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This title of this short essay is borrowed from an editorial by PremiumTimes, published on Monday 13th February, 2023.
The editorial questioned Mr Emefiele’s knowledge of basic economics by arguing that contrary to Mr Emefiele’s narrative ‘currency in circulation does not cause inflation’. The newspaper pushed forward this argument and others to show that the quality of Mr Emefiele’s thinking when it comes to economic policies is embarrassingly poor, judging by his utterances.
While the editorial provided many instances where Mr Emefiele has displayed poor knowledge of economics, about 24 hours after the editorial was published, Nigeria top Central Banker made other utterances that exposed his poor knowledge of economics, thereby supporting the newspaper’s submission. Specifically, on Tuesday 14th February, 2023, according to news item from another online newspaper, TheCable, Mr Emefiele during a meeting with the diplomatic community made two interesting statements:
(1) That politicians are hoarding the new bank notes for political purposes and that this was the cause of the scarcity of the new notes.
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(2) That the policy of mopping-up cash from circulation has reduced inflation. Mr Emefiele cites the reduction in the prices of ram, bull, soya beans and maize to support this line of argument.
The first reason shows how political vindictiveness has come to define monetary policy under Mr Emefiele. The second shows his appalling knowledge of basic economics.
Let start with the second, starving the economy of cash to reduce inflation is counter-productive. It will create cash-crunch that will stunt the economy and inevitably cause social and economic chaos. Some of the items Mr Emefiele cited are perishable goods that will go bad if they are not sold on time at lesser prices, and with limited margin. The rest are livestock. Mr Emefiele seems to be ignorant of news item on how the prices of perishable food items are crashing in Nigeria because of cash crunch. Farmers and traders are counting their losses.
If Mr Emefiele is aware of such news, he could have included tomato, pepper, onion, and the rest on his “inflation is coming down narratives”. If we follow this logic further, we may need to stop using cash all together to reduce inflation to the minimum. This is voodoo economics.
It is puzzling and embarrassing that the top Central Banker in Nigeria can push this kind of pedestrian economic thinking. It speaks to the quality of his thinking and why the Central Bank has come to this sorry state under his watch.
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His second reason about blaming politicians for hoarding cash is laughable. Politicians will always hoard cash if they can. The question is do you need to close the economy, ruin the economic activities of ordinary people, and turn GDP growth rates negative to deal with politicians. The cost clearly outweighs the benefits. Policies are made to improve the welfare of the ordinary people not to make them worse off
The obvious conclusion is that this line of “politicians are hoarding cash” shows that the whole thoughtless policy is set up for political reason.
Beyond blaming politicians, Mr Emefiele and his subordinates at the Central Banks have perfected the habit of demonizing some commercial bankers as the cause of scarcity of new notes, thereby setting the ordinary people against these bank workers. This is dangerous for a few reasons.
One, bankers are working under intense pressure trying to distribute new notes they don’t have. They are vulnerable to mob attacks and insecurity.
Two, the new notes are just not available. So, how do we blame them for its scarcity. Mr Emefiele said yesterday that the optimum currency needed is NGN700B. He did not tell us if he has supplied that amount. He also did not tell us that given the level of scarcity we may need double that amount to calm the market. It is simple logic, demand increases than normal during scarcity.
Three, when we demonize bankers the way some officials of the Central Banks are doing now, we undermine the most important element of banking, which is TRUST. People put their monies in the banks because they trust the bankers and the system. If trust is eroded in any way; the system will be undermined. The irony is that it is the Central Bank that is undermining the banking system by criminalizing bankers for a crisis they solely caused.
Four, different social media posts have shown different instances where Central Bank official filmed themselves ‘apprehending’ commercial bankers who are ‘caught hoarding’ new notes. These videos are gleefully posted on social media. This practice is unethical, primitive, and embarrassing. Nigeria may be the only country in the world today where cash management process is conducted on social media.
Mr Emefiele has shown himself to be bereft of basic economics concepts. It is no wonder that the CBN under his watch had become a tragedy. He has decided to ruin the whole economy and the wellbeing of poor Nigerians who spend all day looking for non-existing bank notes the Central Banker has refused to release.
©️Taiwo Owoeye is a Professor of Economics at Ekiti State University, Ado-Ekiti
15th February, 2023.
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