Forex Fight: CBN Governor, Cardoso versus Falana, SAN -By Dele Sobowale

You can’t challenge us on Naira depreciation, CBN tells Falana.”

VANGUARD, OCTOBER 31, 2023.This news report on the last day of October brought an end to a dreadful month for those charged with managing the Nigerian economy – especially its exchange rate – as well as the rest of us; whose lives are now totally controlled by the dollar. For people like me who remember better days, now looking like fairy tales, the decline of the Naira has been a painful experience. After a preliminary visit to Nigeria in December 1973 to January 1974, I finally decided to return home finally.

On August 4, 1974, at the Ikeja airport, I exchanged one dollar for 70 kobo. I was told later by two of my friends that I was cheated; it should have been less. There was no desperation about the exchange rate then – on the part of the government’s; and on the part of the people. “Money was not our problem; but how to spend it”. And, we spent, and spent until Nigeria moved from a Middle Income country to a poor country today. Probably, nobody alive today will ever live long enough to see the exchange rate return to N1/US$1.

Again, in 1974, no legal luminary had to dust up the constitution in order to compel the CBN Governor to stabilise the exchange rate – because it was relatively stable. So stable, in fact, that when I travelled to the US again in 1975, the exchange rate was still hovering around 70 kobo per dollar. Consequently, lawyers minded their businesses and allowed the CBN Governor to mind his own. No newspaper could have reported such a confrontation.

The first question which comes to mind is: why are they fighting? Better still: should there be a court case on this matter? The answer is not as clear as you might think. Femi Falana, SAN, who has probably filed more suits in the courts than the top ten SANs put together, thinks there is a good reason to drag the CBN Governor to court. Poor, Yemi Cardoso, who inherited the worst central bank since General Idi Amin ruined the Bank of Uganda, needs a court case now as much as he needs a shot in the head. The last thing the beleaguered Governor needs are the distraction and drama which eminent lawyers only can create. But, large sums of money and the future of Nigeria are at stake. Perhaps, a little dust- raising might be allowed.


“The first thing we do; let’s kill all the lawyers.” Shakespeare, 1564-1616.

Lawyers have always had an image problem. Shakespeare was not the only writer who formed a low opinion of them. They all want to win; whether justice is served or not. Lawyers framed the CBN Act on which Falana relies in wanting to go to court. I have read it, and as an economist, it is doubtful to me if any economist partook in drawing up the final draft of the law. To put it more bluntly; the law is asking the CBN Governor to do what no human being has been able to do, or will ever be able to do. Let me quickly explain.

Exchange rates, whether in a controlled or free economy, are not determined by the Governor; but, by interplay of dynamic economic activities. Most of these activities are beyond the control of the bank. Gross Domestic Product, GDP, which measures the goods and services produced by any economy, is the result of countless economic activities by people in and out of the country. Frequently, the Federal Government, which should be in charge of Fiscal Policy, determines what people produce and consume more than the bank which is only mandated to control the excesses resulting from the activities the government induces.

For instance, Obasanjo’s administration decided to encourage cultivation of cassava because there was a noticeable scarcity of the commodity worldwide. Appropriate incentives were provided. Within five years, Nigeria became the leading producer and exporter of cassava. Foreign exchange inflow increased as a result. Obasanjo left; a new government came in and dumped cassava. Rice became the priority food item to be promoted. Millions of farmers switched from cassava to rice. Cassava-generated dollar inflow stopped. Unfortunately, rice production was, and is still, below aggregate domestic consumption. Yes, we harvested more rice; but, there was/is no rice export. Obviously, the decision which reduced dollar inflow was not made by the CBN. The unfavourable exchange rate resulting could not be avoided by any measure the bank can take. Under the circumstances, it is difficult to see how a court of law can order CBN to stabilise rates which are being actively de-stabilised by the FG.


“No government deficit can create inflation unless the quantity of money goes up.” G. Haberter, in, Inflation, its Causes and Cures.

Last month, inflation hit another record – 26.7 per cent. It has been going up steadily for almost three years without ceasing and without an end to its upward trajectory. Imported and domestic inflation have been combining to make unofficial currency devaluation inevitable. Government deficits in the last six years contributed to the rising inflation rate. Unauthorised borrowing through Ways and Means, W&M, added to rubber stamp approval of loans to fund current expenditure led the CBN to increase the quantity of money in circulation without corresponding increase in aggregate productivity. Unfortunately, most of the additional quantity of money was collected by the wealthy who headed for the parallel market to buy dollars; and very little to the Have-nots who manage Small, Medium and Mini-scale enterprises.

Simultaneously, Boko Haram, bandits, kidnappers, herdsmen and Sit-at-home enforcers savaged domestic food productivity. Scarcity became more acute each month; and floods added to the national calamity. Food prices became the major cause of monthly inflation figures before fuel subsidy was halted. “Fuel subsidy is gone”, proclaimed by President Tinubu became the last straw which has now thrown the nation into an inflationary spiral whose effects are just now being experienced. Again, there is nothing the CBN can do immediately to stabilise prices and halt inflation. It is merely wishful thinking for anybody to imagine that a Nigerian court can order the CBN Governor to single-handedly stop rampaging inflation; when the FG is still busy setting the economy on fire.


“A precedent embalms a principle.” William Scott, 1745-1836.

But, before the reader goes away with the impression that the CBN cannot, or, should not be called to order, it needs to be pointed out that the CBN, under Emefiele, contributed to our current predicament by stepping outside its mandate – which is strictly monetary policy – to get involved in activities which properly belong under fiscal policy. Two examples will be sufficient to illustrate the point. Anchor Borrowers Programme, ABP, to which the bank committed N1 trillion, was a fiscal policy programme. Central Banks are never established to undertake retail banking activities. Today, it is a fact that ABP was a failure. Allowing the FG to borrow N22.7 trillion through W&M, was simply a colossal crime which has undermined the aims and objectives of CBN. Falana’s suit, although misconceived, should serve the purpose of only letting the new Governor realise that Nigerians are now watching more closely.

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