The CBN Under Godwin Emefiele

CBN Governor, Mr. Godwin Emefiele


By Umar Musa

In the opinion of many experts on the economy and the financial markets, no governor of the Central Bank of Nigeria has gone through the turbulence Godwin Emefiele had weathered in the last four years. Whether its economic recession, inflation or exchange rate, Nigerians had looked on anxiously for solutions from the CBN. And while all problems have not been solved, no one would deny that the ship had remained stable in the violent storm.

This must be why Mr Jim Ovia, the Chairman of Zenith Bank PLC, at a ceremony in December 2017, argued that Emefiele’s performance and current results “puts him as the best Central Bank Governor in the history of Nigeria.”

In truth, when Emefiele was appointed in June 2014 as Governor of the CBN to replace Sanusi Lamido, now Emir of Kano, he elicited high hopes. Coming from the private sector and as a high-flying Managing Director of the Zenith Bank, no one expected less from him.

He mounted the saddle at a time the economy had started weakening. So many things were happening at the same time. His first two years were tumultuous not just for Nigeria but the global economy, arising largely from the external shocks that hit, particularly the commodity exporting countries.

The shocks led to the plummeting of Nigeria’s reserves as crude oil price fell to a point where it dropped by February 2016, to as low as $28 per barrel. The fall was expected to be calamitous for the Nigerian economy which depended almost 90 per cent on oil revenue. And when you compare this price with the previous years when it averaged $100 per barrel for five straight years from 2009 to middle of 2014, the depth of the expected gloom becomes more glaring.

To make matters worse for many emerging and frontier markets including Nigeria, there was also the shock of the United States normalization which took about $40 billion away from these markets back to the US by the last quarter of 2016. There were also geopolitical tensions across the world and within Nigeria which affected the flow of funds. All these led to negative growth, and by the third quarter of 2016 it climaxed to a negative 2.3 per cent.

This period also saw inflation hitting the economy badly. By January 2016, inflation was just nine per cent, but by January 2017, prices have gone up and inflation had hit up to 18 per cent and Nigerians became uncomfortable.

But in keeping with his promise to run a central bank that spends its energies on building a resilient financial system that can serve the growth and development needs of the country, he and his team went to work. They came up with different measures to check inflation, stabilize the Naira and put the economy on a right footing.

The CBN was prompted to take drastic action by introducing the multiple forex system after some initial trials.  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.

The opening of the Investors’ & Exporters’ Forex Window was particularly exciting to foreign investors who took full advantage of it. In a period of six months, the window has attracted about $10 billion in inflows into Nigeria.

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.

The CBN had also  in June 2015 excluded 41 items from being imported with forex accessed from the official forex market. This has increased patronage for local goods and stimulated local production significantly. 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.

To encourage diversification of the economy and stimulate growth in the agriculture sector in line with President Muhammadu Buhari’s plan, an innovative agric credit plan was put in place. The Anchor Borrowers Programme has transformed the agric sector in the country. Before we introduced the ABP, farmers go to farm rice and all the yield they were getting was one to 1.5 metric tonnes per hectare. But today farmers are getting yield as high as eight metric tonnes per hectare, reducing their costs and making it possible to make their money in rice cultivation.

The efforts of Emefiele’s CBN have not gone unnoticed. He has received several awards at home and abroad. The one that stands out was the 2017 “Best of Africa Achievement Award” given to him by Forbes in Washington DC, United States of America. Forbes Emerging Markets honours a person whose achievements falls within the mission of the organization, which is to promote further investment in Africa by United States investors. The only other Nigerian who had received the award is Aliko Dangote.

Forbe’s Chief Executive Officer, Corporate Council on Africa, Florizelle Liser, said Emefiele merited the honour because the body was happy to see the work that is being done on the Ease of Doing Business in Nigeria and they believed it would pay off. He said: “Many of our members welcome it as an opportunity to see how they can trade more with Nigeria and invest more in Nigeria.”

In particular, the CBN’s support for agricultural development was commended as it would help the growth of agric- related businesses in the country.

There is no doubt that Emefiele has shown commitment to his philosophy of ‘Produce, add value and export’ (PAVE) and this has become evident in the last four years he’s led the CBN.Emefiele is a resilient financial engineer in a resilient economy.

––Musa wrote in from Kano