The many ‘crimes’ of former CBN governor, Godwin Emefiele

President Bola Ahmed Tinubu has suspended Godwin Emefiele as the Governor of the Central Bank with immediate effect. This was announced on Friday by the office of the Secretary to the Government of the Federation (SGF) in a statement signed by the Director of Information, SGF office, Willie Bassey.

According to the Director of Information, the suspension is sequel to an ongoing investigation of Emefiele’s office. As such, the former governor is to transfer his responsibilities to the Deputy Governor of Operations Directorate, Folashodun Adebisi Shonubi. Shonubi is expected to act as the CBN governor pending the conclusion of the investigation of Emefiele’s office.

“This is sequel to the ongoing investigation of his office and the planned reforms in the financial sector of the economy. Mr Emefiele has been directed to immediately hand over the affairs of his office to the Deputy Governor (Operations Directorate), who will act as the Central Bank Governor pending the conclusion of investigation and the reforms.”

President Tinubu has demonstrated a keen interest in Nigeria’s economy as most of his early acts as president are focused on the all-too-important sector. After suddenly pulling the rug on fuel subsidy, the new president embarked on a series of declarations targeted at the business and the economy.

In his first meeting, he declared that the CBN’s 18.5% interest rate in the country was too high. He described it as “anti-people” and “anti-business”, stressing that it needed to be slashed down to encourage investment.

“Interest rates need to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level,” he had said.

Similarly, the president had declared that the country’s monetary policy needs thorough house cleaning. He said the Central Bank must work towards a unified exchange rate as it will direct funds away from arbitrage into meaningful investment in the plants, equipment and jobs that power the real economy.

Now, it seems a lot of what the president felt needed immediate correction to ameliorate the suffering of the masses and indeed ‘let the poor breathe’, passes through the desk of the CBN governor. This would automatically paint him as either incompetent or culpable, at least in the eyes of his new president.

Indeed, in the suspension statement, the Secretary to the Government of the Federation said Emefiele’s dismissal as CBN governor was sequel to ongoing investigations. There are reports that the former CBN governor has been arrested by the Department of State Security (DSS).

Of course, no one can deny that there’s a political angle to this. We can’t forget the role Governor Emefiele played with his Naira redesign policy, a policy which Bola Tinubu’s camp, as the presidential candidate of the All Progressive’s Congress (APC) at the February 25 presidential polls, believed was designed to guarantee Tinubu’s failure. Emefiele contested the APC presidential primaries against Tinubu.

While politically this might seem like a witch hunt, and it probably is, for all we truly know, the fact remains that Emefiele’s time as governor was wrought with numerous misdeeds and missteps which made him a very unpopular governor, especially in the country’s tech space. Below are some of the misdeeds of the former CBN governor.

CBN governor’s redesign policy

What better place to start than the very misstep many people believe must have brought Emefiele his present misfortunes? In October 2022, as the race for the country’s number 1 position heated up between Bola Ahmed Tinubu of the APC, Atiku Abubakar of the PDP and Peter Obi of the Labour Party, Godwin Emefiele announced his ill-advised Naira redesign policy.

While on paper it seemed like a brilliant idea at the time as it was expected to “enable the CBN to take control of the Naira in circulation, manage inflation, combat counterfeiting, and ransom payment,” the former governor failed to take into account the hardship that poor implementation could cause. He also failed to take into account the political twist that the new president’s camp would put to it.

By January 2023 when the deadline for returning old notes expired, it quickly dawned on everybody that the country’s heavily cash-dependent economy had suddenly run out of cash. There was money in the bank but absolutely no cash at hand. Before long, unending and unbearable queues were formed at banks. Cash was been rationed and when that didn’t work, chaos quickly ensued.

Economic activities slowed down excruciatingly. People could no longer buy and sell due to the lack of cash. Point of Sale operators hiked prices, sometimes as high as 1000%. To make matters worse, Nigerian banks were exposed for the technological lightweights that they are as incidents of missing funds, uncompleted transactions and hanging funds became rife.

Unable to access actual cash or its electronic equivalent, people went into a meltdown. They fought each other, fought bank officials and even slept on bank premises just to be able to access their own cash. Riots broke out in several cities across the country. Banks were set on fire and bank staff attacked.

The matter eventually made it to court where the judges eventually ruled that the old notes be returned and made to be in circulation along with the new. By the time it was all over, an outstanding 84.5% of Nigerians have been negatively affected by the CBN’s Naira redesign policy. This was according to the report of a survey conducted by Africa-focused geopolitical research and strategic communications consulting firm, SB Morgen.

18.5% interest rate amid rising inflation

If there’s one thing that was constantly rising and never dropping during Governor Emefiele’s stewardship, it is the country’s interest rate. This year alone has witnessed three interest rate hikes. The first was in January 2023, when the CBN increased the interest rate from 16.5% to 17.5%. By March it was increased to 18%. And just before the termination of President Buhari’s tenure in May, the CBN hiked it further to 18.5%.

The most astonishing thing about the hikes is that each time Governor Emefiele’s CBN increased the interest rate this year, they always promised it would help fight the country’s rising inflation rate. Yet the inflation rate keeps soaring despite the CBN’s best efforts at fighting it via interest rate.

As of April 2023, headline inflation reached its highest level since September 2005, standing at 22.22%, compared to 22.04% in the previous month.

This begs the obvious question; is it any way possible that increasing interest rate is probably not the solution for stemming rising inflation rates? Is it even possible that perhaps, not increasing interest rates might help consumers, at the very least, cushion the effects of inflation? Was President Tinubu perhaps correct in his estimation that the 18.5% interest rate was indeed anti-people and anti-business?

According to Kelvin Emmanuel, Co-Founder and CEO at Dairy Hills, “One credible reason the CBN keeps raising MPR is because it knows that the real inflation rate in Nigeria is not 21.9%, MPR at 18% means the cost of capital in the debt capital markets will keep rising & the end consumers will bear the rising cost of production.”

With the rate increase leading to higher borrowing rates, Nigerian businesses — especially micro, small, and medium enterprises (MSMEs) — have continued to bear the brunt as they have to grapple with tougher funding conditions. It is no surprise the president has called for the poor man to breathe. The economic situation is indeed suffocating.

CBN crypto ban

The cryptocurrency market was a big hit. It was a lifesaver as thousands of teeming youths, unable to successfully compete for scarce jobs, turned to digital currencies as a means of eking out a living. In a very short time, Nigeria was ranked as one of the countries with the highest crypto adoption across the globe.

As of 2020, Nigeria was contributing 90% of total crypto trading by African startups. Globally, the country was ranked 5th, with 11% of its internet users dealing in cryptos. Young people in the country were generally doing great, making a living off cryptocurrency. Then CBN Governor, Godwin Emefiele decided that cryptocurrency was a form of haram and decided to do something about it.

Thus, on February 5, 2020, the CBN ordered all banks, non-bank financial institutions (NBFI) and other financial institutions in the country to identify and shut down accounts of persons or companies transacting or operating cryptocurrency exchanges within their system.

What this meant was that the Nigerian bank account of any Nigerian can be shut down just for transacting or operating cryptocurrency in the country. According to the national lender, it banned cryptos because: Crypto prevents oversight, accountability, and regulation; Cryptocurrency is increasingly being used for criminal activities; Other countries have also banned cryptocurrency; Cryptos have extreme price volatility; Cryptocurrencies do not generate returns (investment).

This represented a huge blow for crypto investors in the country as many of them relied on crypto startups at the time to buy and sell crypto. To this end, many crypto startups suspended operations as they tried to gain clarity and find a way around the imbroglio. Eventually, several of them were forced to relocate their headquarters away from Nigeria. Patricia, for instance, relocated its headquarters to Estonia, the startup capital of Europe.

Described, quite aptly, as the CBN’s ‘War on Crypto’, the apex bank didn’t relent on its effort, going ahead to release several guidelines with which it expected banks to ferret out and clamp down on suspected accounts transacting in crypto.

In April 2022, the Apex Bank slammed a hefty N1.31 billion fine on 6 Nigerian banks for failing to comply with the ban. They are Stanbic IBTC, First City Monument Bank (FCMB), Access Bank, Wema Bank, United Bank for Africa (UBA) and Fidelity Banks. The crypto ban remains in place and it remains to be seen what position the new administration would adopt in that regard.

The eNaira misadventure

Having put a chokehold on crypto transactions in the country, the central bank moved to introduce something similar of its own. On October 24, President Muhammadu Buhari finally unveiled the eNaira after weeks of postponement.

Touted to be Africa’s first Central Bank Digital Currency (CBDC). the CBN emphasised that the launch of the eNaira is a “culmination of many years of research work by the central bank in advancing the boundaries of the payments system to make financial transactions easier and seamless for members of different strata of society.”

According to the CBN, the theme of the eNaira will be: “Same Naira, more possibilities”. While it indeed was the same Naira, it however turned out to possess even fewer possibilities, especially for a system that was supposed to make financial transactions easier and seamless for members of different strata of society. Society just didn’t accept it.

In the first two days of its existence, the eNaira wallet was yanked off the Google Playstore, after about 100,000 downloads. By the first two weeks of its existence, the eNaira was able to manage just 12,500 transactions worth N46.3 million. The CBDC continued to fumble and suffer from acute unpopularity that the CBN, in its frustration, blamed Nigerian Banks for the low adoption rate.

While pleading with Nigerians to download the app and transfer funds from their bank accounts into their wallets, Emefiele said:

“There may be a little bit resistance to you from the banks. This is because moving that money from your account into your wallet is a disadvantage to the banks. I want to say so boldly and bluntly. It is a disadvantage to them. I will say very bluntly, because I am a banker myself, there is apathy by the banks because they know that they will lose some income if you insist on using your enaira wallet for transactions.”

But the truth is, there was absolutely no incentive for Nigerians to move their Naira from banks to eNaira wallets. Just like the CBN noted, it was the same Naira and it was already in a place Nigerians have trusted for generations and probably generating interest. But most importantly, it was already in electronic format and there was no difference in the eNaira in your bank app, and the eNaira in the wallet.

It was therefore not surprising when the International Monetary Fund (IMF) proclaimed that 98.5% of eNaira wallets have remained unused despite increased usage during cash scarcity.

“The average number of eNaira transactions since its inception amounts to about 14,000 per week—only 1.5 per cent of the number of wallets out there. This means that 98.5 per cent of wallets, for any given week, have not been used even once,”

IMF