CEM ANALYSIS, ECONOMY | The Governor of Central Bank of Nigeria is a major stakeholder in the nation’s Economy whose capability in policies direction and implementation affect virtually all sectors of the economy especially the financial sector and the entire private sector being the head of the bankers’ bank and the currency manager of the country.
Tracing the journey to the current state of the Naira, for instance, it is obvious that a very critical factor in the position of CBN governor borders on the caliber of personality that should occupy the seat. This is in terms of educational background first, and then, work experience since performance of CBN in the past years strongly point to capability of the governors that led at various times.
For instance, while the naira has progressively been devalued by every single one of Nigeria’s last 5 CBN Governors between 1982 and today, some Governors have fared far better than others in the management of the foreign exchange under their tenure.
An argument has existed over the years regarding whether the position of the Central Bank Governor should be reserved for economist or bankers. This argument is now very strong considering the outcomes of the policies implemented by the Godwin Emefiele led Central Bank for the past 10 years.
As a matter of fact, CBN seems to have become lauder in the media even though central banks are prominent in economic discuss in all economies across the globe. The volume in the last 5 years can be attributed to negative consequences and unmet expectations as well as prominence in sectoral interventions.
A look at the past governors’ performance and their training background, there seems to be a correlation between their expertise and performance mainly as it concerns the nation’s currency management. The 3 considered in this article are those that worked under the recent democratic era which are Charles Soludo, Sanusi Lamido Sanusi and Godwin Emefiele.
Godwin Emefiele was appointed CBN Governor on June 4, 2014 by President Good luck Jonathan to succeed Sanusi Lamido. Prior to his appointment, he had spent 26 years in commercial banking and had become the Group Managing Director of Zenith Bank.
His education is purely on finance with a Bachelor’s Degree in Banking and Finance and a Master’s Degree in Finance from the University of Nigeria Nsukka. He is also an alumnus of Executive Education at Stanford University, Harvard University and Wharton School of Business where he took courses in Negotiation, Service Excellence, Critical Thinking, Leading Change.
His management of the nation’s exchange is solidly below expectation when compared to his predecessors. Within his first 6-years in his tenure as CBN governor, average annual devaluation of the naira had hit 15.8 percent. Today, value of naira against the dollar has fallen to N461 from N157.3 it was when he took the seat.
While Godwin Emefiele is a banker and financial expert, his past and immediate predecessors had strong background in economics, a probable reason they had better management of the nation’s exchange to keep the naira fairly strong.
Lamido Sanusi Lamido had his bachelor’s degree and master’s degree in Economics from the Ahmadu Bello University before he joined the banking industry where he worked and rose to become the Managing Director at First Bank of Nigeria.
He was confirmed Central Bank governor on 3 June 2009 after he was nominated by the Late President Umar Yar’adua, during the global financial crisis, a period within which he rescued top banks with bailout funds and struck down bank MDs that were found to have mismanaged depositors and shareholders’ funds.
During the 5- year tenure of Sanusi Lamido Sanusi, Central Bank was able to keep annual devaluation rate around 1.2 percent. Though during this period crude oil price rallied 38 percent from $80 to $110, proving the required earnings support to ensure Naira stability, he was vehement in rejecting the International Monetary Fund insistence for our currency devaluation. Under Sanusi, dollar exchange rate only moved from N148 to N157.
Sanusi took over from Charles Soludo who is a professor of economics. His bachelor, master and doctoral degree are all in economics. Unlike Emefiele and Sanusi, Soludo never had any banking experience before he was appointed governor of CBN by President Olusegun Obasanjo.
Charles Soludo was still able to achieve an average annual devaluation of 2.1 percent during his 5-year tenure between 2004 and 2009 despite the crash in crude oil prices by 143 percent between 2004 and 2008. It even went down further crashing by 41 percent between 2008 and 2009 during the Global Financial Recession.
Though he was not a banker, he embarked on the financial sector reforms that led to consolidation of 89 banks to 25 with a stronger capital base which gave the sector the strong footing it still stand on today and on which Sanusi Lamido built upon when he took over.
It is noteworthy that the gap between the black-market rate and the official rate within the same Nigerian exchange market has grown very wide under Emefiele headship of the apex bank, a phenomenon he tried to fight with what was described as draconian approach.
Despite the suspension of sale of dollars to Bureau de Change operators and the shutting down of Aboki FX, the gap grew wider.
The Nigerian economy is so fragile and complicated that it requires a careful planning and thorough analysis of repercussions before some economic; monetary and fiscal policies can be ventured. This is a factor that have been neglected overtime especially in some of the CBN policies such as the recent naira redesign and circulation.
It seems now true that economists possess those critical analytic tools to test impact of any policy on the economy to pave way for proper planning and careful implementation. A strong economics background should be first considered as criteria for appointing CBN governors. Knowledge in finance and banking experience should be an addition.