Politics
New challenges for Nigeria’s new central bank chief, Godwin Emefiele
Nigeria’s new central bank chief Godwin Emefiele took office on Tuesday with a mandate to ward off pressure to devalue Nigeria’s currency and manage rising inflation. With government spending also expected to rise ahead of next year’s presidential election, the new governor will have no room to let up on monetary policy and will have to raise interest rates at some point over the next year, analysts say.
Emefiele’s appointment follows the departure of governor Lamido Sanusi, a vocal critic of the government’s record on tackling corruption, who was suspended by President Goodluck Jonathan in February. The suspension was announced in February as Sanusi, who accused the Nigerian National Petroleum Corporation (NNPC) of stealing $20 billion from state funds, was providing evidence to a parliamentary committee.
The accusation put the Nigerian government on the spot in its efforts against corruption and his removal has raised concerns about the bank’s independence. Emefiele will be closely watched by markets fearful of government interference at the bank. The government accused Sanusi of financial recklessness in his handling of the central bank’s budget and President Jonathan has said the bank’s independence will remain sacrosant.
Africa’s biggest economy, which imports around 80 percent of what it consumes, is struggling with a weaker currency, down 3 percent against the dollar this year, and dwindling foreign reserves. Political risk over February 2015 elections and a violent Islamist insurgency that has killed hundreds this year are also clouding Nigeria’s outlook, with the abduction of more than 200 school girls by Boko Haram making world headlines recently.
“The governor resumed today and we are just done with the official handing over,” said central bank spokesman Isaac Okorafor. Emefiele, who took over from acting governor Sarah Alade for a five-year term, will give a press conference on Thursday at 10 a.m. (0900 GMT), he said.
Single digit-target
At 52 Emefiele is the same age as Sanusi and has more than 20 years’ experience in banking. He was managing director of Zenith Bank, Nigeria’s second biggest, where he built a well-capitalised institution, banking sources say. Emefiele is expected to retain Sanusi’s core policy leanings incuding preventing the devaluation of the Nigerian Naira, under pressure over the past year on concerns that reduced U.S. monetary stimulus will crimp fund inflows to emerging markets.
Emefiele, who experts believe has comprehensive experience in banking, had said devaluation will be “devastating” for the economy.” The naira is currently trading at around 162 to the dollar, outside the bank’s preferred 150-160/dollar range. The new governor will also have to keep inflation within the bank’s single-digit target, despite looser fiscal policy as polls approach.
