Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited

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  • Fiscal Policy

The next CBN governor 11 Dec 2018

Central Bank of Nigeria

The Central Bank of Nigeria (CBN) is, somewhat, a volatile institution. It has had as many governors as the presidents of the country since 1999. In which case, the leadership of the central bank is as transient as the political leadership of the country may be viewed. The trend of not reappointing or elongating the tenure of a CBN governor since 1999 will very likely continue in June 2019, when the first five-year term of the current governor, Godwin Emefiele, expires.
Indeed, a change at the helm of the CBN is all the more likely in 2019. If President Muhammadu Buhari loses his bid for re-election in February, he probably would oblige the President-elect to appoint the next CBN governor. But if he doesn't, the new president can drop Buhari's nominee. There is a window of five days between the presidential inauguration on May 29th and when the next CBN governor would assume office on June 3rd.  
Emefiele had been in office for nearly a year by the time President Buhari assumed office in May 2015. His removal would have been seen to undermine the independence of the CBN. But such concerns would be absent, should the country elect a new President in 2019 who decides not to reappoint Emefiele or drops Buhari's nominee.
The governor of the CBN matters. Central banks make monetary policy independently of the executive arm of government. Monetary policy and fiscal policy are the twin pillars of economic management. As such, the governor of the CBN ought to be carefully considered on the basis of his or her education, thoughts and policy predilection, apart from the leadership skill and character to lead the Monetary Policy Committee, the Board and Management of the apex bank.
A new CBN governor in 2019 is an imperative in restoring investor confidence in the management of the Nigerian economy. In the last four years, the economy has been plagued by capital flight, record low foreign investment flows, a deep recession and weak recovery. The role of the CBN in these debacles includes its multiple exchange rates policy, which allows arbitrage gaps of up to 15%. Interference by the executive arm of government in the CBN extends beyond exchange rate setting in the first year of the Buhari administration, to some recent key management decisions, headlined by the directives for MTN to return funds that it allegedly illegally repatriated out of the country over the years.
The next administration from May 2019 must be able to attract foreign financial flows into the economy. Without this, the recourse would be contractionary budgeting or further increase in public borrowing. The fiscal policies to encourage inward investment in Nigeria must be complemented by having a CBN governor that can inspire investor confidence.
To be able to have the best person for the job, the core principle for appointing the central bank governor must change. Since the First Republic, the CBN governor has always changed from a Muslim northerner to a Christian southerner, and vice versa.
With ethnicity and religion as the overriding criteria, the best person has hardly emerged as the CBN governor. It is a fallacy that the best person for the position will always be found in the combination of region and religion that takes its turn. As with the appointment of Mark Carney as the Governor of the Bank of England in November, 2012, the best man for the central bank governorship may even be an expatriate. The core requirement for the top central banker often varies, based on current economic circumstances, goals of monetary policy, unique experience and specialization.
Under the new paradigm being proposed here, the search for the best man for the CBN governor must include a woman. Since the CBN was founded in 1958, it has not had a female governor. There is absolutely no justification for the gender bias of the CBN governorship.
The immediate past and present governors of the CBN – Lamido Sanusi and Godwin Emefiele – were appointed from their positions as CEOs of two local banks. While Sanusi was CEO of First Bank for barely six months before his appointment, Emefiele was CEO of Zenith Bank for less than four years. But a Nigerian woman, Bola Adesola, has been the CEO of the local subsidiary of a global bank for over seven years. What's more, a woman, Janet Yellen, earlier this year, completed her successful tenure as Chairman of the US Federal Reserve – the world's most influential central bank.
The trend of not reappointing the governor, and overlooking the deputy governors for the governorship, have accentuated the mutation of the CBN from a professional institution to an arena for politics.
To change this, an exceptional individual must be appointed as the CBN governor in 2019, with a view that he or she would be reappointed to pursue certain policies over a longer term and for the reform of the bank to gain ground. Such a long-term appointee, hopefully because of his or her accomplishments, would, for the better part of a decade, help push back on the politicization of the CBN.
More specifically, the next CBN governor must be a notable intellectual, visionary, as well as independent- and reform-minded. He or she should not only be interested in managing risks but must be a policy risk-taker as well. And he or she must be accustomed to digitization and the innovation economy.
It is little-recognised that the central bank affects far more people through monetary policy than the government does through fiscal policy. Central banks have direct influence on the cost of funds, the willingness to save, and capacity to consume. These have implications for the prices we pay for products, job creation and economic growth. It is common for central banks to also be responsible for keeping the banking system safe.
When central bankers are doing a good job, they are often ignored. But when they fail in their mandates and functions, everybody notices. This explains why the CBN has been in the news for some time. Perhaps unaware that it is good news when central banks are out of the news, the CBN has kept itself in the cycle of political news in the last three-and-half years.
In 2019, the CBN needs a new governor that would take it into the tranquil world of central banks that are fulfilling their mandates and being professionally run.