The president of Nigeria suspended the erstwhile governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, on June 9, 2023. According to the report, this action was taken to enable an investigation of his office and planned financial sector reforms.
After his suspension, Emefiele was arrested by operatives of the Department of State Security (DSS) for investigation and questioning.
Recent media reports mention shady financial deals as the topmost reason for his suspension. In the latest episode, Emefiele was said to have borrowed $1 billion from AfreximBank after the elections on April 24, 2023. Two days after the CBN JP Morgan account was credited, $750 million was transferred to the Bluestar Dubia account, an account that has a connection to Dangote, without using “Form A.”
By doing so, Emefiele violated the mode of foreign transactions his administration implemented, using Form A for foreign exchange transactions. The CBN created Form A as an application form for service transactions (invisible commerce). Customers can purchase money at the CBN or interbank rate to pay for approved services in accordance with the Foreign Exchange Manual’s predefined schedules.
Furthermore, this transaction was done at N445 against the official exchange rate.
This is not the first time Emefiele has violated directives during his administration. One of the most violated is Section 38 of the CBN Act 2007. His administration financed the FG with an amount in excess of 5 per cent of the revenue. The section states in subsections 1 and 2 that:
- Notwithstanding the provision in section 34 (d) of this Act, the Bank may grant temporary advances to the Federal Government regarding temporary deficiency of budget revenue at such interest rates as the Bank may determine.
- The total amount of such advances outstanding shall not at any time exceed five (%) per cent of the previous year’s actual revenue of the Federal Government.
Total federal government (FG) liability to CBN has increased for most of the recent years over the previous, save for 2019 and 2021. Data from CBN shows that the holding of the federal government’s outstanding domestic debt as of year-end increased by almost five times in 2015 over that of 2014. It increased from N180.21 billion by the end of 2014 to N877.30 at the end of 2015, the first full year of Emefiele’s reign as CBN governor.
It increased over the next three years and dropped in 2019 from N2.03 trillion in 2018 to N1.9 trillion in 2019. It increased in 2020 to N2.56 trillion and then dropped to N2.42 trillion in 2021.
Two financial items worth of mention here are the overdraft given to the FG by the CBN and ways and means.
The Buhari administration used the CBN most of the time to fund its deficits. Emefiele provided overdrafts to the government amounting to N22.16 trillion from 2015 to 2019.
There has been a steady increase in the amount of overdraft given to the FG by CBN. By the end of 2015, it was N1.76 trillion, an increase from N592 billion in 2014. This represents a 197.25 per cent increase in 2015.
Subsequent years have seen steady increases in the amount of overdrafts given to the FG. It increased by 49.38 per cent to N2.63 trillion in 2016, N3.31 trillion in 2017, and N5.42 and N9.04 in 2018 and 2019, respectively.
Likewise is the provision of funds to the FG through ways and means. While this is one of the channels by which the CBN makes funds available to the government, it also violated Section 38.
A Dataphyte report which explained ways and means showed how it had been used to finance the FG compared to the revenue generated from 2017 to 2022.
Data from the Ministry of Finance, Budget, and National Planning shows that funds from ways and means took a greater proportion of the total revenue for these years.
This action has had great implications for the economy, as stated by Public Policy Expert Atiku Samuel. Speaking to Dataphyte, he said that the CBN’s actions are what caused the inflation that the nation is currently experiencing. It is unacceptable to print money each year to pay for the budget. With an expanding inflationary trend as a result of this move, the economy has become unstable.
Mr Atiku said the apex bank is the economy’s main source of unstable money. Inflation is a byproduct of the arbitrary printing of money without any accompanying economic activity.
This mangling of Nigeria’s economy using monetary and fiscal instruments at his disposal in the past eight years was Emefele’s major sin.