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Kingsley Moghalu and Arunma Oteh: Recent departures from the financial regulatory space 10 Apr 2016

Last May, I wrote an article entitled: “Upward Immobility of CBN Deputy Governors.” It was a hint at how public appointment practices in our country have increasingly enthroned subjective politics over merit, and how this puts public appointees at risk of unplanned early retirement. By January this year, two remarkable individuals, Kingsley Moghalu and Arunma Oteh, had to leave their positions. The former, the ranking official amongst the duo, performed brilliantly as Deputy Governor in the Financial System Stability directorate of Central Bank of Nigeria (CBN); while the latter put in a stellar performance in her position as Director General at Nigeria’s Securities and Exchange Commission (SEC).  While Moghalu’s departure was much more discreetly handled than the media brouhaha of the non-renewal of Oteh’s appointment, the bottom line is that they were not reappointed for the statutory (even though not mandatory) second five-year terms.

These exits are hard to understand in terms of rational public policy. Kingsley Moghalu is an astute policy thinker with extensive global leadership experience at the United Nations and later at a private strategy and risk management consultancy firm he founded in Geneva, Switzerland. He was head-hunted while minding his business by former CBN Governor Sanusi Lamido Sanusi. Moghalu, who has a doctorate from the London School of Economics and is the author of “Emerging Africa”, an acclaimed book on economic transformation strategy, was appointed in November 2009 by the late President Umaru Musa Yar’Adua, to lead a strategic frontier of the reform to save the Nigerian banking industry from a systemic crisis. That crisis was identified earlier by the August 2009 audit which Sanusi commissioned immediately he became CBN Governor.

The crisis resolution path was quickly mapped and rigorously followed through. Nigeria became one of the very first jurisdictions in the world to resolve its banking crisis after the 2008 – 2009 Global Financial Crisis. Under the leadership of the now-Emir of Kano and his able deputy Kingsley Moghalu, a raft of macroprudential regulatory rules were introduced by the CBN which quickly stabilised the banking system. The innovative crisis-resolution special purpose vehicle, AMCON (Asset Management Corporation of Nigeria) was also established to help clean up the balance sheets of the banks. These measures ensured the banks were able to resume lending and thus returned to profitability instead of likely implosion.

The exit from SEC of Arunma Oteh, who incidentally was also appointed by President Yar’Adua in December 2009, serves no good public policy end either. In fact, her exit shows inadequate political support for public officials who dedicate themselves to their responsibilities and would not compromise their integrity and government’s avowed commitment to anticorruption. Oteh’s defence of her professional rectitude and space in her row with some members of the National Assembly initially resulted in denial of funding to SEC for an extended period of time. President Goodluck Jonathan had stood by Arunma Oteh against the push from the National Assembly to remove her before the expiration of her first term in office. This presidential support was not sustained when it was time to renew her appointment, ostensibly because it was a time the President was actively seeking re-election, and the witch-hunting of Arunma Oteh had been relentless. Moreover, it would have been an uphill task for her to get the clearance from the Senate for reappointment because of her nemesis in the National Assembly.

Nevertheless, Arunmah Oteh’s performance speaks for itself. She came into office in 2009 at a time the Nigerian capital market was in the middle of an unprecedented crisis. The local stock market had unravelled, following the immediate past years of growth that was in part fuelled by gross abuse of market discipline. Unfazed, the Harvard-trained Oteh introduced various bold reform initiatives that helped restore market integrity, and consequently, investors’ confidence. These were instrumental to the slow but steady claw back of market indices at the Nigerian Stock Exchange, until the monetary policy risk (Quantitative Easing) the U.S. imposed on the global market began to spark portfolio exits from emerging and frontier markets last year. Portfolio outflows from Nigeria became more pronounced in the last few months of fallen oil prices and aggravation of political risk with the postponement of the presidential election in February.
 
There exists a degree of cynicism towards the performance of public and market policies since these two individuals were refused reappointment. Lamido Sanusi, who spearheaded the intervention and reform of the banking industry had been removed in March 2014, three months to the end of his single term of office. He was replaced by an “Acting Governor.” The market felt a leadership vacuum was created until Mr. Godwin Emefiele, who was appointed Governor from outside the central bank -- resumed in June. It was awkward in this scenario that the Deputy Governor whose work was very relevant to the continuation of stability of the financial system, was edged out a few months later. Similarly, Arunma Oteh’s reform programme was already moving from crisis-response and market stability stage to implementation of growth strategies when she was told to go.

While Oteh has yet to be replaced with a substantive Director-General, Moghalu has been replaced by a substantive Deputy Governor who is definitely not a man of mean qualification. So the issue is not whether there wouldn’t be other suitable individuals to fill the public offices. Nigeria is a country of 170 million people including a horde of well-educated and globally competitive individuals. The issue is what exactly is the policy underpinning for refusing to reappoint performing public officials? What does it mean to create leadership vacuum in market-facing institutions at a time of fragility and crisis as has been the case? Public appointment practices must reflect government’s commitment towards excellent performance, continuity and of course reward of, and not rejection of, high performers like Kingsley Moghalu and Arunma Oteh.  

I had written in my article of last year that, based on the recent practice that is now making the CBN Governor a pre-retirement job for bank CEOs who many observers perceive as having conflicts of interest, Kingsley Moghalu would be overlooked when the time comes to appoint the next governor of the CBN in 2019, after the current governor, Godwin Emefiele, has served out a single term. This, I maintained, would nevertheless be the case, in spite of the fact that Moghalu would be the longest-serving Deputy Governor in office by then (if he was reappointed to a second term). He would not be appointed CBN Governor in spite of leading the key frontier of the most far-reaching reform in the Nigerian banking history, under Lamido Sanusi. It wouldn’t matter that he would have participated in 60 Monetary Policy Meetings. All the financial cost for providing him on-the-job training, the knowledge he has acquired and his experience on the job would be deemed to be dispensable. I was proved correct far sooner than the time I had predicted!

Under the circumstance, it is the country that loses because it chooses not to retain performing officials in its institutions. And our institutions are weakened as a result. Immediately Moghalu left the central bank, he was sought after by foreign institutions with an eye for his performance and track records. He was appointed to the Advisory Board of the influential, London-based Official Monetary and Financial Institutions Forum (OMFIF), an independent research and advisory group offering confidential consultations and advice to public sector asset and reserve holders at the heart of world finance. Soon after, he was appointed Professor of Practice of International Business and Public Policy at Tufts University’s prestigious Fletcher School of Law and Diplomacy in Boston, Massachusetts (effective from July 2015). Even more recently, he became a Partner at Cooke Robotham LLP, a Washington DC-based full-service global law firm with a rapidly expanding presence in the United States, Africa, UK and Latin America and the Caribbean. He combines these international appointments with his role as Executive Chairman of Sogato Strategies LLC, which he now operates from its Washington, DC headquarters.

I do not yet know Arunma Oteh’s subsequent engagements after leaving SEC. But there is no doubt that a world-class professional like herself will pick and choose amongst worthy engagements in the local and international environments.

My conjecture on why Arunma Oteh was denied reappointment nonetheless provides an advisory on the necessity for reform of the procedure whereby some public officials are required to go through another round of screening by the Senate for reappointment. Public officials should no longer require another legislative clearance after the Senate has cleared them for their first term. This is not suggesting that they cannot be called to give account of their stewardship at any time under normal legislative oversight function. Reappointments should be automatic once the President, through the supervising Minister (where applicable), is satisfied that the appointee has done well based on issued Key Performance Indicators at the time of assumption of office, and if he or she has not committed proven serious misconduct in office.

This proposed reform, though not without the risk of insidious complacency of a public sector chief executive that is loaded on gimmickry and politics but light in commitment to excellent performance, will nevertheless solve the big problem of public officials having to ingratiate themselves with members of legislative committees who exercise oversight functions on their institutions. The risk is mitigated because, the president and or the governing party is answerable to the people for the performance of public appointees at the next election. Legislative screening for reappointment of public officials amounts to a waste of time to say the least and should be discontinued.

I congratulate Kingsley Moghalu and Arunma Oteh on their excellent performances in their recent public positions, and I wish them the very best in their current and future endeavours. I also wish that the country would find the political will to align public appointment practices with the performance expectations of well-meaning Nigerians.