Nigeria is about to have a new central bank governor. On September 15th, President Bola Tinubu nominated Olayemi Michael Cardoso to succeed Godwin Emefiele, who had been in office since June 2014. Emefiele’s tenure halted in June when the President suspended him, and Folashodun Shonubi took over as a placeholder.
The Senate will have to ratify Cardoso’s appointment. Four deputy governors also join the leadership of the Central Bank, pending Senate approval: Mrs. Emem Nnana Usoro, Mr. Muhammad Sani Abdullahi Dattijo, Mr. Philip Ikeazor and Dr. Bala M. Bello.
Cardoso’s resume includes being the former chairman of Citibank Nigeria with over 30 years of experience, sitting on the boards of Nigerian subsidiaries of Texaco and Chevron and chairing the EFInA committee. However, there are concerns over possible partisanship. Cardoso has an over two-decade-long relationship with Tinubu. In 1999, Tinubu’s first term as Lagos state’s governor, Cardoso became Commissioner for Budget and Economic Planning. However, he did not complete that term because he won the Michael Romer Memorial Scholarship. Also, in 2015, Cardoso was one of three names considered to become Vice President to Muhammadu Buhari.
One reason for concerns about Cardoso being partisan is that his predecessor showed the same trait. In 2022, Godwin Emefiele reportedly made a subtle entry into the presidential race under the ruling party, APC. It took a court order to stop that ambition. That is why when many of the policies Emefiele pursued in his time as governor seemed to have the nod of President Buhari, it called the apex bank’s independence into question.
Whether or not Cardoso has presidential ambitions, being partisan can influence his decision-making in such a sensitive office. For instance, the central bank printed N23.72 trillion to lend to the government over the last seven years, a 2900% jump. These “ways and means” loans have become a significant addition to Nigeria’s towering debt portfolio. In January, former President Buhari proposed to turn the debt into a 40-year bond with a 9% interest rate rather than rolling it at the CBN’s 19.5%. More notably, the CBN was lending more money than allowed by its own laws.
However, partisan or not, Cardoso will be taking on a heavy job. His first major test will come in the forthcoming Monetary Policy Committee (MPC) meeting, where he will have to decide on Nigeria’s interest rates. The country has raised interest rates eight consecutive times to tame rising inflation rates. But inflation has been stubborn and is now at an 18-year-high.
The new CBN governor will also need to make the naira stable in the forex market. His predecessor has performed poorly in this area, as the naira fell by over 415% against the dollar in his tenure. The gap between official and black market rates also widened from 10% to over 80% before narrowing to 22%. The decision to discontinue a fixed exchange rate system helped reduce the market arbitrage but also tanked the naira at the official market.
Successfully reviving the naira will be a big chip on the new governor’s shoulder. But it won’t come easy. Demand for dollars is extremely high while supply keeps shrinking. These requests come from manufacturers and importers who buy raw material inputs from abroad, parents who pay their children’s tuition fees abroad, Nigerians who pay medical bills abroad, travellers who source Business Travel Allowances (BTAs) and Personal Travel Allowances (PTAs), etc. But because dollars are in short supply, the central bank has over $10 billion in forex backlogs. Two weeks ago, the central bank promised to clear these backlogs in two weeks. Now that this timeline is up, nothing has changed. Nigeria’s forex reserves also shrunk severely under the previous governor.
This forex debacle made the Financial Times Stock Exchange (FTSE) downgrade Nigeria’s rating to an “unclassified” market. And because clearing these backlogs is crucial to stabilising the naira and attracting investors, it will be on the new governor’s front burner.
The CBN governor will also have to devise improvements to several projects by the former administration. For instance, the e-naira, which Emefiele launched in October 2021, has very little adoption. Also, the central bank’s bid to tame inflation has made it get involved in financing food production. But this program hasn’t helped much in boosting food production.
Arguably, the toughest part of his job will be redefining boundaries the previous governor didn’t keep. That involves regaining complete independence and refocusing on its primary job of leading monetary policy.