New CBN governor has a tough task ahead

by MMC
0 comment

Nigeria is about to have a new central bank governor. On September 15, President Bola Tinubu appointed Olayemi Michael Cardoso to succeed Godwin Emefiele, who had been in office since June 2014. Emefiele’s tenure ended in June when the president suspended him and Folashodun Shonubi took his place.

The Senate will have to ratify Cardoso’s nomination. Four deputy governors are also joining the leadership of the Central Bank, pending Senate approval: Mrs. Emem Nnana Usoro, Mr. Muhammad Sani Abdullahi Dattijo, Mr. Philip Ikeazor and Dr. Bala M. Bello.

Cardoso’s CV includes that of former Chairman of Citibank Nigeria with over 30 years of experience, serving on the boards of the Nigerian subsidiaries of Texaco and Chevron and chairing the EFInA committee. However, concerns remain about possible partisanship. Cardoso has had a relationship of over two decades with Tinubu. In 1999, Tinubu’s first term as governor of Lagos State, Cardoso became commissioner for budget and economic planning. However, he did not complete this term as he won the Michael Romer Memorial Scholarship. Also, in 2015, Cardoso was one of three names considered to become vice president of Muhammadu Buhari.

One reason for concern about Cardoso’s partisanship is that his predecessor exhibited the same trait. In 2022, Godwin Emefiele would have makes a subtle entrance in the presidential race under the ruling APC party. It took a court order to stop this ambition. Therefore, when many of the policies carried out by Emefiele during his governorship appeared to have the assent of President Buhari, it called into question the independence of the central bank.

Whether or not Cardoso has presidential ambitions, being partisan can influence his decision-making in such a sensitive position. For example, the central bank has printed N23.72 trillion to lend to the government over the last seven years, a figure 2900% jump. These “ways and means“s” loans have become an important addition to Nigeria’s portfolio. imposing debt portfolio. In January, former President Buhari proposed converting the debt into 40-year bonds with an interest rate of 9% rather than keeping it at the CBN rate of 19.5%. Most notably, the CBN was lending more money than its own laws allowed.

However, partisan or not, Cardoso will have a tough task ahead. His first major test will come at the next meeting of the Monetary Policy Committee (MPC), where he will have to decide on Nigeria’s policies. interest rate. The country has raised interest rates eight times in a row to control rising inflation rates. But inflation has remained stubborn and has now reached its highest level in 18 years.

The new CBN governor will also need to stabilize the naira in the foreign exchange market. His predecessor performed poorly in this area, with the naira falling by over 415% against the dollar during his tenure. The gap between official rates and those on the black market also widened, from 10% to more than 80% before narrowing to 22%. The decision to end the fixed exchange rate system helped reduce market arbitrage, but also caused the naira to fall in the official market.

Succeeding in reviving the naira will be a big burden for the new governor. But it won’t be easy. The demand for dollars is extremely high while the supply continues to decline. These requests come from manufacturers and importers who purchase raw materials from abroad, from parents who pay their children’s school fees abroad, from Nigerians who pay medical bills abroad, from travelers who source Business Travel Allowances (BTA) and Personal Travel Allowances (PTA), etc. But because dollars are scarce, the central bank has more than $10 billion in foreign exchange arrears. Two weeks ago, the central bank promised to eliminate these backlogs in two weeks. Now that this schedule has passed, nothing has changed. Nigeria’s foreign exchange reserves also declined sharply under the previous governor.

This Forex debacle led the Financial Times Stock Exchange (FTSE) to downgrade Nigeria’s rating to “”unclassified” market. And as it is crucial to clear these arrears to stabilize the naira and attract investors, this issue will be at the forefront of the new governor’s debate.

The CBN governor will also have to design improvements to several projects of the former administration. For example, the e-naira, which Emefiele launched in October 2021, very little adoption. In addition, the central bank’s desire to control inflation has led it to become involved in financing food production. But this program hbecause it didn’t do much to boost food production.

The most difficult part of his job will undoubtedly be redefining the limits that the previous governor failed to respect. This implies regaining total independence and refocusing on its primary mission of conducting monetary policy.

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign