Central Bank Governor appointments in Africa, USA & UK; let's go on a journey...

This is a repeat article originally published on September 25, 2015 and still available on this blog.  I felt it was pertinent to bring the article back to the top due to a particular policy action from the Central Bank of Nigeria (CBN) which reminded me of this article.  A few add ins in the last two paragraphs.   

Why will the Central Bank Governor allow banks to sell dollars received from the CBN to their customers at self-determined rates?  There should be a narrow defined spread between the daily inter-bank closing stop rate and rates at which dealing banks sell to their customers.  Nigerian banks are once again being given an opportunity to 'milk' the system.  A policy decision that affects the nation is actually enriching pockets of interest and sending more pockets of people into penury.  Greed has become ubiquitous while patience needed by policy makers and the populace has gone AWOL.  Read on.
        
Dear Africa Interested Individuals:

                                                        Appointments typically send a particular message to the general public.  It shows the direction the person appointing wants to go with the organization in question.  Appointments of a federal nature are supposed to be driven by national best interests and not personal best interests even though the appointments are made by people.  I picked six countries and four are in Africa to review their Central Bank appointments which were all made in the past two years (this was not a preset criterion for selection.)  I picked the USA, U.K., Nigeria, Kenya, Angola and South Africa.  I picked the USA and U.K. because they are developed countries with advanced financial systems that should understand by now the proper way to do things.  I picked Nigeria as the largest economy and most populous nation in Africa, Kenya as the dominant economy in East Africa and a prominent frontier market, Angola as a major Africa oil producer and oil dependent economy and South Africa as the continent's most advanced economy.  Let me take you through my thinking about Central Bank appointments in a nutshell.  The first is necessary, the rest come highly recommended.

• Appointee should have worked at a Central Bank, Government Finance or Economic Team, IMF or World Bank prior to appointment.  
• Have a doctorate degree.
• Have worked in academia at some point during their career.  

United States of America   

Dr. Janet Yellen's appointment took effect on February 3rd, 2014 for a four-year term.  She is the first woman appointed to the position in the history of the United States of America.  She received a Ph.D. in Economics from Yale University in 1971.  Her research and work has focused on reducing unemployment and promoting "responsible economic growth" to improve people's lives. She has taught at the Haas School of Business, University of California, Berkeley.  Most of her career has been spent within the Federal Reserve System of the United States of America.  She was the Vice Chair of the Federal Reserve System before her appointment as the 15th Chair of the Federal Reserve.  She fulfills all three of my criteria.  

United Kingdom   

Mark Carney is the Governor of the Bank of England; he assumed office on July 1st, 2013 and is the first foreign born governor of the Bank of England.  He is Canadian and was the Governor of the Bank of Canada for five years (2008 - 2013) just prior to accepting the appointment to head the Bank of England.  He schooled at Harvard University and the University of Oxford.  He worked for Goldman Sachs for thirteen years and also worked at the Canadian Department of Finance where he was seconded to after joining the Bank of Canada as a Deputy Governor in August 2003.  Mark Carney fulfills my necessary condition for appointment but not the recommended.   His predecessor (Mervyn King) holds a doctorate degree and taught at London School of Economics, Harvard and MIT as a visiting professor. 

Kenya

Dr. Patrick Ngugi Njoroge is the Governor of the Central Bank of Kenya.  He assumed office in June 2015.  He worked at the International Monetary Fund (IMF) for twenty (20) years prior to his appointment.  He has a doctorate in Economics from Yale University like Janet Yellen.  He is well prepared for the office of Central Bank Governor in my opinion.  His predecessor worked in academia prior to his appointment.  Kenya's Central Bank Governor fulfills my necessary and one of my ideal criteria.  

Angola

Jose Pedro de Morais is the President of the National Bank of Angola (this is Angola's Central Bank) and assumed office in January 2015.  He was the Minister of Finance for Angola from December 2002 - October 2008 which is referred to as Angola's "boom period."  He has worked as a Governor at the World Bank and an Executive Director at the IMF.  He is referred to as an Angolan politician having served the government of Angola in multiple capacities over the years.  He is well known to the 'West' and is respected internationally.  He fulfills my necessary condition for appointment but not the recommended.  

South Africa

Lesetja Kganyago assumed office as the Governor of the Reserve Bank of South Africa in November 2014.  He is an Economist by profession.  He served as the Deputy Governor of the South Africa Reserve Bank (SARB) for three-and-a-half years just prior to being appointed the Governor of SARB.  He has a Master of Science in Economics from the London School of Economics.  He has spent pretty much his whole career working for the South African Government in various positions such as: Director of South African National Treasury, Chief Director: Liability of the National Treasury and Director-General of the National Treasury of South Africa.  He has ample experience at the SARB prior to his appointment.  He fulfills my necessary condition for appointment but not the recommended.  His predecessor (Ms. Gill Marcus) was the first woman ever appointed to that position and was the Deputy Minister of Finance for South Africa and Deputy Governor of SARB prior to eventually being appointed the Governor of SARB.  South Africa's pattern is clearly seen and fulfills my necessary condition.  Ms. Marcus upon her departure, thanked the President for appointing her successor from within the institution, "that it showed trust in the institution."  Observers also noted that the appointment of an insider shows continuity and that the SARB is in a safe pair of hands given the smooth transition.  

Nigeria

Godwin Emefiele assumed office as the Governor of the Central Bank of Nigeria on June 3rd, 2014.  He is a Banker by profession having been an employee of Zenith Bank since the bank commenced business in 1991.  He is said to be related to the Chairman/Owner of Zenith Bank: Jim Ovia.  He was the CEO of Zenith Bank just prior to his appointment.  He has an MBA in Finance from the University of Nigeria, Nsukka (UNN.)   He is said to have taught finance at UNN prior to beginning his banking career.  He has taken Executive Education courses at Stanford, Harvard and Wharton.  He does not fulfill my necessary condition for appointment as he has not worked at the Central Bank prior to his appointment to head the Central Bank, nor has he worked at the IMF, World Bank or had a senior government appointment.  His predecessor (Sanusi Lamido Sanusi) followed the same pattern as he too was the CEO of a commercial bank (First Bank) prior to his assumption of office in June 2009.  These last two appointments are in contrast to Charles Soludo who was a Professor of Economics at UNN (visiting professor at Swarthmore College in Pennsylvania,) Chief Economic Adviser to President Obasanjo and the CEO of the National Planning Commission of Nigeria prior to assuming the position of the Central Bank of Nigeria.  He fulfilled my necessary condition and both of my recommended.   

These last two Central Bank appointees were heavily politicized in my opinion and the banking sector became a tool to be used as it pleases the powers that be, instead of a tool to promote responsible economic growth which should be the forerunner of any Central Bank's policies.  The forced takeover of three banks (not given the chance to recapitalize like Wema & Unity Banks) and the refusal of banks to accept cash foreign currency deposits (over the counter) has left many scratching their head and the economy has taken a setback from these actions among others.

Commercial Bank CEOs or top executives should not be appointed to head Central Banks.  Every other country discussed in this article understands this except Nigeria where the people at the top keep taking decisions to please certain interests and not the good of the country.  This same appointment philosophy played out in the emergence of Aigboje Aig-Imoukhuede as the President of the Council of the Nigerian Stock Exchange.  He is close to former President Goodluck just like Jim Ovia (whose protege is now the Governor of Nigeria's Central Bank.)  Both were members of Goodluck Jonathan's economic management team.  Another member, Peter Obi is now the Chairman of the Securities & Exchange Commission, Aigboje chairs the Nigerian Stock Exchange and Jim Ovia's protege heads the Central Bank of Nigeria.  I hope you are all following the story?  

A lot of money transfers in and out of the country, loans to governments and related activities are handled by Zenith, First Bank and to a lesser extent, Access Bank.  Zenith Bank is now in the news for allegedly sponsoring a governor's election two years ago.  Of course, they have swiftly refuted this allegation.  Who tells the truth in Nigeria anyway?  People like me that do, have been pursued and still being pursued by the 'powers that be' that feel that the sun rises and sets daily only for their benefit.    Interestingly enough, an appointee (same time as Emefiele as Governor) as Deputy Governor of the Central Bank (Adebayo Adelabu) was the CFO of First Bank prior to assuming office as one of the Deputy Governors of the Central Bank.  Interest in the banking sector has apparently superseded interest in the economy because bankers are at the helm of the Central Bank of Nigeria and are naturally focused on and gravitate more easily towards what they understand best: banking.  The Central Bank Governor is not an internship position where people learn from the scratch on the job.   

This "learning from the scratch" may leave the economy with scars that cannot be easily removed.  Nigerians at the top, once again, pleasing pockets of interest instead of pockets of people who continue to grown under perennial maladministration. Posterity will not be kind to many of Nigeria's big shots.  I doubt whether they care anyway; money is now their God.    

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