Download CENTRAL BANK AT 50 The Central Bank rolled out the drums last

CENTRAL BANK AT 50
The Central Bank rolled out the drums last week to celebrate 50 years of its existence as government
banker. Prior to its existence, our currency, the pound and our monetary policy management were
subsumed under the ‘protectionist’ umbrella of the Bank of England, the banker to our colonial masters. In
spite of the indirect foreign control of our economy, the purchasing power of our local currency remained
relatively enduring and inflation was never really a menace.
Indeed, when the umbilical cord of monetary management was severed with the creation of our own
Central Bank in 1959, the British pound sterling was almost at par with the Nigerian pound, and our
primary currencies of half pennies, pennies, shillings and pounds adequately served our purpose as the
means of exchange without competition from other international currencies such as the dollar and franc.
These were the days that urban workers paid less than ten shillings for single room accommodation and you
could buy two oranges for one penny (now one kobo).
Even the half penny commanded value and was given and readily accepted as change in our markets.
School children could feed well at lunch time with a two kobo plate of rice and piece of meat, and a school
certificate holder earned less than 15 Nigerian pounds (N30), an amount which adequately covered his rent,
his transportation, feeding, clothing, with a surplus leftover for savings and possibly at least once a week
attendance at a football match or at the local cinema and Saturday night at a night club!
Fifty years down the road, how things have changed! While our erstwhile colonial overlords continue to
find relevance for half pennies, pennies and shillings in their currency profiles, our own equivalents have
long disappeared and are no longer relevant! Inflation has ravaged our system such that even Labour’s
current demand for a minimum wage of N50,000/month cannot buy what 15 Nigerian pounds could buy 50
years ago. Admittedly, inflation and loss in the value of money has not been stagnant in the economy of
our colonial masters, but the magnitude of loss is still within a factor of single digit, while a factor of over
600 defines the magnitude of the disparity between incomes for the same job in our country within the last
50 years.
Now, of course, it is the universal role of Central Banks in every country to promote monetary and
economic policies that will stimulate growth, and price and exchange stability that would stimulate
employment and improve the welfare of its citizens. Regrettably, Nigerians who are old enough will swear
that life was more secure and abundant 50 years ago! They look back with nostalgia at the stabilizing and
socially supportive value and relatively comfortable welfare systems that they enjoyed. They recall that
enduring legacies of our founding fathers in the West, East and the North, including national railways,
electricity corporation, waterways, free education, world class universities and teaching hospitals, including
the first TV station and world class stadium in Africa were all the products of ingenious enterprise and
funds garnered when minimum wage was less than 10 pounds and we had no income from any finite
resource such as crude oil. Today, according to official sources, over 70 million of our population,
including over 40 million youths are unemployed and our infrastructural and social values are in serious
decay!
The following article titled XX“CBN AT 50” by an economic analyst, Adaighofua OjomaikreXX is
reproduced in commemoration or possibly a lamentation of our fate as a country after half a century of our
own ‘independent’ Central Bank. Please read on.
“Just one month after Nigeria’s humiliating exclusion from attending the G-20 summit of the world’s
industrialized and fast emerging economies on account of her low economic rating, the Central Bank of
Nigeria on the occasion of its 50th founding anniversary assembled guests in their hundreds in posh
comfort for a week-long orgiastic binge and conference sessions of highfalutin lectures and unmerited selfpraise. The full cost of this obscene celebration at a time when solemn reflection upon the country’s
economic stagnation was called for, should be made public.
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“The pristine CBN Ordinance as well as each revised version till date enjoins the apex bank to guide the
Federal Government in the direction of balanced budgeting. Among the objectives of the Structural
Adjustment Programme was to put a limit on federal fiscal deficits, if any, at a maximum of 3.5 percent of
GDP. Given our national resources, monetary and fiscal policy management under such constraints is
expected to produce low inflation, competitive low interest rates and stable and realistic exchange rate that
are conducive to vibrant economic activity, full employment, rapid development and growth.
“Upon the country’s independence, the CBN was entrusted with an economy that held forth much promise
and prospects of rapid development. The economy emerged from the 1967 – 70 civil war in relatively good
shape. The next seven years witnessed substantial public and private sector investments in infrastructure
and the productive sectors which led to appreciable growth. But thereafter the economy began to hiccup
before subsequently settling into stagnation, decline and uneven growth from 1981 to 2002.
“For some three decades, the economy has been characterized by persistent excess liquidity, macroeconomic instability, high inflationary pressure, deteriorating naira exchange rate, prohibitive lending
rates, hostile economic environment and high unemployment. These are manifestations of unhealthy levels
of fiscal deficits which should be obvious to the apex bank’s research unit if it were devoted to
professionalism and especially since that fact has been bandied in the mass media over the past nine years.
Sadly, CBN governors through the years actively promoted excess fiscal deficits in dereliction of their duty.
“For instance, some quarters blame the years of stagnation on reduced oil export receipts and burdensome
external indebtedness; yet CBN governors presided over confirmed extensive looting of the treasury of any
available foreign exchange by top government functionaries, their collaborators and other corrupt
individuals. Clearly, the excess liquidity and other adverse features which plagued the economy could not
have been caused by duly converted naira revenue realized from the unlooted balance of oil receipts.
Secondly, before the last surge in crude oil prices improved export receipts, the immediate past President
had likened the immediate past CBN Governor to a quartermaster because he could be counted upon to
furnish whatever naira funds that government wanted despite the ensuing heightened macroeconomic
instability of that period.
“Thirdly, the apex bank under its current leadership claimed in 2007 that CBN owned the bulk of the
country’s foreign reserves because the naira equivalents had already been shared and spent by the three
tiers of government and that such CBN-acquired foreign exchange was not available for use to better the
condition of living of the populace. In effect, over the years instead of the beneficiaries of federation
account dollar proceeds to independently monetize and convert their dollar allocations into realized naira
revenue, the CBN has been substituting ways and means advances for withheld dollar receipts to fund
government expenditure with resultant unhealthy fiscal deficit levels that have laid the economy prostrate
for over three decades.
“However, in August 2007, the CBN came round to propose measures for the correct and economically
beneficial monetisation of public sector dollar proceeds through deposit money banks only for government
to suspend their implementation. Why did the Yar'Adua administration that had sworn to advance the
economic wellbeing of the people as enshrined in the 1999 Constitution opt for the prolongation of the
long-running national economic travails in flagrant breach of the Constitution, the extant CBN Act and the
Fiscal Responsibility Act 2007? All the same, 22 long months have elapsed since the CBN proposals were
put on hold: that period is more than sufficient for any central bank management that is focused, dutiful
and alive to its responsibilities to marshal facts, projections and the binding force of the relevant laws to
convince government that the suspended proposals are the only way out of the existing unsatisfactory
economic situation which government itself presumably seeks to change as we march to Nigeria 20 – 2020
and international relevance.
“Apart from economic stagnation, the faulty fiscal and monetary foundation exacts other heavy costs. For
example, to combat excess liquidity, the CBN mops trillions of naira annually via treasury bills that are
then restructured into sterile but high interest-bearing bonds (whose proceeds are not invested). Foreign
interests in the deposit money banks repatriate hundreds of millions of dollars monthly as interest earnings
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on such inert bonds. In this way, CBN fritters away the country’s hard earned foreign exchange, which
could have been invested productively to consolidate and diversify our industrial base.
“Yet, another frustrating CBN shortcoming is its slavish reliance since the mid-1980s on the dictates of the
World Bank and IMF despite their injurious economic impact.
“Meanwhile, the financial sector reforms begun in 2004 have gone awry. The apex bank’s habitual poor
regulation, inadequate supervision and lax monitoring of the process of achieving the banking sector
consolidation as well as the post-consolidation activities of the banks have led to serious abuses that have
inflicted massive losses on investors in the capital market. The tail wags the dog in the financial sector
with CBN directives routinely failing to attract due compliance.
“Also, the realistic naira exchange rate, competitive interest rates and stable prices which the banking
consolidation was expected to foster have not materialized; yet, our banks continue to declare surprisingly
huge profits while the real sector progressively collapses! Instead of adopting measures that promote
national development, our media-friendly CBN Governor is preoccupied with a misguided role of a mega
bureau de change! Plans for the banking consolidation included making successful banks the only
approved dealers in official foreign exchange: the banks are accessible to all genuine end-users of foreign
exchange. Today, however, an extra 1,000 or so bureaux de change and other speculators not only control
the bulk of available foreign exchange but also rig up naira exchange rates that hurt the productive sectors
thereby channeling the greater proportion of available foreign exchange to treasury looters and smugglers,
who are on an open mission to wreck the economy. And so, the manufacturing sector is in coma while the
ports are choked with goods that the country should ordinarily manufacture.
“What manner of central banking is all that? Government should cultivate knowledge-based solutions by
embracing appropriate fiscal and monetary policies so as to put a stop to this festering mess.”
SAVE THE NAIRA, SAVE NIGERIANS!
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