INTERVIEW: We Inherited A Tight Monetary Policy Environment – CBN Governor

Channels Television  
Updated November 27, 2017
Mr Godwin Emefiele

The announcement of Godwin Emefiele in February 2014 as the governor of Central Bank of Nigeria (CBN) to replace Lamido Sanusi, the then head, was met with a number of criticisms. In this interview, Emefiele reveals the financial environment during the transition between 2014 and 2015.

Q: What was your recap of the fiscal monetary financial system environment that you inherited in June 2014 when you took office?

We have always used the opportunity of the Monetary Policy Committee meetings that happen every other month to provide perspectives about what we are doing at the Central Bank of Nigeria (CBN). Monetary policy Committees’ perspectives and views about macroeconomic situations in the country and that we have done that consistently.

For five straight years, between the year 2009 and 2014, we had crude price averaging about $120 per barrel. Indeed by September 2008, the country’s reserve stood at $62billion. Those were period we had a lot of bumper, inflation, worse loan. At that point, it was possible for CBN to fix an inflation targeting policy between six and nine per cent, to the point that by April 2014, shortly before we assumed office, inflation was 7.9% which was about the six-year loan.

Reserves as a result of the pressures we saw between 2008-2009, had come down to about $37billion. Interest rate even at that time was also relatively stable because inflation rate was also good.

During that time as well, the monetary policy environment was tight because CRR was about 15%. NPR was about 12% . It was essentially a tight monetary policy environment that we inherited. At that time, the global shock had started to show signs of manifestation to the point that at the third quarter of 2014 it had become so manifest.

Q: Few months when you were just settling into office, there was change in political administration, so there was a change of leadership in the country. What were the key issues for you then, looking at the political landscape and the change of governance? What were the key issues you took on board?  

Nothing extraordinary, in the sense that the CBN is an independent institution, focusing primarily on its own core mandate, monetary policy and then making sure that the monetary macroeconomic environment remained stable. Unfortunately, at that time, the effect of the global shock had began to manifest. By August 2014, the crude commodity price was about $110 to a barrel and our reserve was about 37, dropping to 36. So, by the time the government came in May 2015, reserve had come down to 29.

The environment had began to face some forms of pressures. Pressures from drop in commodity prices which resulted in drop in crude prices, impacting adversely on our reserves. Geo-political tensions along the trigger routes across the world. Then we had the Russia, Ukraine crisis, even till now, we seeing geopolitical tensions between Saudi Arabia and Iran. All these have some effect on the flow of capital between emerging and the developed economies.