In countries with significant financial and economic muscle, even rumour about their heads of central banks would send jitters and shivers to their financial markets and keep analysts, economists and commentators busy for the next couple of weeks. The affirmation, last week, by Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria (CBN), that he would not seek a renewal of his tenure when it expires in April 2014 is bound to be noticed by players in, as well as watchers of, the Nigerian financial markets.
Sanusi who became the CBN governor in 2009 has been everything but idle. Like Colossus, his stride spans the nation’s banking sector; and the effects of his policies and leadership have brought a relative calm and stability to it. He has assisted in restoring some elements of confidence, accountability and sanity in the banking sector over the recklessness and mismanagement that prevailed prior to his coming. But some of his policies, actions and utterances have been unpopular and he has been severely criticised for them.
As was reported, Sanusi never intended to stay beyond a single term, anyway. He will be missed by many of his compatriots who would have loved to see him hang around much longer to defend the ownership of his policies. If his policies need more time to consolidate, and for their benefits to become more penetrating, his hands must be there to steer, guide and correct them to avoid a reversal that would squander all their gains. Sanusi’s policies are his legacies and, in my opinion, he should be interested in seeing them through.
I am not implying here in any manner that a successor may not necessarily assume ownership of a predecessor’s policies, but there is always that likelihood that they could be jettisoned and new ones implanted. It is known that Sanusi favours a strong naira over lower interest rate for looser liquidity. A successor with empathy towards, or one who is a protégé of, the business community may impose credit expansion at the expense of a strong naira.
The current high interest rate and tight liquidity regimes, which Sanusi prefers, help to temper inflation. Others may want a little more inflation to rev up the economy and boost employment. No one can say what side Sanusi’s successor will take. For now, investors are remaining in the realms of what is known. They know that high interest rate will persist until Sanusi’s departure. Thus they will have their investments tailored to meet such current exigencies. The flow of new capital for both medium- and long-term investments is likely to remain frozen until the direction of monetary policy is again in plain view.
The worry is the policy inconsistency or, at times, failure arising from leadership changes that ensue. Both investors’ and consumers’ decision-making is going to be affected, which in turn would affect the tempo of economic activities. Five years may look a long time for policies to take hold and their benefits crystallised, some policies need more time and fine-tuning. If it turns out that some of Sanusi’s policies will need more time to yield desired and optimum results, then Sanusi’s departure could place those policies at a risk of failing or terminating.
The complaint often heard is about Sanusi’s monetary policy. Some believe that the only plausible reason unemployment is stubbornly high is probably because Sanusi’s monetary policy is too tight. Monetary policy usually aims to achieve two economic objectives: keep inflation low and unemployment low. A difficult balance it may seem, yet it is achievable. Sanusi seems to be getting one part of that equation right; that is, maintaining relatively low inflation. The other part, maintaining a low unemployment rate, seems to be where his problem lies. If Sanusi’s monetary policy is not curbing high unemployment as expected, then maybe there are other extraneous factors that are being overlooked.
Many policies work well in conjunction with others. If all complementary policies required to boost employment are working well in tandem with the tight monetary policy, there is bound to be a different and more positive result. For example, uninterrupted power supply to the country’s productive sector has a potential of raising employment beyond anyone’s imagination.
Since policies are not made in a vacuum, they still have to conform with the nation’s overall priorities. Sometimes, the nation faces shifting priorities. If today’s thoughts are in favour of a monetary policy that is less tight, that’s all well and good. Sanusi’s successor can go ahead and implement such but should be wary of making money too easy through unreasonably low interest rate and the return of indiscretion by lending institutions. We can only hope that such policy reversal will truly solve the nagging unemployment problem.
Sanusi will be fine. His experience will be useful in other parts of national endeavour. Certainly, he is not yet done with contributing to the affairs of the country. When in 2014 he leaves office, we will be there to wish him all the best in whatever he may choose to do next.
EGHE ISIAKA GUOBADIA
Guobadia, economist, banker, who was special assistant to former finance minister Chu Okongwu, now works in New York.
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