Appointing a new CBN Governor -Punch editorial

WITH the political arena in fluid turmoil and his economic management capability increasingly being called into question, President Goodluck Jonathan will soon have to make a crucial appointment: Who succeeds Lamido Sanusi as Governor of the Central Bank of Nigeria? At this critical stage of our country’s existence, the President needs to rise above narrow partisan considerations and nominate a competent and independent-minded technocrat to the post.

Outgoing CBN Gov, Sanusi

Since the first modern central bank, Bank of Amsterdam, was established in 1609, replacing an outgoing central bank chief has always required deep, sober and mature consideration.  Current global economic conditions make the choice even more decisive. With economies in recession, rapid shifts in the nature of economic relations and new centres of commercial influence, nations scrupulously search for the right persons to run their central banks. In Nigeria, we need only pause to recall where we are coming from – state control of banks; bank failures; consolidation, and a near-crash – to nudge our President to place stability, reforms and integrity high in nominating a new CBN governor.

Central banks are too important in today’s globalised economy. As the financial institution that manages the national currency, money supply, interest rates, inflation, foreign reserves and exchange rates, savings; and regulates the entire financial system, the CBN is not to be trifled with or sucked into the maelstrom of patronage, politics, sycophancy and corruption that have gripped every other public institution in Nigeria.

Jonathan should be patriotic enough to resist the temptation to look for a pliant CBN boss. The job should go to the most qualified, the most competent and the most independent-minded. Some of those currently being bandied in the media are unfit for the position. Politics, ethnicity and other base sentiments should play no role in considering a governor.

Like other nations, our past, present and future aspirations are vital in making this appointment. Former President, Olusegun Obasanjo, chose a solid, cautious banker, Joseph Sanusi, in 1999 after a tumultuous decade that saw the mushrooming of banks, bank runs and the collapse of 44 banks. Succeeding him was Charles Soludo, who took the stability achieved by his predecessor further by bolder reforms that consolidated the banks and brought greater sophistication to the financial system. It took the incumbent, Lamido Sanusi, to rein in the financial recklessness among some of the emergent mega banks, restore confidence in the system and guarantee stability in the money and foreign exchange markets. This has helped greatly to re-energise and stabilise the capital market where market capitalisation of quoted equities was about N13 trillion last week as local and foreign portfolio investors returned, compared to about N4.6 trillion after the near-crash of 2009/10.

Using the autonomy provided by the CBN Act No 7 of 2007, the bank was able to take quick, definitive actions such as taking over eight troubled banks, providing N620 billion for their rescue, de-coupling the banks from non-core banking operations and midwifing the establishment of AMCON, the country’s first “bad bank” to mop toxic assets from the system.

Crucially, despite the fiscal recklessness of the federal and state governments, the CBN has leveraged on its independence to steady the forex market. Inflation and interest rates, though still high, no longer swing wildly, while brave attempts are under way to curb the unloading of public sector funds onto the system. Much, however, still needs to be done, especially as we approach an election year and politicians step up their manoeuvering and realignments. One danger is that public office holders will attempt to splurge on public funds and derail the gains made in reining in high inflation, forex and interest rates. Only a strong-willed, apolitical technocrat can maintain ongoing counter-measures by CBN, such as pegging Cash Reserve Ratio on public sector funds at 75 per cent.

A sound monetary policy manager will calm the markets, reassure our development partners and investors and forge ahead with reforms suitable for the times and new challenges. Maintaining the CBN’s autonomy is crucial.

Jonathan should learn from the United States where President Barack Obama, a Democrat, has appointed Janet Yellen, a Republican, to head the Federal Reserve Bank. And from the United Kingdom, where a Canadian, Mark Carney, was appointed in 2013 as Governor of the Bank of England; from Malaysia, South Korea and India where accomplished academics-cum-technocrats were tapped to run their central banks. Yellen was selected for her perceptive insights on the global meltdown and how to deal with it; Carney, for his brilliance in shielding Canada from the worst effects of the meltdown when he was governor of the Bank of Canada.

The lesson is that politics, personal ambitions, ethnicity and short-termism are not allowed; only the long term interest of the country matters. In Nigeria too, past leaders have resisted the temptation to play politics with the appointment of a CBN governor, the tenure of a non-expert in 1975-77 being the sole exception since it was established in 1958.

The Senate, which constitutionally confirms nominees for the post, should take all this into account and ensure that it approves only a thorough professional who has a clear vision combining experience and broad knowledge with a determination to maintain the independence of the central bank.