By Ismail Auwal
Former Deputy Governor of the Central Bank of Nigeria, Professor Kingsley Moghalu, who was in charge of Financial System Stability of the apex Bank between 2009 and 2014, said the Central Bank of Nigeria (CBN) should have been more strategic, looking into the future to enable it tap from the 21st-century world trend of “freedom investments”, otherwise called fiat investments, rather than the ban policy, calling it “reactionary with little modern economic thinking”.
Moghalu, who is the current UNDP Special Envoy on Post-Covid Development Finance for Africa, said this in an interview on Channels Television’s Sunday Politics with Seun Okimbaloye. He said the decision by the CBN “is not surprising, acknowledging the risks the current influx of Bitcoin investments by Nigerians might pose on it’s financial system”, but said that “countries across the world understood that these types of innovation and digitally driven investments are the future and as such are thinking ahead”, developing strategies for managing their attendant risks, as is the case with any investment, while “exploring its opportunities in the areas of economic growth and development”.
He expressed concern about the policy, which he said is in conflict with an earlier position of a sister agency primarily in charge of investment and securities in Nigeria, the Securities and Exchange Commission (SEC), which he said had earlier “acknowledged Cryptocurrency as investment and exchange transaction and even announced plans to issue a policy directive on dealing in such”.
Asked whether the ban amounts to criminalising the transactions. Kingsley, who is also a lawyer, said he doesn’t interprete the “ban as criminalising deals in cryptocurrency, as only a law can make an act a crime, meanwhile, the CBN has no such power to make laws but that it was a directive on banks, which are directly under the supervision of the CBN, to close all accounts dealing in the coded currency exchange”.
As a certified risk management expert himself from the International Risk Management Institute, Moghalu said he would not have taken this “reactionary measure to curb the risk of cryptocurrency on the Nigerian Financial and Investment sector”. Instead, he suggested that the regulators (CBN and SEC) could have synergised “to develop a Central Bank for Digital Currency (CBDC) model as China did”, to position Nigeria better for the prospects of such capital investment schemes to ultimately link the investments to its legal tender to serve as another means of Forex inflow and reserve protection, especially at a time when Nigeria desperately needs Foreign Direct investment and Forex to boost its Economy.
The Professor of Economic Policy explains that the CBN should not get used to its recent reactionary responses, saying the banning spree “as our only financial risk management strategy only makes Nigeria more vulnerable, hurting its political economy”. He added that it is the main reason why the business and investment ecosystem in Nigeria is not booming, because “no investor will risk his money investing where there is no policy consistency or deep economic policy thinking”. Because it makes profitability of investment difficult, if not impossible.
Moghalu, who was a Presidential Candidate in the 2019 general elections, also said the Nigerian economy will continue to suffer and can never be protected by CBN protectionism so long as the fiscal and trade policy framework remains weak. He argued that the CBN should in principle have no business interfering with value-exchanges, if not for the fear and pressure on it to protect the Nigerian conventional business and investment markets, who may lose it to these kinds of fiat investments, due to lack of environment for investments, especially foreign direct investment in Nigeria owing to high rates of duplicate and fribulous taxation, insecurity, weak legal framework and institutions, lack of harmony in trade policies and most importantly, the unsustainable multiple foreign exchange rates.
