CBN: Time to defend the integrity of our institutions

Of late, we have been shouting ourselves hoarse over the open takeover of the monetary policy powers of the Central Bank of Nigeria by the Nigerian presidency and ignorant politicians and how the CBN governor has acquiesced to the development without much of a fight.

We are all witnesses to the various monetary policy comments of the president and how the CBN has tallied along even when it was hurting the country and leading to a forex crisis.  The polity is also awash with the rumours that the CBN Governor had to sign an undertaking that in one year the Naira must be restored to an exchange rate not exceeding 250 to the dollar before the President reluctantly permitted the partialfloatation of the Naira in June 2016. As if to confirm the rumours, the CBN has done literally everything in its powers to still control the forex market from the back door without success.

True to type, the president has come out of recent to restate his opposition to the floating of the Naira and we have seen the actions being taken, including sending out security operatives to arrest Bureau de Change operators and being forced to sell the dollar at fixed prices to keep the exchange rate down.

This is highly unfortunate and is giving a very negative impression of the CBN and its ability to independently determine the country’s monetary policies.

Recall that late last year, Muhammad Sanusi II, the Emir of Kano and former governor of the Central Bank of Nigeria, weighed in on the bizarre economic management tactics of the federal government and the relationship between the government and the Central Bank of Nigeria claiming the CBN has been illegally funding the government (up to N4.7 trillion – trillion — equal to almost 50% of the FGN’s total domestic debt) and in clear violation of the Central Bank Act of 2007 (Section 38.2) which caps advances to the FGN at 5% of last year’s revenues. The Emir further described the relationship between the federal government and the Central Bank as unhealthy.

We need to restate that it is the duty of the Central Bank governor to guard the independence of the Bank and insulate it from political interference regarding monetary policy –exchange rate; inflation rate and interest rate. Investors and the market generally frown upon political interferences with monetary policy decisions and a critical component of the job of the head of a central bank is to take active steps to defend the independence and integrity of the central bank in monetary policy matters.  Already, the Chairman of the United States of America’s Federal Reserve Bank, Janet Yellen is already preparing for the threat posed by Mr. Donald J. Trump the President-elect with regard to the independence of the Bank.

But in Nigeria, the CBN governor appears to have been intimidated into surrendering the CBN to the politicians without much fight. This is most unfortunate.  The governor must realize that he has a sacred duty to defend the integrity of such a critical national institution and history will judge him harshly if he fails to or is even seen to be actively collaborating with those who seek to illegally hijack the powers of the CBN.

We are not unaware of the enormous coercive and manipulative powers of the Nigerian presidency. But that is no excuse to lamely surrender such a critical national institution to politicians who have no idea how to determine monetary policy. If the pressure is too much on him, he can do the next honourable thing as is done in saner climes – resign.