CBN governor is failing, but finance and trade ministers are not playing their part

THE Central Bank of Nigeria (CBN) Governor Godwin Emefiele is taking the biggest chunk of the blame for his  poor management of the foreign exchange market, but Minister of Finance Zainab Ahmed and Minister of Trade and Investment Niyi Adebayo should not be absolved from the guilt of poor economic management in the country, The ICIR findings have shown.

Emefiele has been criticised rightly for his multiple exchange rate regime,  capital controls, demand side FX model and restrictive dollar management.

These concerns have seen the naira on a downward slope and currently at about N580/$ in the parallel market, with negative impacts on household consumption, inflation (17.4 per cent) and weak purchasing managers’ indexes, dealing blows on consumers.

“What is happening in the foreign exchange market is a  consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex,” Economist and Private Sector Consultant Muda Yusuf told The ICIR in a recent interview.

“This weak investor confidence is expected to persist in 2021 because of lack of clarity around the country’s FX management framework,” Lagos-based Economic Analyst Damilola Adewale said in response to poor FDI inflow into the country.

In all the criticisms, however, only vey few have mentioned that Finance Minister Zainab Ahmed and Minister of Industry, Trade and Investment Niyi Adebayo have failed to provide support for the naira from the fiscal side.

Nigeria’s Ministry of Finance manages the finances of the Federal Government of Nigeria, including controlling and monitoring federal revenues and expenditures.

The Finance Ministry and the Ministry of Industry, Trade and Investment are both saddled with the enforcement of the fiscal policies of the government and attracting investment into the economy.

This has not been the case since 2019 as Nigeria continues to witness a huge drop in investment on the back of several wrong policies.

For instance, Foreign Direct Investment inflows into Nigeria fell by 21.21 per cent in 2020 to $2.6 billion, the lowest since 2015, according to data published by the United Nations Conference on Trade and Development, UNCTAD.

The consistent decline in FDI has stifled job creation in Africa’s biggest oil producer and worsened the growth prospects of the economy, ballooning the unemployment rate to  33.3 per cent in the fourth quarter of 2020.

The biggest challenge is that the two ministers have not explored several means of attracting investments and have not designed clear-cut policies for that purpose, analysts say.

“In 2014, a trader on Bloomberg in Hong Kong or New York could click a button and buy a choice of 6 Nigerian bonds from JP Morgan or 11 from Barclays. That’s how Foreign Portfolio Investments flowed in and kept the Naira strong. These ended in 2015. Now we struggle for dollar remittances with Binance,” Economist and Finance Expert Kalu Aja said in reaction to Nigeria’s economic poor run.

Minister of Finance Zainab Ahmed

Aja blamed crushing capital controls which made it difficult for bond holders to redeem dollars if they sold their securities.

Political Economist Pat Utomi has also said that the country lacks a national economic strategy for development.

On the part of the industry minister, several manufacturing companies are shutting down and he does not seem to have any formula for dealing with that. He also has not commented about them, meaning that he may not be aware that the companies are going out of business.

Two of these firms that have shut down since 2019 when Adebayo became minister are Glenz Metal in Enugu and Elton Hanniee, producer of soap and toilet cleanser.

The ICIR learnt  from top industry sources that Elton Hannie went out of business in 2020 when its raw materials got stuck at the ports, incurring a lot in demurrage.

The constant occurrence of the situation led to the company’s shut-down. Other firms that have gone out of business since 2019 are: International Glass Industries in Aba, Super Glory Nigeria Limited, Iwaya, Ogun State, and West African Building Materials, Ota, Ogun State.

CBN Governor Godwin Emefiele. CREDIT: Channels TV

The reporter found that West African Building Materials shut down in 2019 due to FX policy, according to top industry sources.

Once a nation’s manufacturing sector is not strong, imports will dwarf  exports, resulting in weak local currency, according to analysts.

Nigeria’s manufacturing sector contributes less than 10 per cent to the Gross Domestic Product as against South Africa’s 14 per cent and Egypt’s 16 per cent.

The National Industrial Revolution Plan, which started in 2013, expired in 2020 without achieving most of its goals, but there is yet no industrial strategy in Nigeria, industry players say.

Business and Finance Expert Richard Ayoade said until Nigeria could manufacture, produce and industrialise, real economic change would be impossible.

Also, the minister of trade is yet to re-start the Export Expansion Grant (EEG). In 2013, this policy, which was meant to improve non-oil exports, was suspended. Since Buhari came to power in 2015, the policy approval has been in the National Assembly’s desks.

While some companies have been approved for the EEG, 38 others have not since 2018/19. Up till today, there is no coherent policy to drive the non-oil exports in the economy.

The result is that non-oil exports have not exceeded $4 billion since 2013. In 2018, while Nigeria earned $3.3 billion from all the non-oil export products, Bangladesh received $33 billion from export of textiles only.

Economic analysts have insisted that Nigeria’s inability to ride on non-oil exports to strengthen the economy is taking its toll on the naira, amid the apex bank’s reluctance to float the local currency.

Former Deputy Governor of the Central Bank of Nigeria Kingsley Muoghalu said Nigeria must build a strong manufacturing and export-led economy, which must be driven from the fiscal side.

“The most important determinant of the value of the Naira is whether or not the Nigerian economy is productive or competitive in international trade. That is to say, whether it has a diversified base of complex, value-added products it exports and earns forex from those exports. I am not talking about diversification to cashew nuts and yam tubers. No. Those are primary commodities, not complex, value-added ones that are serious of serious engineering and innovation.”

The finance minister has failed to plug leakages in several government ministries, departments and agencies.

In Warri, Port Harcourt and Kaduna refineries, N168.178 billion was lost in 2019, and only N1.681 billion was realised as revenue, according to The ICIR’s calculations of the companies’ financial statements.

In 2020, the moribund refineries wasted N153.084 billion, making only N5.216 billion as revenue.

Also, there have been concerns about poor remittances of revenue by some revenue-generating government agencies.

Earlier in the month, the Nigerian Senate had issued queries to the apex bank, Nigeria Customs Service and the Nigerian National Petroleum Corporation for failures to remit their excess revenues to the Consolidated Revenue Fund of the federation.

Many analysts wonder why the Federal Ministry of Finance watches as these revenue-generating agencies fail to remit the money at a point President Muhammadu Buhari has gone on a borrowing spree across the world.

According to the National Assembly panel, the apex bank has failed to remit its operational surpluses to the Consolidated Revenue Fund (CRF) over the years from its yearly budget of about N2.3 trillion budget.

Also, on the side of the Ministry of Industry, Trade and Investment, it has been an issue of policy somersault and inconsistencies.

Nigeria lost several would-be investors in the automotive sector on the back of policy inconsistencies and the government not keeping up with the promises to investors who had pumped billions of naira into the sector.

From 2013, import of new cars attracted 35 per cent levy and 35 per cent tariff. The policy attracted several local and foreign car assembly plants who stormed Nigeria to leverage its demography and a growing economy.

However, the current government, in 2020, slashed import of cars to five per cent, hurting many  firms that have invested billions into the economy.

Niyi Adebayo had hinted at plans by the Federal Government to review the automotive policy, but delay in the review has put upbeat investors hanging on the balance, discouraging future investors from expressing confidence in the Nigerian economy.

“There are several countries we can learn from in Africa. Kenya and Tanzania have national sectoral plans in each aspect of the economy devoid of political interference. This is part of the reason we make one step forward and steps backwards, ” Associate Consultant to the British Department for International Development Celestine Okeke told the ICIR.

“You saw our flight cargoes leaving empty the other time because of poor policy coordination. This is where I expect the Minister of Industry, Trade and Investment and the Ministry of Finance to come in.”

He noted that the aforementioned ministries should enable trade and investment and not kill them.



    “They are to facilitate trade and not to kill trade. Why would exporters suffer to export and we are talking about the weakness of the naira?”

    Experts say floating Eurobonds, as finance minister does, is not enough, but attracting direct investments that will create jobs and improve the productive capacity of the economy.

    This, to them, is partly the finance minister’s job via low tariffs, tax holidays and economic reforms.

    Again,  experts say the finance minister, who also oversees budgets, should be more interested in running a capital-driven annual budgets to boost infrastructure investments that will facilitate a productive economy.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

    Support the ICIR

    We invite you to support us to continue the work we do.

    Your support will strengthen journalism in Nigeria and help sustain our democracy.

    If you or someone you know has a lead, tip or personal experience about this report, our WhatsApp line is open and confidential for a conversation


    Please enter your comment!
    Please enter your name here

    Support the ICIR

    We need your support to produce excellent journalism at all times.

    - Advertisement


    - Advertisement