Central Bank governor Godwin Emefiele has been in the news, facing challenges occasioned by his partisanship and involvement in politics. The overlying challenge moving forward is not only finding a less political replacement but also salvaging the independence of the central bank in an overtly political landscape.
Editor’s note: This essay is available in our print issue, Godfathers: An Introduction. Buy the issue here.
A legacy of extended military rule in Nigeria is the often incessant fawning over the president that government officials do. Appointees were careful to ensure that senior leadership did not suspect disloyalty and plot their removal in the politically charged environment that multiple coups left. It gave rise to an intense cult of personality, where appointees began to ‘serve at the pleasure of the president’. The transition to democracy did little to change that, especially as appointments to public positions—partisan or independent—often come with the need to stay on the individual’s good side to remain in office.
This is the challenge that Godwin Emefiele faced when, little than a year after being appointed governor of the Central Bank of Nigeria, he had to work with President Muhammadu Buhari; the man who had defeated his initial appointer at the polls, then-president Goodluck Jonathan. Emefiele’s ability to develop ties with the new government, assert himself over a more pliant finance minister and eventually attempt to run for president speaks volumes to his capacity to play politics from a position that should be fairly insulated from it.
THE CHALLENGE OF THE JOB
Central Banks are empowered to address monetary policy concerns, supervise the country’s financial system, and manage its legal tender and macroeconomic stability. The major areas handled by the central bank double as the challenges faced in its management. These are monetary and fiscal policy; where monetary policy refers to the central bank’s activities and how they impact the circulation of money and credit in an economy and fiscal policy is within the purview of the government, its decisions around taxation and spending. In a sense, the CBN is meant to serve as a check on the excesses and potentially dangerous whims of the government of the day.
The government has converted what should be a serious relationship guided by legal provisions to a more familiar affair, like a child and the ‘bank of mum and dad’. This lends credence to the furore around the N23.7 trillion ‘ways and means’ restructuring request, currently at the Senate, to be included in the 2023 budget. ‘Ways and Means’ are loans or advances that the CBN makes to the federal government to address emergencies in anticipation of a payback. Financial bodies like the International Monetary Fund and the World Bank have kicked repeatedly against these loans, warning against its effects on inflation. While financing the government’s budgetary shortfalls is legally provided for, the CBN Act of 2007 puts the limit at a 5 per cent threshold – a bar that the government breached after borrowing N6.3 trillion from the bank in the first 10 months of 2022. Simply put, the Emefiele-led CBN has enabled the government forego necessary cost cutting measures.
It might explain the administration’s lack of urgency in implementing the Oronsaye White Paper report, which sets out to reduce the bloat in Nigeria’s public service architecture, and actively drive better investment vehicles, such as the African Continental Free Trade Agreement. It could also explain why the government insisted on a subsidy on petrol products that is clearly too much of an expense for the country.
The most important argument for economists is this; if the Central Bank is not independent, investors do not have an institution to trust against the whims and caprices of government policy. The trade-off for an independent body is that the bank’s governor is given an overlapping term; a long-term contract that should insulate them from having to respond or interact with the vagaries of a presidential term.
In the United States, governors of the Federal Reserve serve 14-year terms, during which they may be nominated as chair of the reserve. On average, most central bankers serve a term of 5-6 years and the appointment often involves at least two institutions of state to ensure that the choice is not a pliant political proxy. It is also why the same bar for impeaching a president—a two-thirds vote by the Senate—is also applied in removing a governor of the Central Bank.
Economists largely agree that an independent central bank can make better monetary policy and ensure that the economy responds to markets fairly and effectively. The worry with the Emefiele-led CBN is that, instead of serving as a backstop on the side of the markets, the Central Bank has only enabled the government’s more reckless fiscal policies and put investments at risk.
A LINE OF JUGGLERS
Reports of the State Security Service (SSS) invading the Central Bank and seeking a court injunction to arrest Emefiele should be concerning. There are clear constitutional provisions to remove an ‘erring’ governor and using other arms of state sets dangerous precedents that could be abused by future administrations. Such actions can only dissuade competent candidates from assuming the position and discourage investors from believing in the independence of the bank.
As it stands, the challenge with the CBN goes beyond replacing Emefiele as former governors have not necessarily been strictly ‘apolitical’. Clement Isong (1967–1975) was elected governor of Cross River State in 1979, merely four years after leaving office, while Charles Soludo (2004–2009) was a political adviser before assuming the job and finally succeeded in becoming governor of Anambra State in 2020.
Previous governors have also not been scandal free; Emefiele’s direct predecessor, Sanusi Lamido Sanusi (2009–2014) was suspended over accusations about the transfer of oil revenue used by opposition politicians ahead of the 2015 elections. Some might argue that former bank governors, especially those who served during the military era, could focus strictly on the job since they worked with military governments that were expected to be professional and apolitical. Yet, even these officials have not been immune from criticism.
Paul Ogwuma (1993–1999) served during the General Sani Abacha regime and has been criticized for playing a part in the former military dictator’s pilfering of public funds through CBN. Likewise, Abdulkadir Ahmed (1982–1993) was mentioned among government officials involved in Nigeria’s controversial membership of the Organisation of Islamic Cooperation (OIC) during the Babangida regime.
Adamu Ciroma (1975–1977) not only served as finance minister during Olusegun Obasanjo’s first term as a democratically elected president but contested twice for the presidency, losing the primaries of the National Party of Nigeria in 1978 and then being disqualified in 1992.
As such, Emefiele’s active engagement in partisan politics, and even his desire to take part in the presidential contest, is not necessarily new when one considers his predecessors.
This leads to an important question. How strong can a purportedly apolitical institution be in a landscape that is becoming even more political?
For starters, we can dispense with the illusion that succeeding governors will not be partisan to some degree. This is because where parties have ideological leanings, those who appoint will either favour more state-driven or market-led monetary policies and these will coincide with the preference of the appointee.
Most CBN governors have been bank chief executives, implying that some expertise in managing market interactions is considered, but the previous tradition of internal promotions has been dispensed with (three of the first five indigenous governors were serving deputy governors). Potential biases in appointment should be offset by ensuring that the institutions and individuals involved in choosing Emefiele’s successor are mindful of the necessary role the governor will play in managing the markets.
Emefiele stands to vacate the bank having met three democratically elected presidents—a unique achievement in itself. In an ideal situation, he would be feted for providing stability across two government transitions and balancing the potential excesses of an administration.
Yet his legacy is now likely to be tied to controversial monetary decisions, the redesign of the Naira, his botched bid for president and the rumours surrounding his potential arrest by the SSS.
His successor will do well to note that once appointed and confirmed, their primary allegiance should be to the country by ensuring the economy is well managed and interests better secured. If they wanted a political position, the finance minister would be a better fit.
Most importantly, the next set of elected officials will do better to strengthen institutions and avoid unnecessary overreach within structures⎈
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