Wednesday, June 11, 2014

Central Bank of Nigeria gets new governor; what's on his plate?

Economist Ayo Teriba has written about two important challenges facing the new CBN head.

1. The need to gather and use economic data 
"...latest detailed spending and employment data available [as at June 2014] are for 2011...It is hoped that the CBN will broaden its partnership with the National Bureau of Statistics to ensure that these yawning data gaps are filled so that MPC can be adequately informed of these key aspects of the economy before vital policy decisions are taken."
2. The need to use expert economists
"No economist on the CBN board, few part-time economists on the Monetary Policy Committee...the technical expertise required for the Board of the CBN and the MPC to confront contemporary global economic and financial complexities and translate them to growth, employment, price, exchange rate and financial stability outcomes for Nigeria cannot be currently assumed to exist within the CBN. Both the Board of the CBN and the MPC are now populated by lawyers, accountants, bankers and/or stockbrokers."  

Godwin Emefiele, the new CBN Governor, resumed office June 2nd 2014 for a five-year term.  He was previously Group Managing Director of Zenith Bank PLC.  He has articulated his desire to create "a central bank that is professional, a central bank that is apolitical, and people-focused. A Central Bank that spends its energies on building a resilient financial system that can serve the growth and development needs of our beloved country, Nigeria."
His AGENDA SPEECH is worth reading
or watching:
 
It includes the kinds of things people want to hear now:
In "B. Central Banks and Economic Development", "We will work with the fiscal authorities in reducing other structural distortions to productive growth, as this will enhance access to credit, as well as stimulate growth and employment generation." 
In "C. Our Agenda for Development Finance", "the CBN will also design a programme for our fellow citizens who need as low as N50,000 without collaterals through registered and accredited local cooperatives. We shall encourage venture capital companies and business angels to fund SMEs" 

And it ends with a summary, because everybody loves a summary:
"CONCLUSION: The sole objective of this briefing is to place before you our plans to move our country forward. These ideas can be summarized as follows:
§ Pursue a gradual reduction in key interest rates, and include the unemployment rate in monetary policy decisions;
§ Maintain exchange rate stability and aggressively shore up foreign exchange reserves;
§ Strengthen risk-based supervision mechanism of Nigerian banks to ensure overall health and banking system stability;
§ Build sector-specific expertise in banking supervision to reflect loan concentration of the banking industry;
§ In view of inadequate trigger thresholds from a macro-prudential perspective, consider and announce measures to effectively address this anomaly;
§ Abolish fees associated with limits on deposits and reconsider ongoing practice in which all fees associated with limits on withdrawals accrue to banks alone;
§ Introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas;
§ Establish Secured Transaction and National Collateral Registry as well as establish a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions;
§ Build resilient financial infrastructure that serves the needs of the lower end of the market, especially those without collateral;
§ Renew vigorous advocacy for the creation of commercial courts for quick adjudications on loan and related offences.
We must, by now, have been tired of hearing people talk about the “potentials” of Nigeria. Now is the time to live that dream. I truly believe that working together, we can achieve our goals and give Nigerians the chance to live longer, better and more fulfilled lives."

The assets and liabilities: 
Emefiele has inherited a solid central bank that is to some extent professional and in the last few years achieved
financial system stability (via AMCON and the intervention that saved depositor funds and ultimately saved the banks and jailed some fraudulent bank chiefs),
low inflation,
exchange rate stability,
an efficient payment system (rather more electronic and less cash-based than it was five years ago),
and a consistent (and transparent) monetary policy in the last couple of years.

On the other hand, profligate spending on bribes for votes in this election season (presidential elections expected in Q2 2015) will make it even tougher to control liquidity, inflation, or exchange rates.
There's also the question of how to better tap into global money flows, since today's hot money (MINT money) is so easily withdrawn from emerging market investments when economic conditions improve in Europe/the USA.
Above all, there's the fact that Emefiele's stated goal of deepening access to capital and finance for businesses and individuals is not new - it's the same thing past CBN governors, Finance Ministry, and in particular the Trade and Investment ministry, the Presidency, NGOs like EFInA, everybody wants.  Maybe it's just a hard goal to achieve.
You can find comments from the usual suspects: Razia Khan, Bismarck Rewane, BGL ... on these challenges.

The gossip section:
What does the new CBN chief mean when he references being "professional, apolitical" and he even used the words "expends its energies building ..." -
Well, some criticized his predecessor Sanusi Lamido Sanusi for poking his nose into politics by informing of billions in missing oil receipts.  Much has been made of the fact that he received an early suspension, got the sack effectively, from President Jonathan for that reason.  He was vocal in other ways: CBN autonomy debate, openly/unprofessionally expressing his abhorrence of (naira) billionaire bank owner-thieves, questioning the presidency's right to fire him without Senate approval even, and he dared to wear full traditional regalia to the office one day - crazy dude, that Sanusi.

In June 2012, dressed as Dan Majen Kano; 
two years later, Sanusi is the new Emir of Kano
As with many things in Nigeria, tribalism unnecessarily plays a role in the criticism of Sanusi.  Why did Sanusi support Islamic banking - is he trying to impose a Sharia kingdom?  Who authorized him to donate xyz money to flood victims in a Northern state?  Did he leak the letter about the missing oil receipts?  Is he working for the opposition party against Jonathan?
 Why fool around with fiscal policy when (for example Igbo) traders and potential industrialists in the real economy can't borrow money and bankers in the real economy can't keep their jobs because your policy has shrunk their bank?  Here are some scathingly critical articles amongst the hundreds you can find.  One, Two, Three, Four, ...
You know where I stand: I can only wish to be that crazy (if crazy also means gutsy, effective, and fun-loving) Ah, but this article is about the new Gov, Godwin Emefiele.
Wish him god-speed. 

2 comments:

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