In my reflections on institutions in Nigeria, I have maintained the position that Nigeria suffers from isomorphic mimicry – a situation where institutions are created and made to act in ways to make themselves “look like institutions in other places that are perceived as legitimate,” but which in reality are not. We have created various institutions of governance that are supposed to work like institutions in western countries – with elaborate laws and provisions providing for their supposed independence. However, our presidential system ensures that regardless of the laws establishing these institutions, they ultimately operate at the whim and caprice of the president, who, if and when he chooses, can disregard the law and ride roughshod over those institutions.
Successive Nigerian presidents, even if they manipulate supposed independent state institutions, are careful, at least in public, to portray these institutions as independent – and for very good reasons. The first reason is to deny responsibility for their actions and the second is to prevent unsavoury repercussions from the international community or the international markets.
However, that fact and subtle way of manipulating institutions is completely lost on Mr Buhari and his handlers. Objective empirical evidence of the independence of a central bank is seen through three indices: 1) how isolated the governing board of the central bank is from the political process, 2) the ability of the central bank to refuse to finance government budget deficits when it judges that doing so will harm the economy; and 3) the primacy of price stability as the ultimate goal of central bank activity.
Although Nigeria’s apex bank currently fails in at least two of these indices, it was once adjudged to be relatively independent since 1999 to at least 2014. Besides, even if the government frequently interferes with the decision of the bank, it does not do so openly and leaves the markets to second-guess the degree of independence Nigeria’s apex bank enjoys.
But the Buhari administration has removed all doubt about the lack of independence of the bank. The president routinely issues orders and directives to the bank. In 2020, while hosting governors of the ruling All Progressives Congress (APC) party in his home in Daura, Mr Buhari ordered the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food into the country due to “the steady improvement in agricultural production and attainment of full food security.” Not done, his publicist, Garba Shehu – a supposed veteran journalist who should know the drills – issued a statement with the headline: “Don’t give a cent to anybody to import food into the country”.
Still, on September 10, 2020, at a meeting of the National Food Security Council at the State House in Abuja, Mr Buhari again repeated his directive to the CBN. But this time, it wasn’t only importation of food items that are banned from obtaining forex, but also fertilizer imports. Not done, he went on twitter the next day to make the same point.
“I am restating it that nobody importing food or fertilizer should be given foreign exchange from the Central Bank. We will not pay a kobo of our foreign reserves to import food or fertilizer. We will instead empower local farmers and producers.” He provided his reason: “we have a lot of able-bodied young people willing to work, and agriculture is the answer”.
Of course, following his orders, the CBN added food items and fertiliser to the list of banned items for foreign exchange. Never mind that the same federal government a month prior admitted that it borrowed a total of 5, 000 metric tonnes of assorted grains from the food stock of the Economic Community of West African States (ECOWAS) to address the apparent hunger and deprivation in the country. But even as the president was ordering the banning of all food imports, the CBN had to issue special emergency approval for four companies to import maize into the country to tackle scarcity.
It was not the first time Mr Buhari was openly announcing his subjugation of the CBN to the world. In 2015, shortly after coming to power, he declared that there shall be no devaluation of the Naira. Since then, all the actions and policies of the CBN – mostly irrational and stomach-cringing – have been in keeping with that directive. These include placing certain items on import prohibition list, banning, un-banning and re-banning Bureau de Change operators, cutting down trees in Area 4, Abuja, where BDC operators stay, accusing everybody else of being responsible for the woeful performance of the Naira, challenging the operator of a website to physical combat etc.
Is it any wonder then that the CBN has been turned into the government’s piggy bank, illegally printing trillions of naira (N20 trillion as at the last count) for the government to spend while crowding out the private sector? Is it any wonder that the CBN just doles out money to satisfy every of the president’s whimsical ideas and programmes in the name of development financing? Is it any wonder that the CBN continues to enrich the close associates of the president through the arbitrage opportunities in the current unsustainable foreign exchange management system? Is it any wonder then that no one trusts the CBN or its management of monetary policy and virtually all foreign and portfolio investors have fled the country and domestic players are all hedging against the Naira?
