By Mariam Mohammed
Nigeria is in the middle of a very important shift in its economic structure; and one man, amongst others, at the heart of this is the Governor of the Central Bank, Mr Oluyemi Cardoso. A truly traditional symbol of what a CBN governor should be: urbane, measured, focused and averse to political showmanship.
Over the years, there was a steady decline of corporate governance at the country’s apex bank. Since the Presidency of former Dr Goodluck Jonathan and General Muhammadu Buhari (rtd.), those entrusted with the country’s monetary policy were more giving to showboating than steadying the inherent economic turbulence, leading to runaway inflation, a bloated backlog of foreign exchange obligations, and outright sleaze at the CBN.
It is gratifying to note that there is a bright spot on the horizon owing to the unprecedented putrid excision from the apex bank and arraignment of a former top gun of the CBN.
It is no longer news that the CBN under the former helmsman, Mr Godwin Emefiele, neglected the key functions of the bank to regulate money institutions, insulate it from the vagaries of politics and stablise the markets. Rather, the bank became a soapbox for political chicanery, so much that an incumbent governor threw his hat into the political ring to run for the Presidency and flaunt it without let.
However, there is a measure of confidence building and the markets are responding favourably to this. First, the settling of $7 billion forex arrears, particularly to foreign airlines, demonstrates that the Nigerian government is committed to its contractual obligations.
Also, the naira rebound against the US dollar and other major currencies, even when it seemed all hope was lost, speaks to the vision and strategic policies of Mr Cardoso. Only a few weeks ago, the naira was trading at almost N2,000 to the greenback, but this weekend currency speculators have been counting their losses as the naira is exchanging for N1,350 to the US dollar.
Complementing this economic progress, there is the remarkable boost in the country’s external reserves, which increased by $993 million to $34.11 billion as of 7 March, reaching an eight-month high.
This could not have been possible without the apex bank governor strengthening processes for the Diaspora to make remittances and be guaranteed of getting value for them. This is coupled with heightened interest of foreign investors in local assets, including government debt securities.
To give context to this, in early March, foreign investors oversubscribed, by 79 per cent, the Federal Government’s N500 billion at the Open Market Operations (OMO) auction. Beyond ensuring the legitimate flow of foreign investments, the Governor has not let his eyes off the activities of illicit flows, which some have been traced to terror financing. To stem the scourge, the CBN moved against one such entity, Binance, the multi-trading forex and crypto platform.
Speaking on the matter, Mr Cardoso was spot on when he said, “We are concerned that certain practices go on that indicate illicit flows, going through a number of these entities and suspicious flows. In the case of Binance, in the last year, $26 billion has passed through Binance Nigeria from sources and users who we cannot adequately identify.”
This is a move every responsible and patriotic Nigerian ought to commend, taking into cognisance the destruction and unimaginable loss of lives linked to terrorism and its financing. Besides, this is expected from every government that pays fidelity to its citizens’ welfare and security. Some Nigerians who have kicked against the move to sanction the crypto firm should note that in late November 2023, Binance was equally sanctioned by US authorities and made to pay one of the largest fines in corporate history. The firm agreed to pay $4.3 billion to the US Commodity Futures Trading Commission (CFTC), the Department of Justice and other US government agencies over money laundering and other charges.
Nigeria cannot be an exception at a time of global forex crisis, financial instability and efforts to stem terror financing. Rather the applause for Mr Cardoso and his management team at the CBN should be resounding and high.
While it is noted that the Governor is on track, the warning needs to be served that the manufacturing numbers have to be worked on to ensure that there is an upward swing to increase productivity and shore up the employment numbers. This will require working with those at the Ministry of Finance and other segments of the economy on the fiscal side. This is already happening as the CBN has demonstrated greater synergy building with the NNPC Ltd, Ministry of Agriculture and Food Security, amongst others.
Granted that the economic shift will not happen overnight, Nigerians need to know regularly what measures are being undertaken, so as their buy-in can be guaranteed. Mr Cardoso and his team need to unpack their short to long term strategies to retool the economy and offer a clear roadmap, as it balances out a manufacturing-led economy and one that’s service-oriented.
With the benefit of hindsight, it is significant that Mr Cardoso should beware of palace courtiers and the intoxicants of early achievement, in order not to suffer the fate of the former Chairman of the Federal Reserve, Alan Greenspan. Greenspan, who spent nearly two decades at the US Federal Reserve, was once hailed as the omnipotent “maestro” of the US economy, but his reputation suffered in the aftermath of the 2008 financial crisis.
Sebastian Mallaby, winner of the Financial Times and McKinsey Business Book of the Year Award in 2016, argues that most histories of the 2008 crisis have ascribed blame to Greenspan’s excessive faith in the self-policing efficiency of markets. So, Governor Cardoso has to create stability in the market, and should resist the temptation when all is majorly “settled” to limit himself to containing fluctuations in inflation, while failing to limit leverage and bubbles. The end goal should not just be price stability but rather financial stability.
But for now, it is worthwhile to commend President Bola Tinubu for a strategic pick in the person of Mr Yemi Cardoso, who is truly the Star Boy of the moment after a season of anomie at the CBN.
Mariam Mohammed writes from Abuja.
