Absolutely enjoyed reading this piece, thank you for the insights.
However, I feel made points under misconception #5 is quite watery (also judging from the level of detail compared to other paragraphs). The truth is, regardless of whatever systems upgrade or sophistication implemented in the financial system, dubiously creative minds would always work around ways to game the system. Does it means efforts like this should not be made? No. Does it mean progressive attempts should not be made, even if it might fail? No.
This piece also failed captured any possibility of the CBN's policy being politically motivated or acting based on highly classified information to do the abnormal (hasty implementation). Could it be a matter of urgency; choosing between two evils, which has made this poor and hastily implementation the "necessary evil" in the short term, especially considering that Nigeria is currently in a very sensitive season?
I guess we'll never know (except for those who have the appropriate security clearance)
"If you look at Meffy's policies purely from an economic lens, you'll scratch your head to see how it makes sense. Between October and now the CBN has gone into overdrive trying to do many things all at once which begs the question of why? Why are you launching new notes this close to the elections? Even if we were to ignore that, why's there a rush to get these old notes out so quickly? Why's the CBN introducing debit cards?
"It's easy to forget, but this is the second time Meffy's launched new notes. He came to office under former President Goodluck Jonathan in March 2014. This came about following GEJ's dismissal of his predecessor, Sanusi Lamido Sanusi. Meffy must have observed how things went then and learned something. The most important lesson is that the CBN governor and his policies are subject to the whims of the President.
"In December 2014, Meffy launched new ₦100 notes commemorating Nigeria's centennial anniversary. Then, unlike now, it was a phased introduction which is the global standard. There was no rush to get the new ₦100 notes. The CBN only had to stop printing the old notes and gradually mop them out of circulation. So it begs the question, why didn't Meffy use a tried and tested template? The apparent answer is Buhari."
This might not be a popular take, but I sincerely believe that on the matter of the redesign, Meffy is acting largely as a stooge, following the bidding of the president. If you see all of this as political rather than economic policy then it makes sense and you'll see that the so-called explanations like tackling inflation and whatnot are smokescreens to deflect from what is in reality, a political feud within the ruling party.
In Buhari’s speech yesterday, he cleared a myth. The APC propaganda machinery led by the Oshiomoles and El-Rufais said that Meffy was the one pouring poison in Buhari’s ears. But the president confirmed that it was his directive — which makes sense. As military leader in 1984, he led a currency redesign and fired the guy who got in his way. I opine that while Meffy is inept as a CBN governor, he's perfectly executed his role here as a stooge, a yes man. Had Meffy refused, he would simply have been booted out and a replacement who would do Buhari’s bidding would take his place.
This isn't a defense of Meffy. He's a very unpopular guy at the moment. But let's think critically here. Look at the Ways and Means advance for example. The CBN act of 2007 dictates that the CBN can only fund a budget deficit for a fiscal year no more than 5% of projected revenue. And when it does, it must not do so again until the FG clears the debt. Yet, by some accounts, the CBN funded the FG as high as 80% and did so recurrently! No CBN governor worth his salt should do that.
If you visit the CBN's website, [https://www.cbn.gov.ng/FAQS/FAQ.asp?Category=Monetary+Policy] its FAQ issues a cop out regarding the implementation of its monetary policy, particularly with regards to the Ways and Means advance. Let me share it, word for word:
"Can the Federal Government frustrate the Central Bank from pursuing its monetary policy?"
"Yes, when the Federal government exceeds its revenue the CBN finance government deficit through Ways and Means Advances subject (in some cases) to the limits set existing regulations, which are sometimes disregarded by the Federal Government.
"The direct consequence of Central Banks financing of deficits are distortions or surges in monetary base leading to adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy."
Meffy more or less is saying "I know the rules, but eh, it ain't all my fault". I believe this also applies to the currency redesign.
Absolutely enjoyed reading this piece, thank you for the insights.
However, I feel made points under misconception #5 is quite watery (also judging from the level of detail compared to other paragraphs). The truth is, regardless of whatever systems upgrade or sophistication implemented in the financial system, dubiously creative minds would always work around ways to game the system. Does it means efforts like this should not be made? No. Does it mean progressive attempts should not be made, even if it might fail? No.
This piece also failed captured any possibility of the CBN's policy being politically motivated or acting based on highly classified information to do the abnormal (hasty implementation). Could it be a matter of urgency; choosing between two evils, which has made this poor and hastily implementation the "necessary evil" in the short term, especially considering that Nigeria is currently in a very sensitive season?
I guess we'll never know (except for those who have the appropriate security clearance)
Brilliant piece Dayo, well done. I was the one who interviewed you in the Zikoko piece and I wrote yesterday
[https://stephenagwaibor.substack.com/p/trouble] that some of your predictions from then have manifested now. Here are a couple of paragraphs from the article which I'd reshare here:
"If you look at Meffy's policies purely from an economic lens, you'll scratch your head to see how it makes sense. Between October and now the CBN has gone into overdrive trying to do many things all at once which begs the question of why? Why are you launching new notes this close to the elections? Even if we were to ignore that, why's there a rush to get these old notes out so quickly? Why's the CBN introducing debit cards?
"It's easy to forget, but this is the second time Meffy's launched new notes. He came to office under former President Goodluck Jonathan in March 2014. This came about following GEJ's dismissal of his predecessor, Sanusi Lamido Sanusi. Meffy must have observed how things went then and learned something. The most important lesson is that the CBN governor and his policies are subject to the whims of the President.
"In December 2014, Meffy launched new ₦100 notes commemorating Nigeria's centennial anniversary. Then, unlike now, it was a phased introduction which is the global standard. There was no rush to get the new ₦100 notes. The CBN only had to stop printing the old notes and gradually mop them out of circulation. So it begs the question, why didn't Meffy use a tried and tested template? The apparent answer is Buhari."
This might not be a popular take, but I sincerely believe that on the matter of the redesign, Meffy is acting largely as a stooge, following the bidding of the president. If you see all of this as political rather than economic policy then it makes sense and you'll see that the so-called explanations like tackling inflation and whatnot are smokescreens to deflect from what is in reality, a political feud within the ruling party.
In Buhari’s speech yesterday, he cleared a myth. The APC propaganda machinery led by the Oshiomoles and El-Rufais said that Meffy was the one pouring poison in Buhari’s ears. But the president confirmed that it was his directive — which makes sense. As military leader in 1984, he led a currency redesign and fired the guy who got in his way. I opine that while Meffy is inept as a CBN governor, he's perfectly executed his role here as a stooge, a yes man. Had Meffy refused, he would simply have been booted out and a replacement who would do Buhari’s bidding would take his place.
This isn't a defense of Meffy. He's a very unpopular guy at the moment. But let's think critically here. Look at the Ways and Means advance for example. The CBN act of 2007 dictates that the CBN can only fund a budget deficit for a fiscal year no more than 5% of projected revenue. And when it does, it must not do so again until the FG clears the debt. Yet, by some accounts, the CBN funded the FG as high as 80% and did so recurrently! No CBN governor worth his salt should do that.
If you visit the CBN's website, [https://www.cbn.gov.ng/FAQS/FAQ.asp?Category=Monetary+Policy] its FAQ issues a cop out regarding the implementation of its monetary policy, particularly with regards to the Ways and Means advance. Let me share it, word for word:
"Can the Federal Government frustrate the Central Bank from pursuing its monetary policy?"
"Yes, when the Federal government exceeds its revenue the CBN finance government deficit through Ways and Means Advances subject (in some cases) to the limits set existing regulations, which are sometimes disregarded by the Federal Government.
"The direct consequence of Central Banks financing of deficits are distortions or surges in monetary base leading to adverse effect on domestic prices and exchange rates i.e macroeconomic instability because of excess liquidity that has been injected into the economy."
Meffy more or less is saying "I know the rules, but eh, it ain't all my fault". I believe this also applies to the currency redesign.