The governor of Central Bank of Nigeria, CBN, Godwin Emefiele’s strong monetary policy stand has earned him confidence of president Muhammadu Buhari, who has excitedly nominated him for a second five-year term in office, a move that could comfort bondholders keen to see the bank’s policy of a stable and strong currency continue.
Buhari, who has backed Emefiele’s monetary policy, nominated him for another term, via to a letter read on the floor of the senate on Thursday. The upper house of parliament is expected to confirm the nomination.
Emefiele has overseen an interventionist currency policy at the behest of the presidency, propping up the local naira by pumping billions of dollars into the foreign exchange market.
He also introduced a multiple exchange rate regime to try to mask pressure on the naira and avoid a series of devaluations, a step that has kept liquidity tight in Africa’s biggest economy.
The bank cut rates to 13.4 per cent in March, its first rate cut since November 2015. The rate has been held at 14 percent since July 2016 to support the naira and curb inflation.
Buhari, who starts his second four-year term on May 29, has pledged to rejuvenate the Nigerian economy, sub-Saharan Africa’s largest energy producer.
Emefiele has offered affordable credit to boost some industries to offset curbs on access to foreign exchange for those sectors imposed to protect local producers.
Inside sources said Emefiele’s nomination was in recognition of his “patriotism and irrepressible commitment to the growth and development of the Nigerian economy”.
Emefiele, whose first term was due to end this month, will be the first central bank governor to have his tenure extended into a second term since Nigeria’s return to democracy in 1999.
“The idea of continuity might give some comfort to foreign investors who will expect a policy of naira stability to continue,” said Razia Khan, head of research for Africa at Standard Chartered Bank in London.
“This lessens the risk of any near-term profit-taking.”
Emefiele’s return could be supportive for bonds as investors hunt for yields on the debt market while equity players worry about slow growth, expecting sentiment to remain weak for stocks, analysts say.
More than $6 billion has flowed into the local bond market since February’s presidential election as foreign investors piled into debt to lock in yields as high as 14 per cent helping to keep the currency stable.
“Governor Emefiele’s nomination means that we will likely not see a major change in the conduct of monetary policy or a much-needed shift in Nigeria’s diversification strategy,” said Cobus de Hart, senior economist at South Africa’s NKC African Economics.
Nigeria entered and exited its first recession in a quarter of a century under Emefiele’s tenure as global oil prices plummeted and then gradually began to rebound.
Some economists have argued that his strong currency policy exacerbated the downturn.
Anthony Simond at Standard Aberdeen Asset Management in London said he expected a continuation of current monetary policy. “Whether it will be good for the country in the long run is a different question. But for now, high carry and stable FX will continue,” he said.
Emefiele has said the bank would continue its tight monetary stance in the near term and sees inflation of 11.3 percent in February rising to 12 percent this year before moderating.
Observers see this as a major feat by Emefiele, who is helping Buhari revive Nigeria’s agricultural sector and wean it of its sole dependence on oil as source of revenue. No Governor of the apex bank has been retained in Nigeria in recent times.
Emefiele was first appointed in 2014 by former president Goodluck Jonathan and was retained when Buhari came to office in 2015.
Before assuming the office of the CBN governor, the 57-year-old banker was the Group Managing Director of Zenith Bank Plc.
As CBN governor, Emefiele introduced various interventions to ensure that the naira was kept stable during the recession, including introducing a list of items for whose import foreign exchange was made unavailable.
That initial list of 41 items now contains 43 items.
He also introduced an investors and exporters window while directing banks to sell forex to customers over the counter for basic travel allowance (BTA), medical and education bills.
When confirmed by the Senate, Emefiele will serve as Governor for another five years.
Sources in the country’s financial sector told Oriental News Nigeria, that Buhari was impressed with the manner Emefiele navigated through the nation’s economic landscape especially during the recession when he sustained a conservative approach to monetary management rather than dance to the popular tune being played from the gallery by “so called experts”.
President Buhari was also said to be happy with the success recorded by the CBN through the Anchor Borrowers’ scheme which gave a fillip to agriculture. “One area this government has scored very high is in agriculture and food production, even the fiercest critics acknowledge this. This is possible because Emefiele showed commitment to the scheme and the results are there for everyone to see.
“By retaining Emefiele, Mr. President has also pointed to the direction his government is going during his second term. He is determined to push further and consolidate the gains already made in agriculture. Emefiele understands and interprets the President’s vision hence he has decided to continue to work with him,” the source said.
Before now, there had been intense lobby for the job of CBN Governor as Emefiele’s tenure officially ends next month.
On Thursday, President of the Senate, Dr Bukola Saraki, disclosed the intent of President Buhari while reading the letter at plenary on Thursday.
“In view of the expiration of his first tenure as Governor of the Central Bank of Nigeria (CBN) in June, 2019, and in pursuant to the provision of section 81 (2) of the Central Bank of Nigeria 2007, I hereby present for confirmation of the senate, Mr Godwin I. Emefiele, for re-appointment as the governor of the Central Bank of Nigeria (CBN) for the final term of five years.
It is my hope that this Distinguished Senate will consider and confirm this nominee in the usual expeditious manne.
“Please accept, Senate President, the assurances of my highest regard,’’ the letter stated.
Godwin Emefiele, who was confirmed governor in June 3, 2014 to serve his current term, is the 11th CBN Governor.