Emefiele: A central bank governor in the politician’s image

Analysts set agenda as Buhari nominates Emefiele for 2nd term

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President Muhammadu Buhari got his undeserved, unmerited second term. In tow, Godwin Emefiele, central bank governor, got his too! Both failed woefully in the management of the economy in their first terms and would not have qualified for a second term in meritocratic climes. But Nigerians rewarded Buhari’s poor first-term performance with a re-election; in turn, Buhari rewarded Emefiele’s first-term underachievement by reappointing him for another term of five years.

Of course, Buhari reappointed Emefiele because he pursued, almost without reservation, the president’s statist and illiberal economic agenda, including: propping up favoured sectors, notably agriculture and manufacturing, with billions of naira; protecting these sectors from international competition through high tariffs, exchange control and outright import bans; feeding Buhari’s deficit-financing by extending massive overdrafts to his government; and, of course, like Buhari, not wanting to “kill the naira”; so, instead of liberalising the foreign exchange market and allow the naira to adjust to its true market-determined level, he is operating different foreign exchange windows that foster different exchange rates, which distort the economy and discourage foreign investors.

Surely, if the consensus is, as it is, that President Buhari failed economically in his first term – and the evidence of appalling performances across all economic indicators proves this – then Emefiele cannot insulate himself from that failure because he was the enthusiastic driver of all the policies behind it. Indeed, he has led the central bank like the omniscient head of Gosplan, the state committee that ran the Soviet Union’s planned economy.

To be sure, Emefiele is the most powerful central bank governor in Nigeria’s recent history. Over the past four years, he has been the central bank governor, the de facto finance minister and the de facto coordinating minister of the economy, all rolled into one! When President Buhari did not have a finance minister and an economic team in the first six months of his administration, Emefiele effectively combined the roles of central bank governor, finance minister and head of the economic team. He travelled with Buhari around the world, acting as Nigeria’s finance minister and the president’s chief economic adviser.

At a time of deep economic/financial crisis, no serious country puts the running of its economy solely in the hands of a central bank governor. The US didn’t do so during the 2008 global financial crisis; in fact, President Obama’s first act, as a newly sworn-in president in January 2009, was to push the appointment of Tim Geithner as Treasury Secretary through Senate confirmation. But with the central bank taking directives from the presidency – the common phrase was “Presidency directs central bank to …” – Emefiele gained the confidence of the president. Indeed, Buhari would have further delayed the appointment of a finance minister, but for widespread criticism that the delay was spooking the markets.

Of course, when Buhari eventually appointed a finance minister, she, Kemi Adeosun, was so lightweight, with no international standing or even gravitas within the cabinet, that Emefiele effectively doubled as central bank governor and de facto finance minister throughout her tenure. Truth is, where a finance minister is strong and capable, the central bank governor would focus on his core roles of ensuring price stability and regulating the banking/financial sector, as Emefiele’s predecessors, Professor Charles Soludo and Sanusi Lamido Sanusi did, and, indeed, as Emefiele himself did in his first year as central bank governor when Dr Ngozi Okonjo-Iweala was the finance minister.

However, under the Buhari administration, Emefiele has switched the central bank into extremely dirigiste, statist and mercantilist modes, pushing Nigeria into a closed economy through hugely illiberal macro- and micro-economic policies.

But here is an interesting question: Would Emefiele have pursued the same policies he spearheaded under the Buhari administration if he was still CBN governor under President Goodluck Jonathan, with Dr Okonjo-Iweala as minister of finance and coordinating minister of the economy?

The question is pertinent because Dr Okonjo-Iweala believes that the Buhari administration worsened Nigeria’s economic situation. In her book, “Fighting Corruption is Dangerous”, Okonjo-Iweala said that, despite the collapse in world oil prices and the steep economic decline, the Jonathan government took measures that “kept the economy in positive growth territory in 2014 and the first quarter of 2015, when we left office”. Then, she added: “In contrast, as oil prices continued their downward trend in 2015 and 2016, economic policy responses were inadequate or outright wrong; a disjointed monetary and exchange rate policy damaged investor confidence, led to capital flight, and ultimately led to economic recession for the first time in two decades”.

Clearly, Emefiele did not recommend the “outright wrong” and “disjointed” policies he later pursued under Buhari’s government to the Jonathan administration in his first year as CBN governor. So, given the same circumstances, why would a central bank governor behave differently under two different presidents?

Well, political economists would explain such behaviour as a public choice problem. For instance, the objective of economic policy is to maximise social welfare, and the consensus among welfare economists is that the general good is best promoted through competitive markets and integration into the world economy through open trade policy. But, according to the public choice theory, a central bank governor serving under a statist president may, for self-preservation, pursue policies aimed at pleasing the president but which lead to what the economist John Williamson called “social ill fare”!

Yet, a truly technocratic central bank governor, while being politically aware, must know how to say “no” to a president. For instance, Urjit Patel resigned as governor of the Reserve Bank of India in December last year reportedly because of Prime Minister Narendra Modi’s attempts to undermine the bank’s independence. Also, recently, two of President Trump’s proposed candidates for a Federal Reserve’s governor were forced to withdraw after criticism that “they would not be independent enough from Trump”.

But, in Nigeria, every critical state institution is politicised – the military, EFCC, the CBN etc – and most so-called technocrats are politicians in disguise. Emefiele is one of them. Take one example. During the presidential election, the PDP’s presidential candidate, Atiku Abubakar, criticised the CBN’s foreign exchange policy and said that, if elected, he would not renew Emefiele’s appointment. What did Emefiele do? Well, he fired back, telling Atiku in a statement: “Don’t drag Nigeria back to SAP era”.

Surely, a technocratic and apolitical central bank governor shouldn’t interfere in partisan politics in that way. In 2016, during the US presidential election campaign, Donald Trump said that, if elected, he would not renew the appointment of Janet Yellen as chair of the Federal Reserve. Professor Yellen didn’t issue a statement criticising Trump’s economic policy. But Emefiele couldn’t resist joining the political fray.

Furthermore, by criticising the liberal ethos of the structural adjustment programme, Emefiele was taking an ideological stance in support of Buhari’s statist ideology. But Nigeria’s economy was better off under SAP than under Buhari’s socialist military regime and under his current statist administration. Emefiele should read a speech by one of his predecessors, Charles Soludo, entitled “Avoiding the mistakes of old Buharinomics”.

Professor Soludo argued that, since SAP, “there is a broad consensus on continuing progress towards a competitive market economy framework”. That consensus broadly continued during the PDP’s 16-year rule, particularly under Presidents Obasanjo and Jonathan. But with his socialist policies, Buhari, aided by Emefiele, has shattered the consensus.

But if the current statist, anti-business, anti-free trade and open market policies continue, with Nigeria isolating itself from the global economy and refusing to join AfCFTA, this country’s economy would be deeply uncompetitive, inefficient and unattractive to foreign investors, with wide-ranging adverse consequences. Emefiele should reflect on this, being his and Buhari’s legacy, as he develops his next five-year agenda!


        Olu Fasan


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