The rise and fall of CBN governor Emefiele

The latest twist in the tale of Nigeria’s all-powerful Central Bank Governor, Godwin Emefiele, is his suspension by President Bola Tinubu amid an investigation of his office and planned financial sector reforms.

On Friday evening, Tinubu ordered the immediate suspension of Emefiele from office as the governor of the Central Bank of Nigeria (CBN). He has been made to hand over to the deputy governor in charge of operations, Folashodun Shonubi.

There’s usually no way back for a suspended CBN governor in Nigeria. Emefiele himself was appointed in 2014 following the suspension of then CBN Governor Sanusi Lamido by President Goodluck Jonathan. His reappointment in 2019 saw him become the first CBN governor to secure two terms in over two decades.

Emefiele’s fall from grace is telling. He has gone from the all-powerful figure who decided who got Nigeria’s scarce dollars or benefitted from trillion-naira CBN intervention funds by the stroke of a pen, to a man now in the custody of the DSS over allegations of money laundering and terrorism financing.

The suspension of the emperor, as he is referred to by several bankers due to the imperial way he ran the monetary affairs of the country, is being interpreted as the latest move by President Tinubu to sanitize monetary policy.

Under Emefiele, Nigeria has operated a multiple exchange rate system that has sowed confusion among foreign investors and starved the country of dollars. The practice drew the criticism of Tinubu who used his inauguration speech to call for its end.

Fixing the broken foreign exchange market in Nigeria is seen as a crucial step in attracting foreign investment back to Africa’s largest economy. But for many investors, Emefiele’s removal as CBN governor was just as crucial.

The CBN’s management of the currency had created room for arbitrage and corruption, with the parallel market premium averaging N65.8/$ over the official rate between 2015 and 2021, much higher than the N5.1/$ premium between 2004 and 2014.

Emefiele’s suspension is likely to now pave the way for a market-reflective official exchange rate. That will be followed by a narrowing of the wide gap between the official and parallel market rate, according to some analysts who spoke with BusinessDay.

Apart from his failed attempt to run for presidency which would have pitted him against Tinubu in the battle for who represents the ruling APC party, Emefiele did little to endear himself to Tinubu.

The former Lagos state governor, Tinubu, had during his campaign accused Emefiele of trying to scuttle his chances of winning the elections by going through with a naira redesign policy that mopped up cash in the system and stoked anger towards the ruling party.

Emefiele’s relationship with Tinubu’s predecessor, President Muhammadu Buhari, was quite the opposite.

The 61-year old’s unorthodox monetary policies were supported by Buhari whose orders he followed by resisting calls to allow the naira to weaken after a crash in oil prices hammered petro-currencies.

Emefiele’s tenure, which began under former President Goodluck Jonathan in 2014, has been characterized by an unprecedented rise in inflation and collapse in the value of the local currency.

Nigeria’s headline inflation went from 8 percent when Emefiele first assumed office as governor in 2014 to as high as 22 percent as at April 2023, according to NBS data.

It was under his watch that the CBN violated its own law by giving the government more loans than the law permitted thereby stoking the inflation he was trying to curb.

The CBN’s loans to the government otherwise known as ‘Ways and Means’ jumped from N790 billion in May 2015 to N23.7 trillion in 2022.

Between 2021 and 2022, the CBN’s loans to the government went from N17.5 trillion to N22 trillion which means some N4.5 trillion was added in 2022. That’s almost at par with the total revenues earned by the government for the whole year when the figure should never exceed five percent of public revenue, according to the CBN Act.

Curious policies like the restriction of importers of some 42 items from accessing dollars at the official market all but served to expose his warped ideas about monetary policy.

He resorted to suppressing demand for dollars when the expectation was for him to seek ways to improve dollar supply.

Even when his policies fell flat on their face no one could hold him to account. The bankers never criticized or questioned him not even when he would routinely debit them for breaching a rigged lending guideline that required them to lend 60 percent of customer deposits.

The banks were also subjected to one of the highest Cash Reserve Ratios in the world at an effective rate of around 40 percent. Despite being unable to do business with as much as 40 percent of total customer deposits, the bankers never openly challenged him, preferring to speak to the media off record instead.

His time as governor has also coincided with an increasing lack of transparency at the apex bank which has not published its financial results since 2018.

Emefiele repeatedly got away with murder but the chicken may have finally come home to roost for him.