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THE LIMITS OF FINANCE SECTOR INSENSITIVITY By Omilo

Oct 13, 2023
OMILOOMILO

THE LIMITS OF FINANCE SECTOR INSENSITIVITY By Augustine Omilo

“In the United States of America, USA, Jerome Harden Powell heads the Federal Reserve Board, FRB (the equivalent of Nigeria’s CBN). He was first appointed to the board in 2012 by former President Barrack Obama. Barring any discrepancies in performance, his board membership position will run till 2028. From being a board member, he was appointed to the position of Chairman (governor) in 2018 by president Donald Trump for four-year tenure. President Biden reappointed him to the same position in 2022. This is system stability in practice!”

All sectors of a nation’s economy are important. All of them play different roles that result into collective manifestation of the economic and social behavior of the society. One sector that easily stands out as a yardstick for measuring the economic performance of countries is the finance through its stability or otherwise.

For many years, Nigerians have been denied good sustainable life styles as a result of instability in her finance sector. Banking policies are hardly maintained to the letter. Worse still, the Central Bank of Nigeria (CBN), the supervising bank of the nation has continued to fail in its role of providing sanity to the banking sub-sector. Political leaders have not helped matters in this direction.

The apex bank, under the watch of President Bola Ahmed Tinubu has had three governors within a space of about one hundred days. The Nigerian leader met Mr. Godwin Emefiele as the governor. He put him in incarceration and appointed an acting head in the person of Mr. Folashodun Shonubi.

Given the important function of the CBN as bankers to other banks in Nigeria, citizens of the country waited eagerly to witness the confirmation of Folashodun’s appointment by the national assembly. This did not happen. Instead, the President chose to appoint another of his allies as another acting governor of the bank. Now that this third man, Dr. Yemi Cardoso’s appointment has been confirmed by the National Assembly, one can only hope that he swings into action immediately with a view to stablising the monetary policies of Nigeria.

It is extremely difficult to attract foreign investors to an economic system that is ruled by instability in financial policies occasioned by frequent changes in the management team. The benefits of consistency in national finance administration cannot be over emphasized.

SEE ALSO: NIGERIA’S DOUBTFUL INDEPENDENCE AT 63 By: Augustine Omilo

In the United States of America, USA, Jerome Harden Powell heads the Federal Reserve Board, FRB (the equivalent of Nigeria’s (CBN). He was first appointed to the board in 2012 by former President Barrack Obama. Baring any discrepancies in performance, his board membership position will run till 2026. From being a board member, he was appointed to the position of Chairman (governor) in 2018 by President Donald Trump for four-year tenure. President Biden reappointed him to the same position in 2022.

Elvira Nabiullina was first appointed to the position of the governor of Central Bank of Russia, CBR in 2013 by President Vidmire Putin. He is still there. The trend is the same in the U.K where Andrew Bailey was appointed for eight-year term in 2020.

The average inflation rate in USA was 3.4 % in 2000. As at August, 2023, the rate is 3.7% while that of Nigeria rose from 6.2% to 25% for the same period (2000 – 2023). Even with the economic complaints of the Gabonese, the country’s inflation rate currently stands at 2.3%.

One of the most unstable currencies in the world in terms of rate of exchange with the US dollar is the Nigerian naira. It moved from about N467 to a dollar in April 2023 to its present rate of about N995 to one dollar. The dollar on its part has remained relatively stable at rates between $1.2 to $1.6 to one pounds sterling since 1972 when it exchanged for the pounds at the rate of $2.6 per pound.

Nigeria’s attempt at bringing sanity to her monetary policy with the redesign of the naira notes failed due to poor management of the approach.

Stabilizing the nation’s finance sector must be given priority if the economy of the country must witness rapid transformation during the time of Bola Tinubu as the leader of the world’s most populous black nation.

Just as the military or police armoury remains the most volatile arena that must not be allowed to fall into the hands of enemies, the CBN is the financial armoury of Nigeria. It must not be allowed to be captured by the monsters that have continued to harass the nation. These include corruption, nepotism, tribalism, fraud and favouritism. In addition to these, the news making the rounds show that the CBN is currently defaulting on repayment of over $10b owed Nigeria’s Deposit Money Banks, DMB. The debt arose as a result of contract and dollar swap deals between the apex bank and the commercial banks.

Due to the numerous complications from this debt, an acute shortage of dollar for banks to meet the demands of their customers has arisen, thereby putting the finance sector at a higher level of instability. The new governor of the Central Bank of Nigeria must address the issue urgently if the investing community is to take Nigeria serious on matters of economic stability.

Considering the danger arising from all these, it may not be out of place for Nigeria’s president to consider the economic risks inherent in placing the headship of the Federal Inland Revenue Service (FIRS), the Central Bank of Nigeria (CBN), Federal Ministry of Finance and the Customs Service in the hands of citizens from Yoruba land; no matter how qualified they may appear. There is a limit to national financial instability.

 

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