How happy is Emefiele, the CBN governor?

At the Annual Bankers’ Dinner
in Lagos last Friday, Nigeria’s Central Bank (CBN) governor, Godwin Emefiele took off his 40-page highly worded presentation with a joke.

He was speaking to a gathering of what is undoubtedly the best and brightest people in Nigeria’s financial sector on the theme, ‘Policy Options for Reversing Nigeria’s Economic Downturn.’
“Good evening ladies and gentlemen,” Emefiele started, “a story was once told of a man who has been married to his wife for over 20 years and was very proud of how delicious his wife’s food always tastes. Wherever he went and whenever he could, this man would not miss an opportunity to boast about the cooking skills of his wife. One day, seeking to prove his many boasts, he invited some of his colleagues to dinner and asked the wife to make a meal.

“Everyone arrived as expected, settled into couches, and were patiently chatting and waiting for the food. When dinner was eventually ready and served, they were invited up to the dining table. This man was still boasting and talking about how nice the food would be. But to the disappointment of the guests and to the humiliation of the man, the meal was way too salty and the meat was not well cooked.
“While the visitors were still making derisive and jeering comments at the man’s boastfulness, he angrily confronted his wife to explain why she could not make a nice meal this time around. Everyone held their breadth and waited for a logical explanation. But to their utter disbelief, the wife simply said, ‘Sorry my husband, it is because of the CBN policy on the exchange rate!’”
That joke aroused great laughter from the ‘high class’ audience but simply captures how Emefiele and the CBN are increasingly being blamed for the country’s many economic woes.
Nigeria is in a serious economic mess and faces a classical case of “stagflation” – a situation where a country’s Gross Domestic Product (GDP) is falling or being stagnant, while unemployment and inflation are rising, all simultaneously.
Recent data from the National Bureau of Statistics (NBS) indicate Nigeria’s Economy contracted by 0.36 percent, 2.1 percent and 2.24 percent in the first, second and third quarters of 2016, respectively. Inflation figures for September and October 2016 were 17.9 percent and 18.3 percent, respectively, while official statistics also indicate that the country’s unemployment rate increased to 12.1 percent and 13.3 percent during the first and second quarters of 2016.
Economists agree that stagflation is a difficult situation for policymakers – therefore, it is often difficult to have single macroeconomic policy address rising inflation and slow growth simultaneously. And this is because fighting inflation may require implementing policies that might be inimical to economic growth, whereas expansionary policies to stimulate growth usually worsen inflation. So, it has been a dilemma for the monetary authorities.
Given the sharp drop in oil prices, Federation Account Allocations to States have dropped by an average of about N2 billion monthly per State, and partly explains their inability to meet some basic recurrent expenditures including payment of workers’ salaries.

Average inflows of foreign exchange into the CBN have fallen by over US$2.3 billion every month over the last twenty six months- no thanks to soft oil prices.
Yes, the country could have been better prepared to deal with this downturn; but is the CBN solely responsible?
As at June 2014 when Emefeile assumed office, Nigeria’s FX Reserves had fallen from the high of US$62 billion in 2008 to only US$25 billion. Yet, demand for FX has reached an all-time high of over US$1.2 billion per week or US$4.8 billion per month.
Imagine that 90 percent of the things bought in Shoprite stores across the country are imported: the eggs and avocado peers are from South Africa, the meat is from Zambia, and Moet Champagne is from France.
This simply explains that the size of the nation’s FX Reserves and the value of the Naira critically depend on the lifestyles of its citizens and on the value and types of imports allowed into the country.
“Which country grows like this? Show me one economically advanced nation that attained that exalted position importing everything, and I will build you a bridge to the Queen’s Palace,” Emefiele had told his audience.
No sensible central bank governor can be excited about this sort of situation, especially implementing monetary policies in a country that relies so much on other countries for her basic needs and signs off endless requests for Forex requests for such huge imports.
Emefiele seems frustrated and often sounds like a ‘broken record’ these days. And this is understandable.
Nigeria’s fragile macroeconomic conditions and the strong headwinds confronting the economy is worrisome. Worse still, while the monetary policy has reached its limits- the fiscal authorities seem to be snoring away – no sense of urgency.
How happy can a central bank governor be when Nigeria’s economic challenges have defied every known monetary solution due to structural problems which the fiscal authorities seem not in a hurry to fix. That explains why lending rates are high – the banks take deposits at as cheap as 6 percent today, yet can only lend at over 25 percent because they have to factor in the high cost of doing business and of course pass it on to the borrowers.

Last Tuesday, the CBN’s Monetary Policy Committee left rates unchanged, reiterating the limitations of monetary policy in reversing the current stagflationary condition in the economy, which it traced to supply and demand shocks.
Like several similar calls in the past, Emefiele urged government to roll out a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations.
But are the fiscal authorities listening? No wonder his vigorous defense of the CBN’s current policies geared towards engendering growth and curbing inflation at the CIBN dinner.
Emefiele, therefore, cannot claim to be happy with the scenario no matter how much cosmetic smile he wears – and no serious central bank governor in his shoes, should be.
He cannot be happy when he has had to run a whole Central Bank for over one year now without a board which is supposed to be taking critical decisions at the bank. President Buhari dissolved boards of agencies since June last year and till today, no sense of urgency to reconstitute them.

Emefiele, 55, cannot claim to be happy when even the Presidency helps in depleting scarce foreign reserves with the President’s numerous seemingly unprofitable travels, often with large delegation which costs the country millions of scarce dollars per trip.
He cannot be a happy central bank governor when the utterances and even body language of the president negate collective ideas and scare investors which he tries to woo.
No Central Bank governor can be happy working with a Commander-in-Chief who agrees with him one moment on a policy but disowns him the next moment he feels the policy is not delivering as fast.
Emefiele cannot be happy coping with endless requests for unavailable forex from the high and mighty to allow them import even what the country can comfortably produce if it puts its act together. Of course he is under immense pressure to review or cancel the 41 items which the CBN denies forex access for their import.
Nigeria at some point was receiving about $36 billion FX inflows monthly but today struggles to make up $500million. It is not a laughing matter. No Central Bank governor can be happy watching such situation except he doesn’t know or fails to accept that his job is on the line even when he has contributed nothing to it.
A central bank governor cannot be happy when a minister of agriculture, in an economy mouthing diversification and begging for jobs for its teeming youths and has nearly depleted its foreign reserves, would have the courage to demand an approval from the CBN for a long list (over 100 actually) of FX requests to import mere fish (worth over 600,000 tons) rather than finding ways to encourage local production.
No central bank governor can be happy when he is blamed for everything wrong with the economy forgetting that monetary and fiscal policies are complementary.
Emefiele cannot be happy when the fiscal authorities are simply snoring and therefore, cannot live up to complementary expectations. So, he had to take over the job of the Agric minister in finding solutions to reducing rice imports by encouraging local production through the successful Anchor Borrowers Programme. Yet, he is seen as demeaning the office of a central bank governor?

This is obviously not the best time to be a governor of the Central Bank of Nigeria.
So no matter the cosmetic face Emeiele wears, no matter how much he pretends that everything is okay, he is definitely not happy at this point or mildly put- not as much happy as he should be.

 

Onyinye Nwachukwu