KELECHI MGBOJI x-rays the chief banker of Africa’s most populous country who hazards an adventure to stabilise a stormy financial system.
Virulent critics of the apex bank regulator are quick to cite some of the worsening economic indices like recent devaluation of the naira, hike in interest rates to 13 per cent from 12 per cent, the raise in private sector cash reserve requirement (CRR) from 15 per cent to 17 per cent, and steady decline in foreign exchange reserves from $35.7 billion in April 2014 to about $28.9 billion mid-March, 2015 against his pledge on assumption of office on June 3, 2014.
Although CBN statutory provision guarantees the CBN governor of five years tenure before being reappointed or otherwise, at a time like this, it is important to put the issues and the man at the centre of it all in proper perspective.
Emefiele holds a B.Sc and an MBA in Finance both from the University of Nigeria Nsukka (UNN). Before commencing his banking career, he lectured Finance, Bank Management, and Insurance at the UNN and the University of Port Harcourt (UNIPORT), River State.
Also an alumnus of Stanford University, Harvard and Wharton Graduate School of Business where he took courses in Negotiation, Service Excellence, Critical Thinking, Leading Change and Strategy, the Delta State-born career banker had over 18 years of banking experience before his appointment as the CBN governor.
Until the National Assembly approved his appointment on February 20, 2014, Emefiele was the Group Managing Director of Zenith Bank Plc, a position he held from August 2010 after being on the bank’s management team from inception and held various management positions in the bank, including serving as the bank’s Executive Director in charge of Corporate Banking, Treasury, Financial Control and Strategic Planning.
He was directly responsible for all the group’s local subsidiaries, treasury and correspondent banking, and multilateral, conglomerates, and private banking. He also had responsibilities for direct supervision of majority of the bank’s branches in Lagos and Northern Nigeria.
With this wealth of experience that saw Zenith Bank strengthen its position as a leading financial institution in Africa, winning recognition and getting endorsement at home and abroad for giant strides in key performance areas like corporate governance, service delivery and deployment of cutting-edge information and communication technology (ICT), Emefiele’s appointment as CBN boss was greeted with applause.
When on June 3, 2014, he took over from Sanusi Lamido Sanusi, his vision was “Growing the economy …other than just a core mandate of ensuring that we have a stable environment”. Sanusi was removed in February, four months to the end of his term of office, on government charges of financial recklessness and impropriety.
During his screening at the National Assembly for the top banking job, Emefiele told the lawmakers that growing the economy other than just a core mandate of ensuring a stable financial environment would be his focus.
He also pledged to build on the positive policies of his immediate predecessor credited with bringing relative stability to the banking industry and putting it on a sound footing.
However, Emefiele dropped hints on elements of the reforms he hopes to pursue at the apex bank as the governor. Unveiling his vision and ideas during his maiden press briefing titled ‘My Agenda as CBN Governor’, Emefiele released his blueprint of “creating a central bank that is professional, a central bank that is apolitical, and people-focused; that spends its energies on building a resilient financial system that can serve the growth and development needs of Nigeria”.
Macro-economic stability and radical measures to drive down inflation and high interest rates, tackle unemployment, improve banking system supervision, efficient and secure payment system and lots more encapsulate Emefiele’s ideas of the new CBN that will maintain, not only exchange rate stability and financial system stability, but provide holistic approach to growing the economy.
He stated: “The core of my vision is to effectively manage potential threats to financial stability, and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness. In this regard, we hope to anchor on two main pillars: managing factors that create liquidity shocks and zero tolerance on practices that undermine the health of financial institutions.”
Emefiele hopes to create a people-centred model central bank not only “delivering price and financial system stability but also promoting sustainable economic development”.
“This vision draws inspiration from our understanding of the multiple mandate of the bank to pursue both price and financial system stability as well as provide complementary developmental functions by creating an environment for Nigerians to live better and more fulfilled lives,” Emefiele stated.
In his argument, price stability can rarely be adjudged a goal in itself, except cast against the ultimate objective of improvement in the quality of life. For him, therefore, reasonably stable prices provide a catalyst for rational consumption and investment decisions and for orderly economic progress.
“We must start with championing policies that promote the sustainability of our hard-earned macroeconomic stability,” the CBN boss had stated.
His monetary policy disposition is such that will pursue gradual reduction in interest rates, believing that such a reduction in deposit rates would encourage investment attitudes in savers, while a reduction in lending rates would make credit cheaper for potential investors.
According to him, to enhance financial access and reduce borrower cost of credit, CBN would pursue policies targeted at making Nigeria’s T-bill rates more comparable with other emerging markets and by extension, pursue a reduction in both deposit and lending rates.
Mindful of the huge systemic risk posed by repayment default by bank borrowers, Emefiele has come up with some novel ideas to enhance the operation of credit reference bureaux, establish secured transaction and national collateral registry.
He also plans to strengthen the sanction system to include: blacklisting of companies/individuals that have been found to be serial loan defaulters. Indeed, these names would be circulated in the banking system to guide banks in identifying bad borrowers and denying them access to credits in the banking system; implement stringent loan provisions and penalties for banks that lends to blacklisted persons and companies; intensify collaboration with relevant agencies, and in particular, the justice ministry, to strengthen bank’s ability to enforce contracts and recover matured debts.
Renewing of vigorous advocacy for the creation of commercial courts for quick adjudications on loan and related offences, and establishment of a national credit scoring system that will improve access to information on borrowers and assist to make good credit decisions are among his goals.
On banking supervision, his idea is to work towards a better risk-based supervision framework. According to him, this will be achieved by training sector-specific bank examiners. He had noted, for instance, that while the banking industry has excessive concentration in oil and gas loans, the CBN does not have the expertise to analyse and monitor the risks inherent in these credits.
In the light of the above, Emefiele believes that specialisation would help reduce an increasing reliance on outside consultants, ensure that confidential supervisory information are protected and guarantee a staff depth that can generate robust in-house data to help senior CBN officials prepare adequately for public engagements.
Barely one year after he rolled out his CBN blueprint, some of his brilliant and lofty ideas have been kick-started to give bite to the lofty objectives, and it is hoped that more are going to be put into practice as he steps into the second year of tenure.