The Governor, of the Central Bank of Nigeria, CBN, Mr. Olayemi Cardoso, has listed the critical challenges the CBN is bedeviled with at this time.
The CBN Governor in a presentation recently said the challenges are deep-rooted and need in-depth review by the new Central Bank governing board to put the CBN on a healthy trajectory.
In a presentation on the Preliminary Assessment of Challenges Facing The Central Bank Of Nigeria, Mr. Cardoso, said the CBN Board led by him was directed by President Bola Ahmed Tinubu to “clean up” the CBN. This is even as the special investigator into the affairs of the CBN appointed by the CBN is still looking at the CBN books
He said now that he has outlined the most cortical challenges of the CBN, he will introduce high-level proposals to address the reformation challenges.
Current Critical Challenges Faced by the CBN
He said in assessing challenges currently facing the Central Bank of Nigeria, preliminary questions are being raised on addressing these challenges. The challenges Include;
- Failure in corporate governance in CBN:
- How will issues of governance be addressed?
- Diminished institutional autonomy:
- How can public and financial systems’ stakeholder confidence be restored in the autonomy and integrity of CBN?
- Need to refocus CBN back to core functions:
- What needs to be in place to revert to evidence-based Monetary policies?
- Discontinuation of unorthodox Monetary policies and Foreign Currency management?
- Unorthodox use of Ways and Means spending:
- What controls can CBN develop to enforce statutory limits in the use of Ways and Means of financing public sector deficit?
- Backlog of FX demand:
- How much of the backlog is real versus speculative/ hoarding?
- Are there creative financing options for clearing the short to medium-term backlog?
- Lack of clarity in fiscal and monetary relationships – where are the delineations, and what should be the limits in CBN’s fiscal side interventions?
- Inflation and price stability:
- What are the causes, and what is CBN’s proposed response to address inflation and price stability issues?
- Access to FX market and FX price discovery:
- What mechanisms exist to address FX rate unification under a willing buyer and willing seller arrangement?
- What should be the role of the Central Bank in the FX market?
- Is there a need for interest rate realignment to money supply, inflation, and market realities?
- Current Financial System Stability:
- What is the current state of the financial system?
- Are CBN surveillance frameworks being updated proactively to track the expanding use of electronic payment systems by Fintech and Telcos?
He noted that these problem statements need in-depth review by the new Central Bank leadership team to determine what mechanisms are currently working, what can be tweaked or dispensed with and what new tools need to be introduced.
How a refocused CBN can support economic growth.
The CBN Governor further indicated that “the economic policy proposals of the Administration identify a set of fiscal reforms and growth targets that will achieve $1.0 TN GDP within eight years.”
“In reviewing selected BRICS and MINT countries, with large populations and similar developmental characteristics as Nigeria, it is interesting to identify macro-economic indices that point to Nigeria’s economic trajectory, given the faithful implementation of the proposed economic reforms. In economies bigger than $1.0TN, these indicators include moderate inflation, sizable foreign reserves, and the capacity to quickly rebound from a cyclical economic downturn” he stated.
Advisory role of CBN
Mr. Cardoso said the CBN must refocus on its core mandates rather than heterodox policies.
“Much has been made of past CBN forays into development financing, such that the lines between monetary policy and fiscal intervention have blurred. In refocusing the CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth” he stated.
He said these advisory roles could include, for instance: Act as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy, facilitating new regulatory frameworks to unlock dormant capital in land and property holdings, accelerating access to consumer credit and expand financial inclusion to the masses, de-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies. These verticals have huge demand patterns, with the potential for high local inputs and value retention, and can be the basis for rapid industrialization and exercise CBN’s convening power to bring key multilateral and international stakeholder participation in government and private sector initiatives.
Be Patient with the CBN
He called for patience as the reforms crystallized. “It must be emphasised that CBN does not have a magic wand that can be waved at the current economic challenges. The problems facing the bank are large and complex.”
“However, with focused leadership and sustained reforms, it is expected that over time, the country will see gains open economic spaces, attract new investments, create employment, and give our hardworking and talented compatriots opportunity for a more prosperous future” he stated.