By Arize Nwobu
SAT, 28 MAY, 2022-theGBJournal| It was a presidential vote of confidence and mark of honour for President Muhammadu Buhari to have re-appointed Mr Godwin Emefiele as the Governor of Central Bank of Nigeria (CBN) in 2019 for another term of five years.
The development also signified President Buhari’s statesmanship over political considerations in view of the fact that Emefiele was first appointed by former President Jonathan.
As a keen observer of the economy and the momentum generated by Emefiele and his team as they confronted the challenges, his re-appointment by President Buhari was well deserved. It was necessary for him to continue and sustain the momentum towards redefining the structural imbalances and creating multiple pillars in the economy.
President Buhari came on board at the onset of the global crisis. The CBN Governor gave him a prognosis that the country’s foreign reserve would plummet as a result of the crisis. And as a proactive measure to conserve foreign reserves CBN introduced the policy which excluded 41 items from the Interbank foreign exchange market to curtail the importation of items that could be produced locally.
The policy resonated with the President. It was the same with the Anchor Borrowers’ Programme {ABP) which also aim at conserving external reserves by reducing the importation of agricultural commodities, increasing banks’ financing to the agricultural sector and creating new generation of farmers and entrepreneurs.
Besides President Buhari’s vote of confidence on Emefiele, Forbes New York also honoured Emefiele recently with the Forbes Best of Africa Lifetime Achievement Award in recognition of his ‘’remarkable performance and pace-setting achievements’’ at CBN. Forbes noted that the CBN Governor had been able to regulate Nigerian banks and evolved policy measures to stabilize the economy in the face of global imbalances.
CBN was focused, creative and resolute in the face of the global challenges and introduced policies with far reaching results on both the financial system and economy. From inception, Emefiele had put financial system stability on the front burner. He had noted that his vision was to manage potential threats to financial system stability and create a strong governance regime that would be conducive for financial intermediation, innovative finance and inclusiveness.
He anchored his vision on two main pillars, namely 1. Managing factors that create liquidity shocks. 2. Zero tolerance on practices that undermine the health of financial institutions. Maintaining financial system stability is germane in ensuring a stable macro economy because the wheel of economy revolves on the axle of the financial system. An unstable financial system can wreak havoc on the economy. Factors that can trigger financial system instability include liquidity mismatch, non- performing loans, poor corporate governance, global imbalances and under regulation. Others include market liberalization, moral hazards, irrational exuberance, poor macroeconomic policies, exchange rate risk and contagion, equity market and others.
In recognition of the role of banks in maintaining financial system stability, CBN under Emefiele introduced a dividend policy to support banks increase their capital base through retained earnings instead of using a greater percentage of their profit to pay dividends irrespective of the debt profile.
‘’Anything that destabilizes the banking system will have adverse impact on the economy. We are keeping our eyes on the banking system to ensure there are no significant threats that will alter the strategic health of the banking system’’, Emefiele had noted. The said dividend policy stipulated that banks or discount houses with non- performing loans (NPLs) above 10 per cent were not allowed to declare dividend to their shareholders.
CBN also raised the bar for banking consumer protection and released a Consumer Protection Framework (CPF) which are guided by the good practices and high level principles of the World Bank and G-20 respectively. The CPF formed the bedrock for the establishment of a virile consumer protection for the enhancement of financial inclusion and ultimately a stable financial system.
Nwobu is a Lagos based Chartered Stockbroker and Business Journalist. He writes via arizenwobu@yahoo.com Tel: 08033021230
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