By Dirisu Yakubu
He cuts the image of a happy man; a leader who defied the odds to deliver on sundry areas where his predecessors failed. To him, the journey to the realization of a new Nigeria has commenced, with the vehicle set to take Nigerians to the Next Level, now on full throttle. The above reflects President Muhammadu Buhari’s rating of his stewardship in the past four years, which in his words, has the trappings of a success story.
Playing host to governors elected on the platform of the ruling All Progressives Congress, APC, who were in Daura to pay the first citizen the Eid-el-Kabir Sallah homage earlier in the week, an obviously elated President Buhari said the country had achieved food security and also lauded the efforts of the security agencies in the fight against insurgency and sundry security challenges in the land. “We have achieved food security,” he said, adding that “for physical security, we are not doing badly. The country is more secure than in 2015, and the country is more prosperous than in 2015,” he stressed.
Given this feat (food security) therefore, Mr. President directed the Central Bank of Nigeria, CBN, not to “give a cent to anybody to import food into the country,” as “foreign reserve will be conserved and utilised strictly for diversification of the economy and not for encouraging more dependence on foreign food import bills.”
In the past few days, policy analysts, economists and politicians have been reacting, with many faulting the powers of the President to direct the CBN to take certain actions, citing the bank’s autonomous and independence status as provided in the law. Before this, some quick facts on the Nigerian economy!
According to the Economic Complexity Index, ECI, “Nigeria is the 52nd largest importer in the world of such commodities as wheat, corn, rice, raw sugarcane and dairy products.” ECI report also notes that Nigeria consumes “over $22 billion of foreign exchange annually.”
The CBN on other hand says “Nigeria’s monthly food import bill fell from $665.4 million in January 2015 to $116. 4million as at October, 2018.” The CBN also claimed that “there was 97.3 per cent cumulative reduction in monthly rice import bills, 91.6 per cent in fish, 81.3 per cent in milk, 63.7 per cent in sugar and 60.5 per cent in wheat,” adding between the period (January 2015-October, 2018), there have been “a cumulative fall of 75.9 per cent and an implied savings of over $21 billion on food imports.”
Reacting to this development on a Channels Television programme, Politics Today, former CBN deputy governor, Professor Kingsley Moghalu said the quest to make Nigeria consume what it produces is a laudable one. He however questioned President Buhari’s powers to direct the apex bank in the performance of its statutory functions.
His words: “The CBN Act of 2007, Article 1 (3) is very explicit that the bank in order to achieve its mandate should be independent in the performance of its functions. It is very clear; it is not Kingsley Moghalu who said, it is the CBN Act.” That said, the Young Progressive Party, YPP, Presidential candidate in the 2019 election, gave the three exemptions to the rule, for the sake of emphasis.
“There are only three instances in the operation of the Central Bank where it requires the direct approval of the President. One is the approval of the annual accounts of the CBN. The President must approve it. Two is the approval of currency designs. For the CBN to issue coins, naira notes and so on, the President has to approve those designs and proposals. Three, any external investment by the Central Bank itself as an institution has to be approved by the President. Outside of these three specific instances, the Central Bank does not require the formal and explicit approval of the President to perform its job,” he added.
On what he made of the directive, Moghalu continued: “That is another way of saying that the President himself or any political authority outside of the bank should not be giving the bank instructions. This is a fundamental principle of central banking around the world over the last four decades. And that’s one of the reasons many central banks work successfully to overcome the global financial crisis of 2008. It is because they have the independence and of course, the CBN of my time, we had the independence to do what we were able to do and we did not take direct instructions from political authorities.”
Is the CBN a republic on its own?
“No, it is not but the principle of central banking requires that it should have some independence from everyday political authority. For example, if politicians want to be popular, and because of that they want low interest rate and tell the bank to lower the monetary policy rate and the bank lowers it; that is an inflationary policy that is going on in the fiscal side. We know that about at least 70 % of Nigeria’s budgetary expenditure goes into recurrent expenditure. A lot go into repaying foreign debts and very little go to capital expenditure.
“When you spend a lot of money on recurrent expenditure, that is expenditure that has inflationary impact and this is one of the reasons the CBN several years ago had to jerk up the monetary policy rate to 14 %. It was to fight inflation because the primary mandate of the Central Bank is to main price stability. The primary mandate of the CBN is not to sing and dance with the executive branch of government or any other branch. Now, does the President tell the Independent National Electoral Commission, INEC boss how to run an independent electoral umpire? Should he tell the Chief Justice of Nigeria, CJN what the Supreme Court ruling should be in the case of Atiku and the Peoples Democratic Party, PDP, against Buhari and the APC even though he appointed the CJN?
“People should not confuse things. There are certain institutions that, by the very nature of their job, require a little bit of distance from the political class. That is what I’m saying. I am not saying that the CBN is a sort of republic on its own. No! It is accountable to the National Assembly. We go to the National Assembly every six months or periodically to brief it because that is the legislation,” he further explained. Like Moghalu, Professor Jonathan Aremu in his reaction argued that the issue is not whether the directive would impact positively or negatively on the economy but on what the law says about the operations of the bankers’ bank. Aremu, a former staff at the CBN and Professor of International Economic Relations, stated that for the CBN to function in compliance with the law establishing it, it requires some level of independence.
“I will not conclude that it is good or bad but Moghalu has rightly pointed out that certain level of autonomy is relevant for central bank to perform its functions. It is going to send wrong signals to the global economy, not only in Nigeria. For me, the issue of directing the CBN governor has to change. What the President should have said is that people can import food but foreign exchange will not be paid. But even in that case, why can’t the President dialogue with the CBN and allow the bank to say this because immediately you say the President directed the CBN governor to behave this way; people will feel something is wrong.
“Secondly, it is going to be difficult for the CBN to perform its function within the country independently of the political class as well as globally with other central banks including the International Monetary Fund, IMF and the World Bank,” Aremu stated.
Independence of CBN, a myth- Senator Shehu Sani
On the part of Senator Shehu Sani, it was important to separate the content of President Buhari’s directive from the directive itself, saying while one was right, the other was wrong.
He said: “We can divide the President’s point of action into two. The first is the directive which is against the norms, ethics and division of authority when you consider the autonomy of the CBN. He has no right to direct the CBN to do what they should do or not do. Secondly, what is the content of what the President said? I share the position of the President in that aspect: If we are going to be serious about food production, we have to close the tap on importation and I think there is better way of going about that by consulting the CBN and I heard it about some months ago when the CBN directly issued a statement on the importation of textile, milk and dairy products.
“I think what the President said was right in terms of the substance, not the directive that we need to put an end to the importation of food to encourage local production. If we have to set a standard, I believe things should be done rightly but we should also put it the other way that the independence of the CBN is more of a myth. It is a myth in the sense that we know it clearly out of what is written in our constitution and our laws that the CBN was never and is never an independent body but ideally, it is supposed to be so. And when we see a transgression against such red lines, I think issues need to be raised. It is in the spirit of making sure that we protect the independence of the CBN that we go against some directive but I share the fact that we have to stop importing food to encourage local production. On this, the President is right.