Can Yemi Cardoso Save The CBN?

Governor, Central Bank of Nigeria (CBN), Dr. Yemi Cardoso
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By Etim Etim

This headline presupposes that the Central Bank has been lost, destroyed or finally finished off by the former management. Even if that is not totally correct, many Nigerians believe that the sweeping off of Godwin Emefiele and his four deputies, the first such major overhaul in at least three decades, is a mere a cosmetic action that may just amount to treating the symptoms, while the ailment festers underneath. There’s no doubt that the bank’s reputation has been severely damaged in the nine years that Emefiele ran it. The last time the CBN was this harmed was during the regime of Sani Abacha when Paul Ogwuma was the governor. Last year, I wrote two articles criticizing Emefiele for dabbling into partisan politics, and pointed out the danger he’s plunged the institution into. I am sure that he’s learned his lessons the hard way.

But others believe that the scope of the challenges are well beyond the former governor. “Our problem is systemic and so every solution should go to the very root of the matter. How can we have a functional Central Bank when the country is buffeted by all sorts of systemic problems?”, asks a former director of the bank who retired last year after 33 years of service, in a long conversation with this writer.

He goes on: ‘’The Central Bank does not operate in a vacuum.  It is part of Nigeria, and is managed by Nigerians; and so, the bank would have all the tendencies that we are known for; which exist in other Nigerian institutions. For a long time, NNPC refused to remit crude oil exports proceeds into the federation account. How then could the CBN have built up the reserves? Why are we blaming Emefiele for the high exchange rate whereas the country’s crude oil sales were going elsewhere? Does anybody in his right sense believe that Emefiele had embarked on the Naira redesign on his own; without approval of his bosses? Why has the government not arrested and prosecuted Emefiele’s bosses who asked him to do the Naira redesign? How can the government borrow a staggering N23 trillion through Ways and Means, and you don’t expect to have a run-away inflation? The fundamentals of this economy are very faulty. We have a very weak economy; high levels of corruption; low productive capacity; low export base and massive importations; yet you expect Emefiele to perform magic and bring about low exchange rate? Why is Emefiele the fall guy? Where are the people who gave him the approvals for his actions’’?

The Tinubu administration believes that the former CBN governor and some of his lieutenants have more serious questions to answer; and that a new institution will emerge from the ruins of the last nine years. Emefiele was appointed in June 2014 by President Goodluck Jonathan for a 10-year tenure of two terms. He would have completed the two terms next June. Soon after he assumed office, there were rumours that politicians and officials of the government of the day have looted the Bank massively to fund the election campaigns of 2014 and 2015. There were talks of dollars being withdrawn from the bank and distributed to party officials in Lagos and other South West states in what was termed “Operation Capture the South West’’. Tinubu was then a chieftain of the opposition party. He saw it all. While some people argue that the Governor should have blocked the illicit withdrawals, others contend that the CBN Governor has no powers to disobey a directive from the President. “If a President sends a memo to the CBN Governor that he needs $500,000 in cash this evening, the Governor will comply without hesitation or asking a question’’, says a banker who does not want his name in print.

 If it is so easy to take money from the vault of the Bank, then this country stands no chance of survival. There is no assurance that the practice will not continue, no matter who the Governor is. I am one of those who believe that Emefiele should have stood up to the politicians who asked him to do wrong; otherwise, he should have resigned. The former governor is also accused of facilitating round tripping of the dollar – buying cheaply at the official rate and selling at a huge margin at the market rate – for many influential members of the cabal of the last administration, in addition to many cases of abuse of office and dishonesty. But where was President Buhari? Was he not aware?

I have been greatly troubled by the revelations coming from the CBN since Emefiele was arrested in Lagos in June. It is quite an irony that it is President Tinubu, a man who is not renowned for any anti-corruption posturing, that is championing the investigations into the corrupt practices that occurred under President Buhari, a man who was honoured by fellow African leaders for his anti-corruption credentials. Wonders shall never end in this land! If Godwin Emefiele is eventually prosecuted and convicted, or if a plea bargain deal is struck between him and the authorities, President Buhari will have to explain if he was under a spell when all these were happening.

Now, can Yemi Cardoso rescue the Bank and redeem its reputation? The verdict is mixed. For ordinary Nigerians, nothing will change apart from the faces on the executive floor of the bank. They believe that the game will continue and will play out in different ways under this dispensation. Others are more hopeful. But Prof. Akpan Ekpo, an economist and former VC of University of Uyo, who had been a board member and MPC member of the bank, says Mr. Cardoso and his team should focus on restoring the reputation of the institution; stick to monetary policy and exchange rate management and should stress managed float for the Nigerian currency. “There is no convincing argument for floating the Naira argument for floating the Naira which is not a convertible currency”, he told me. He notes that the Bank should extend the period of allowing both the old and new notes to be used simultaneously to next May and coordinate well with the fiscal side of the economy to ensure stability. Drawing from his experience, Ekpo says the CBN Board and MPC should be made up of technocrats (economists) rather than politicians because “the CBN deals with money and financial matters, and to a large extent, should not be politicized. The MPC is the engine room of the bank and the outcomes of their meetings are derived from evidence-based research. It is a very technical committee’’. Serious countries the world over take measures and go to great extent to hire the best to manage their Central Banks and insulate them from politics and political influences. The last Governor of the Bank of England was not even from the UK. He was a Canadian.

The banking industry has been quite befuddled and, in some cases, embarrassed, by the Emefiele saga, especially since he was one of them until his appointment in 2014, coming on the heels of other eminent bankers like Paul Ogwuma; Joseph Sanusi and Sanusi Lamido Sanusi who also became governor. But the bankers are typically reticent and deferential when it comes to matters concerning their regulators. No banker will publicly excoriate a regulator, whether CBN or SEC or NDIC. But I managed to speak to the CEO of one of the Big Five banks on condition of anonymity on what the Cardoso team should do to save the CBN. “I am not sure that there is much to add to the suggestions that have been widely made, and that is that the new team should fix the FX liquidity crisis and the attendant FX rate issues’’, he spoke under his breath. “They should execute consistent, disciplined and fairly applied monetary policy; better coordination between fiscal and monetary policy; and finally rebuild the integrity of the Bank to be achieved through proper governance in decision making and respect for contracts. On governance, the directors and deputy governors should be empowered to take decisions that are within their portfolios without delegating (or being asked to) delegate upwards’’.

 If the CEO’s thoughts and Prof. Ekpo’s suggestions sound alike, it is because the solutions are, as in many cases, are within reach. But can Yemi Cardoso turn the CBN around? Does the administration have the political will? I shall be here in another five years to report it.

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