This Central Bank Governor’s Tenure is a Tale of Everything Wrong With Socialism

March 11, 2019 08:00 UTC

A poor and densely populated country stuck at number 137 worldwide in the economic prosperity rankings, with a per capita GDP of just about $2,000 – this would be the perfect proving ground to show once and for all that left wing economics can successfully turn the fortunes of a struggling people around, and give the world an alternative to its failing capitalist system.

When Godwin Emefiele became governor of the Central Bank of Nigeria (CBN) in 2014, Africa’s largest economy stood at the brink of a historic change of power between the widely-derided pro-market incumbent president and his wannabe Robin Hood-type challenger.

After five years of paper economic growth, Nigerians were ready to dispose of president Goodluck Jonathan who was perceived as a bumbling centrist and replace him with Africa’s answer to a 20th century Latin American left-wing firebrand. In Muhammadu Buhari, voters saw the saviour – a man with a number of views to the left of Hugo Chavez and an odd habit of appearing in public throwing up Nelson Mandela’s fist salute.

Buhari has made a habit of copying Nelson Mandela’s black power salute even though Nigeria has never had anything close to an anti-apartheid struggle | Source: Reuters/Getty

He was the guy to upset the established order, fight corruption and spread some of that 7 percent GDP growth around for the benefit of the impoverished Nigerian masses. Desperate to keep his job following the election, Emefiele allowed himself to become Buhari’s rubber stamp for the next four years. What happened next should be studied and used as case study material for decades to come in high school Economics textbooks.

First Tragedy, Then Farce, Then Stereotype

One of the most unfortunate stereotypes in existence is that of the maniacal African president gallivanting around his astonishingly poor country in a solid gold limousine powered by the cries of little children dying of malaria, while eating the sautéed tongues of his political opponents and keeping a white dude called Seamus as a pet in his 75-bedroom royal palace.

While Buhari is hopefully guilty of none of those things, he certainly did nothing to challenge his reputation as an arrogant statist and an unrepentant tribalist. He set the tone for how he would govern over the next four years during a 2015 interview in Washington DC, where he openly stated that those who gave him 97 percent of their votes and those who gave him 5 percent of their votes “cannot in all honesty be treated equally on some issues.”

In time-honoured African dictator fashion, Buhari was letting the world know that he had no idea how to actually deliver on his “Unicorns For All” left wing populist campaign, and so he would do what all left wing populists do – deflect attention from his performance by inflaming ethnic, religious and class tensions so as to rule by division.

As oil prices tanked from 2015 through 2017, taking a disastrous toll on the Nigerian Naira, Buhari’s solution was to fix an unrealistic official exchange rate and attempt to shore it up by banning the imports of just about anything he could get his hands on. Emefiele complied, and the CBN in 2016 released a list of 41 items that it would no longer release forex for. The list, which was the socialist government’s Big Idea for arresting the Naira’s slump, included everything from foreign currency bonds to tinned fish, and – for some reason – Indian incense.

Unsurprisingly, the policy failed and the Naira fell even further, at one point recording a near-100 percent divergence between official and parallel exchange rates.

Over the course of Emefiele’s tenure, the Naira has been one of the world’s worst-performing fiat currencies | Source: Bloomberg

As the forex scarcity began to bite, with parents unable to send money to their kids in school abroad, Buhari took another step from the left wing populist playbook.

In a 2016 interview with CNN’s Christine Amanpour, he implied that such parents were “living above their means,” – a nod to their possible involvement in illegal activity.

Expectedly, this had the desired effect at home, with one economic half of the country left aghast at the comments and the other half gleefully taking the rare opportunity to stick the boot into arrogant rich people. Nigeria’s economic and monetary policy descended into farce on Emefiele’s watch, but at least he got to keep his job. Like all champagne socialists, his self interest trumped anything else.

‘Dancing Headless Chicken’ Economics

Perhaps the most striking feature of Emefiele’s tenure was the sheer divergence between publicly stated policy and their end results. While the CBN was busy banning people from importing Indian incense and cold-rolled steel sheets, it authorised expensive forex subsidies for religious pilgrims heading to Mecca and Jerusalem, ostensibly because their prayers would revalue the Naira.

Of course said prayers did precisely nothing, as the Naira only slipped some more, leaving frustrated Nigerians questioning the rationale behind such decisions. It felt at one point like a re-enactment of a parody with the CBN insisting on maintaining multiple exchange rates instead of floating the currency for the market to decide, while at the same time approving or refusing forex applications on a seemingly arbitrary basis.

Emefiele’s tenure at the helm of Nigeria’s central bank has at times felt like a live action reenactment of a South Park parody | Source: South Park Studios

Again as with every other left wing authoritarian government in the history of humanity, what really happened is that some well-connected people got rich amidst the chaos, taking advantage of multiple exchange rates to carry out arbitrage trading. In public, some people were throwing up the black power fist and railing against “looters.” In private, their friends and family made out like bandits, all the while being cheered by the adoring poor who were apparently socking it to the “rich looters” whom Buhari referenced about 50,000 times a day.

Unsurprisingly, amidst this level of brigandage, official monetary policy failed to have the impact that it should normally have.

Despite being a developing economy with a severe lack of investment in its real sector, Nigeria is one of the most expensive places to borrow money in the world | Source: Trading Economics

Nigeria is now in a weird situation where it has both an absurdly high central bank exchange rate and double-digit inflation that shows no signs of slowing significantly.

In defiance of all known economic principles, Nigeria’s inflation rate has spiked despite absurdly high interest rates | Source: Statista

What Begins in Farce Ends in Farce

With the expiration of his tenure due in June 2019, Emefiele reportedly wrote to the President informing him of the impending date. After four years of belying every bit of economic knowledge and common sense available to him on the altar of his job, he probably expected Buhari to reward his loyalty and extend his tenure.

Instead according to Bloomberg, the President replied thanking him for his service, and indications are that he will be asked to proceed on a three month terminal leave. President Buhari apparently wants to hire his own man to pick up where Emefiele left off. The reason? According to sources close to the Presidency, the President is under pressure from his allies to appoint a northerner as the new governor of the apex bank.

The economic future of Africa’s largest country and one of the world’s most strategically important countries is now being decided on the basis of petty tribal politics, because that is all that populist socialism has to offer. Buhari himself is accomplished in his understanding of ethnic horse trading, having strategically packed the vast majority of key appointments in his administration with northerners like himself.

If this is questioned, the official response is always that the person in question is the “most competent” available. This plays well with the northern audience who eager to score one over their more prosperous southern counterparts whom they perceive as arrogant.

While it may play well unfortunately, it does little to address the reality that Northern Nigeria still has some of the worst human development index figures in the world, which will not be remedied through appointments.

The bias is so glaring that some social media users in Nigeria now refer to President Buhari using a tongue-in-cheek Game of Thrones reference as ‘King of the North’

Emefiele’s example shows that under the governance of Africa’s latest iteration of tired, discredited socialist ideas, it is possible to ignore your professional instincts as a central banker and fall in line with the government’s goal of equal poverty distribution and demonization of ideological opponents, but at the end of it all, lose your job because you come from the ‘wrong’ ethnicity. The rule of left wing populism after all, is self-preservation using lowest common denominator politics.

Regardless of who the president picks to succeed Emefiele, one thing is clear, it is definitely not about coming up with economic policies that create wealth or improve the economy for Nigerians. Nigeria’s newly re-elected left wing populist administration is more interested in throwing red meat to the country’s lower classes by pushing a “live within your means” narrative containing an implicit accusation of the middle and upper classes.

The economy? Who cares about that when you can throw out a few meaningless slogans and clench your fists in public?

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Last modified: October 14, 2019 02:53 UTC

@DavidHundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin