Open letter to CBN's acting governor

Open letter to CBN's acting governor

Ms Lagarde, was once the Managing Director of the International Monetary Fund, IMF, 2011-2019. Last week in the USA, she admitted what had been bothering most economists – the feeling that the economic theories and principles which had formed the basis of global finance no longer work as they should. There are others, who have been disturbed by the lingering feeling that we need new ideas. Otherwise, the global economic system is moving gradually towards a crash. Some of the signs of impending universal doom are already with us.


“BRICS expansion faces   eleventh hour hurdle.”   REUTERS AUGUST 23, 2023.

BRICS as most people know stands for Brazil, Russia, India, China and South Africa – nations which lately have been talking about ditching the US dollar and replacing it with a new currency. Even before the deal has been ratified, we are learning that some proposed new members – UAE and Saudi Arabia, have commenced trading in their own currencies instead of the dollar. The impact on global trade has not been fully studied. The political “gains” have taken the lead. Yet, every economist realises that we are in uncharted territory. The mind-boggling task of managing several currencies has not been adequately addressed.

Nigeria has not been invited to join the expanded BRICS. But, what will happen if India insists on paying us with rupees for our exports to their country and agree to accept our naira for imports from the country? With a perpetual balance of trade against us, India will soon have loads of naira on its hands and we will have billions of rupees to dispose off. Certainly, the time has come for Nigerian authorities – FG, CBN – to set up a study group to educate all of us. Certainly, it will create massive and unprecedented   upheaval globally.


However, that is only a pre-amble to my main mission today. It is to warn the Acting Governor of the Central Bank of Nigeria, CBN, to reconsider his approach to the tasks before him. One, he seems to rely more on power and force than on reason and persuasion. He apparently believes that he can alter economic reality by changing measures repeatedly in order to achieve exchange rate stability. Second, he is gradually falling into the same trap as Emefiele before him. Third, he was in the CBN when the bank surrendered N23.7 trillion through Ways and Means to the Buhari government without the approval of the rubber stamp National Assembly, NASS, as required by law. He said nothing; perhaps to protect his job. Now, he has a bigger job; Nigerians should worry if he will put self before the country. Unless he addresses these concerns, he will continue to fail.. Let me explain.


“Brute force without wisdom falls by its own weight.” Horace, 65-8 BC.

If Mr Shonubi is honest with himself, he will readily admit that the imbalance between dollar inflow and outflow is at the heart of the problem. Nigeria had no problem with exchange rate of N0.70/US$1 under Gowon because what we took in exceeded what we paid out by a wide margin. We crossed the line to over N1/US$1 under Buhari in 1984-5 and we have never looked back. The reasons for the ever rising exchange rates under each government varied; but, the fundamental problem was the same. The demand for dollars exceeded the supply. This is not the sort of problem you solve by “cracking down” on BDCs or abokis. There are only three options: increase dollar supply or reduce dollar demand or do the two simultaneously. The FG and CBN have not taken steps to increase supply or reduce demand. You have tried to apply brute force or what the Americans call jaw-boning. I will urge you and your colleagues to find out what happened when various American governments attempted price controls. It never worked. You assault on BDCs failed because a lot of people believed me and not you, that your forceful intervention would fail as it did.

You could however have partly, not fully, succeeded if you took one step before invading the parallel market. That critical step allowed the US governments embarking on price control to buy time while they work out more lasting solutions to the problems. Forgive me if I don’t divulge the secret here.


“For the sins you do two by two, you must pay for one by one.” – Rudyard Kipling, 1865-1936.

Kipling must have had the current predicament in which the former CBN Governor finds himself in mind when he wrote that line. I have covered all the CBN Governors since 1987; and just as it appeared that Godwin Emefiele would be the first to complete two terms of five years each,   “fortune’s honey turns to gall.” Now he probably wishes he had stopped at the end of the first term. The nation never before looked closely into the relationship between Aso Rock and CBN. The President being the more powerful of the two can make the Governor betray the mandate of the bank in setting independent monetary policies as required by the decrees, constitutions and laws regulating the conduct of the bank. It is easier for the Governor to succumb if the President is a “brother”. Now that everybody’s eyes are on the CBN, my first advice to you is to return to basics. Your relationship with Tinubu should not be different because he is Yoruba and not Birom, Efik, Hausa or Idoma. CBN must regain its independence.

Second, focus on getting the FG to fulfil its obligation of raising sufficient revenue, including dollar income, to execute its projects and programmes.

That means you should not turn Ways and Means into an ever ready ATM machine for the FG to tap illegally. Insist on following laid down procedures. In that regard, avoid the tyranny of the urgent. Governments, after failing to plan properly, invariably find themselves in a financial crunch. They run to the CBN for an urgent “under-the-table” bail out. Once granted, you have become an accomplice in illegality. You can’t press for them to repay without exposing your original error of judgment. One illegal transaction thereafter will follow another until N23.7 trillion has been racked up.

Finally, there are two ways to significantly increase dollar revenue in the short term. The first is through exporting more crude oil; the other is by importing less — including less finished petroleum products. Here are the reasons why.

“Nigeria’s oil production drops 14.69% to 1.22mb/d – Report.”

That report in VANGUARD of August 29, 2023, summarises half of what you need to know about why you now labour in vain to normalise exchange rates. Crude oil theft still remains at 400,000 b/d according to the NNPCL. Does it make sense to you that a nation badly needing dollars, will allow $960 million to be stolen and lose production of another $960 million, totalling $1.92 billion monthly, without taking steps to collect its legitimate revenue?

Stop harassing BDCs and abokis. You can’t bully reality. Tackle FG.

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