Buhari and Emefiele’s monetary policy disaster

The economic challenges and strong headwinds facing Nigeria have not been properly addressed by political parties and candidates. For anyone with a deep understanding of the challenges of an economy that is tottering on bankruptcy, the postulations and promises of the candidates and their political parties are confounding. This discourse reviews a critical issue in the economy in the area of monetary policy and ends with questions on how presidential candidates will deal with the challenge.

The Central Bank of Nigeria and the Major General Muhammadu Buhari(retd.) led Federal Government have conspired and egregiously violated the provisions of S.38 of the CBN Act on advances from the CBN to the Federal Government for funding the federal deficit.The advances were in excess of the statutory limit – five per cent of the previous year’s actual revenue. We now have more than N22tn in ways and means, being high-powered money, not backed by value, pumped into the Nigerian economy and mismanaged by the administration. The administration could not pay back within the statutory one-year period. It has sent a request to the National Assembly to convert the advances into debt so that it can be securitised by a long-term bond.

There are matters arising out of this state of affairs. The first is about a President and Commander-in-Chief, the Minister of Finance, and the Chief Law Officer in the person of the Attorney General for the Federation, all conspiring to break the law. The Attorney General is included because he ought to have advised the President and the Minister of Finance properly and if they refused his advice, the coast was clear for him to do the needful. They conspired to form the guilty mind and went ahead to commit the offence through the physical act. Yes, it is an offence against the Nigerian people, a desecration of fundamental fiscal and monetary norms amounting to an abuse of office, which should have attracted impeachment and removal from office.

The second is about the constitutional role of the National Assembly in the exercise of the oversight role over the executive. The rubber stamp National Assembly saw nothing wrong in the advances, heard nothing wrong and continued the pretence that all was well and sang about it in their hosanna choir mentality. Despite the humungous remuneration paid to the members of NASS, they failed the Nigerian people and left their work undone. The third is that the CBN has been granted independence in its enabling law. The CBN ought to have resisted the attempt to violate its enabling law and ensure that it released advances in accordance with the law.  But the CBN governor saw himself as a politician and indeed, had sought presidential nominations in the ruling All Progressives Congress before he was stopped by Buhari.

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Furthermore, the same Debt Management Office that has been mouthing inanities on the sustainability of Nigeria’s debt, despite evidence to the contrary, is now sounding the alarm bell of Buhari leaving N77tn in debt for the next administration. The DMO had resisted all noble advice to begin to take steps to prune down borrowing while mouthing inanities like debt to GDP ratio, when it was clear to all that debts are not repaid with dead portions of the GDP that contribute nothing to the revenue. The foregoing demonstrates a failure of institutions and the rule by strong men and women who consider themselves above the law.

The president has forwarded a request to the NASS to essentially convert the huge ways and means to a loan; converted to a debt to be securitised by a bond.  This is simply asking the NASS to approve a loan request after the money has been drawn down by the executive and spent.  Nigeria is now faced with a dilemma – to simply continue making provisions for repayment within the budget which will be extremely costly because the money to do this will be borrowed at a higher interest rate or to go for a long-term bond which will be cheaper.

The recent attempt at redesigning the naira has further shown the flight from reality which has become the hallmark of CBN’s monetary policy. Across all the states of the federation and in all the banks, the new notes have been extremely scarce based on the very poor supply by the CBN. The author of this discourse was still paid with old notes in the last couple of days of withdrawing money from the banks. The CBN Director of Corporate Communications, Osita Nwanisobi, was reported in the front page of a major newspaper as stating that the fact of banks not having enough new notes was false and merely speculative and insisted on the sanctity of the January 31, 2023 deadline. Pray, how else do you describe monetary policy insanity? When a CBN spokesperson lies blatantly and continues marketing facts which he knows to be false and deliberately contradictory to the lived reality of the majority of Nigerians, then he and his bank are living in a different world and a different reality. Sane persons therefore ought to call him and his superiors to order and possibly consider consigning them to an asylum where they belong. A CBN spokesperson cannot be sounding combative like the media aides of the president or the aides of the ruling party. His response to monetary policy issues should be guided by evidence.

In consideration of the foregoing, it is not clear from the manifestos how whoever emerges as president in the next couple of weeks will deal with these issues especially, the humungous ways and means advances. Will he limit the advances to what is allowed by law or will he continue in the old manner? This is a challenge for all candidates, especially for a candidate who promised to continue Buhari’s legacy. It is not going to be rosy despite the election promises. The options and choices for the next president are limited to between a rock and a very hard place. There is no easy choice.

There is no need to rush currency redesignation and change in view of the limited capacity and lethargy of the CBN in meeting its statutory obligations. Rather, the CBN should work at its pace, which is beyond the January 31, 2023 date, to ensure that monetary policy implementation eases the severe economic burdens on the people, rather than increasing and multiplying it.

Finally, the CBN Act needs to be amended to provide punishment for key officers of state, from the president, finance minister, director of the Debt Management Office, the CBN governor and acquiescing key officers of the National Assembly who violate the rules on ways and means. The power to prosecute them should be left to the civil society (all Nigerians) and not any compromised attorney general who is an appointee of the President and serves at his pleasure.

Once more, happy new year to all Nigerians of goodwill.

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