Challenges Before the New CBN Governor and Suggested Focus
The first Challenge the new CBN governor has is to reframe the autonomy of the bank within the context of being an institution of the Federal government and indeed part of the Executive arm of the government. From the look of things, the outgoing governor expanded the autonomy of the bank beyond reasonable contemplation. He tended to act as a parallel government authority that was not accountable to the President and indeed seemed to be in competition with the President. This led him to rebut any attempt to make him accountable and he seemed to carry on as the lord of manor with the unquestionable power and discretion.
Second, is that he also must uphold the conservative nature of Bankers and especially that of a Central Bank governor. He must know when to speak and when to be quiet. He must not reveal all he knows and comment on every subject in the media. He must not overheat the system with off- cuff comments.He must restore the dignity of the central bank governor, who gets investors and market operators attentive any time he speaks, because his words must be weighty. He must depoliticise the CBN.
Thirdly, he must not be overbearing in determining monetary policies. He needs to consult more with the Finance Ministry and other economic managers of the economy before deploying new policies. The failed 5000 naira denomination project for example suffered from lack of appropriate consultations. Even in the meetings of the Monetary Policy Committee, his voice must not be over bearing.
Fourthly, he must maintain neutrality when dealing with the banks that he supervises. He must not give the impression that there are favoured or favourite banks while there are others who are not worth protecting. The outgoing governor got himself so emotionally involved in some of the bank reforms that he carried out.
Fifthly,he must focus his monetary policies to maintaining macro- economic stability, without imperilling economic growth and development. The current effort to liberalise credit to the SME sector, especially to Agriculture must be sustained. This is one area the outgoing governor has done well in my view.
Sixthly, the effort to sustain the value of the naira must be backed with effort to promote productivity in the economy. Artificial propping up of the naira value will not be sustainable and may deplete our Foreign reserves to dangerous levels. The CBN must support the effort of the ministry of Industry, trade and investment to lift up manufacturing and promote exports. Related to this, he must resist the urge to return to undue foreign exchange controls which have not been helpful in the past. There should be free flow of foreign currencies into and out of the country, which helped to narrow the gap between official and parallel market rates in recent past.
Lastly, every effort must be made to keep interest rates low. The gap between lending and saving rates remain too high and discourages savings and investment in the productive sector. Today, businesses borrow at upto 25% while savings rate is still around 5%. To aid this, the CBN must drive to attract or create a pool of funds for long term borrowing to support industrial rejuvenation.
Mazi Sam Ohuabunwa OFR
President, Nigerian American Chamber of Commerce(NACC)
Immediate Past Chairman, Nigerian Economic Summit Group(NESG).
Immediate Past President, Nigeria Employers Consultative Association(NECA