Yemi Cardoso, the nominated Governor of the Central Bank of Nigeria, is poised to confront several pressing challenges in his new role, pending confirmation by the Senate. Among these challenges are the foreign exchange shortage, high double-digit interest rates adversely affecting businesses, and the rapidly escalating inflation rate. This article delves into the prospects and issues Cardoso may face as he steps into this significant role.
Cardoso’s nomination as the potential 11th CBN governor has generated considerable excitement among market players, thanks to his strong reputation for managing monetary policies effectively. He is set to succeed Godwin Emefiele, whose suspension and removal still raise legal questions. The choice of a banker like Cardoso has revived the ongoing debate over whether bankers or economists make more suitable central bank governors, given that several of Nigeria’s successful CBN governors in the past have been economists.
Key issues awaiting the incoming CBN governor include tackling the foreign exchange crisis, addressing high double-digit interest rates, bringing accelerating inflation under control, and addressing unpaid intervention loans.
During Emefiele’s tenure, the CBN struggled to contain inflation, with last month’s inflation rate reaching an 18-year high. Emefiele attributed high prices to greedy middlemen. His governance period was marked by increased lending to the Federal Government, CBN-funded agricultural programs, and fixed exchange rates, which raised questions about the central bank’s independence. Emefiele also faced criticism for briefly considering a run for the presidency while serving as CBN governor, raising concerns about his successor, Cardoso.
Cardoso, who has a longstanding association with political figure Bola Tinubu, had previously served as Lagos State’s Commissioner for Budget and Economic Planning. Despite concerns of partisanship, his impressive career in banking and his academic and professional achievements provide hope that he can excel as a CBN governor, similar to other appointments made by Tinubu.
Tinubu also nominated four new deputy governors for the apex bank, including Emem Usoro, Muhammad Abdullahi-Dattijo, Philip Ikeazor, and Bala Bello, all of whom bring extensive experience in banking, economics, and finance to their roles.
Addressing the foreign exchange crisis remains a paramount concern. The exchange rate plays a crucial role in a country’s macroeconomic stability, and Nigeria’s recurrent FX challenges have led to fluctuations and market concerns. Despite the adoption of various policies by the CBN, the FX crisis persists, with FTSE Russell recently reclassifying Nigeria from a frontier to an unclassified market due to foreign currency delays. Cardoso and his deputies will face the task of resolving this issue.
Another critical concern is the double-digit interest rates. The CBN began tightening its monetary policy in May 2022, raising the benchmark interest rate to combat rising inflation. However, this move has drawn criticism from stakeholders who argue that higher interest rates could hinder economic growth and productivity.
Lastly, the CBN’s intervention loans, particularly the Anchor Borrowers’ Programme, have encountered difficulties with repayment and allegations of mismanagement. Recovering these loans, amounting to over N1.1 trillion, poses a challenge for the new CBN governor. President Bola Tinubu has ordered the recovery of these funds, and Cardoso will need to work with security forces and other stakeholders to ensure successful recovery.
In conclusion, Yemi Cardoso’s tenure as the potential new CBN governor comes with several significant challenges, including managing the foreign exchange crisis, addressing high interest rates, controlling inflation, and recovering unpaid loans. His experience and qualifications provide hope for effective governance, but the road ahead is not without hurdles.