Connect with us

Strictly Personal

From Experiment To Experience: Why the Nigerian Central Bank Needs its Traditional Navigators Back, By Chibuikem Ugo-Ngadi

Published

on

Commerce Takes the Central Helm

If you’re tuning into this, you’re likely aware of Yemi Cardoso becoming the new chief of the Central Bank of Nigeria (CBN). His appointment, following Godwin Emefiele’s exit, is notable for another reason: both are commercial bankers, and their leadership comes at a pivotal moment for our economy.

For those who’ve journeyed with my earlier piece, ‘A Call To Action,’ I won’t delve into the detailed statistics again. However, to give you the big picture, our economy is on shaky ground. The naira’s value keeps dwindling, now taking over N1000 to match a single USD. The task of steadying this precarious situation leans heavily on the decisions and actions of the CBN and its helm.

While the trend of appointing commercial bankers to lead the CBN brings forth concerns, it’s not a question of their competency in the banking sector. They excel there. However, piloting the Central Bank has its own set of challenges distinct from commercial banking. The differences and intricacies of central banking are profound, and that’s where my reservations come into play.

Different Worlds

At first glance, central banks and commercial banks might seem to operate within the same realm – the financial sector. However, their mandates, operational scopes, risk management practices, and utilised tools delineate two distinct worlds.

Mandate:
Central banks serve a broader public interest. Their primary objective is maintaining economic stability for the nation. This means they work to control inflation and ensure steady economic growth. On the other hand, commercial banks are primarily business entities. Their driving force? Profit. They focus on attracting customers, granting loans, and providing other financial services to ensure their bottom line grows.

Scope of Operation:
Central banks have a wide lens, monitoring the entire economy. They pay close attention to various economic indicators and global trends to make informed decisions that impact the nation. Commercial banks, however, operate on a more individualized scale. They cater directly to their customers, whether individuals or businesses, offering services that respond to specific financial needs.

Risk Management:
When central banks think of risks, they’re looking at the bigger picture. They’re concerned about large-scale economic threats that can affect the whole country. Commercial banks, in contrast, handle risks that directly impact their day-to-day operations. This includes managing potential loan defaults or keeping up with shifts in the market.

Tools and Mechanisms:
Central banks use tools meant for guiding the entire economy. They employ methods like adjusting the amount of money in banks or setting key interest rates to influence economic conditions. Commercial banks, however, use their tools in a more direct manner. They decide on loan interest rates, offer deposit schemes, and introduce new financial products to attract and serve their customers better.

Navigating Two Worlds: Profit vs. Policy

Merging the distinct worlds of central and commercial banks requires careful consideration. While central banks are dedicated to ensuring national welfare and economic stability, commercial banks have profit as their primary goal. As commercial banking leaders transition into central banking roles, there’s a vital concern: could they inadvertently favour their previous domain?

This is more than just an economic dilemma—it directly influences the trust that the public places in these pillars of finance. Central banks are guardians of our financial health, setting rules to foster a robust economy. In contrast, the profit-driven nature of commercial banks often sees them navigating these rules inventively.
Furthermore, the importance of relationships in the commercial sector can’t be understated, yet central banking demands unwavering impartiality. Introducing a leader from the commercial world might blur the lines of decision-making, raising valid concerns about whether the broader economic interests remain the focal point.

Bypassing Expertise

In the intricate dance of global finance, the choreography of central banking leadership remains crucial. We’ve explored how central and commercial banks dance to different beats. Now, let’s shine a spotlight on Nigeria’s recent break from tradition.

Over the recent years, Nigeria has embarked on what can be termed a ‘recruitment experiment’. The rhythm shifted recently as the trend favoured promoting commercial bankers directly into the central bank’s top role, a distinct departure from traditional appointments. The result: Nigeria’s monetary choreography seems to have missed some crucial steps, leading to disruptions in our macroeconomic performance.

One can’t help but think this isn’t just a twist of fate. While the federal government’s fiscal choreography has certainly added complexity to the central bank’s performance, decisions like the FX Swaps, Naira Redesign Rollout, and Ways and Means Lending resonate as tunes unfamiliar to the seasoned central banking ear. It’s like a skilled ballerina suddenly trying to lead a breakdancing performance.

“Those that are doing it, do they have two heads?” as often quipped in Nigerian households. Globally, it’s a rarity to see a central bank led by someone without deep roots in central banking. While commercial bankers in other countries do occasionally don the central banker’s hat, they usually do so after an extensive apprenticeship in central bank policymaking.

Consider Jerome Powell of the US Fed: his journey from corporate banking and legal practice to the helm of the Fed spanned several years, allowing him to immerse in the central banking culture. Or Andrew Bailey of the Bank of England, whose decades-long waltz within the bank’s corridors prepared him for the top job. Even in emerging economies, leaders like Pan Gongsheng in China and Shakitanka Das in India have risen after extensive experience in their nation’s policy tapestries.

So, while commercial banking insights might offer some flair, nothing replaces the deep, nuanced expertise of a career spent in central banking. As the world’s financial ballet continues, it’s time Nigeria reconsiders its lead dancer.

The Pillars of Traditional Central Banking

Grounded Knowledge in Monetary Dynamics:
Central banking goes beyond mere figures. It’s a complex interplay of strategies, forecasts, and responses. Those who’ve spent their careers in central banking have a hands-on understanding of these complexities. They’ve been in the trenches, navigating global economic shifts, balancing inflation, and setting interest rates. This isn’t just textbook knowledge. They’ve witnessed how policy decisions play out in the real world, equipping them with insights that are tough to replicate.

Objectivity at the Helm:
In the vast world of finance, varying sectors sometimes have clashing goals. Career central bankers stand out with their honed objectivity. Their journey within the policy-centric environment of a central bank ensures they approach challenges without any tilt towards commercial banking influences. This unbiased stance guarantees decisions made prioritize the nation’s overall economic well-being.

Steady Policy Hand:
A stable economy thrives on clarity and predictability. Enterprises, investors, and the general public all benefit when there’s a consistent policy direction. Central bankers, with their repository of past experiences and policy impacts, offer this steady hand. Their decisions aren’t hasty but are rooted in long-term objectives, reducing abrupt policy changes that can disrupt markets.

Built-in Networking:
Years in the central banking sphere mean they’ve forged essential ties. They’ve worked side-by-side with diverse teams, partnered with governmental bodies, and conversed with international peers. These connections are invaluable. When a new policy is on the horizon or when feedback is needed, they have a ready network to tap into, ensuring efficient and informed decision-making.

Charting the Right Course

As Nigeria stands at the precipice of an unparalleled macroeconomic tempest, the actions of the Central Bank in the coming months will either anchor us firmly or leave us adrift. While the allure of shortcuts in policymaking might seem tempting, it’s crucial to remember that the Central Bank isn’t just another institution; it’s our nation’s flagbearer in the global financial arena. It’s our voice, our representative, asserting our place on the world stage.
The Central Bank should be our sanctuary from the pitfalls that often plague Nigerian policymaking. It should be a beacon of steadiness amidst the chaos, guiding our economic ship through tumultuous waters with an experienced hand at the helm.

To mitigate the challenges ahead, it’s imperative we revert to the tried-and-true: placing the keys of the Central Bank in the hands of those who know its every corner, its every nuance. For the health of our nation, the vibrancy of our economy, and the future of our people, it’s high time we return the Central Bank to its rightful stewards: the career central bankers.

Strictly Personal

If I were put in charge of a $15m African kitty, I’d first deworm children, By Charles Onyango-Obbo

Published

on

One of my favourite stories on pan-African action (or in this case inaction), one I will never tire of repeating, comes from 2002, when the discredited Organisation of African Unity, was rebranded into an ambitious, new African Union (AU).

There were many big hitters in African statehouses then. Talking of those who have had the grace to step down or leave honourably after electoral or political defeat, or have departed, in Nigeria we had Olusegun Obasanjo, a force of nature. Cerebral and studious Thabo Mbeki was chief in South Africa. In Ethiopia, the brass-knuckled and searingly intellectual Meles Zenawi ruled the roost.

In Tanzania, there was the personable and thoughtful Ben Mkapa. In Botswana, there was Festus Mogae, a leader who had a way of bringing out the best in people. In Senegal, we had Abdoulaye Wade, fresh in office, and years before he went rogue.

And those are just a few.

This club of men (there were no women at the high table) brought forth the AU. At that time, there was a lot of frustration about the portrayal of Africa in international media, we decided we must “tell our own story” to the world. The AU, therefore, decided to boost the struggling Pan-African New Agency (Pana) network.

The members were asked to write cheques or pledges for it. There were millions of dollars offered by the South Africans and Nigerians of our continent. Then, as at every party, a disruptive guest made a play. Rwanda, then still roiled by the genocide against the Tutsi of 1994, offered the least money; a few tens of thousand dollars.

There were embarrassed looks all around. Some probably thought it should just have kept is mouth shut, and not made a fool of itself with its ka-money. Kigali sat unflustered. Maybe it knew something the rest didn’t.

The meeting ended, and everyone went their merry way. Pana sat and waited for the cheques to come. The big talkers didn’t walk the talk. Hardly any came, and in the sums that were pledged. Except one. The cheque from Rwanda came in the exact amount it was promised. The smallest pledge became Pana’s biggest payday.

The joke is that it was used to pay terminal benefits for Pana staff. They would have gone home empty-pocketed.

We revive this peculiarly African moment (many a deep-pocketed African will happily contribute $300 to your wedding but not 50 cents to build a school or set up a scholarship fund), to campaign for the creation of small and beautiful African things.

It was brought on by the announcement by South Korea that it had joined the African Summit bandwagon, and is shortly hosting a South Korea-Africa Summit — like the US, China, the UK, the European Union, Japan, India, Russia, Italy, Saudi Arabia, and Turkey do.

Apart from the AU, whose summits are in danger of turning into dubious talk shops, outside of limited regional bloc events, there is no Pan-African platform that brings the continent’s leaders together.

The AU summits are not a solutions enterprise, partly because over 60 percent of its budget is funded by non-African development partners. You can’t seriously say you are going to set up a $500 million African climate crisis fund in the hope that some Europeans will put up the money.

It’s possible to reprise the Rwanda-Pana pledge episode; a convention of African leaders and important institutions on the continent for a “Small Initiatives, Big Impact Compact”. It would be a barebones summit. In the first one, leaders would come to kickstart it by investing seed money.

The rule would be that no country would be allowed to put up more than $100,000 — far, far less than it costs some presidents and their delegations to attend one day of an AU summit.

There would also be no pledges. Everyone would come with a certified cheque that cannot bounce, or hard cash in a bag. After all, some of our leaders are no strangers to travelling around with sacks from which they hand out cash like they were sweets.

If 54 states (we will exempt the Sahrawi Arab Democratic Republic for special circumstances) contribute $75,000 each, that is a good $4.05 million.

If just 200 of the bigger pan-African institutions such as the African Development Bank, Afrexim Bank, the giant companies such as MTN, Safaricom, East African Breweries, Nedbank, De Beers, Dangote, Orascom in Egypt, Attijariwafa Bank in Morocco, to name a few, each ponied up $75,000 each, that’s a cool $15 million just for the first year alone.

There will be a lot of imagination necessary to create magic out of it all, no doubt, but if I were asked to manage the project, I would immediately offer one small, beautiful thing to do.

After putting aside money for reasonable expenses to be paid at the end (a man has to eat) — which would be posted on a public website like all other expenditures — I would set out on a programme to get the most needy African children a dose of deworming tablets. Would do it all over for a couple of years.

Impact? Big. I read that people who received two to three additional years of childhood deworming experience an increase of 14 percent in consumption expenditure, 13 percent in hourly earnings, and nine percent in non-agricultural work hours.

At the next convention, I would report back, and possibly dazzle with the names, and photographs, of all the children who got the treatment. Other than the shopping opportunity, the US-Africa Summit would have nothing on that.

Charles Onyango-Obbo is a journalist, writer, and curator of the “Wall of Great Africans”. X@cobbo3

Continue Reading

Strictly Personal

AU shouldn’t look on as outsiders treat Africa like a widow’s house, By Joachim Buwembo

Published

on

There is no shortage of news from the UK, a major former colonial master in Africa, over whose former empire the sun reputedly never set. We hope and pray that besides watching the Premier League, the managers of our economies are also monitoring the re-nationalisation of British Railways (BR).

 

Three decades after BR was privatised in the early to mid-nineties — around the season when Africa was hit by the privatisation fashion — there is emerging consensus by both conservative and liberal parties that it is time the major public transport system reverts to state management.

 

Yes, there are major services that should be rendered by the state, and the public must not be abandoned to the vagaries of purely profit-motivated capitalism. It is not enough to only argue that government is not good at doing business, because some business is government business.

 

Since we copied many of our systems from the British — including wigs for judges — we may as well copy the humility to accept if certain fashions don’t work.

 

Another piece of news from the UK, besides football, was of this conservative MP Tim Loughton, who caused a stir by getting summarily deported from Djibouti and claiming the small African country was just doing China’s bidding because he recently rubbed Beijing the wrong way.

 

China has dismissed the accusation as baseless, and Africa still respects China for not meddling in its politics, even as it negotiates economic partnerships. China generously co-funded the construction of Djibouti’s super modern multipurpose port.

 

What can African leaders learn from the Loughton Djibouti kerfuffle? The race to think for and manage Africa by outsiders is still on and attracting new players.

 

While China has described the Loughton accusation as lies, it shows that the accusing (and presumably informed) Britons suspect other powerful countries to be on a quest to influence African thinking and actions.

 

And while the new bidders for Africa’s resources are on the increase including Russia, the US, Middle Eastern newly rich states, and India, even declining powers like France, which is losing ground in West Africa, could be looking for weaker states to gain a new foothold.

 

My Ugandan people describe such a situation as treating a community like “like a widow’s house,” because the poor, defenceless woman is susceptible to having her door kicked open by any local bully. Yes, these small and weak countries are not insignificant and offer fertile ground for the indirect re-colonisation of the continent.

 

Djibouti, for example, may be small —at only 23,000square kilometres, with a population of one million doing hardly any farming, thus relying on imports for most of its food — but it is so strategically located that the African Union should look at it as precious territory that must be protected from external political influences.

 

It commands the southern entrance into the Red Sea, thus linking Africa to the Middle East. So if several foreign powers have military bases in Djibouti, why shouldn’t the AU, with its growing “peace kitty,” now be worth some hundreds of millions of dollars?

 

At a bilateral level, Ethiopia and Djibouti are doing impressively well in developing infrastructure such as the railway link, a whole 750 kilometres of it electrified. The AU should be looking at more such projects linking up the whole continent to increase internal trade with the continental market, the fastest growing in the world.

 

And, while at it, the AU should be resolutely pushing out fossil-fuel-based transportation the way Ethiopia is doing, without even making much noise about it. Ethiopia can be quite resolute in conceiving and implementing projects, and surely the AU, being headquartered in Addis Ababa, should be taking a leaf rather than looking on as external interests treat the continent like a Ugandan widow’s house.

 

Buwembo is a Kampala-based journalist. E-mail:buwembo@gmail.com

Continue Reading

EDITOR’S PICK

Metro3 hours ago

Nigeria kicks as South African police torture citizen to death

The Nigerian Union South Africa (NUSA) has condemned the killing of another of its citizens, Prince Muoka Ebuka, who was...

Politics19 hours ago

Nigeria 2027: Opposition party chieftain Atiku vows to support Obi if …

In Nigeria, the 2023 presidential candidate of the Peoples Democratic Party, Atiku Abubakar, has hinted that he would support the...

VenturesNow20 hours ago

Nigeria: Court insists Binance executive can face trial on behalf of firm

In an ongoing tax evasion case, a Nigerian court decided on Friday that Binance executive, Tigran Gambaryan, may go to...

Tech22 hours ago

How Nigerian online connection hub Workjeje helps with access to quality service providers

A Nigerian online connection hub, Workjeje, has revealed how it is connecting individuals and corporate bodies to quality service providers...

Sports22 hours ago

Egyptian midfielder Elneny announces departure from Arsenal after eight years

Egypt and Arsenal midfielder, Mohamed Elneny, has announced his departure from the club at the end of this season after...

Culture23 hours ago

Nigerian moviemakers Funke Akindele, Mo Abudu, Jade Osiberu named in Hollywood Reporter’s Powerful Women in Film list

Foremost Nigerian moviemakers, Funke Akindele, Mo Abudu, and Jade Osiberu have been named in the Hollywood Reporter’s list of the...

Politics23 hours ago

Senegal: PM Sonko condemns French military bases on territory

Senegal’s Prime Minister, Ousmane Sonko, in a detailed speech on Friday, touched a range of national issues, including the euro-backed...

Metro1 day ago

Tinubu’s ‘Renewed Hope Agenda’ repositioning Nigeria as global investment hub— VP Shettima

Vice President Kashim Shettima believes the “Renewed Hope Agenda” of the President Bola Tinubu administration is gradually transformating Nigeria into...

Tech2 days ago

Dubai’s cybersecurity firm CyberKnight sets up business in Africa

Dubai-based cybersecurity company, CyberKnight, has expanded its business into Africa by opening an office in Egypt. CyberKnight, a cybersecurity advisory...

VenturesNow2 days ago

Nigerian govt denies reports it plans to borrow pension fund for infrastructure

The Nigerian government has denied reports that it plans to borrow the N20tn pension fund to finance infrastructural projects. In...

Trending