Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has said that adopting the monetary policy being proposed by the presidential candidate of the Peoples Democratic Party (PDP), Atiku Abubakar, would be “as good as going back to the era of Structural Adjustment Programme (SAP) in Nigeria.
Emefiele said this during the monetary policy committee (MPC) meeting of the apex bank in Abuja.
SAPs are a complex of loans that the World Bank and the International Monetary Fund (IMF) offer to a country suffering from an economic crisis. It forces the country to implement new policies.
It was introduced to Nigeria by then military president, Ibrahim Babangida in 1986. The programme benefitted the country’s rural classes and farmers, but the middle class and the civil servants suffered. The Naira also depreciated up to 80% against the U.S. dollar, causing uncontrollable inflation.
In November 2018, Atiku said it was worth the risk to float the naira even if it results in inflation, adding that any side effect would be balanced out by attracting more inflow of foreign currency.
Floating the naira simply means allowing the naira exchange rate to be market-driven rather than setting it a fixed price. If it happens, there will be only one rate which will be a reflection of the country’s economic situation. The CBN will no longer be the sole provider of foreign exchange and will no longer dictate what rates should be. As a matter of fact, the CBN will be a player in the forex market like everyone else.
“I would prefer to float the naira because I believe that will bring about a more stable exchange rate,” Atiku had said in an interview with The Africa Report. “Therefore, foreign investors are more likely to return to Nigeria and invest as much as possible. We have to create more incentives for foreign investment and relax conditionalities, remove regulations as much as possible.”
But speaking on Tuesday, the CBN governor said Atiku’s proposal is “a road to perdition” if Nigeria adopts it.
His words: “The MPC reviewed it and concluded that it would be wrong. It is as good as saying that we should go back to the era of Structural Adjustment Programme (SAP) in Nigeria.
“The implication can better be imagined. It will certainly lead to capital flight, lead to massive depreciation or devaluation of the currency and ultimately to currency crisis in Nigeria and I think we should all know that it is a road to perdition to ever go in that direction.”
The CBN governor also dismissed insinuations about the existence of a capital control regime in the country.
He said although the CBN is completely apolitical in its activities as an independent institution, it would not hesitate to respond to economic issues within its purview.
“There is no capital control in Nigeria today because you cannot find the CBN trying to intervene in the market for demand and supply of foreign exchange,” he said.
“We cannot be talking about allowing import of items that can be produced in the country today, exporting jobs from Nigeria to foreign countries, and we say we have the interest of Nigeria at heart? We don’t agree with anybody. It is a wrong premise to say that you will allow imports to just flood the country just because you want to please anybody. It is not in our interest.
“We will remain apolitical. We will not want anybody to drag the central bank into issues that are within our remit, otherwise we would respond to it.”