The emir of Kano, and the immediate past governor of the Central Bank (CBN), has told the Financial Times of London that President Muhammadu Buhari’s endorsement of the CBN foreign exchange policy encourages corruption.
Sanusi said the current forex policy endorsed by the president encourages similar rent seeking and corruption which trailed the subsidy regime.
“These measures are good for the economy and display strong political will to change the system. But getting monetary and fiscal policies right will be crucial for broader progress in structural reform.”
” The president’s anti-corruption stance is totally inconsistent with the foreign exchange regime he supported, it encourages corruption and rent-seeking similar to the fuel subsidy regime”.
“Unfortunately, because the exchange rate is right out there in front now, monetary policy is being seen as the barometer for broader economic thinking,” he said.
“It is sad that on this one policy you get it so wrong that you risk taking away attention from everything else you are doing.”
Sanusi who resisted devaluation during his own tenure as CBN governor said he did so because he “had reserves of over $40bn and an oil price at over $110,” admitting that there are no easy ways out of the current situation and “devaluation is a bitter pill”.
Exporters and investors “are holding on to foreign currency, as no one would sell at the rate the government is setting”, while “the government does not have the reserves to keep the exchange rate at its official level in the market”.
“These policies have been tried in different parts of the world and in this country before and they have just never worked. No matter what the stated intention behind them, they are wrong,” he said.
The gap between the black market rate and the “artificial” official exchange rate would keep widening until the bank adopted a more realistic policy or the price of oil climbed and dramatically increased reserves, he further said.
He said a more flexible exchange rate policy at this point would be the “least bad option”.
“We are hopeful that given all the other positive things done so far, policy will head broadly in the right direction and flexibility will come in down the line.”