CBN After Sanusi

 

When the story of who succeeds Lamido Sanusi as governor, Central Bank of Nigeria, CBN, is told, he or she will be described as the most scrutinised candidate to ever occupy the position. This is because as the countdown to June when Sanusi’s five-year tenure as CBN governor is slated to end, the stakes are much too high in the selection of a fitting replacement.  For President Goodluck Jonathan, he has had to contend with a stormy petrel, unlike in other climes where Sanusi’s counterparts are more temperate, circumspect and less visible on the soapbox.

With 2014 projected to be a decisive year for Jonathan on how the public perceives his administration going into 2015 general election, the choice of who succeeds Sanusi is believed to be of top priority in the Presidency. The President is said to have met with Ngozi Okonjo-Iweala, finance minister and coordinating minister for the economy, last week, to review an earlier shortlist of candidates for the plum job. The action is believed to be the fallout of a recent confrontation involving the President and the CBN governor. As widely reported, Jonathan asked Sanusi to resign on account of his indiscretion in leaking a missive alleging that the Nigerian National Petroleum Corporation, NNPC, failed to remit $49.8 billion oil revenue to the CBN. Sanusi reportedly refused to resign citing the CBN Act 2007 which provides that a governor can only be removed by the President provided the removal is supported by two-thirds majority of the Senate. Though the claim was later found to be largely inaccurate, its effect on the Presidency was damaging as opposition elements and critics seized on the claim to pillory Jonathan. Sanusi’s recalcitrance was the height of discomfort that the Presidency has had to endure from the many unguarded utterances from the CBN governor.

In deciding the next CBN governor therefore, the President is believed to have requested a thorough vetting of the likely candidates to avert the bull in the china shop scenario represented by Sanusi. Okonjo-Iweala is to have a significant input in the choice of who succeeds Sanusi on account of her role as the coordinating minister for the economy. “We cannot continue to have someone who works at cross purposes with government occupying the seat of a sensitive agency like the CBN,” explained a finance ministry source last week. Though details of the shortlist vary, the magazine’s source was able to pinpoint some leading names. They include Olusegun Aganga, current minister of trade and investment; Mustafa Chike-Obi, chief executive officer, CEO, Asset Management Company of Nigeria, AMCON; Aigboje Aig-Imokhuede, immediate past CEO, Access Bank; and Bisi Onasanya, CEO, First Bank of Nigeria.

The deputy governors of the apex bank are also said to be in the race for the top job. However, top on the list are Sarah Alade, deputy governor, economic policy, and Kingsley Moghalu, deputy governor, financial system stability. But the President may be amenable to Alade’s choice in line with his avowed commitment to increase women’s participation in his government. Her background also advertises her as an ideal candidate. Trained as an economist, Alade is a former lecturer at the University of Ilorin. She has worked on International Monetary Fund, IMF, projects on behalf of government. If appointed, Alade will be the first female CBN governor in the country’s history. However, Tunde Lemo who retired from CBN recently as deputy governor, operations, is also said to be in the race.

The list may be tentative, but analysts say it falls within the pattern of previous appointments for the top position which showed preference for candidates from within the apex bank. This happened in the case of Aliyu Mai Bornu, Ola Vincent, and Abdul Kadir Ahmed, all former deputy governors who were appointed governors in 1963, 1977, and 1982 respectively. Appointments in the past have also been made from outside the apex bank, bringing in technocrats from the country’s financial sector. In 1967, for instance, Clement Isong, an advisor, IMF, was appointed as CBN governor. In 2004, also, Chukwuma Soludo, an economist and consultant with the World Bank, economic adviser to then President Olusegun Obasanjo and chairman, National Planning Commission, was appointed to head CBN. Were Jonathan looking for a repeat of the Isong/Soludo option, Aganga and Chike-Obi are sure bets in this regard. Both of them have considerable experience in the financial and investment sectors, especially at the international level. However, many analysts have cautioned that merit, rather than gender, ethnic or geo-political considerations should be the basis for the appointment of the next Central Bank governor.

Going by the controversy-laden tenure of Sanusi, the Presidency may look out for candidates with less inclination to hug the headlines for all the wrong reasons. In doing this, the President may however be guided by the provisions of Section 8 of the CBN Act 2007 which states thus: “The governor and deputy governor shall be persons of recognised financial experience and shall be appointed by the President subject to confirmation by the Senate on such terms and conditions as may be set out in their respective letters of appointment.” This provision suggests that the incoming governor must have experience in the financial sector.

However, this requirement is said to be at variance with current trends in advanced and other economies where economists are favoured to head their central banks. In Ghana for instance, economists have consistently headed the Bank of Ghana. The Bank of England, United Kingdom, UK, has also in recent years been headed by economists. Its current governor, Mark Carney, who is also chairman of the G20’s Financial Stability Board, is a distinguished Canadian economist who was once governor of the Bank of Canada and the first non-British to head the 320-year-old Bank of England. Zhou Xiaochuan, an economist appointed in 2002, is the governor of the People’s Bank of China, which is the central bank of the Republic of China. In the United States, US, Janet Yellen, President Barack Obama’s pick to succeed Ben Bernanke as chairman of the Federal Reserve Bank of US, is also a renowned economist and the first woman to mount the saddle in the 100-year-old institution.

Analysts are of the view that Nigeria should embrace this international best practice and shop for an outstanding economist who will go beyond the financial services sector and implement monetary and financial policies that will engender real growth in the economy. The country’s economy is said to be growing at a healthy rate of seven per cent but many Nigerians know that it is a jobless growth as the unemployment rate, conservatively put at 24 per cent as at 2012 by the Nigerian Bureau of Statistics, NBS, is said to be very high. The rate, which is measured by the number of people actively looking for a job as a percentage of the labour force, has risen steadily over the years, from 12 per cent in 2006 and is projected to keep rising into the near future as more Nigerians enter the labour market. Besides, many Nigerians are living well below the poverty threshold as the rate is now put at 70 per cent. According to Akpan Ekpo, a professor of Economics and director-general, West African Institute for Financial and Economic Management, “If we collapse the rates of inflation and unemployment with the poverty incidence, then both the discomfort and misery indices increased in 2012 and 2013.”

Those in favour of an economist for the top job have thus argued that the country needs a CBN governor who would place more emphasis on economic issues, noting that past governors have always focused on banking regulation at the expense of the larger economy. The CBN is expected to play a critical role in the country’s quest to become one of the 20 largest economies in the world by 2020 and in achieving government’s economic Transformation Agenda. This is so because the CBN Act 2007 charges the apex bank with the overall control and administration of the monetary and financial sector policies of the federal government. The bank is thus expected to ensure monetary and price stability, maintain external reserves to safeguard the international value of the naira, promote a sound financial system in the country, issue legal tender currency in Nigeria and act as banker and provide economic and financial advice to the federal government. The CBN, statutorily, also has a developmental function – to reposition the banking sector to grow the economy by extending credit to key sectors like agriculture and manufacturing to boost the economy and generate employment. In the days ahead, the federal government may look to CBN to play more of this developmental role. The state of the economy, and by implication the country, is thus predicated on how well CBN’s policies are implemented.

Ekpo, however, noted that the apex bank has been unable to address the problem of high cost of funds “as lending rates remained an average of 25 per cent.” Henry Boyo, an economist and manufacturer, also lamented that CBN’s monetary policies over the years have been injurious to the economy with the resultant high interest and inflation rates, disparity between savings and lending rates, declining value of the nation’s currency, and the inability of banks to lend to the real sector, particularly the small and medium enterprises, SMEs, which are regarded as the engine of economic growth all over the world. The manufacturing sector, which is able to generate employment opportunities and reduce poverty, is still comatose, contributing less than five per cent to the gross domestic product, GDP. To Boyo therefore, the country needs a CBN governor who can demonstrate competence in the conduct of monetary policies and regulation of the banks and other financial institutions in the country. “To me, a well grounded economist, not political economist, is the kind of person we need for the position. I know you can’t violate the provisions of the Act, but we will be digging a trench for ourselves if we appoint any one of the managing directors, retired or serving, of any of the banks who have been beneficiaries of the faulty monetary operations of the central bank,” said Boyo.

To Pat Utomi, a professor of economics and director, Lagos Business School, the conduct of a central bank governor has implications for the economic development of the country. Utomi who blames the apex bank for the economic woes of the country said the country needs strong institutions and not strong men, adding that central bankers should be people of few words as people are very sensitive to whatever they say. Godwin Owoh, an economist and executive chairman, Union Consulting International, also noted that if banks were to play their traditional role of stimulating economic growth, the CBN would have to be committed to achieving a vibrant financial services sector without rocking the economy.

According to Boyo, the country needs a CBN governor who can tackle head-on the protracted problem of excess liquidity in the system, which results in profitability for the banking sector with no positive impact on the economy. Sanusi’s successor is also expected to implement monetary policies that would ensure a reduction in interest rates and bank charges, which have crippled the real sector over the years; ensure exchange rate stability; and control the dwindling value of the naira, among others. As noted by Ekpo, “The outcome of any macroeconomic policy, programme and strategy must be sustained improvement in the standard of living of Nigerians. Anything else would be academic.”

This underscores the critical role of the apex bank in the development agenda of the country. But if merit is sacrificed on the altar of gender, ethnic or geo-political considerations in the appointment of a new CBN governor, the institution may not be able to live up to its mandate in the years to come.

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former Broad Street Journal Editor

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