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Godwin Emefiele

NIGERIA - Finance

Regulated Growth

Governer, Central Bank of Nigeria (CBN)

Bio

Godwin Emefiele is currently Governor of the Central Bank of Nigeria (CBN). Prior to joining the CBN, he served as Group Managing Director and Chief Executive Officer of Zenith Bank PLC, one of Nigeria’s largest banks with over 7,000 staff, about $3.2 billion in shareholders’ funds, and subsidiaries in Ghana, Sierra Leone, Gambia, South Africa, China, and the UK. Before his banking career, he was a lecturer in finance and insurance in two Nigerian universities. He holds degrees in banking and finance from the University of Nigeria, Nsukka.

What key policy moves have ensured the health and growth of Nigerian banks up to this point? A number of policy measures have helped sustain the health and growth of […]

What key policy moves have ensured the health and growth of Nigerian banks up to this point?

A number of policy measures have helped sustain the health and growth of Nigerian banks and enabled the industry to continue attracting the interest of foreign banks. Most importantly, we have strengthened the Risk-Based Supervision (RBS) framework, built specialist supervisory capacity to reflect the structure and sector concentration of banking system credits, and developed a stronger and more robust macroprudential regulation and supervision framework. We have also worked with relevant stakeholders to establish commercial courts in Nigeria so as to expedite the adjudication of banking related disputes and stem the growth of purchasing non-performing loans (NPLs). The abolition of the practice of uniform banking and return to mono-line banking in which banks are categorized into commercial, merchant, and specialized banks has curtailed the scope of individual banks’ permissible activities and minimized contagion risk. The establishment of the Asset Management Corporation of Nigeria (AMCON) in 2010 led to the recapitalization of ten troubled banks, including three bridge banks, the injection of additional liquidity into the banking system through the NPLs of the banks, and the facilitation of the mergers and acquisitions of seven of the ten banks. Two of the banks, in which the CBN did not intervene, have also been restructured and returned to good health by their owners, while one bridge bank is slated for sale before the end of 2015.

The CBN recently issued a list of Forex restricted imports intended to bolster foreign reserves, defend against inflation, and encourage the development of local capacity in agriculture and manufacturing. Are these policies viable in the long term?

In the five-year agenda of the CBN, I underlined the importance of non-conventional approaches to achieving our mandate and the need to assume a wider responsibility in order to ensure the smooth functioning of the economy. The external headwinds which the economy has been exposed to over the past year, with a close to 50% drop in crude oil prices and the impact this has had on our external reserves, has only made it imperative that we refocus our energy on encouraging productivity in key sectors of the economy, relative to supporting consumption activities, which have little or no impact on the creation of jobs in the local economy. In a developing country like Nigeria, it is critical for the central bank to assume responsibilities that foster economic growth and job creation. Hence, the discontinuance of foreign exchange allocations for the importation of certain commodities was designed to both preserve our external reserves and simultaneously boost domestic supply capacity and job creation. Presently, we have substantially idle domestic capacity. For instance, millions of tons of locally produced paddy rice are left unprocessed by our underutilized rice mills while tons of almost expired rice find their way into the country. This undermines domestic productivity, exports jobs, and heightens poverty. As I noted in other discourses, development does not occur in a vacuum, but has to be triggered by a calculated policy mix. The present stage of Nigeria’s development, which is still predominantly agriculturally based, with very little industrial development, needs to be nurtured and scaled up to achieve the country’s aspiration of being one of the twenty largest economies by 2020, articulated in its Vision 2020 agenda.

What are your expectations for the year ahead?

One of the prevailing challenges of the Nigerian economy is the pressure on our external reserves occasioned by the huge fall in crude oil prices and aggravated by speculative FX demand, round tripping and front loading activities in the FX market. Another challenge confronting Nigeria is the less than balanced domestic aggregate supply, which has inadvertently undermined job creation and amplified poverty. The resolute determination and strategic planning of the current government coupled with the various interventions and initiatives of the CBN will contain any adverse consequences of these challenges. Our prognosis is that even in the face of continued softened oil prices, the clouds will lift in the course of the year. We hope to see improvements in our domestic refining capacity, which will help to reduce demand for FX for petroleum imports and therefore reduce pressure on our reserves. These critical factors will help to mitigate the impact of the external shocks that the economy is experiencing. Overall, my outlook for the Nigerian economy is positive.

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