CBN VS THE PEOPLE
By: Sir Henry Olujimi Boyo (Les Leba) republished in March 2012
INTRO:
Last week, this column republished ‘Shoprite’ as Metaphor for AfCFTA The article discusses the hardships faced by local manufacturers due to government support for foreign imports that compete with local goods. All republications can be found in the archives using the below link.
(See www.betternaijanow.com for this series and more articles by the Late Sir Henry Boyo)
Today’s republication discusses events which portray how previous CBN leaders have contributed to the mismanagement of the Nigerian economy. Despite these records, since the initial publication of this article, the mishandling of monetary tools that could be wielded for the improvement of Nigeria’s economy has prevailed. This article also contains a letter from Femi Falana to the CBN on behalf of the Late Sir Henry Olujimi Boyo, and Mr. Adaighofua Ojomaikre insisting on transparency and accountability.
As you read through the below article taking note of previous events and rates, keep in mind its first republication (2012), a clear indication that things remain stagnant even as we face the year 2023.
The advocacy for a deregulated foreign exchange market to facilitate economic growth and social welfare enhancement commenced over ten years ago. In spite of the validity and strength of the prescription, those government agencies responsible for monetary and fiscal policies have buried their heads deep in the sand, so that they cannot hear or indeed, see the progressive rationale of the argument. When confronted, the outgoing CBN Governor before Charles Soludo offered a feeble response about the sanctity of certain government policies. Professor Soludo, on the other hand, remained boastfully in denial of the validity of this advocacy until he capitulated suddenly in August 2007, with his Strategic Agenda for the naira, which some in the media readily recognized as the wholesale lifting of what we had consistently preached for over five years at that time!
However, some Nigerians will recall that in February of the same year, CBN had released new design note issues and freshly minted coins in replacement of the existing profile. Billions of naira had been expended in production of the new currency and billions more in a media blitz to encourage public recognition and acceptance. In the light of what would apparently become a huge waste if Soludo’s Agenda, which also included production of fresh currency profile, were accepted, Mr. President politely asked the erudite Governor to keep the matter on ‘pause’, and claimed that his office had not been carried along on the matter.
In the aftermath of Yar’Adua’s stop order, presumably, Soludo’s conscience led CBN into attempts to publicly recognize and empathise with the plight of the very poor, particularly the children from deprived homes from the North.
Later, Lamido Sanusi induced some level of hope that new CBN Governor would recognize that the poison in the economy was the existing framework that induced CBN’s monopoly of the forex market.
In spite of CBN’s inability to achieve its prime mandate of price stability, i.e., reduced inflation rate, lower single digit conducive cost of borrowing to facilitate industrial capacity utilization and growth with increasing employment level, Sanusi has refused to reexamine the causative factors for depleting purchasing power and demand and the deepening poverty level in the land.
Curiously, however, just like Soludo, Sanusi has also latched onto an overt advocacy on relief for the poor, even though his aggressive insistence on fuel subsidy removal in January this year exposed the underlying hypocrisy of his real concern for the welfare of the masses!
Indeed, each of the CBN Governor’s mentioned above has gone out of the traditional confines of the office to demonstrate their ‘love’ for the poor! The majority tribe of disadvantaged Nigerians may not have heard them, but they certainly feel the pains caused by the poisonous monetary model that all three Governors have been unwilling or unable to address. Inexplicably, these Governors have often blamed our economic predicament on excessive spending by the three tiers of government.
However, the universally appropriate policy for reviving a comatose economy is expansion in fiscal spending, without which you cannot effectively stimulate demand and create jobs for the people!
The failure of the regulatory process has been identified as the cause of the serious dislocations and immense fraud in the banks and in the capital market. In recent times, Nigerians have wondered if banks could have continued milking the system for so long without the knowledge of CBN. Infractions like round tripping, money laundering, margin loans, insider practices, the list is endless, were overtly sustained in the full glare of all and sundry but the regulatory agencies assured us that the banks were very sound, and Nigeria was immune from the world’s financial crisis! It is unbelievable that no one in CBN was ever found culpable in the subsequent financial mess.
Incidentally, both Soludo and Sanusi have received the Financial Times Awards as best Central Bank Governors during their tenure. It is certain, however, that the respected London Newspaper would dare not hint of such award for the Governor of the Bank of England, if prevailing monetary policy rate was 12%, and inflation remained as high as over 10%, while 20% of the population was jobless!!
It would be inappropriate to just sit and fold our hands and let this drama of deceit continue. Ultimately, after 10 years of dialogue with the deaf, we had no other choice than to advise our Legal Counsel, the respected patriot and eminent activist, Mr. Femi Falana to demand for certain information to clarify our understanding of CBN’s operations. The deepening poverty level in spite of increasing wealth and the systemic contradiction, present enough reasons to suspect the apex bank may also be riddled with waste, inefficiency and corruption, as we have seen in prime government agencies such as NNPC, SEC and the Pensions Task Force, lately.
The text of Mr. Falana’s letter to the CBN is as follows:
“March 5, 2012
“Dear Sir,
“REQUEST FOR INFORMATION ON SUBSTITUTION OF FOREIGN CURRENCIES PAID INTO THE FEDERATION ACCOUNT
“We are Solicitors to Messrs. Henry Olujimi Boyo and Adaighofua Ojomaikre (hereinafter referred to as “our clients”) on whose behalf we write this letter.
“Our clients’ instructions are briefly stated as follows:
“1. By virtue of Section 162 of the Constitution of the Federal Republic of Nigeria (1999) as amended “there shall be a Federation Account into which all revenues collected by the Government of the Federation shall be paid except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
“2. It is further stipulated that “any amount standing to credit of the Federation Account shall be distributed among the Federal and State Governments and the Local Government Councils in each State on such terms and in such manner as may be prescribed by the National Assembly.”
“3. Contrary to the aforesaid provision of the Constitution the Central Bank of Nigeria has been substituting foreign currencies paid into the Federation Account with Naira funds before distributing same to the three tiers of government i.e. the Federal and State Governments as well as the local government councils in each state of the Federation.
“4. The adverse effects of the said substitution of revenues in foreign currencies with Naira funds on the national economy include the followings:
i. Sustaining high double-digit cost of funds;
ii. Increasing production costs thereby occasioning national de-industrialization;
iii. Fueling inflation at rates that pauperize and make pension contribution a worthless pursuit, (current projected inflation of 15% compared to less than 5% in successful economies);
iv. Creating increasing unemployment with over a third of our working population idle with the collateral risk of rising insecurity;
v. Weakening the Naira value and instigating high fuel prices with increasing subsidy component, and
vi. instigating national debt accumulations at exceedingly high cost projected at over N500 billion in the 2012 budget,
vii. creating an adverse economic ripple that deepens poverty, when dollar revenue increases;
“5. Compliance with the aforesaid constitutional provision and payment of foreign accruals to beneficiaries of the Federation Account by means of dollar certificates (which prevent capital flight, money laundering and smuggling) will ensure monetary and price stability and promote a sound financial system as well as dispel the perennial scourge of excess liquidity and its negative chain of high inflation/interest rates and collapsing industrial landscape, and will promote an enabling environment with the following prime features:
i. Low single digit cost of borrowing across the board (in contrast to current over 20% rate of interest), which hurts businesses;
ii. Low production costs for made-in-Nigeria products;
iii. Low fuel prices, much below the old level of N65/litre;
iv. Minimal inflation rate of not more than 3%!
v. Strong stable and realistically valued Naira with attendant increased purchasing power for all income earners;
vi. Low motivation for capital flight;
vii. Rapid increase in employment through sustainable industrialization thereby checking widespread poverty;
viii. Minimal national debt and reduced debt service charges;
“6(a) In the light of the foregoing our clients have instructed us to find out why the Central Bank has refused to comply with the aforesaid provision of the Constitution. Indeed, the Monetary Policy Thrust of the Government Transformation Blueprint Vision 2020 states that “one potentially enduring solution which would avoid the creation of new money and boost the Naira value in the foreign exchange market, relates to the allocation of foreign exchange earned from oil to the three tiers of Government rather than monetizing it.” The use of dollar certificates eliminates capital flight, money laundering and smuggling. Consequently, our clients demand to know by which authority CBN continues to violate Section 162 of the Constitution.
“6(b) Our clients also demand for clear information on the following:
(i) All dollar revenues, which have been substituted with naira in monthly allocations (and the applicable rate for substitution) in the past five years.
(ii) Monthly balances in the Excess Crude account, and the details of all withdrawals from the Excess Crude account
(iii) Total value of monthly borrowings with sales of Treasury Bills and Bonds and related interest rates and service charges.
(iv) Total value of monthly auctions of dollars to commercial banks and applicable exchange rate
(v) Total value of monthly allocation of dollars to Bureau de Change and applied exchange rate.
(vi) Total monthly profit made by CBN on all auction sales of dollars
(vii) Total monthly credit balances in foreign reserves account.
(viii) Total value of fuel subsidies paid monthly for fuel imports
(ix) Tabulation of annual budget deficits
(x) Tabulation of annual rates of inflation
All above information are required for the period 2007 to 2011
“6(c) Our clients also demand for clear information on the source of the total amount of bailouts advanced to the banks since 2007.
This information should clearly distinguish the total sums and the sources of AMCON intervention in the banking crisis.
“6(d) Our clients also demand for a clear statement on
(i) Nigeria’s debt portfolio (external/domestic) and the tenor and applicable interest charges on these loans
(ii) The structure and yield on our foreign reserves and their current locations.
“TAKE NOTICE that this request is anchored on Section 2 of the Freedom of Information Act. Therefore, you are required to accede to our clients’ request within seven days of the receipt of this letter. Otherwise, we shall be left with no other alternative than to pray the Federal High Court to compel you to justify the decision of the management of the Central Bank to treat section 162 of the Constitution and the Monetary Policy of the Government with disdain.
“Yours sincerely,
FEMI FALANA”
SAVE THE NAIRA SAVE NIGERIANS
