Nigeria’s President Bola Tinubu Suspends Central Bank Governor, Godwin Emefiele
Nigeria’s new president, Bola Tinubu, has suspended the country’s central bank governor, Godwin Emefiele, with immediate effect. The suspension marks the end of Emefiele’s era of unorthodox policies at the West African institution, which were often criticised as being too interventionist. In his inaugural speech last month, President Tinubu had been critical of Emefiele, calling for interest rates to be cut and Nigeria’s multiple exchange rate systems to be unified.
Emefiele has been replaced by Folashodun Adebisi Shonubi, one of his deputies, and ordered to hand over leadership of the Central Bank of Nigeria to him. The suspension comes as a result of the ongoing investigation into Emefiele’s office and planned reforms in the country’s financial sector.
Emefiele’s tenure as central bank governor was defined by unconventional policies, with his independence being questioned by critics who argued he was too close to the government of former President Muhammadu Buhari. He aligned the bank with Buhari’s interventionist approach, banning forex sales to importers of certain goods and making loans to farmers and industries in an effort to encourage local manufacturing. During his tenure, the bank also lent more than $50 billion to Buhari’s government.
Critics argued against Emefiele’s decision to keep the currency artificially high when the 2016 oil price crash made the strategy unsustainable. The introduction of multiple exchange rate “windows” and a scarcity of the US dollar resulted in many businesses and citizens using a parallel market where the dollar trades up to 50% above central bank rates. Investors argue that multiple exchange rates are opaque and favour the well-connected who buy cheap dollars from the bank and sell higher on the black market.
Emefiele also oversaw the introduction of redesigned banknotes ahead of the presidential election in February. The launch descended into chaos after a shortage of the new currency led to ATM queues and bank brawls.
Additional Piece: The Impact of the Suspension of Nigeria’s Central Bank Governor
The suspension of Nigeria’s Central Bank Governor, Godwin Emefiele, brings significant implications for the country’s economic outlook and political stability. Emefiele’s tenure was characterised by unconventional policies that were intended to protect Nigeria’s struggling economy, with many of his policies having mixed results.
The Suspension’s Impact on Nigeria’s Economy
The suspension of Emefiele will have a significant impact on the country’s economy, particularly as Nigeria recently emerged from a recession. In November 2021, Nigeria’s central bank maintained its benchmark monetary policy rate at 11.5%, despite high inflation and a weak currency. It is unclear what direction the new governor will take, particularly regarding interest rates and Nigeria’s multiple exchange rate systems.
The suspension is also likely to impact Nigeria’s financial markets, which have witnessed a sharp drop since the announcement. The Nigerian stock market, which closed at -0.50%, experienced a significant decline in trading volume and market capitalisation in the days following the suspension.
Impact on Political Stability
The suspension of the central bank governor has raised questions around President Tinubu’s intentions, particularly in the context of his criticism of Emefiele in his inaugural speech. The move is likely to polarise the political scene in Nigeria, with some analysts citing that the suspension could be a way of tightening Tinubu’s grip on power.
The timing of the suspension is notable, considering that Emefiele’s last term was due to end next year. Critics have claimed that Emefiele’s suspension is politically motivated, given the role the central bank governor has played in supporting the government’s finances.
Summary:
Nigeria’s new president, Bola Tinubu, has suspended the central bank governor, Godwin Emefiele, citing ongoing investigations into his office and planned reforms in the financial sector. During Emefiele’s tenure, the bank made unconventional policies, with his independence being questioned by critics. The suspension will have significant implications for Nigeria’s economy, particularly as the country recently emerged from a recession. The suspension is also likely to polarise the political scene in Nigeria, with some analysts citing that it could be a way of tightening Tinubu’s grip on power.
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Nigeria’s new president has suspended the country’s central bank governor, marking the end of an era of unorthodox policies at the West African institution.
Bola Tinubu, who took office on May 29, ousted central bank chief Godwin Emefiele, with “immediate effect,” according to a statement from the cabinet secretary’s office on Friday evening.
“This is a follow-up to the ongoing investigation into his office and planned reforms in the financial sector of the economy.”
Emefiele was ordered to hand over leadership of the Central Bank of Nigeria to Folashodun Adebisi Shonubi, one of his deputies.
Tinubu had been critical of Emefiele in his inaugural speech last month, saying interest rates needed to be cut and Nigeria’s multiple exchange rate systems needed to be unified.
“Monetary policy needs a thorough housecleaning,” the president said.
The suspension, though long overdue, marks a fall from grace for Emefiele, who had led the bank since 2014 and became the first central bank governor since Nigeria’s return to democracy in 1999 to be reconfirmed for a second five-year period. His last term was due to end next year.
Emefiele’s tenure as central bank governor was defined by unconventional policies with his independence questioned by critics who argued he was too close to the government of former President Muhammadu Buhari.
He aligned the bank with Buhari’s interventionist approach, banning forex sales to importers of certain goods and making loans to farmers and industries in an effort to encourage local manufacturing. The bank has also lent more than $50 billion to Buhari’s government.
Emefiele’s tenure was dominated by the bank’s efforts to shore up the value of the naira with Nigeria’s dwindling foreign reserves to avoid sharp devaluations of the currency. There were also chronic shortage of dollars which hampered an economy heavily dependent on imports.
Analysts disputed the wisdom of keeping the currency artificially high when the 2016 oil price crash made the strategy unsustainable.
The introduction of multiple exchange rate “windows” and the scarcity of the greenback have forced many businesses and citizens to turn to a parallel market where the dollar trades up to 50% above central bank rates.
Investors argue that multiple exchange rates are opaque and favor the well-connected who “return” buy cheap dollars from the bank and sell higher on the black market.
The value of the naira has fallen sharply in recent days, with the currency sliding to an all-time low on Thursday.
Emefiele also oversaw the introduction of redesigned banknotes ahead of the presidential election in February. The launch descended into chaos after a shortage of the new currency led to ATM queues and bank brawls.
The central bank chief stunned Nigerians last year when he attempted to run for president as the ruling All Progressives congressman without resigning from his role, contravening electoral and central bank guidelines.
Emefiele sued the electoral commission and Nigeria’s attorney general before giving up on his presidential ambitions.
https://www.ft.com/content/4d2d920f-a535-4fb9-806b-062948784063
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