Central Bank governor in Nigeria suspended and arrested amidst war on cash

Godwin Emefiele, the former Governor of the Central Bank of Nigeria (CBN), has been suspended and arrested by Nigeria’s secret police.

The reasons for his removal and detention are still unclear. Emefiele had held his post for nine years, during which Nigeria’s currency depreciated by 65% and inflation nearly tripled.

His arrest followed an extensive investigation by the State Security Service (SSS), with allegations of financing terrorism, fraud, and economic crimes of national security dimension.

Emefiele had pursued a cashless policy, withdrawing high-denomination notes from circulation without providing replacement as promised, thereby causing a cash crunch.

Despite the adverse impact on an economy where 63% of the population is poor and 33% unemployed, the central bank continued this policy till the Supreme Court halted it.

This strategy, aimed at advancing Nigeria’s central bank digital currency (CBDC), the e-Naira, resulted in an economic downturn and loss of public trust in the central bank.

The e-Naira has seen a “disappointingly low” public adoption, partly due to Nigerians’ limited access to smartphones and the internet.

Although the International Monetary Fund (IMF) still sees potential in the e-Naira, the dismal performance so far and the arrest of its main proponent, Emefiele, may cause other African central banks to reconsider launching their own CBDCs.

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