SAN FRANCISCO, February 08, (THEWILL) – Former Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, has declared that President Muhammadu Buhari risks exacerbating the country’s economic woes and undermining his government’s achievements on security and corruption by endorsing exchange rate policies that are doomed to fail.
Speaking during an interview with Financial Times, Sanusi, now Emir of Kano, said he was disappointed to see Buhari’s strong security and anti-corruption efforts overshadowed by a monetary policy regime with “very obvious drawbacks that far outweigh its dubious benefits.”
“Unfortunately, because the exchange rate is right out there in front now, monetary policy is being seen as the barometer for broader economic thinking,” he said in an interview at his palace. “It is sad that on this one policy you get it so wrong that you risk taking away attention from everything else you are doing.”
Noting that the president had been dealt an extraordinarily difficult hand, he added: “There are no easy options and devaluation is a bitter pill.” During his own tenure as governor he had also resisted it but added that “I had reserves of over $40bn and an oil price at over $110,” he said.
“Exporters and investors are holding on to foreign currency, as no one would sell at the rate the government is setting”, while “the government does not have the reserves to keep the exchange rate at its official level in the market.
“These policies have been tried in different parts of the world and in this country before and they have just never worked. No matter what the stated intention behind them, they are wrong.”
The country’s economic woes were now being exacerbated, Mr Sanusi argued, with the currency peg and restrictions in the foreign exchange market creating “a lot of speculative and precautionary demand”.
The gap between the black market rate and the “artificial” official exchange rate would keep widening, Mr Sanusi predicted, until the bank adopted a more realistic policy or the price of oil climbed and dramatically increased reserves.
“This encourages corruption and rent-seeking similar to the fuel subsidy regime” that enabled industrial scale theft of oil revenues under the previous government.
A more flexible exchange rate policy at this point was the “least bad option”. “We are hopeful that given all the other positive things done so far, policy will head broadly in the right direction and flexibility will come in down the line.”
As CBN governor from 2009 to 2014, Sanusi won international acclaim for cleaning up Nigeria’s banking system and later blowing the whistle when billions of dollars in state revenues from oil sales went reportedly missing. He was suspended by Former President, Goodluck Jonathan, for inconsistences in the figures of the missing funds but subsequently became emir of Kano, the second highest Islamic authority in the country, in 2014.
The CBN, with Buhari’s public endorsement, last year imposed tight capital controls and pegged the naira at an official rate currently 35 per cent stronger than the black market rate insisting repeatedly that the naira will not be devaluated.
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