Re – A primer on the “Trilemma” – Why CBN and Adeosun differ

Doctor, your piece on the above topic published on 01 October 2016, made for good reading for the student of economics than for the business man.  However, remember, that sitting on the fence as you did in the write-up, did not advance the cause of humanity.  On this matter, I hold the view that the […]

Doctor, your piece on the above topic published on 01 October 2016, made for good reading for the student of economics than for the business man.  However, remember, that sitting on the fence as you did in the write-up, did not advance the cause of humanity. 
On this matter, I hold the view that the CBN largely contributed more to the high state of insecurity in the country by its holding a high MPR in the search for price stability and international capital mobility.
Nigeria is currently experiencing high un-employment (Obasanjo recently said so) with a high proportion of the nation’s work force take-home pay falling below the national minimum wage.  It is at this critical point that all policies at macro-level should aim at addressing this monster – unemployment.  The consequences of high employment include increasing rate of armed robbery, drug pushing, kidnapping, militancy, etc.; as the saying goes, ‘an idle mind is the devils workshop’.  Was it a coincidence that your article appeared on the day major newspapers carried as front page headline news, the kidnapping of the wife of the current Governor of the Central Bank of Nigeria along Benin – Agbor road?  According to the report in the dailies, the kidnappers did not know her identity at the time of the kidnapping.  It means therefore, it could have been anybody.  The fact however is, the kidnappers would not have engaged in the high risk criminal act if they had the option of gainful employment.
High interest rate as promoted by the CBN Monetary Policy Committee has largely destroyed the individuals and businesses.  It has also destroyed the capital market, the property and real estate market and has left the organised private sector largely at the mercy of equity capital and distributors or suppliers credit.  I wish to be as brief as possible.  Who are the beneficiaries of this high interest rate as canvassed by the CBN?  The beneficiaries include the CBN itself, the banks and high network portfolio managers.  These institutions are the ones that form the bulk of investors in the higher interest paying Federal Treasury bills and Treasury bonds.  Victims include the capital markets- no quoted company on the floor of the Nigerian Stock Exchange nor any state government, can raise any primary issue of securities now due to the higher yield on risk free rate, savings account holders are still are paid interest at 5% by the banks. The biggest victim is the Federal Government being made to carry a higher borrowing cost from the domestic market.  I believe borrowing cost at the federal level has now replaced petroleum subsidy as the item with the highest estimate in the national budget.
The open disagreement between the Minister of Finance Kemi Adeosun and the CBN Monetary Policy Committee on interest rate is an embarrassment to the government and people of Nigeria.  This is not the first time the CBN has openly snobed the Federal Government.  To mention but a few; remember the Prof Charles Soludo Naira Re-domination Program in which Soludo cited the CBN 2007 Act as his authority not to get the government of Yar’Adua’s approval to re-dominate the national currency.  Remember it is the same Act that CBN Governor Sanusi Lamido Sanusi relied on and refused to submit the budget of the CBN to the National Assembly for the assembly’s over-sight function.  Now it is the same provision of the CBN 2007 Act that the current Governor relies on to ignore the plea of the Honourable Minister of Finance for monetary policy to be used as an instrument to tackle the high level of un-employment and dwindling domestic industrial production.
Prof, this is not a time to sit on the fence, come out on which side would the Nigerian State benefit – the Minister’s or the CBN’s?  To me – I choose the minister’s side.  Our farmers and industry now need cheaper funds from the banking sector to survive and to grow their businesses to meet domestic demand and possibly to achieve export levels, to enable the youths to get gainful employement.  The points you adduced as the stance of Hon. Kemi Adeosun are valid and reasonable for the economic growth of the country.  Failure of the CBN to reason along with the Minister is enough to give support to the call by Kaduna State Governor El-Rufai for the amendment of the Central Bank Act to avoid all the embarrassment being caused by its selfish policies.  A little tip: read the CBN Act and you will observe the CBN has no supervisor who approves its budget and who they address their annual report to except, to its board of directors.  Section 4 of the CBN 2007 Act has the Federal Government of Nigeria as its sole investor but has no right to call it to account for it work. Act now before CBN high interest rate regime destroys Nigeria.
Submitted by Nicodemus Dodo (FCA), The Beatitudes, Masaka, 0802250101. [email protected]