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Former CBN Deputy Governor Moghalu Blames Emefiele for Nigeria’s Forex Crisis

…Said CBN under Emefiele Politics, no longer independent

A former Deputy Governor of the Central Bank of Nigeria, Professor Kingsley Moghalu, has said the apex bank governor, Mr Godwin Emefiele, should be blamed for the crisis in the foreign exchange market in Nigeria.

Moghalu said so on Thursday in an article titled “The Nigerian Economy: Between the Federal Ministry of Deficit and Debt and the Central Bank of Politics”.

He said that under Emefiele’s leadership, the CBN had lost its independence as the apex bank saw itself as a quasi-fiscal agent, using its ability to print money for the incumbent government.

Over the past few years, the nation has relied heavily on CBN deficit financing, with debt peaking at N19trn in June 2022.

The CBN had struggled to maintain the value of the naira in the foreign exchange market with little success.

The naira depreciated in the parallel market by 150 naira as the exchange rate rose to 710 naira to the dollar on July 30, 2022 from 560 naira to the dollar on December 31, 2021.

As a result, the gap between the official exchange rate and the parallel market exchange rate widened to 281 naira or 65.5% per dollar at the end of July, from 189.95 naira or 45% at the end of June.

The CBN had made many attempts to defend the Naira, but the currency fell massively in the second quarter of 2022.

To defend the Naira, the Central Bank had introduced a host of regulations, ranging from a ban on the sale of dollars to BDCs to the RT200 scheme, which is designed to offer a N65 rebate on export earnings.

Nevertheless, the CBN’s intervention comes at a cost in terms of Nigeria’s foreign exchange reserves, which have not grown at the expected rate despite high oil prices.

Year-to-date, the reserve has lost $1.37 billion, falling from $40.52 billion in December 2021 to $39.16 billion in June 2022.

In July alone, Nigeria’s foreign exchange reserves depreciated by $80.25 million despite the oil boom and the Central Bank’s aggressive policy to attract the dollar into the economy.

The decline in the supply of foreign exchange contributed to the downward trend in the value of the local currency in the official market, amid the CBN’s interventions.

Emefiele has recently come under attack over some of its policies and statements which experts say could have a negative impact on the financial market.

For example, he had put the blame for the decline in the value of the currency on different stakeholders.

In 2018, Emefiele said Nigerians’ huge appetite for imports was responsible for the decline in the value of the naira. He then banned the accessibility of Forex for the import of 41 items.

In July 2021, he also spoke out harshly against Bureau De Change (BDC) operators accusing them that their illegal currency trading was negatively impacting the Naira.

In September 2021, Emefiele blamed Aboki FX for the depreciation of the naira the country had then suffered and threatened to arrest the mastermind behind the forex intelligence firm. Despite this threat, the naira continued to perform poorly against the dollar in the foreign exchange market.

Earlier this year, the CBN Governor again blamed the depreciation of the naira on the activities of those involved in money laundering, terrorist financing as well as politicians.

Earlier this week, he blamed the Nigerian National Petroleum Company Ltd, saying the National Oil Company had failed to return currency to government coffers.

However, investigations by THE WHISTLER showed that contrary to its claims, a whopping $2.7 billion was paid into the NNPC account with the CBN in the first six months of this year.

But Moghalu, in his article, said the CBN’s failure to play its role as independent manager of the economy has allowed those with ‘special interests’ and incompetent political leaders to ‘kill’ the economy. .

He said: “It is not often that I agree with Nigerian Finance Minister Zainab Ahmed. Not because of anything, but because I fundamentally disagree with what I consider his fiscal mismanagement of Nigeria. But at least she recently gave an honest assessment of how broke Nigeria is now.

“As regards my dearly beloved Central Bank of Nigeria and its Governor, the less said the better. For this, I believe, is the ultimate calamity. Why? Normally the Minister of Finance responds directly to President.

“Where a federal government is not reformist like in the days of President Obasanjo, the minister may be subject to negative political pressure if he is not a strong, respected and accomplished figure like Ngozi Okonjo-Iweala, which politicians were wary of because she wasn’t exactly into bus trips to a chance disguised as “fiscal management.”

“Furthermore, President Obasanjo protected her and her reforms. President Goodluck Jonathan strongly supported it, even if “in parallel, other activities maintained beyond its attributions, for example in the oil sector, continued”.

“But where a central bank is genuinely independent, as the CBN was in our time, it can act as a check, in the national interest, on the worst excesses of bawdy politicians who often dot the Nigerian landscape with high profile public appointments. level.”

He added: “In the current scenario, the management of the Bank clearly does not believe in the concept of central bank independence in its operations. Instead, the Bank asks “how high?” once the presidency said “jump”. He sees himself as a quasi-fiscal agent, using his ability to print money, for the government of the day.

“This is what the rent seekers and the parasites who profit from this situation justify as an ‘unorthodox’ central bank (like, of course, the central bank in Zimbabwe and Venezuela).

“Well, what’s the result today?” Between mismanaged fiscal space and a deeply compromised central bank that has sold its soul to politicians and private sector profiteers, the wheels have come loose in the Nigerian economy.

Moghalu added that it is ironic that the CBN is printing money for the government through “illegal ways and means by lending” only to start pretending to fight inflation by raising the key rate.

He said, “If the CBN is busy printing money for the government through illegal ways and means lending, then pretending to fight inflation through late increases in the policy rate and what a commentator rightly called the “questionable” cash reserve ratio policy on commercial banks, how to effectively fight inflation?

“Please don’t tell me that ‘inflation is a global phenomenon’, just as some mischievously or ignorantly refer to the levels of debt-to-GDP ratios of advanced and productive economies.

“There is a difference between real global challenges and us fundamentally killing our own economy with our own hands in the service of corruption, vested interests and incompetent political leaders.

“The combined fiscal, currency and forex calamity overseen by the Federal Ministry of Finance, Budget and Planning, on the one hand, and CBN management over the past 7 years, on the other hand, is a tragedy for Nigeria that could have been avoided. The effects on the life of the average Nigerian are truly sad to see.

“This is a cautionary tale for the next President of Nigeria. If we are to renew and revive the economy of Nigeria, the right policy will be to do the right thing. So be it for the statutorily independent institutions. Let the competence to govern the critical aspects of our national life.After all, when the positive results finally arrive, the political leader will also take credit for them.

The former CBN Deputy Governor in his article further argued that the problem is not an absence of competence in economic management in Nigeria but an absence of competent political leadership.

“The CBN is today the largest repository of competent technocrats in the Nigerian public sector. In the past, other government agencies have relied heavily on the Bank for the secondment of skilled staff.

“The same caliber of economists and technocrats is still there. Politics at the top has tied their hands,” he concluded.


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