Emir Muhammad Sanusi II criticizes Buhari for endorsing current forex policy

Emir of Kano and former governor of the Central Bank of Nigeria (CBN), Alhaji Muhammad Sanusi II, has berated President Muhammadu Buhari’s endorsement of the CBN’s foreign exchange policy, saying the  policy encourages corruption.
While commending the President for the removal of fuel subsidy, Sanusi said the current forex policy encourages similar rent-seeking and corruption which plagued the subsidy regime.

He stated this in an interview with Financial Times.

The Emir stated that Buhari “has put an end to the (crude) swap regime which is also one side of rent-seeking and corruption. He has made the NNPC start producing accounts, so there is greater transparency.

“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.”

Sanusi however expressed surprise at Buhari's move to support forex regime, stating that the President's anti-corruption fight was “totally inconsistent”.

He said the monetary policy regime has “very obvious drawbacks that far outweigh its dubious benefits."

“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.

He added that, “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.”

On why he did not devaluate naira when he was  CBN governor, he said at the time, the country “had reserves of over $40bn and an oil price at over $110.”

He said there is no easy way out of the current situation, stating that “devaluation is a bitter pill”.He noted that the country’s economic misery has deepened, with the currency peg and restrictions in the foreign exchange market creating “a lot of speculative and precautionary demand”.

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.

Sanusi further said that the gap between the black market rate and the official exchange rate would keep widening until the bank adopted a more realistic policy or the price of oil climbed and dramatically increased reserves.