ON Tuesday, August 14, Prof. Chukwuma Soludo, Governor of the Central Bank of Nigeria (CBN) announced a number of monetary policy initiatives geared towards reinforcing the management of the national currency within the Nigerian economy and to facilitate its emergence as reference currency in the regional and continental economies. The CBN hosted an elaborate media event and invitations were extended to state governors and various financial sector institutions. Curiously, the Federal Minister of Finance and mandarins from public finance institutions were conspicuously absent.
At the briefing, the CBN proposed to re-denominate the Naira by a factor of 100 effective from August 1, 2008, by shifting two decimal points to the left thereby instantly and effectively creating a hectonaira (HN) unit of account. Other proposals included the adoption of measures towards the liberalisation of current account flows, the positioning of the Naira in a direct reference relationship with the United States (U.S.) Dollar, at N1.25 to $1: an uncanny coincidence with the pre-SFEM 1986 rate.
The CBN's "strategic agenda for the naira" as it was labelled, also referred to plans to ensure the convertibility of the Naira by 2009, initiating accession to certain Articles of the International Monetary Fund, and the start of monthly redistribution of real U.S. Dollar proceeds from the Federation Account to state governments (excluding Local Governments for the time being). There were also plans to adopt an inflation-targeting framework, to increase transparency and publicity of monetary policy committee decisions.
The thrust of the CBN's Naira agenda is audacious. It is an expression of the premier age-old central banking responsibility of ensuring price stability and inflation management. It is also quite clever to use the U.S. Dollar and the ECOWAS economy as benchmark and targets. Without question, the Central Bank is inspired in making these proposals, by its success in the banks consolidation exercise and hence seeks to take reforms to the next level by this monetary policy initiative. It is difficult to doubt that there exists necessary and near sufficient conditions for the CBN to promote the nascent plans. The domestic money market has been tamed by the greater involvement of many players, thanks to the post-consolidation balance sheets of the banks and the professional attitude of the Debt Management Office on public sector borrowing.
As we understand it, a contraction in Naira money supply is to be offset with the monthly Dollar payments to state governments. The implication for inflation management should be salutary to the extent that exchange must be exclusively made through the commercial banks and the CBN can look over their shoulders and books. We may concede too that strengthening the Naira should be all the raison d'etre for economic institutions and political managers in Nigeria.
Given appropriate dollar infusion, necessary conditions for ever-rising productivity and a fast-growing naira economy may begin to take firm root. Nigerians want value for their hardwork and handiwork, their resources and endowment. However, the challenge is not just about the Naira but ensuring that other indicators are well managed and that the country's production index is carefully multiplied, by paying attention to existing obstacles, overlooked in the proposal, which can neutralise the likely beneficial impact of the new measures.
Unfortunately, whatever opportunities that may have been provided by the CBN proposals were soon jeopardised with the baffling disclosure that the CBN did not take key officials and departments of government into confidence in the preparation of such a major monetary policy that could result in major transformations in the people's lives, with implications for other policies. The Federal Executive Council had to set up a team to "critically" review the CBN statements and "advise Council accordingly.'' Soludo then had to undertake a marathon session responding to the questions and anxiety of an embarrassed Federal Executive Council. Efforts made by a number of officials to emphasise that there was no error of judgment by the CBN in not providing government a preview of the intended announcements sounded unconvincing.
In particular, the excuses were based on a fabled notion of independence and autonomy of the CBN as reportedly enshrined in the recent CBN Act. The effect has been a feverish attempt on the part of the Government to disown the policy and the CBN. Notably, the Federal Accountant General, in a telling reaction announced that there is no known plan to start the payment of Federally Allocated Revenue to state governments in U.S. dollars from September 2007 as announced by Soludo.
Barely a long week after, Mr. Michael Aandokaa, Attorney General and Minister of Justice also announced that the CBN contravened Section 19 sub sections 1 and 2 of the new CBN Act which provides that Presidential approval must be sought and obtained in writing on issues regarding the national currency.
Hence, he continued, " I, as the Chief Law Officer of the Federation hereby stop all actions on the redenomination of the Naira'' . The Attorney General then proceeded to narrate an unedifying interview he reportedly conducted with President Umaru Yar'Adua and the President's Counsel, Jalal Arabi, to find out if Soludo had obtained prior approval, in writing, to commence the Naira initiatives.
Prof. Soludo and Aondoakaa have both, in their own exceptional ways, set the tone for an appraisal of two emergent phenomena in Nigeria today. It begins with the flush of public officers strutting on the nation without much homework done, and the rash of ego paraded in the public arena as a component of state policy directives. In the present case, a matter of huge national importance has been decimated by regretful grandstanding by public servants clinging to titles.
The first phenomenon is the recent amendment to the Central Bank of Nigeria Act. Signed on May 25, 2007, it is one of a set of bills that stealthily emerged in the twilight of the Obasanjo administration. The reality is that it has almost been unnoticed by the generality of our people and this is evident in the clear absence of debate of its now extant provisions.
In a previous editorial, we had argued that the self-rule of the Central Bank as enunciated by the new Act has to invite greater responsibilities and self-regulation. We do not accept whatever manner of law that would alienate or even, exclude, the Head of government and principal officers in charge of financing a sovereign state from a fundamental intervention in that country's monetary and ultimately, its fiscal policies.
We hold that the tragedy of this policy hiatus is well-nigh avoidable if public policy was conducted in good faith and with a greater focus on the common good. It is obvious that even with its secluded interpretation of the CBN Act, the CBN is well-meaning but it failed to realise that the CBN is only a strategic member of Government. This otherwise hardworking institution got carried away.
The second emerging phenomenon refers to the attitude of President Yar'Adua's own nominees and appointees. Whilst trying to assert themselves as new chefs in the kitchen, the practice and skills required for resolution of conflicts seem to be lacking. For the second time in a fortnight, Mr. Aondoakaa has intoned that he is the ''Chief Law Officer of the Federation".
In this particular instance, he ought to know that he need not remind Nigerians so. Rather, it would have been good to advise Mr. President to summon and order the CBN Governor to withdraw the re-denomination proposal. The conflict that has played out, so far, in public glare, between the Presidency and the CBN is a disservice to Nigeria's new beginning.
The economics and merits of the idea of Naira revaluation have been crowded out by the emergent crisis of management. But there is still room to inquire if Nigeria's top priorities are sequentially reflected in that strategic agenda for the Naira as proposed. The task before the authorities is to quickly build a consensus on the various arms of the policy agenda and resist the hubris in searching for the vanquished.
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