Major controversies that trailed Emefiele’s tenure as CBN Governor

THE suspended former Central Bank of Nigeria’s (CBN), Governor Godwin Emefiele, was the chief executive at Zenith Bank Plc before moving office to head the CBN in June 2014, a year before President Muhammadu Buhari became president of Nigeria.

Emefiele was reappointed for a second five-year term in May 2019, which was due to end in June 2024.

Roles and controversies under Buhari administration

The governor was one of the most influential members of the Buhari administration, during which the central bank made significant economic interventions, some of which were controversial.

These include propping up the naira, lending huge sums to the Federal government through Ways and Means (as a lender of last resort), extending credit to multiple sectors through the Anchor Borrowers Programme, and other ancillary interventions.

Analysts were, however, worried about some of his policies that gave undue attention to development finance and excessive regulation of banks at the expense of price stability.

Emefiele and violation of CBN Act, Fiscal Responsibly Act

The Central Bank of Nigeria (CBN) under Emefiele violated Section 38 of its own Act by overlending the sum of $49.2 billion to the Federal government through Ways and Means.

The situation subjected the economy to intense pressure as Nigeria’s inflation rate surged to 22.22 per cent.

Section 38(2)of the CBN Act 2007 provides that lending to the government should not exceed 5 per cent of the previous year’s actual revenue.

The ICIR findings further showed that with respect to revenue accruals, lending to the Federal government should not have exceeded $450 million but had spiked to $49.2 billion.

This development, among others, led to Moody’s downgrading of the Nigerian economy to B3 rating, driven by the significant deterioration in Nigeria’s government finances and overburdening debts.

An economist, Kelvin Emmanuel, told The ICIR that one implication of the development was that it put intense pressure on lending to small and medium enterprises.

“You notice that cash supply deposits are higher than the production outlook of the economy. When so much cash is chasing a few goods without commensurate production and services, it creates a problem.”

“Basically, we printed $49.2 billion out of thin air when the window says you can give only $450 million. You can see the wide margin. The apex bank violated its own Act. This is part of the major reason the economy is in a mess. The wider implication is that lending to real sector is now extremely difficult,” Emmanuel said.

He added that when there is so much paper money that is not backed by assets, it inadvertently spikes prices and inflation, and suffocates lending to the small and medium enterprises.

“The lending rate of 18.5 per cent is as a result of this kind of over-bloated cash into the economy not being tied to specific assets. The banks will now have to put their own mark-up and will lend around 27 and 28 per cent,” he said.

The CBN’s guidelines limit the amount available to the government under its Ways and Means Faculty of 5 per cent of last year’s revenue. However, according to Fitch Ratings report in January 2021, “the Federal Government’s borrowing from the CBN repeatedly recorded around 80 per cent of FG 2019 revenues in 2020.”

Besides the CBN Act, the Fiscal Responsibility Act of 2007 provides a threshold and the guidelines for national and sub-national borrowing.

Section 41 (1) (a) and (b) of the FRA stipulates that borrowing shall only be for capital expenditure and human development, be on concessional terms with low interest rates, and be for a reasonably long amortization period.

The FRA also requires legislative approval for borrowing, as well as stipulates that the government should ensure that the level of public debt as a proportion of national income is held at a sustainable level.

The controversial Anchor Borrowers Programme

The lion’s share of a N1 trillion ($2.1-billion) loan it extended to rice farmers, under the so-called Anchor Borrowing Programme was not largely repaid, an official who worked as a facilitator in the scheme confirmed.

“The scheme is fraught with lots of repayment challenges as the political class’ undue interference dragged down the success of the policy,” a development economics and consultant to the British Department of International Development, (DFID), who consulted for the policy, Celestine Okeke, told The ICIR.

At a point, many of the farmers, especially in the northern region of Nigeria, clearly declared to Emefiele they would not be able to repay the loans because of herdsmen attacks on and destruction of their farms.

Attacks by herdsmen on farmers was one of the dark incidents that marked the Buhari administration. In many cases, the herdsmen killed the farmers and destroyed hectares of what could have been bountiful harvests for the nation.

Contradictory banking regulations

Emefiele also came under fire for subjecting banks to contradictory regulations.

For instance, whereas lenders must hold 32 per cent of deposits as reserves — far more than their counterparts in South Africa and Kenya, as the regulator battles to contain inflation — banks were being forced to extend 65 per cent of their deposits as loans to stimulate credit.

Emefiele also left interest rate unchanged, well below the annual inflation rate for too long, critics contend.

The CBN was unable to rein in consumer prices until they skyrocketed to an 18-year high of 22.22 per cent in April.

Emefiele even made a foray into party politics when he asked a federal court to permit him to remain in charge of the CBN while seeking the ruling party’s nomination for the presidential election. He only dropped that ambition after Buhari ordered ministers and political appointees wishing to run for office to resign.

His most controversial move as central bank governor came just before the 2023 general elections with his naira redesign policy.




    His attempt to replace the old N200, N500 and N1,000 notes with new ones at short notice resulted in an acute shortage of cash, hobbling day-to-day business in the cash-dominant economy.

    Some state governors challenged the policy in court, and in a ruling, the Supreme Court nullified the February 10 deadline he had set to phase out the old notes.

    But even with the ruling, Emefiele tarried for weeks to announce that all the denominations would remain legal tender till December 31, 2023, as declared by the Supreme Court.

    Nigerians experienced intense agony during that period as many individuals and businesses suffered acute cash scarcity for survival.

    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.

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