President Muhammadu Buhari directed that the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food.
Backstory: Presidential spokesman, Mallam Garba Shehu, quoted the President as saying: “Don’t give a cent to anybody to import food into the country.”
Why it matters: The President should not be saying this. Buhari’s remarks sent shock waves across the country and international investment community. This is because the President’s remark suggests that the CBN lacks its independence (enshrined in the CBN Act 2007) and could be politicized.
Buhari has not hidden his desire to attain self-sufficiency with food production. And it appears that his desires seem to align with those of the Godwin Emefiele, the CBN Governor who has at various times rolled out measures to restrict FOREX supply for food related products.
- On Palm Oil, Emefiele in June announced his plans to follow a “presidential directive” to “stop the importation of oil palm” into Nigeria.
- Recall that this month, the CBN also announced that the bank will stop the allocation of FOREX for the importation of milk into the country.
- Emefiele told Bankers at a dinner in Lagos that his food import restrictions were working. According to him, Nigeria’s monthly food import bill fell from $665.4 million in January 2015 to $160.4 million as of October 2018.
- “Most evident were the 97.3 per cent cumulative reduction in monthly rice import bills, 99.6 per cent in fish, 81.3 per cent in milk, 63.7 per cent in sugar, and 60.5 per cent in wheat,” he said.
What they are saying:
- Kingsley Moghalu, a former CBN Deputy Governor and presidential candidate said: “Nigeria’s entire economy appears to have been sub-contracted to our Central Bank, including industrial and trade policy. In the process, the economy has fared poorly, and the Central Bank has lost its independence. This is sad!”
- Former World Bank Vice President, Oby Ezekwesili took her own battle to President Buhari calling him, “a completely out-of-touch ‘leader’”. She warned that Nigeria already stands the risk of famine and such directive was poorly informed.
- Economics Professor, Jonathan Aremu said: “Why can the President not dialogue with the Central Bank and allow [the] Central Bank to say this? Because immediately you say that the President directed Central Bank Governor to behave this way, people will think something must be wrong!”
- SBM Intelligence, in a briefing note noted that the alarming directive “signals that there is pressure on the naira’s exchange rate.”
The downside: Emefiele himself has significantly yielded the independence of the Central Bank in a bid to protect himself. According to insiders, Emefiele suffers a credibility crisis and cannot push back.