By Haruna Lawal
With the appointment of a substantive helmsman at the Central Bank of Nigeria (CBN), Dr. Michael Olayemi Cardoso, the much-anticipated stability in the management structure is expected to begin to take shape. With this development, many an analyst has devoted time and energy to unveiling the new central banker in relation to the task ahead as the economy continues to struggle to cope with multiple pressures that are impacting harshly on the citizens.
As he assumes office, the CBN helmsman will face spiking inflation, higher interest rate, falling bank adequacy ratio, volatile exchange rate among others which will test his preparedness for the job. There is no contesting the fact that Cardoso’s appointment as the CBN governor is well deserved considering the fact that he is eminently qualified, having proven his mettle elsewhere.
In confronting these and other challenges, he will be expected to commence the recapitalization of the banking sector. This is imperative as the value of the naira continues to drop in the market. Similarly, he will also strive to restore confidence to the foreign exchange market, deepen and ensure efficiency of the financial system, capital requirements for banks, addressing ways and means financing of fiscal deficit as well as completely jettisoning the controversial naira redesign policy. Others are the tenure and cost of funds in the banking system, reducing concentration of risks in banking sector, initiation of stakeholders’ engagement and corporate governance.
It is important, also, to point out that Cardoso is assuming the leadership of the CBN at a very crucial time in the nation’s economic history. There is no gainsaying it that a serious confidence crisis in the foreign exchange market is fueling an unprecedented speculative onslaught on the naira. Similarly, the economy is grappling with severe adverse effects of depreciating exchange rate, soaring energy costs, ravaging inflationary pressures, huge backlog of foreign exchange obligations that needs to be cleared and debt service obligations that need to be redeemed.
The economic management orthodoxy of market forces was being called to question in the country following the social outcomes of the recent market-oriented reforms. But on the part of the CBN, it is pertinent to enjoin Cardoso and his team to ensure strategic and transparent intervention in the foreign exchange market in order to minimise volatility.
Similarly, the CBN under this new management may have to look at the import and export (I&E) window and possibly create an autonomous window in the banking system where the currency can trade freely without any encumbrances. This is necessary to avert the diversion of remittances to other jurisdictions or the black market.
Perhaps, drawing from the experience of foreign airlines some of which are looking elsewhere for business opportunities as a result of the government’s inability to satisfy their foreign exchange earnings, it is imperative that the government accords high priority to this area so as to restore the confidence of domestic and foreign investors.
Before his appointment, Cardoso, a banker, stockbroker and public policy maker, had served in Lagos state under Governor Tinubu as commissioner for Economic Planning and Budget. In this regard, he is considered an expert in fiscal policy as against the perceived mandate of the Central Bank, as an agency of government, that superintends over monetary policy and microeconomic issues. Many also argue that this may not matter much considering the fact that one of his predecessors in office, Alhaji Adamu Ciroma, a history graduate, who was appointed by General Murtala Mohammed as CBN governor, was assessed to have performed well in that office. That he later served as Minister of Finance, attests to this assessment.
Regardless, he is coming into office at a time of heightened expectation- runaway inflation, fledgling value of the nation’s legal tender, the Naira, vis-à-vis other international currencies, exchange rate challenges, price instability among many other issues that are plaguing the economy.
It is from this point of view that one is persuaded to posit that Cardoso, who was admitted into Aston University in the United Kingdom to study managerial and administrative studies and who also has a Master’s degree in public administration, from Harvard University, United States of America, has his job cut out for him.
Nigerians expect him to hit the ground running and put in place policies that will bring the economy under control by fashioning out implementable monetary policies that will, hopefully, energise the micro economic issues the president will act on in his determination to give the economy, generally, the desired kiss of life.
Beyond these general assumptions about his duties as the CBN governor it is important to put him on notice that there is an urgent need to stabilize the price mechanism that has been impacting negatively on the economy, heating up the system and generating inflationary trends that are unhealthy and unacceptable. He is expected to bring down inflation, currently at double digit levels. He must not wait to be told that the society is finding it difficult to cope with the enormous challenges presented by an economy in distress. As a key economic adviser to the president, he will be expected to think on his feet and outside the box to initiate policies that are people- friendly.
Another aspect of the economy that is responsible for the seeming crisis in the economy, regarded as exceedingly import- dependent, is the alleged political interference in the foreign exchange management. If this is the true position, it becomes hasty to envy him his appointment because the demands are not likely to ease anytime soon. However, Nigerians expect him to step on toes, including sensitive ones, in the management of the nation’s dwindling foreign exchange.
It will, also, not be out of place, to expect the incoming CBN governor to insist on the independence of the apex bank so as to avoid the abuse experienced lately in its application of the ways and means policy that almost turned it into the piggy bank of the executive branch.
On the part of the new CBN helmsman, Cardoso, his appointment, considering his experience and his plans which he unveiled at the Senate screening, hold something to look forward to by Nigerians. It is heartening to note that he has pledged to accord priority to clearing the backlog of unsettled foreign exchange obligations, enhance transparency, fix corporate governance and ensure confidence in the autonomy and integrity of the bank. Judging by his vast experience, the CBN Governor has what it takes to give the apex bank a new lease of life and ultimately ensure the building of a virile economy.
• Lawal, an economist, wrote from Lagos