The Emir of Kano, Muhammad Sanusi, who is also the immediate past governor of the Central Bank of Nigeria, has described President Muhammadu Buhari’s endorsement of the CBN forex policy, as an encouragement of corruption.
In a recent discussion with Financial Times, while praising the president’s removal of “wasteful and corrupt fuel subsidies”, the Emir noted that the current foreign exchange policy of the CBN would give rise to the familiar rent-seeking and corruption which were the hallmark of the subsidy regime.
“He (Buhari) has put an end to the [crude] swap regime which is also one side of rent-seeking and corruption. He has made the NNPC start producing accounts, so there is greater transparency,” Sanusi said.
“These measures are good for the economy and display strong political will to change the system. But getting monetary and fiscal policies right will be crucial for broader progress in structural reform.”
According to FT, Sanusi said that Buhari’s anti-corruption demeanor is “totally inconsistent” with the forex regime he assented to, while further stating that it “encourages corruption and rent-seeking similar to the fuel subsidy regime”.
Sanusi frowned at the said CBN policy describing it as a monetary regime that has “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. 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.”
He revealed that he dismissed devaluation during his own tenure as governor of CBN because Nigeria “had reserves of over $40bn and an oil price at over $110,” admitting that there are no easy ways out of the current situation and “devaluation is a bitter pill”.
Sanusi further explained that exporters and foreign 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.”
He projected that the widening space between the imposed official exchange rate and the black market rate would keep increasing until the CBN attempts a more realistic policy or if the price of oil peaks and drastically increased reserves.
“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.”