President Muhammadu Buhari has nominated the present governor of the Central Bank of Nigeria (CBN) Godwin Emefiele to serve for a second five-year term.
Emefiele was first appointed in May 2014 by former president Goodluck Jonathan to replace Muhammad Sanusi. In one sense it has been surprising that Emefiele has survived both the Jonathan and Buhari governments. There has been intense lobbying to replace him with someone from the northern part of the country in line with an unwritten rotation policy between the north and south on key positions. Buhari has, however, resisted the lobbying.
One thing Buhari values more than anything is loyalty and Emefiele has proven his. Buhari fully recognises that whatever achievement he can boast of in his first term — with regard to monetary and wider economic policy — have been mainly driven by CBN policies. Under Emefiele, the central bank has heavily intervened in different sectors of the economy and most importantly for Buhari, has intervened in the foreign exchange market to support a strong Naira despite widespread calls from economists to devalue the currency. This has earned Emefiele his political capital from the Buhari Administration. The president has long favoured a strong Naira over a free floating currency, as part of state-managed economic policies.
Critics say Emefiele has compromised the central bank’s independence in the way he pursued policies that are only favourable to the president. The governor’s policies have brought controversial results. For example, his intervention schemes have left banks with little or no incentive to lend to the private sector, so credit growth is at an all-time low.
Emefiele’s next five years will not be significantly different from the last five. The stock market did not respond positively to his nomination as it continued a five day decline on 10 May to reach a two-year low. The Naira and bond yields also remained largely unchanged after the announcement which is an indication that bond and currency traders do not expect any significant changes in the monetary policy direction.
The only factor that will cause a major shift in policy direction will be a significant decline in oil prices.