Should we be concerned who the next governor of the Central Bank of Nigeria (CBN) will be? This query assumes that we will go with tradition and not re-appoint the incumbent. The latter has got until June next year before his current term ends. And arguably, he, more than any other central bank governor in this country, has drawn a thick line under the importance of the CBN in the proper management of this economy. Alas, under Sanusi Lamido Sanusi, monetary policy management has loomed extra large only because the fiscal side of the macro-economic equation has been managed after a wimpish fashion.
In the last three years, the CBN has weighed in on its side of the economy, with a plan to steady a doddering banking sector that resulted in infusions of money into the economy that we previously associated only with the federal government. It has pursued cheap money policies designed to help the same banks improve their balance sheets. Currently, much of the conversation around the activities of the central bank has been about how tight its policies have been, and in whose interest these have been pursued. In between, the central bank has led interventions in disparate sectors of the economy in an almost desperate attempt to get lending flowing to these sectors. Along with its now notorious quasi-fiscal operations, it has attempted to change the nature of the domestic payments and settlements system.
Arguably, there is a strong case for awarding the central bank a strong pass mark for its exertions over the last three years. If nothing else, our banks (because of the fillip lent them by the CBN) appear stronger than they were four years ago, and individually, represent reduced risks to the local financial services space. Moreover, banks are less likely today to aid dubious financial transactions than they were a few years back. And, a proliferation of payments/settlements platforms have improved customers’ experience of financial transactions.
That said some have counted the costs of the CBN’s diverse interventions in the economy against its gains and concluded that things ought to have proceeded differently. The size of the initial intervention in 2009, for example, was in the region of N600bn; and since then AMCON (the CBN’s bad bank) like a veritable money-doubler has moved the cost of the last bank rescue into trillions of naira. Uncertainty remains as to how this is going to be funded. Against the fact that less than 40% of financially active Nigerians use the formal banking sector there is a point at which all this begins to look like the typical Nigerian play: huge amounts of subsidies headed into the pockets of a privileged clique.
On balance, therefore, we all have a huge interest in the process for selecting the next central bank governor. That office affects our everyday life far too much for us to leave decisions about it in the hands of our “experts”. Only recently, the United Kingdom offered up a useful example of what ought to be done when it appointed Mark Carney (a Canadian, and until then, the Bank of Canada governor) as replacement for Sir Mervyn King. The latter is credited with having helped “protect Canada from the worst recession in a century”, and as head of the Financial Stability Board, for the design of initiatives that restrained “commercial bankers whose reckless dealings precipitated the 2008-09 financial meltdown”.
The UK (as befits the host of the world’s leading financial capital) scoured the world, and chose the best man for the job. Ought we to do less? We have ambitions (as encapsulated in the Vision 20:2020 strategy programme) that demand even more. Why not begin then, by advertising the vacancy (if actually there is one) in major publications across the world? Job description? To maintain “price stability” of course. Or better still, hand the recruitment process over to a reputable headhunting firm? At the end of which process, the candidate is then presented to the Senate for confirmation hearings. The probability is higher that a more competent candidate emerges off a transparent process than if we left it to politicians to decide based on which candidate they find more acceptable.
Unfortunately, “global best practices” will always lose to “local constraints”. And in the example of the Nigerian central bank governor, these constraints are onerous. The tools, for instance, with which s\he must work are blunter by far, than you are likely to meet in other jurisdictions. At one level, the financial and economically savvier bits of the local commentariat is still engaged in discussions over how best to use policy instruments to change monetary conditions. Is the better route through the policy rate, through tinkering with liquidity, or via the exchange rate? Each of these routes has strong entrenched interests whose manoeuvring will test the mettle of the best of us. A non-resident will be stymied by them in due course.
Thus, a Nigerian for the job. And a very qualified one, at that.