Since the whispers of Godwin Emefiele’s interest in becoming President of Nigeria grew into open conversations and loud noises, people have been wondering who might replace him as CBN Governor. These mesmerizing wonderments appear to have intensified since news broke of the accusations against him, of terrorism financing by the Department of State Services (DSS). Given that Mr. Emefiele is still abroad, there seems to be an uneasy stalemate in the open disagreement between both institutions.
While some may be wondering what next, regarding the Governor of the CBN, and perhaps what the right action should be to protect the integrity and stability of Nigeria’s APEX bank, this writer examines the more cogent question about the core attributes of the next Governor, and the need to thread with caution in order to protect the apex bank’s reputation and ensure system stability.
Therefore, in order to put a context to this question, it might be useful to begin by answering the basic question, what is a Central Bank?
According to many experts, a central bank is an independent agency that specializes in the control of money supply, conduct of monetary policy, supervision of the financial system, management of the legal tender, and engendering of macroeconomic stability in a country. These responsibilities are given to central banks to stabilize the nation’s currency, keep unemployment low, prevent inflation, and foster economic growth. Central banks also significantly interface with international organizations like the World Bank, the International Monetary Fund (IMF), the World Economic Forum (WEF), credit rating agencies, and the likes.
In light of this working definition, with respect to Nigeria’s Central Bank’s day-to-day responsibilities/ goals, and with looming uncertainty over Mr. Emefiele’s future, I believe that the next Governor of the CBN should be someone with the requisite education, experience, and exposure to do exactly what central banks were created to achieve.
This means that the ideal Central Bank of Nigeria Governor should be a distinguished economist rather than an experienced commercial banker like we have had with the past and present CBN Governor. The problems plaguing our economy and the financial system, require an individual with strong understanding of both fiscal and monetary policies, who can harness and correctly deploy the monetary tools available to steer this country on the path of economic growth.
In Nigeria, it appears we are wont to assume that commercial banking is equivalent to central banking. But nothing can be farther from the truth. The fact that someone is connected enough to mobilize deposits at lower interest rates and convert these deposits into loans at higher interest rates does not make the person understand monetary policies nor the fostering of macroeconomic growth.
It is therefore pertinent to not play politics with the appointment of the next CBN Governor should Emefiele vacate or be made to leave, nor repeat the same cycle of putting square pegs in round holes.
Another disadvantage of a commercial banker as CBN Governor is the strong possibility of divided loyalty. One of the core mandates of the CBN is to regulate Deposit Money Banks (DMBs), but a CBN Governor who is drafted from a DMB will face the twin temptations of favouring their former employers and designing regulations that could favour the Banks but not necessarily the public.
Therefore, a CBN Governor who has any connections to a commercial bank will always have a suspicion of bias hanging over their heads like the sword of damocles. The only way to eliminate this is to appoint a neutral personality with no employment affiliations to commercial banks.
In addition to the new CBN Governor being a first class economist, the individual must also possess the following attributes: international experience and exposure. The world does not exist in isolation and travel is a great source of education. Thus, a CBN Governor who has worked in international financial institutions and dealt with monetary policies at the highest global level will be a perfect fit to occupy the seat of CBN Governor for Africa’s largest economy.
The second attribute is insider knowledge. A deep knowledge of the workings of the CBN and how to effectively engage with policy stakeholders will surely be a strong advantage to the new CBN Governor. There is no doubt that such talents abound within the CBN and will undoubtedly excel if given the opportunity.
Let us use our tongue to count our teeth, by appointing an economist to this all important office.
At least our recent history regarding banking consolidation is there to support us and lend credence to the argument.