Emefiele, CBN and our future

At some point later today, January 24, the governor of the Central Bank of Nigeria, Godwin Emefiele, is bound to be back in the news as the CBN’s monetary policy committee (MPC) concludes its 289th meeting and offers its position on the future direction of the country’s macro-economic environment. Would the CBN adopt a further hawkish position and tighten rates or adopt an accommodative, wait-and-see position, this being the MPC meeting before Nigeria’s general elections? What are Nigeria’s takeaways and lessons from the global economic ecosystem as indicated by signals from the Bretton Woods institutions, the Eurozone and the recently concluded global economic forum in Davos? What would be the message from the MPC with regard to inflation, Naira re-design, money supply and the foreign exchange regime?

Whatever the CBN governor says today, would be a signal of the country’s immediate economic direction and also of his effective return to work after the drama in between his trip to the United States in December 2022 as part of President Buhari’s delegation to the US-Africa Leaders’ Summit, his sudden disappearance from the radar due to his taking his annual leave in addition to medical leave, and his eventual return to the country on January 13, 2023. The drama in-between that we refer to has been well reported, namely the story that the Department of State Services (DSS) wanted to arrest the CBN governor on allegations that he is a financier of terrorism and economic crimes of national security implications. The DSS went to court to seek leave of court to arrest the CBN governor upon his return to the country. There have been court cases in this regard from which a lot has been revealed about our country and the conflict between its institutions and what appears to be the complete lack of coordination and synergy among state institutions.

Early December 2022, the chief judge of the federal high court, Justice J. T. Tsoho declined an application by the DSS to arrest and detain the CBN governor. Justice Tsoho declined the ex-parte application by the DSS, citing the absence of any concrete evidence to substantiate its claims. The matter subsequently came up again in this case, in the court of Justice Maryam Hassan of the federal capital territory’s high court where the Incorporated Trustees of Forum for Accountability and Good Leadership sought an order of the court to enforce Emefiele’s fundamental human rights. Justice Hassan again declined the DSS application, in a ruling delivered on December 29. Justice Hassan has been rightly praised for handling the matter expeditiously, but His Lordship made even more far-reaching declarations that should be underlined.

One, the two courts agreed that the DSS does not need the leave of court to arrest the CBN governor whose office does not fall under the purview of Section 308 of the 1999 constitution which grants immunity from prosecution, while in office, to the president, the vice president, governors and their deputies making a total of 74 persons that are entitled to such privilege. Two, both courts stressed the point that the CBN governor cannot be arrested on the basis of mere suspicion or allegations without concrete evidence. Justice Hassan had used the word “an important person” or something like that, but what the court was drawing attention to is the tendency of the security agencies to arrest just about anyone on a whim and a caprice, without any prior evidence or investigation, or the establishment of a prima facia case. If Emefiele had not been the CBN governor, he could have been picked up like “a common criminal” and subjected to a harrowing experience only for the same state to discover that there is no case to submit to the court. This case highlighted again that we run a justice system that applies different rules according to status, ethnicity and class — in outright violation of the rule of law as prescribed by the country’s basic law, the 1999 constitution.

Justice Maryam Hassan made the additional point that if the DSS wants to arrest the CBN governor, it should have sought the clearance of the president of the Federal Republic of Nigeria to start with or put the accused person on notice given the strategic position that he occupies and the implications for national security, financial stability and the flow of foreign investments. Obviously, it would appear that the DSS did not inform the president and if they did, nobody has told us. What everyone has seen is that when the CBN governor returned from his long stay overseas, and he met the president during a visit by the Arab Bank for Economic Development boss, he was warmly welcomed by the president. This has been interpreted by those expecting the president’s intervention, body language or voice, to mean that the president has no problem with Emefiele. The CBN governor is an appointee of the president of Nigeria, even if the CBN Act of 2007, Sections 1, 8, 11 thereof grant the CBN autonomy, and requires in Section 11, the concurrence of two-thirds of the Senate in matters relating to the appointment or removal of the CBN governor.

The position of a central bank as a political agency and its neutrality is a much-discussed subject in the study of central banks worldwide. What needs to be pointed out here is that indeed, the point about the international dimension of the move against Nigeria’s CBN governor, highlighted by the court of Justice Hassan, has been proven, now that the international media is beginning to focus heavily on the subject, especially Bloomberg. The principal role of a central bank with regard to financial stability is signalling. A central bank as an institution sends out signals about the health and direction of a country’s economy. When the wrong signals are sent, the entire economy could be affected. Where else in the world does the Department of State Services openly discredits a serving central bank governor?

By making Emefiele a target, the Department of State Services may have inadvertently created more problems than it seeks to solve. It has issued denials here and there but so much damage has been done. The matter could have been handled differently and better in the over-arching interest of the country and its financial system. It is a shame that it all got so messy with the sordid matter descending to the street level, with reports of sponsored protests and demonstrations in favour of the CBN governor on the streets of Abuja, his residence being occupied by the police and no one claiming responsibility for the occupation. The Department of State Services (DSS) has more far-reaching responsibilities than the Nigeria Police Force (NPF). It must resist the temptation to behave like everyday law enforcement officers. Doing so will be a disservice to the scores of intelligent and well-trained men and women among its ranks.

The DSS should be reminded that there has been a precedent in this regard. In 2014, Sanusi Lamido Sanusi, CBN governor as he then was, faced a similar situation when the DSS seized his international passport upon his arrival from Niger where he had gone to attend a meeting of governors of the central banks in West Africa. He was suspended from office while he was away in Niger. He was equally accused of terrorism financing, and misconduct. Lamido was further accused of having violated the Financial Regulations Council Act. The fiery Lamido who believed he was a victim of a witch-hunt for trying to expose malfeasances within the system went straight to court to defend himself. The court not only ruled in his favour, but the court also awarded him damages to the tune of N50 million and asked the federal government to apologize to him. At the time, the DSS threatened to go on appeal and it did. I have no immediate facts as to whether or not Sanusi Lamido Sanusi eventually got the N50 million that the court awarded in his favour. Years later, it is the turn of Godwin Emefiele. Why is the DSS always linking CBN governors to terrorism? The opaqueness of the allegation indeed confounds not just the courts but also the fair-minded and reasonable man on the street. Why would Nigeria back-to-back, advertise the managers of its monetary policy as rogue elements, knowing that this could sabotage the county’s economic fortunes and bring the country into international disrepute?

But what I find curious, and let me discharge this quickly is that more than any other CBN governor before him, Godwin Emefiele has been a far more hands-on regulator and administrator. His remit is monetary policy but under his watch, the CBN has been at the centre of everything, completely over-stretched beyond its traditional mandate. I don’t consider this to be a good thing. But in the face of the total abdication of responsibility by other departments of state, Emefiele’s CBN stepped early into the void and did whatever was possible to prioritise Nigeria’s economic interest and the people’s well-being. When the people who had been employed to manage Nigeria’s fiscal policy could not deliver and chose instead to demonstrate gross and insufferable incompetence, Emefiele stepped in with policies hitherto reserved for the fiscal space. The federal ministry of agriculture has been unimpressive since 2015, it doesn’t even have a reliable farmers’ register. Emefiele’s CBN stepped in with the Anchor Borrowers’ Programme and began to talk about value chain addition in the agriculture sector. COVID happened. The CBN again under Emefiele’s watch stepped in and mobilised the private sector to provide the necessary support. Although we are still waiting for a proper audit of all the contracts that were awarded to wives and girlfriends under that scheme, nobody can deny the leadership that Emefiele and the CBN provided. This same CBN introduced anti-money laundering and counter-terrorism financing regulations.

However, in its new-found role of helping the government to meet its needs and goals, Emefiele was ever so willing to support the Buhari government with Ways and Means, shoring up a debt of over N22 trillion in careless violation of the Fiscal Responsibility Act. Without Ways and Means, however, the country would have been completely bankrupt – a clear sign of the cluelessness of the people Nigeria voted for in 2015. The only problem is that the CBN has no right to break the law in trying to help the situation. Let me add this: given his vantage position, Emefiele has so far created winners and losers in the Nigerian system. As the custodian of the country’s foreign exchange, his management of that regime is probably at the root of his travails. Those who lost out in Nigeria’s rent-sharing system are not expected to sing his praise. But what is more worrisome is how the Nigerian state keeps reducing the fortunes of an entire country to the level of an individual, rather than focusing on institutions. Emefiele has suddenly become the subject rather than the CBN as an institution, or the larger subject of state failure.

I am not saying that Emefiele is above the law or beyond it. Far from it. I am saying that hounding Emefiele ignores the deeper issues. When will the CBN be fit for purpose? Emefiele has not gone to court directly, like Sanusi Lamido before him, to defend his integrity but he may well find himself doing so at some point. But the question needs to be asked: Can the DSS inquire into the monetary policy of the CBN as it now purports to do? Defining monetary policy is not part of the core function of the DSS. To do so brazenly would amount to an overreach, in the absence of incriminating evidence. The standard procedure would have been for the government of the day to order a forensic audit of the CBN or compel it to release its full audited financials as required by law. The enabling law provides for that. And incidentally, the CBN has not published its own audited reports as required by law. To separate myths from realities, the best that the state can do is to insist on and follow up on due process. Where are the CBN’s audited reports? But to reduce the Central Bank of Nigeria to a spectacle of games between the security and the political establishment is tough to watch. The bigger question that Nigeria needs to resolve is this: Do we want an independent CBN or not? How do we protect the independence and neutrality of the Central Bank of Nigeria and shield it from partisan disruption even of its leadership?

The argument that the CBN governor is in the eye of the storm because he redesigned some denominations of the naira notes is silly — if it is true. In that regard, the CBN has not done anything illegal. It is perfectly within its purview to seek to control the money supply, redesign the national currency and check counterfeiting. It may be argued that more time should be given to allow the new notes to circulate as has been done in the United Kingdom in a similar situation, but this cannot be a reason for the current hullabaloo! Emefiele argued that the currency redesign was in part a bulwark against inflation. He may have been proven right given that the exchange rate has been relatively stable for a while, even if the December effect may have had something to do with that as well. Some commentators have asked him to resign. I think that would even complicate the situation further. Resignation is not an option at this time. The law requires him to follow due process and give three months’ notice. During the pendency of that notice, a deputy governor is required to act. The uncertainty that could result from all of that at this time of transition in Nigerian politics, cannot bode well for the Nigerian economy. Emefiele has two more years in office. If it suits the next government that will assume office in May 2023 to remove him, then let it be up to that new government to follow due process and act as it deems best in the overall interest of Nigeria. In the meantime, he can be investigated if there are concrete grounds for doing so.

Having said all these, the point must be made that this particular CBN governor – Godwin Emefiele- is embattled because he made the mistake of showing interest in partisan politics. His pain is significantly self-inflicted. The CBN Act is patterned after the enabling Act of the Bank of England. At the height of political provocations, the governors of the Bank of England stay completely above the fray and avoid partisan politics. Emefiele crossed the line. He allowed himself to be deceived by those who told him he could become president. When the same spell-binders abandoned him, he was left alone to carry the can. This is the cause of the kind of embarrassment he currently receives and the CBN being brought down to the level of the street. Even outright imbeciles now offer opinions about CBN policies these days and it is frustrating to see. Future CBN governors would have to learn from his travails. His best bet is to prepare for the worst after the elections.