The tumultuous tenure of the past administration at the Central Bank of Nigeria (CBN) has become a defining issue in the nation’s ongoing economic crisis. Professor Kingsley Moghalu, a former Deputy Governor of the CBN and a prominent economist, has delivered a scathing assessment, asserting that the “political capture” of the apex bank under the leadership of Godwin Emefiele was the primary catalyst that severely deepened Nigeria’s economic woes, leaving a legacy of instability and currency devaluation.
In his analysis, which was written on the social media platform, X, Moghalu details how the CBN effectively abdicated its statutory role as an independent monetary authority, transforming into an extension of the fiscal arm of the government. This shift, he contends, fundamentally corrupted the institution’s ability to manage monetary policy effectively and resulted in massive damage to the nation’s currency and macroeconomic stability.
The Erosion of Independence and Policy Distortion
According to Moghalu, the core problem was the institutional erosion of the CBN’s independence. He highlights the excessive and unsupervised lending to the Federal Government through the mechanism known as Ways and Means (W&M) advances. These colossal sums, printed and disbursed outside of the legal limits stipulated by the CBN Act, flooded the economy with liquidity. This unchecked monetary expansion acted as an inflationary accelerator, directly contributing to the spiraling cost of goods that has crippled household purchasing power.
Moghalu emphasizes that a central bank’s fundamental duty is to maintain price stability. By financing the government’s deficit through money creation rather than through traditional borrowing instruments, the CBN violated this core mandate. He describes this fiscalization of monetary policy as a clear sign of political servitude, where the bank’s actions were driven by immediate political expediency rather than sound economic principles.
Furthermore, the professor pointed out that the policies pursued by the previous CBN management were frequently contradictory and counterproductive. Instead of implementing orthodox measures to manage foreign exchange, the bank resorted to complex, multi-layered currency management systems and imposed stringent capital controls. These measures, Moghalu argues, failed to solve the fundamental supply-side problems in the FX market. Instead, they merely created opportunities for arbitrage, distorted pricing mechanisms, and ultimately chased away foreign investment, leading to a significant loss of confidence in the Naira.
The Anchor Borrower Program and Unconventional Intervention
The former Deputy Governor also turned his critical eye toward the CBN’s aggressive foray into development financing, most notably through the Anchor Borrower Program (ABP). While ostensibly designed to boost agricultural production, Moghalu suggests that the bank’s execution of these programs was fraught with challenges.
He maintains that development banking is the domain of specialized institutions like the Bank of Industry and the Bank of Agriculture, not the central bank. By directly intervening and allocating credit, the CBN exposed its balance sheet to unnecessary risks and distorted the allocation of resources in the market. Moghalu implies that the political pressures inherent in such large-scale government-backed programs often override commercial viability and lead to inefficient use of public funds, blurring the lines between monetary control and fiscal disbursement.
He further suggests that the interventionist model, characterized by direct subsidies and preferential exchange rates for favored sectors, created systemic distortions. Rather than fostering genuine, sustainable growth, it fueled a system dependent on access to cheap, subsidized currency and credit, which often benefited political insiders rather than the intended beneficiaries or the Nigerian economy as a whole.
Lessons for the New Administration and the Path Forward
Moghalu’s assessment serves as both a critique of the past and a prescription for the present. He strongly advocates that the new leadership at the CBN must prioritize the immediate restoration of the bank’s independence and institutional integrity.
First, the CBN must return to its primary mandate of fighting inflation through credible and consistent monetary policy. This involves halting the financing of government deficits through Ways and Means and utilizing market-based tools, such as interest rate adjustments, to manage money supply.
Second, the central bank must simplify and liberalize the foreign exchange market to promote transparency and attract legitimate capital inflows. The professor stressed that confidence, not control, is the key to stabilizing the Naira. Only when investors and businesses trust the market mechanisms will they commit the long-term capital required for sustainable recovery.
Finally, Moghalu calls for a clear delineation between the roles of the CBN and the Ministry of Finance. Monetary policy must be shielded from political pressures to ensure that economic decisions are made based on data and long-term national interest, rather than short-term political gains. The new administration must demonstrate an unwavering commitment to this institutional independence to prevent the recurrence of the policy errors that culminated in the nation’s current high-inflation, low-growth environment. The road to recovery, Moghalu concludes, begins with fixing the central bank itself.
