Naira in Focus as Emefiele Begins Nigeria Central Bank Job

Following his confirmation by the Senate last month as the new Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele will officially assume duties this week. This is consequent upon the expiration of the tenure of Mallam Sanusi Lamido Sanusi. Prior to his nomination by President Goodluck Jonathan, Emefiele was the Group Managing Director of Zenith Bank Plc. Undoubtedly, his appointment has come at a time of great economic anxiety and declining confidence in the banking sector.
Banking, including central banking, is a confidence game. That is why the person at the helm of the country’s apex bank has a very important role to play in building confidence in the financial sector and steering the economy towards stable growth. There is no doubt that Emefiele’s track record as an accomplished commercial banker has placed him in good stead to raise the needed confidence and strengthen both the banks and the national economy. The multiple challenges before Emefiele as CBN helmsman require him to focus on the core functions of the office, especially the use of monetary policy to promote a stronger economy.

The roles of the CBN as the regulator of the banking sector and the nation’s lender of last resort are also critical responsibilities over which a lot will be required of him. He should, therefore, not allow himself to be stuck in any narrow ideological groove, but must strive to be open-minded, proactive and alert at all times. He must also be able to change with the exigencies of the times and fashion out policies that are in the best interest of the country.
In this regard, the new CBN boss should focus on how to deploy monetary policy to create employment and check inflation. He, alongside his team, should seek to strengthen the financial system by reviewing the existing monetary policy while retaining its good aspects. Policies such as the Cashless Policy initiated by Sanusi, and the firm stance against corporate governance infractions should be retained. The current tight monetary policy needs to be reshaped because of its adverse implications for private sector performance. Only recently, the CBN retained the 12 percent Monetary Policy Rate (MPR), which has been in operation for the last one year.
In the same vein, current interest rates are too high and detrimental to private sector productivity and the capacity to create new jobs for the over 24 million unemployed Nigerians. Currently, there is an outcry by bank customers over arbitrary charges by commercial banks. Some banks have refused to comply with the November 2012 resolution of the Bankers’ Committee to halt charges on inter-bank Automated Teller Machine transactions and other opaque billings.
There is, therefore, the need for a moderation of the current tight monetary policy. Keeping interest rates reasonably low is necessary to promote a strong economy. It will also help channel funds to the real sector of the economy, such as agriculture, that has potentials to rev up the economy and create jobs.
The subsisting interest rates make access to funds difficult, and raises the cost of production. There is no denying the fact that an effective monetary policy will improve the welfare of the citizens and the informal sector that has suffered a lot from credit crunch.
The labour market needs substantial assistance without adding to the risk of inflation. Officially, Nigeria’s rate of inflation is put at a single digit, but the truth is that it could be in the region of 12 percent, according to experts. Therefore, keeping inflation under control is necessary to stabilize prices of goods and services.
We urge the new CBN boss to initiate far reaching monetary policy that will bring down inflation and improve the value of the Naira. There is also the need to set appropriate crude oil benchmark that will help to stabilise the economy.
Today’s globalised economy requires CBN to tailor its monetary and fiscal policies in line with happenings in international markets, but with real attention to the country’s economic interests, especially our domestic market. In that regard, deposit money banks and micro-finance houses should be made to concentrate on their primary functions as financial intermediaries. These days, many commercial banks have deviated from their conventional roles. This has not helped the economy to grow, as it should. The Inspectorate Division of the CBN should be strengthened for proper supervision of the banks.
We believe that the new CBN Governor must have studied his new turf carefully. He must measure what he says and avoid the kind of situation that led to the suspension of his predecessor from office. The Central Bank is a conservative institution that requires utmost sobriety. Let him discharge the functions of his office strictly in line with the provisions of the CBN Act.
All in all, Emefiele should lead by example and ensure greater transparency and accountability in the management of the funds and policies of the bank, which his predecessor was said to have flagrantly abused. It is also necessary to have clear policy implementation pathways that are not based on the fancy of the man at the helm of affairs.
While wishing the new CBN governor a successful tenure, let him keep in mind that the nation’s economic prosperity, the welfare of the citizenry and the strength of our currency and the banking sector will depend largely on the policies that he initiates.