into a spiral. The parallel rate started racing recklessly towards N2,000/$. There was panic and pain everywhere. I was one of those who argued that the new policy — coming just a few weeks after the removal of petrol subsidy — was neither well thought-out nor well implemented.

The consolation is that after the rampage, the naira managed to settle around N1,500/$ for a bit. Many market analysts contend that the true value should be around N1,200/$. Nonetheless, it is now obvious that, like fuel prices, the naira will gain or lose from time to time depending on the variables — as it happens with even major currencies. Fixing a currency’s exchange rate is the real sign of trouble that will always inspire speculation. When the market knows that the exchange rate is flexible and can gain or lose as the forces of demand and supply interact, the reality may dim the light of marginal speculators with no staying power. Every genuine forex user needs this comfort.

I still do not support unbridled currency devaluation. I maintain that it is never a lasting solution to the forex crisis. A country that is “export-deficient” (the new politically correct term for “import-dependent”) will always run into this type of crisis. You cannot be demanding $3 billion for imports and earning $1 billion from exports and be expecting your currency to sleep easy. Will the forex rain from the skies? I have always favoured “deprecation with safeguards”, but I apparently lost the argument when we held on to the official peg for way too long and all kinds of shenanigans blossomed, with arbitrage billionaires springing up everywhere. The devil is always in the detail.

The CBN appears to have got a hold on the arbitrage haemorrhage. As the parallel market moves, the Nigerian Foreign Exchange Market (NFEM) also moves. The signal to the parallel market is that stocking forex in anticipation of arbitrage is now a risky venture. Cardoso will argue that his forex management policy is working, judging by the increased non-oil inflows, especially remittances. The new pricing mechanism is managed on an NFEM platform called electronic foreign exchange matching system (EFEMS), an open system for rate determination which provides visibility around demand and supply. This visibility helps drive more credible determination of the exchange rate.

If I have to be honest, though, I do not envy CBN governors. Most often, they are fighting a fire they did not start. For instance, take a look at the 2025 budget. Tinubu initially proposed an expenditure of N49.74 trillion before increasing it to N54.2 trillion. Our amazing lawmakers added N700 billion on top, taking the total to N54.99 trillion. In naira terms, this is the highest budget in our history. The budget contains an estimated deficit of N13.08 trillion. In simple English, for every N100 we plan to spend, N24 is from money we don’t have. Agreed, public revenues have grown remarkably in the last couple of years, but why not use part of that to reduce the deficit instead of expanding spending?

When the resultant liquidity floods the system and too much naira is chasing after fewer goods, it is the job of the CBN governor to deal with the inflation — even though he was not the one that prepared or approved the expansionary budget. When the three tiers of government pump out trillions of naira into the economy and the naira starts chasing dollars to finance both legitimate transactions and illicit payments (such as bribes), it is the job of the CBN to mop up the mess by making sure the exchange rate is stable. But can you fight the dollar with the naira? Oil exports provide most of the oxygen for the forex market but we no longer earn enough of petrodollars.

Inflation remains the elephant in the room. We’ve been warned that no country can record meaningful progress with double-digit inflation. The monetary policy committee (MPC) of the CBN has been trying to control money supply by keeping the monetary policy rate (MPR) high, but the inflation report by the National Bureau of Statistics (NBS) has not brought smiles to our faces. It was only in January that there was a drop (based on a new methodology), but even 24.48 percent is an enemy of progress. Whatever the methodology, the CBN has to do more work to bring down the inflation rate. And the fiscal and political authorities need to make things easier for the central bank.

Despite all the glaring challenges that are bedevilling the economy mostly because of the tough decisions we failed to take ages ago, I have been much impressed with the CBN management in recent times. For one, Cardoso speaks confidently and convincingly about the bank’s mandate. He speaks like someone who knows what he is doing, knows the direction he is facing and knows how to get there. Markets thrive on clarity. It breeds confidence. Cardoso has returned the CBN to an orthodox, data-led central bank model. Of course, he will make mistakes. But if he is pragmatic enough to correct them when they arise, he will win more respect. It is a hard road to travel.

AND FOUR OTHER THINGS…

ONE EL OF A GUY

Hated. Adored. Never Ignored. That is a slogan among fans of Manchester United Football Club. Mallam Nasir el-Rufai, the former governor of Kaduna state, can as well adopt the slogan. I do not know of many Nigerian politicians who evoke as much passion — either positive or negative — as el-Rufai. His defection from the ruling APC to the SDP has been dominating debates and discussions on X, Facebook, WhatsApp, TV and radio. There are rumours he wants to run for president in 2027. Others say he is only preparing the way for the emergence of a major challenger to the APC, with the way opposition parties are imploding. Whatever it is, el-Rufai has sent tongues wagging. Intriguing.

HIDE AND SEEK

The Supreme Court appears to have fully pampered the Rivers house of assembly with its judgment. The lawmakers are now on a frolic. The apex court ruled that Governor Simi Fubara should present the budget to the rebel lawmakers, most of whom had publicly announced they had defected from PDP to APC. The court said it was not an established fact. The lawmakers first gave the governor 48 hours to present the 2025 budget before later locking him out of the assembly complex “for not following due process”. The next thing we saw: they adjourned indefinitely. Fubara has obviously demonstrated his desire to obey the court judgment, but the lawmakers are having a ball. Politics.

VARSITY VANITY

I have lost count of how many universities have been established by the federal government in the last five years. As we speak, there are reports that the national assembly is planning to create 200 more. What really is the motive — or should I say motivation? Are we trying to have the highest number of universities in the world? To what end? Do we have the resources — intellectual and financial — to provide quality education to the intakes? I can understand that our population is growing and we need to prepare for the new generation of students but can we, in all sincerity, claim that these overnight, haphazard creations will add value to the knowledge industry? Confounding.

NO COMMENT

Senator Adeseye Ogunlewe, a former federal lawmaker and one-time minister of works, has added a curious dimension to the Senator Natasha Akpoti sexual harassment controversy by appearing to blame it on her beauty. “The beauty of distinguished Senator Natasha is a problem for her,” he said. When she is passing, there’s no way men will not look at her. How can you be a man, and when a beautiful woman is passing, you close your eyes? You might tag it as anything, but it’s inborn for men to look at beautiful women…” Can someone explain the relevance of this point to the issue at hand? Should robbers get a pass because they cannot take their eyes off the good things of life? Wonderful.