Sunday, October 27, 2013 / By Ray Echebiri, Olufemi Awoyemi and Alexander Ekemenah
Mallam Sanusi Lamido Sanusi whose five-year term as governor of the Central Bank of Nigeria (CBN) terminates May 31, 2014 has served an exit notice. This leaves President Goodluck Jonathan with the task of looking for a suitable successor to Sanusi.
Nigeria however has the opportunity to learn something about whom to pick as our own 'responsible public official of the economy' from the insights and analyses surrounding the appointment of the Governor for the Bank of England by David Cameron and the next head of the United States Federal Reserve by Barack Obama.
The playbook for choosing Central Bank Governors has been re-written, not just because of the management approach to the financial crises but because this is a public position that in many Western countries is considered second in importance only to the Prime Minister or President. Indeed, there are countries in which the Governor of the central bank is considered even more important in the public perception. After all, politicians are not believed, and...
Our recent experience will indicate that whoever becomes the governor of the Central Bank of Nigeria will have to engage in the economic direction of the sovereign, and not be content with monetary policies and interest rate management alone – a playbook that does not support the movement from an emerging/frontier economy to an industrialized economy which Nigeria needs to be in order to fulfill its potential.
The central bank is a major pillar in the economic architecture of any modern economy. Any central bank remains a critical component of its nation's government. In Nigeria, our constitution assigns the responsibility for banking and monetary policy to the National Assembly under the Exclusive Legislative list. Since 1959, the Nigerian Federal Parliament has delegated that power subject to ongoing oversight to the Central Bank of Nigeria.
Under the prevailing legislation, Parliament has charged the CBN with specific responsibilities stated inter-alia in the act as follows:
1) maintenance of stable prices
2) maintenance of stable financial system
The Mindset Prior to Now
While Nigeria’s economy was at its infancy, getting a Governor for the CBN was perhaps a routine, albeit political, appointment for any Nigerian President/Head of State; chiefly because anybody could sit atop the CBN as governor and still acquit himself creditably because of the economic realities prevalent at the time. Then, banking supervision, risk management, economic linkages between fiscal and monetary policies, wealth and income distribution and management of inequalities, alternative payment systems due to advancement in technology, regional integration and globalization as well as contagion effects due to interlocking financial markets were not issues to contend with.
The formulation and execution of monetary policy was also not a mind bending and nerve racking job because everything was basically routine. Little wonder then that a historian who was ‘mistakenly’ appointed the CBN governor at that time also acquitted himself creditably. Those days are long gone and will never come back again.
The reality today is that the headship of the Central Bank anywhere in the world has long ceased to be the ‘job for the boys’. Only the best minds with the right academic and professional background backed by a world class pedigree are good enough for the central bank governor’s office. To be sure, these are not easy to find. They may not be the popular faces on television screens and pages of newspapers. They are definitely not the job-seekers who pander to the media, public officials and know-tow with politicians like cattle egrets. Instead, they are those rare species of sound mind, proven and possessing a helicopter view of the economy, global markets and know-how to aggregate the interests of entities with the sovereign interest; constantly searching for the solutions to the socio-economic challenges of today and at the same time building models that will help answer tomorrow’s questions.
Today, Nigeria stands on the verge of making the most impact decision as to its commitment to emerge from the shadows of potential and transit towards fulfilling the aspirations of the founding fathers to become the most developed economy in black Africa.
The country can no longer be content with tokenism; it is against our national interest and well being to pretend that we can return to a regime of business as usual. At this crucial moment, it is the aspiration of every Nigerian to see the emergence of a developed economy based on our overflowing natural and human resources, and more importantly, based on our well articulated but un-integrated Vision 20:2020.
Now is the time we move from considering or appealing to be allowed into the BRICS club (Brazil, Russia, India, China and South Africa) of emerging economies, BUT rather a time to agree on when we force the recognition of Nigeria as a member of BRINCS. This can only happen if the right person sits atop the central bank as governor.
Unlearning the Past to Build a Desired Future
One of the main lessons of the global financial crisis manifests itself in the way, approach and platforms used to address the sovereign issues that arose – a process that leads to the ascendancy of the economists, nay central banks as the ‘saver of last resort’.
This realization led to the rewriting of the governance playbook as central banks invariably ended up choosing winners and losers in the emerging economic environment through the policies adopted. Inevitably, the trend that evolved in the selection of central bank governors all over the world stemmed from this. It was clear it was not going to be business as usual anymore.
This realization is predicated on the realization that the role of the central bank as a catalyst for economic growth and anchor for stabilizing the financial system could no longer be reversed; or consigned back to that of playing the hitherto traditional roles. In effect, the real change was the recognition that the Central Banks of today carry a dual mandate: financial and monetary regulator and a key stakeholder in the overall national economic development.
With this, it becomes easy to understand why Britain that literally adorns conservatism like an indispensable winter coat would go all the way to Canada to pick Mark Carney as the new governor of the Bank of England. At first, Britons could not understand why Cameron and the Chancellor of the Exchequer, George Osborne, would get ‘giddy in the head’ by considering an appointment of a foreigner as the governor of the Bank of England. They were later to make a u-turn to applaud their decision especially when Carney’s intimidating credentials and astounding accomplishments were dropped in the public domain. Carney who became governor of Bank of Canada in 2008 was credited with shielding Canada from the worst effects of the late-2000 financial crisis. The Canadian economy had waxed even stronger at a time the economies of other industrialised countries are at their knees.
Carney’s accomplishments as the governor of Bank of Canada and his appointment as the governor of the Bank of England may not be unconnected with his rock-solid academic background and excellent skills in monetary policy engineering, apart from the overall regulatory environment in Canada that emphasized risk management across its banking operations. Carney had earned a bachelor's degree in economics at Harvard in 1988. He later attended Oxford University where he received a master's degree in economics in 1993. Two years after (in 1995) he received a doctorate in economics at University of Oxford. Carney’s work experience is also insightful – having spent 13 years with Goldman Sachs, working in its offices in London, Tokyo, New York and Toronto.
In Search of a Joseph
As President Jonathan embarks on the onerous search for a new governor for the Central Bank of Nigeria, he would have it at the back of his mind that he is searching for one man or woman whose actions would have more impact on the economy than that of any other person. He must know that he is searching for that man or woman who, by what he does or what he fails to do, would lead the country to the promised-land or to the abyss. He is looking for the most responsible adult in the economy.
Therefore, it must be an effort that rises far above the usual political, ethnic or tribal considerations; and aligns the sovereign interest to his self interest. This, by all measure will be his legacy appointment.
We trust that the President recognizes the weight of history on him, and indeed the importance of the choice he needs to make. To support the process, BusinessWorld and Proshare have undertaken the arduous task of sifting through all the arguments, decision criteria, issues for consideration and the choices open to the president and have commissioned work to provide an aide memoire which should also allow the public to be carried along.
In delivering on this self-enlightened interest task, we have developed a methodology that should deliver at a minimum, insights and answers to the key questions that should occupy the mind.
This special 2-part report broken into sub-headings will be published over the next few weeks in BusinessWorld Newspaper (online and print) and Proshare’s suite of websites and resource platforms. We shall be x-raying the issues at stake for the national economy with a clear objective of laying bare the nexus between the fiscal and monetary policy decisions taken all with a view to draw from it the attributes that the new CBN governor must possess if he/she is to be able to grapple with the unique challenges Nigeria is confronted with. By doing this, we shall be delivering on our civic and corporate responsibility at this critical time.
We will do our best to encourage Nigerians to be engaged in the process of recalibrating the architecture of our economic landscape through this appointment, drawing lessons from our last two appointments which have paved the pathway for a sustainable process for selecting or appointing central bank governors.
We welcome insights, perspectives, and contributions from all stakeholders on the broad objective of this report – indicating whether you want this published or for our research purposes only.
More importantly, we look forward to receiving nominations from the well informed about whom the best man for the job should be; and basis for the choice.
Readers can send their contributions to the Project Team Leader: