The above is the screaming headline from a report by Bloomberg on recent developments in the Nigerian foreign exchange market leading to the organization pointedly wondering aloud if the new governor of the Central Bank of Nigeria is really his own man!
An unbiased assessment of this sweeping pronouncement will be to ask if this conclusion is not rather hasty, brash and probably thoughtless. We accept that the morning can show the day but, for goodness’ sake, Emefiele has just been given a five-year tenure as the CBN governor and he just clocked nine months on the saddle yesterday, March 3, 2015, having assumed office on June 3, 2014. Therefore, inasmuch as one would expect to receive feedback on performance continuously from him, being a public officeholder, it is not to the extent of reaching such a far-reaching and damning condemnation.
My immediate take is that most of these foreign interest-based publications would often make a judgment based on their experience. Also, following their tracking of particular developments, they advice on expected outcomes and, often, economic agents proceed to take positions based on such sentiments which often prove costly when not borne out in reality.
The governor in this respect had pointedly warned speculators to be wary that with him they stand the chance of having their fingers burnt if they persist in speculating with the exchange rate of the naira. It is not unlikely that some wagers have taken a bet that the official rate of exchange of the naira would at this time settle well above the 200 mark, and it is not unlikely that they have lost their bet which might be the reason for this rushed castigation.
This report by Bloomberg makes the observation that the governor of the central bank is stemming currency declines in a manner that could damage the government of Africa’s biggest oil producer and economy ahead of the March 28, 2015 elections. It is claimed that the governor is putting off painful adjustments until after the elections. Those who have tracked the outcome of the meetings of the Monetary Policy Committee would attest to the fact that the committee has conveyed the unmistaken impression of the independence of its membership as they take decisions, otherwise some of the recent decisions taken by the committee ran contrariwise to the publicly advertised position of the governor at his confirmation hearing.
One recalls here that the governor, during his confirmation hearing, clearly decried the prevailing high interest rate in the economy as anchored by the Monetary Policy Rate, then at 12 per cent, and took a stand against devaluation of the naira as he correctly argued that considering the undiversified nature of the export base of the country, devaluation was an ill wind which would no
Boniface Chizea
t blow the country any good. But much to the surprise and consternation of most compatriots, the meeting which followed the commencement of the fall in oil price saw the naira devalued officially by 8 per cent with the MPR increased by 100 basis points. This, of course, must not be interpreted to mean that the focus has been abandoned. What has happened is just a detour to avoid a looming obstacle on the route to the preferred destination. But no doubt if the governor had his way, he could at best have delayed such a decision from taking place so early in the day. But the decision of Monetary Policy Committee should not be unduly circumscribed by individual views, no matter how dominant. What is paramount and must not be compromised and must therefore be prioritized is the overall interest of the macro economy and the wellbeing of a generality of the Nigerian population.
Therefore, it is only fair that the MPC should be given the benefit of the doubt if following the last meeting on February 4, 2015 it took bold decisions with regard to the relevant macro variables. And if the committee was overly concerned with regard to how its decision would impact the anticipated elections, it would not have contemplated a devaluation of the naira and a hike on the MPR on the eve of the elections. The committee under this governor enjoys and jealously guards its autonomy as it discharges its assigned mandate. And pray, how can not allowing the naira to go on a freefall be adjudged as attempting to damage the government of Africa’s largest oil producer?
Boniface Chizea
