The God(win) of Small Things

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.

Written by Afolabi Adekaiyaoja

Jan 23, 2023

Photography by IMF Staff Photo / Stephen Jaffe

Editor’s note: This essay is available in our print issue, Godfathers: An Introduction. Buy the issue here.

Alegacy 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...

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The God(win) of Small Things

THE CHALLENGE OF THE JOB

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