The Central Bank of Nigeria has come under intense scrutiny in the past six months. This is not just because of its controversial restrictions on foreign exchange transactions but also as a result of allegations that its leadership facilitated inappropriate massive cash withdrawals of foreign currencies from the Bank's coffers by the erstwhile National Security Adviser, Sambo Dasuki, close to the 2015 presidential elections.
These transactions are believed to have had the blessing of President Goodluck Jonathan.
PREMIUM TIMES believes these unfortunate controversies pose a serious threat to the lived reality of the independence of the Central Bank, which we believe is of vital importance to the maintenance of a sound economy.
The Nigerian economy is today in crisis and the Central Bank has suffered major reputational erosion while a strong economic team capable of revamping the economy is yet to emerge. Sooner, rather than later, the question of a clean competent Governor for the Central Bank is bound to be on the table. At that point, we should be clear on the basis for the selection of the next Governor of the CBN whenever the incumbent, Godwin Emefiele, leaves office.
We believe it is time to end the practice in recent years of appointing current or former chief executives of commercial banks as Governor of the CBN. We agree with the view expressed recently by Joseph Sanusi, former Governor of the CBN (1999-2004) that it is wrong for government to foist commercial bankers previously regulated by CBN deputy governors on the latter as their bosses, when such bankers have not imbibed the institutional culture of central banking and the CBN.
Mr. Sanusi advised the government to, in future, appoint the governor of the CBN from amongst the deputy governors of the Bank, while commercial bankers could only be brought into the leadership levels at CBN as deputy governors so that they can assimilate the institutional culture before aspiring to the ultimate leadership role.
Mr. Sanusi should know. He spent a long professional career in the CBN, rising to the position of Deputy Governor. In an era - different from today - in which the government still had significant shareholdings in commercial banks, and the CBN did not have autonomy but was still under the Federal Ministry of Finance, he was subsequently appointed the managing director of UBA and later First Bank before retiring.
President Olusegun Obasanjo named Mr. Sanusi Governor of the CBN after being sworn in as president in May 1999. Several previous governors of the Bank had earlier served as deputy governors: Aliyu Mai Bornu, Clement Isong, Abdulkadir Ahmed (the longest serving governor for nine years), and Ola Vincent.
We believe that serving or retired deputy governors should be appointed to lead the CBN in order to enhance its progressive growth and strengthening it as a key national institution on the basis of professionalism.
In most developed or emerging market economies, the global best practice is that central bank governors have previously served as deputies. Janet Yellen, Chairwoman of the United States Federal Reserve Bank, was previously Vice-Chair of the institution. Mark Carney, the Governor of the Bank of England, was previously Governor and Deputy Governor of the Bank of Canada. The present governors of the reserve or central banks of Ghana, Malaysia, Russia, South Africa and Turkey were all previously deputy governors, to name a few examples.
Moreover, in today's modern banking era in which banks are key private sector economic agents, potential conflicts of interest abound for any commercial banker appointed Governor of the CBN.
Central banking also is primarily a public policy responsibility. This is different from transaction-focused commercial or investment banking. Central banking as an occupation therefore calls for institutional knowledge, dispassionate stance and intellectual proclivity that few operators in our banking ecosystem possess.
With this in mind, PREMIUM TIMES believes the following five requirements ought to guide the President of the Federal Republic of Nigeria in appointing the next Governor of the CBN.
Integrity: In the Nigerian environment that has nurtured systemic corruption, and considering recent revelations and the Buhari administration's anti-corruption stance, a person appointed to lead the CBN should be a person of proven integrity.
It is not a valid defence for a CBN Governor to justify questionable decisions and actions by asserting "superior orders" from the President, when (a) the laws of Nigeria should always be observed, and (b) such an individual has the option of resigning his appointment if he or she feels under pressure to act against his professional conscience - to the extent such a conscience exists.
Professionalism: The Governor of the CBN must exhibit the highest standards of professionalism in his or her conduct and leadership as an example for the staff of the institution. This includes the desired attribute of political neutrality, as opposed to deploying the institution's processes to serve partisan agendas.
Relevant experience: A CBN Governor should have had prior experience in a central bank, an international monetary or financial institution, or an economic policy research institution.
Intellectual ability: The global best practice is that a central bank governor should have an advanced degree, preferably a Ph.D. degree or at least a Master's. On close observation, we found that virtually all the governors of the reserve banks of developed and emerging market economies in the examples cited above, amongst others, have this profile. Normally, the intellectual track record of a potential central bank governor is evidenced in books or other writings on topics relevant to the several mandates of central banking - macroeconomic issues and monetary policy, banking regulation and financial stability, development economics and finance, and political economy.
Central banks in every economy are also major centres of authoritative research. A central bank governor that lacks intellectual training and weight will not be able to provide thought leadership.
International exposure: In a globalized world, and with Nigeria's position as Africa's most populous country and its largest economy, our central bank should be headed by a man or woman with global exposure in terms of work experience, education, and professional associations and activities.
We must pay closer attention to the selection of the leadership of important national institutions such as the CBN, making them more merit-based, in order to avoid situations that diminish these institutions and us as a country in the eyes of the world.
We hope that President Buhari, whose prerogative it is to appoint the Governor of the CBN under Nigeria's laws, subject to the confirmation of the Senate, will bear this in mind in the appointment of the next head of the CBN should that event occur within the timeframe of his presidency.