According to reports, on Thursday, 17th of November 2016, Emmanuel Ukeje, the Special Assistant to the Governor of the Central Bank of Nigeria, said that there would have been a total collapse of the nation’s economy or a more critical situation had it not been for the policies of the CBN Governor, Godwin Emefiele. He made this known while conveying a message from Emefiele at the All Civil Society National Economic Summit.
Amazingly, he justified his claims by referring to bank recapitalisation and the adoption of the Treasury Single Account.
“For instance, prior to the recapitalization, the total number of commercial banks could not match asset base of a single South African bank. But this is not the case anymore as our banks are now robust,” he said.
“The same goes for TSA which removed sharp practices in some banks as instances arose where you had banks using government money lodged with them to buy government bonds. In other words, the government was buying bonds back with their own cash through these banks which basically reaped the system,” Emefiele stated.
From the message by Emefiele one would wonder if saving the economy was dependent on these two efforts alone. How can Nigeria’s economy flourish when so many archaic policies were put in place, thereby leading the country to its present state.
Dear Mr Emefiele, in case you missed it, here is a list of policies that did not go well with the economy:
Devaluation of the naira
It would be recalled that in 2015 immediately after President Muhammadu Buhari assumed office, economic experts and stakeholders in the country called for the devaluation of the naira but this didn’t happen in 2015. Instead, the Central Bank governor and his “Oga Buhari” ignored the plight of these stakeholders, stating that they were not convinced to devalue the naira. Godwin Emefiele, who obviously was with Buhari on his stance in the devaluation of the naira, watched the economy crumble instead of making hay while the sun was shining. The devaluation that would have happened in 2015 was delayed to 2016. This move also made Nigerians wonder if the CBN is really autonomous of the Federal Government.
Foreign exchange
2015 was characterised by several trial and error foreign currency restrictions which the CBN thought could save the naira from a total collapse. The CBN reduced the yearly amount of ATM spending outside Nigeria from $150,000 to $50,000 in 2015 but as at October 2016 the monthly ATM limit was reduced to $100 per month from $300 per day of last year. How does the CBN want Nigerians who are doing business or schooling outside the country to cope? How does the CBN expect students to cater for their feeding, transportation and buy textbooks and other basic things needed for their schooling with just $100 a month? By these restrictions put in places, there is a 70 percent chance that these students will not come back to Nigeria because it is evident that the government has no blueprint on how to turn the economy around. This would also mean a tough time for business owners who are already outside the country.
Another issue of the CBN on Forex is the fact that it excluded some essential raw materials from the list of items valid for Forex in Nigerian Forex Exchange markets. The CBN gave reasons for its decision saying that the policy is intended to sustain the stability of the foreign exchange market, resuscitate local manufacturing and change the structure of the economy.
Going through the list of items excluded from getting Forex from the market one would wonder if Nigeria has become a producer of the major inputs needed for local production in the country. In reality about 16 of the total items in the list, serve as critical raw materials for intermediate goods produced in Nigeria, especially as the country lacks the capacity for optimal production of these items. For instance, the country does not produce rubber, glass and glassware. Glasses and glassware are needed by the pharmaceutical companies to package their product.
Instead of the naira strengthen despite all these policies, it has continued to weaken. The naira, which is currently N465/$, fell from N213/$ in April 2015 to N251/$ in December 2015.
Manufacturing in Nigeria
As a result of the stringent Forex policies put in place by the CBN, most manufacturers in the country are being forced to shut down and move their operations to neighbouring countries for business activities.
The Manufacturers Association of Nigeria (MAN) reported that 58 members of the association had closed down due to the unavailability of raw materials and a fall out of forex restrictions from the federal government.
It is so disappointing that it would take Nigeria about 4 years before it can be self-sufficient in manufacturing some of the items banned from having access to Forex for importation.
Job loss
The closures of businesses in Nigeria have resulted in workers being forced into joblessness. About a few weeks ago, Erisco Foods Limited announced that it was shutting down its operations in the country and moving to Kenya, Cameroon, Cote d’Ivoire and Ethiopia. Following his exit, the labour market should be expecting about 1500 persons joining the number of unemployed in the country. Currently, over 4.5 million Nigerians have become jobless since 2015.
Investors Confidence in Nigeria
Under Godwin Emefiele’s watch, several foreign investors pulled out of the country. International companies such as Iberia Airlines and United Airlines closed shop in Nigeria because of the harsh business condition caused by the CBN policies. The airlines complained that they were unable to repatriate their revenue from Nigeria back to their country due to lack of foreign currencies in the Forex market.
According to the National Bureau of Statistics, the value of capital imported into Nigeria in the second quarter of 2016 was estimated at $647.1 million, which represents a fall of 75.73 percent relative to the second quarter in 2015. Portfolio investment declined from 1,009.13 million in Q3 2015 to 920.32m in Q3 2016. Foreign Direct Investment declined from 717.72 in Q3 2015 to $340.64 in Q3 2016.
With all these happening in Nigeria one would wonder how the CBN Governor Godwin Emefiele thinks that his policies saved Nigeria from total collapse. It is worthy to note that the Q3 GDP figure of Nigeria still showed that the economy did not grow. It’s GDP contracted by 2.24 percent.
