The new Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has on Thursday presented his 10-point agenda.
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Godwin
Emefiele (M) formally assumes office as governor, Central Bank of
Nigeria on Tuesday, June 3, 2014 at the Bank's Headquarters in Abuja.
Credit: CBN
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Emefiele said he was committed to create
"a central
bank that is professional, a central bank that is apolitical, and
people-focused. A Central Bank that spends its energies on building a
resilient financial system that can serve the growth and development
needs of out beloved country, Nigeria."
Before introducing
his agenda, Emefiele praised the work that the previous governor did to
achieve financial system stability, low inflation, an effective payment
system, and exchange rate stability.
Monetary policy
Emefiele
said the CBN would pursue a gradual reduction in interest rates, an
apparent shift away from his predecessor’s hawkish monetary policy that
was credited with bringing inflation down to single digits. Interest
rates have been stuck at 12 percent since late 2011, and several
measures have been made to tighten liquidity, which has been brought
inflation down but made businesses complain that lending rates are too
punitive.
"Such high rates create preserved incentives for
commercial banks to simply buy virtually risk-free government bonds
rather than lend to real sector," Emefiele said.
He said that
while reduction in deposit rates would encourage investment attitude in
savers, a reduction in lending rates would make credit cheaper for
potential investors.
Emefiele also said that the apex bank would
begin to include unemployment rates "as one of the key variables
considered for its monetary policy decisions". He added that the CBN
would design its monetary policy taking into account the potential
fiscal expansion in the run-up to the 2015 elections.
Exchange rate policy
The
CBN chief said the bank would continue to maintain exchange rate
stability in view of the high import dependent nature of the economy.
Emefiele cautioned that a systematic depreciation of the naira may
translate to considerable inflationary pressure with negative effect on
macro-economic stability.
"Therefore, under my leadership, the
bank will continue to focus on maintaining exchange rate stability and
preserve the value of the domestic currency."
"We will
sustain the managed float regime in the management of the exchange rate
as this will allow the bank to intervene when necessary to offset
pressure on the exchange rate."
Economic development and employment
Emefiele
said that the Central Bank would no longer focus solely on monetary and
price stability. Citing the experience of Japan, the US and France,
the governor said that the CBN would start supporting selected economic
sectors using "direct methods" of intervention to support the overall
performance of the economy as well as boost employment.
"With
an annual additional 1.8 million Nigerians to the labour pool, the
Central Bank cannot afford to sit idly by and concentrate on price and
monetary stability.
"Additional measures would be
required towards identifying productive sectors of the economy and
channeling credit towards these sectors, while imposing proper
monitoring and performance measures in order to ensure that the goals of
increased employment and poverty reduction are attained."
Stability of financial system
Under
the leadership of Emefiele, the CBN will continue to sustain the
effective management of the potential threats and avoid systemic crisis.
"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."
To achieve the goal, the bank would work with
stakeholders to aggressively shore up the reserve, and would engage
both the fiscal and political authorities, the governor said.
Agenda in brief
- Pursue a gradual reduction in key interests rates, and include the unemployment rate in monetary decisions;
- Maintain exchange rate stability and bolster foreign exchange reserves;
- Strengthen risk-bases supervision mechanism of Nigerian banks to ensure banking system stability;
- Build sector-specific expertise in banking supervision to reflect loan concentration of the banking industry;
- In
a view of inadequate trigger thresholds from a macro-prudential
perspectives, consider and announce measures to effectively address this
anomaly;
- Abolish fees associated with limits on deposits;
- Introduce
a variety of financial instruments to boost specific enterprise areas
in agriculture, manufacturing, health, and oil and gas;
- Establish
Secured Transaction an National Collateral Registry as well as
establish a National Credit Scoring System that will improve access to
information on borrowers and assist lenders to make good credit
decisions;
- Build resilient financial infrastructure that serves the needs of the lower end of the market;
- Renew advocacy for the creation of commercial courts for quick adjudications on loan and related offenses.
You can read the full address of the new governor
here.
It will also be recalled that President Goodluck Jonathan
suspended previous governor of the CBN, Sanusi Lamido Sanusi, over 'financial recklessness', a claim Sanusi
denies. The ex-governor insisted that he was removed
for highlighting alleged widespread corruption in the oil sector and
appealed his suspension in court.
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