This article was first published in the September 2017 Africa edition of Accounting and Business magazine.

Nigeria has taken a hit from the slump in oil prices, impaired crude production and inadequate macroeconomic policy interventions, all of which resulted in harsh economic conditions for most of 2016 and have led to its current recession.

Among other government authorities in the trenches, the Central Bank of Nigeria (CBN) has played a critical role in the last year in managing some of the exposures by implementing monetary and quasi-fiscal policies – some of which have been untraditional and unprecedented.

So how does the renowned banker and current governor of the CBN, Godwin Emefiele, view the experience? We ask him about the challenges faced and lessons learned for the journey ahead.

Q: How do you view the progress of the policies that CBN announced in response to Nigeria’s worsening economic conditions in June 2016?

A: To understand the impact of the June 2016 foreign exchange (FX) policy, there’s a need, first and foremost, to understand the enormity of the problems that beleaguered the FX markets and the economy before it existed.

The fall in oil prices that began in 2014 exposed the vulnerabilities of the Nigerian economy – the structural imbalances and the lopsided dependence on imported goods. With the rising demand and falling supply of FX, exchange market pressure built up rapidly, FX reserves diminished and the exchange rate mechanism weakened. It very quickly became harder to satisfy legitimate demand in the market, even as the bank strove to eliminate [unscrupulous] demand. As a result, a backlog of more than US$4.2bn in unsatisfied demand accumulated, despite the exchange rate depreciating from NGN155:US$1 to NGN197:US$1.

With the new FX policy, we have been able to liberalise and improve market efficiency. We were able to clear the US$4.2bn backlog in FX demand through a combination of spot and forward sales. The exchange rates have stabilised and are converging downwards, FX reserves have begun to rise, albeit slowly, speculators have been largely uprooted from the market and investors’ confidence has returned significantly.

To further the gains from this policy, the bank established the investor and exporters ‘FX window’ in April 2017; this has facilitated market-driven transactions and catered for investors’ and exporters’ FX needs. It has also helped the FX supply by improving market transparency, and the convergence and stability of rates. I am happy to note that the smooth and transparent operations of this ‘window’ have contributed to an inflow of over US$2.5bn since it was introduced.

Q: The impact of the rising FX rate against the naira has impeded growth, particularly in sectors that rely on imported inputs. The CBN’s efforts to improve conditions, including the recent injection of the dollar, has increased supply and reduced the exchange rate. How can these achievements be sustained?

A: The FX window has been very important for ensuring the sustainability of FX supply. The fact that transactions are now market-orientated has assuaged investors’ fears, and the uncertainties usually associated with capital repatriation have mostly been eliminated. So investors are now confident that repatriation will not be a problem. The heightened transparency and burgeoning investor confidence are expected to sustain the FX supply in the market. The long-term solution to our huge FX demand is to continue to diversify the economy. We need to be able to produce our consumables and reduce the burden on our FX reserves.

Q: The Economic Recovery Growth Plan (ERGP) has been widely welcomed. What governance considerations will ensure that current achievements crystallise and are maximised in future policies?

A: The ERGP was developed in March 2017 as a two-pronged strategy: to solve the short-term economic recession that has beset the Nigerian economy since 2016; and to provide a long-term strategy to ensure that economic growth in Nigeria is not only non-inflationary, but also inclusive and sustainable. As we continue to improve issues around power, security, infrastructure and telecoms, I believe both cost of doing business and lending rates will eventually decline.

A key drag on the Nigerian economy is the infrastructure gap, which has contributed to the high cost of doing business. The ERGP, in its attempt to resolve the infrastructure problems, is expected to moderate the cost of doing business. I believe that once we improve the current issues with power, transportation, security and administration, the cost of doing business will be substantially reduced.

Q: What role can professional accountants play in influencing and enhancing the effectiveness of the ERGP?

A: Professional accountants are needed across a wide variety of industries. The ERGP is a holistic document that was pulled together through a collective effort from many expert contributors, including monetary and fiscal authorities, industrial and structural policy authorities, and players in the public and private sector. This ensured the consistency of policies across the board.

Given the length and breadth of consultation, the document will have received some input from accountants. To ensure the effectiveness of the plan, professional accountants, with their reputation for adhering to high standards, can ensure that the quality of implementation is at all times top-notch. They can audit and monitor the policy process to ensure that relevant authorities do not deviate from it and from the standards required in the implementation of the ERGP.

Jane Ohadike is ACCA’s regional head of policy for sub-Saharan Africa