Sanusi Lamido Sanusi has eventually emerged the ninth Nigerian Governor of the Central Bank of Nigeria (CBN). This is sequel to the exit of Chukwuma Soludo, who, no doubt, will for long be remembered by players in the banking industry and equally by observers as ‘Mr. Consolidation’.
While we join stakeholders in the nation’s financial sector and many other interested observers to congratulate Sanusi Lamido Sanusi on his appointment as the helmsman over the country’s Central Bank, we will, as is customary with our proactive insight into the direction of Nigeria’s economy, not lose sight of the major challenges facing the new CBN leadership. Drawing the attention of the new CBN Governor to these challenges and highlighting certain policy options for us is a befitting congratulatory remark.
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One lesson painfully learnt from the incidence of the global financial crisis and the margin loan debacle which rocked Nigeria’s banking industry in recent times is that weak or non-existent coordinated regulation of the financial system can turn things upside down. With the increasing complexity of Nigeria’s financial system and the overlapping incidence of functions, risks and even portfolios of financial institutions there is an urgent need for a coordinated or consolidated approach to the supervision of financial institutions. Thus the new CBN leadership is expected to lead in what may eventually be the era of coordinated regulation to avoid systemic leakages that may endanger the health of the overall financial system.
In order to boost domestic and international confidence in the country’s banking sector, the CBN would have to pursue further transparency on corporate governance standards and best practices especially bordering on greater transparency in accounting disclosures. Though a few banks have voluntarily accepted to adopt the International Financial Reporting Standards(IFRS) in the production of their financial reports, it is however imperative that such international best practice that aligns our banks’ reporting format with that of other banks across international borders be made mandatory.
In the same vein, the close monitoring of banks’ activities should be further pursued with a view to ensuring that the banks critical role of financial intermediation is not done at the expense of vital sectors and activities in our economy. To further strengthen the banks and boost the confidence of domestic stakeholders, the CBN should skilfully and without fear or favour apply liquidity its liquidity management instruments and tools.
The management of the foreign exchange (forex) market and the exchange value of the naira has for quite sometime become a major challenge for the CBN. While it is true that the structure of the country’s economy plays a major role in determining the value of our naira, it is equally germane that the CBN applies all necessary instruments and policies that would help shore up the value of our currency and further sanitize the forex market. On monetary policy and inflation control, an area where the CBN in the last couple of years had made strides, the new leadership should further deploy all necessary tools in maintaining an effective single digit inflation rate.
The growing phenomenon of cross-country banking investments by Nigerian banks across Africa, though a welcome development – one that indicates growth, has equally thrown up regulatory challenges that should attract the attention of the new CBN leadership. With this multinational profile of Nigerian banks, it is certain that any inadequacy in regulation may trigger an anomalous process that may swallow the region. Also, the CBN being a leading central bank in the West African sub-region should properly lead in the direction of achieving the target monetary union by ensuring that governments in the region are made to achieve the necessary economic convergence prior to a monetary union.
Capacity building for its core staff especially those whose functions border on research and data analysis for economic management, financial system surveillance, monetary policy matters, and foreign exchange and reserve management is one area that should elicit the interest of the new CBN leadership as this will help determine the nature of preparedness of the institution towards overcoming the challenges facing it in a fast changing financial system.
Though the challenges awaiting the new CBN leadership are enormous yet they are not insurmountable if appropriate human capital, team work, resolute pursuit and a supportive government are at its disposal. Sanusi Lamido Sanusi, Bon Voyage, as the French would say.
