History has taught us – and scholars are now documenting the lessons – that a great deal of the difference between developed/prosperous societies and those that are not are traceable to the presence and quality of institutions. For instance, Daron Acemoglu and James Robinson – in their highly acclaimed book “Why Nations Fail” conclusively show that the reason why some nations are rich and others poor, divided, as it were by wealth and poverty, health and sickness, food and famine, is as a result of the presence and quality of man-made institutions in the former and its absence or weakness in the latter.
To drive home their point, they cited the example of Korea – a remarkably homogenous nation, yet the people of the South are among the richest while those of the North are among the poorest in the world.
The contrasting fortunes of the two Koreas are in the nature and quality of their economic and political institutions. While those of the South are open, encouraging innovation and full participation in the economy coupled with a workable political system that is fully accountable and responsive to citizens, those of the North are closed, dependent on individuals and non accountable and responsive to citizens.
That is why countries that seek to build prosperous and sustainable societies anchor them on strong institutions rather than personal rule or strong men. Institutions are impersonal and enduring and not subject to the whims and caprices of leaders. They outlive individuals and guarantee progress regardless of the people inhabiting them at any point in time.
It is in this light that we view the constant interferences with the Central Bank of Nigeria (CBN) by politicians as dangerous and detrimental to the economy and the image of the country.
Since the inception of the current democratic dispensation, but most especially, since the inception of the current administration, politicians have more or less sought to usurp or even usurped the powers of the CBN and the monetary policy committee to determine the country’s monetary policy.
It will be recalled that in August, Mr El Rufai, the Kaduna state governor, pointedly asked the Central Bank of Nigeria to reduce the prevailing interest rates or that ‘they’ (politicians) will take over and legislate the level of interest rate in the economy.
But Mr El Rufai, a close confidant of the President is not alone. Indeed, even the president has, since assumption of office, interfered severally with the autonomy of the CBN and has made definitive Monetary Policy pronouncements. In Paris, France, in September 2015, the President was quoted as saying: “I don’t think it is healthy for us to get the naira devalued.” when quizzed on the shortage of foreign exchange that decision will cause, he argued that “the central bank is providing ample foreign exchange to “essential services [and] industries.”
Also, in a widely circulated interview with Aljazeera, the president pointedly said the Nigeria will not devalue the Naira because devaluation is not good for a country like ours that imports everything including toothpicks. Expectedly, after the pronouncements and even before that, the CBN has lost its independence to determine the country’s monetary policy and has relied instead on reading the ‘body language’ of the president and taking actions that will conform to that ‘body language.’ Therefore, the MPC’s decisions are not being seen as independent decisions but tailored by the wishes of the President. The markets usually frown on such political interferences with Central Banks and monetary policies.
Even when the president was made to literally eat his words and allow for a floating of the naira in the face of severe forex scarcity, he still keeps making comments to show that he may still reverse the decision. At a gathering of business people recently, the President was quoted as saying:
“I don’t like the returns I get from the CBN (Central Bank of Nigeria)… “How much benefit can we derive from this ruthless devaluation of the naira? I’m not an economist neither a businessman – I fail to appreciate what is the economic explanation.”
As it is becoming obvious, the results of all these interferences on the economy has been very negative and has rather portrayed the CBN as a rudderless institution with no strategy but rely exclusively on its political masters for important decisions that should normally be the exclusive preserve of professionals.
Politicians must realise that prosperous and sustainable societies are built around respect for the laws of the land and on strong institutions. This administration must not set a bad example of trampling on and consequently destroying institutions while trying to build a prosperous society. It never works!
We urge the government and politicians to respect the provisions of the law and allow the CBN and the MPC the independence to determine the country’s monetary policy.
