In his book, 'Just Before Dawn', Professor Kole Omotosho tells the story of how Alhaji Adamu Ciroma[i] was, in 1975,
appointed the Governor of Central Bank and Alhaji Aliko Mohammed, the Managing Director of Daily Times. On that fateful day, according to the story, Ciroma, respected editor of the then very influential New Nigeria newspaper was supposed to be sworn-in as Daily Times Managing Director while Mohammed, an accountant, was to be the CBN Governor. But while the ritual was on, then Head of State, the late General Murtala Mohammed, mistakenly gave Ciroma the paper assigning him the apex bank Governorship and Mohammed, the Daily Times MD job. When told of what he had done after the ceremony, Mohammed, rather than correcting the error, reportedly said a General does not change his words and that the duo should go and learn on their respective jobs. With that, Ciroma, a journalist by profession, became the CBN Governor while an accountant became the Daily Times MD!
The lesson from that experience is that in our country, the CBN job has for long been regarded as just another political office which does not require any special training or exposure, the reason why money lenders are sometimes appointed into the board of the bank. This is in contrast to what obtains in other parts of the world where the media generate serious debates about the qualification, experience, exposure and worldview of the people being considered months before such sensitive appointments are made. But that also presupposes that the people being considered are men of ideas who must have strong positions on issues and the process of appointments made open and transparent.
In the first part of my last week piece, 'Who Will Save the CBN?', I had stated that in most countries, professionals with background in economics and not bankers or accountants are usually appointed to the board of apex bank because the job essentially is to superintend the economy and not to make profit or allocate forex. Using a recent American Bureau of Economic Research working paper titled 'Choosing the Federal Reserve Chair: Lessons from History', I had examined the antecedent of the present CBN Governor against the backdrop of his stewardship in the last five years and asked: "assuming we were to review the Joseph Sanusi era against such indices as unemployment rate, inflation, interest rate, value of Naira etc. how shall we remember the man?"
The essence of the exercise was not to denigrate the man but to look at the institution he heads against what I consider its core responsibilities. With the American model, I had argued that emphasis on academic qualifications as well as professional experience and exposure are important if we want a vibrant Central Bank that can make impact on the economy as opposed to the present regime where Bank Managing Directors are elevated to the Board based on unclear criteria. In furtherance of my position I had argued that "without a pro-active CBN whose men understand the intricacies and workings of modern economy, we are just deceiving ourselves to think any reform package can work."
While I have nothing against the appointment of bankers into the CBN Board, provided they have the requisite credentials, what I consider unhealthy is the growing perception of the CBN Board membership as no more than another chieftaincy title for any favoured Bank Managing Director. Because the job is not just about making profit but rather it is about adding value to the economy through the interplay of several variables. This point was underscored in a chapter on Monetary Policy written by David E. Lindsay and Henry C. Wallich in the book 'The World of Economics' where the duo argued that governments all over the world have authorised monetary developments with instruments that afford control over deposit creation and affect general financial conditioning, adding for effect: "Central banks' actions are deliberately aimed at influencing the performance of the nation's economy and are not based on ordinary business considerations such as profit."
With the state of our economy, I believe we should begin to debate why we are at this terrible state despite our human and material resources and this debate should go beyond personalities to institutions that are supposed to change our fortunes. It is within that context that I picked on the apex bank which, in my layman's view, has not succeeded in meeting its core obligations such as ensuring price stability, ginger growth, maintain the integrity and value of the Naira as well as provide financial stability. And for those who may not have been following the discourse, I had last week x-rayed the economy and the impact which the CBN ordinarily should play but which it has not. But the question which I did not ask and which many believe is at the root of the problem is: how much blame can we put at the doorstep of the CBN given the kind of system we run? We will come to this later, perhaps next week.
The piece, not unexpectedly, generated a lot of hoopla in several quarters, especially within the banking industry and specifically at the CBN. It also exposed something I never really thought of, that many bank executives see the CBN Deputy Governorship job as a natural progression in their career, a sort of an icing on the cake. But while I never really imagined how pervasive such primitive ambition is within the industry, I can say quite clearly now that it is such myopic thinking that my piece was set to challenge. I also believe that with the economy in shambles, the only way out is for us to engage the people who are in charge or supposed to be in charge in robust debate about the direction we are headed, or at least should be headed, so we can help galvanise the system for the better.
I must stress though that the motivation for the piece was not, and still is not, to run anybody down and I believe I did not do that. Personally, I have tremendous respect for the CBN Governor, Mr Joseph Sanusi, who has tried his best under the unfortunate circumstance he finds himself to, at least, instill some measure of sanity in the banking system. From all available reports, he is an honest man, a virtue in short supply in our nation today. But I insist that his job, and that of any serious CBN Governor for that matter, goes beyond competing with or supervising/regulating commercial and merchant banks.
But let us continue from last week where I reviewed the credentials of the members of the Federal Reserve, the apex bank of the United States, against the lies in many quarters, including CBN, that Alan Greenspan is a musicologist. He is a trained economist with a doctorate from New York University. So are other members of his Board. The essence, however, is not to denigrate any discipline or profession for economics (and I have heard it said somewhere that once you can get a parrot to say demand and supply you have made an economist of it), what I set out to do was provoke debate in the collective enterprise to make the Nigerian economy work. And for the benefit of those who may think I read economics, the truth is that I scored the lowest grade in the subject (Introduction to Economics) in my first year in the University and I took the course at all because it was compulsory. But then, I am persuaded that in our search for a solution I believe we should look at all the options with the probable conclusion that if it works for others, why should we think we can do it another way and yet expect the same result? And my imagination has been fired by all the recent literatures I have been reading on how the modern economy works.
Now, let us check out the Bank of England that has a nine-member Monetary Policy Committee.
* The Governor, Mervyn Allister King is a Fellow of the British Academy, professor of economics at London School of Economics and a visiting professor at Harvard. Andrew Large, Deputy Governor, read economics at Oxford and then did MBA at INSEAD in 1969. He had previously served as Deputy Governor from 1998 to 2002, after being executive director and Chief Economist from 1991 until then;
* Rachel Lomax, Deputy Governor in charge of Monetary Policy studied economics at Cambridge and London School of Economics, and has been a career civil servant;
* Charles Richard Bean, Executive Director and the Bank's Chief Economist, was professor and head of economics at the London School of Economics, as well as visiting professor at Stanford University;
* Mariam Bell, an Oxford trained economist, was appointed from her own economic consultancy firm, which she set up after being head of research at the Royal Bank of Scotland and Economic Adviser at HM Treasury.
* Stephen Nickel, part-time member of the committee, read mathematics at Cambridge before studying economics at London School of Economics, was professor and dean of economics at Oxford and is now professor of economics at London School of Economics;
* Kate Barker, an external member of the committee, studied economics at oxford, was Chief European Chief Economic adviser at the CBI;
* Richard Lambert read history at Cambridge and worked at the Financial Times from 1966 until he retired as editor in 2001;
* Paul Tucker, President of the Royal Economic Society who also teaches at London School of Economics, completes the picture.
What the selection shows is that the apex bank board is a serious body whose membership is usually dominated by well-schooled professionals whose positions on how the economy should work are well known, plus a minority of intellectuals from other fields. According to the American working paper under reference, "the fact that monetary policymakers' views have played such a central role in determining the success of policy in the past suggests that the key characteristic to look out for in future policymakers is a realistic understanding of how the economy works."
And for those who have argued that the United States and United Kingdom are developed societies, they can check out Kenya where the Governor of the Central Bank, Andrew Mullei, has a doctorate in economics and his deputy, Edward Sambili also a doctorate in economics from the university of Lancaster, United Kingdom. But aside the credentials of the helmsmen, the unique thing about the Bank of Kenya is that it posts on its website a comprehensive 'weekly report of monetary and financial developments' with charts and graphs on its money market and open market operations, exchange rate, national forex reserves, government revenue collection report, progress on compliance issues, inflation rates, interest rates etc. From the January 12 report, (which is very detailed) for instance, it is very easy for investors to relate with the economy. In contrast, I would implore readers to visit the website of our Central Bank and draw their own conclusions.
Coming home, late Dr. Clement Isong had a Ph.D in economics from Harvard. As CBN Governor, under Chief Obafemi Awolowo as Federal Commissioner of Finance the economy was managed during the civil war and beyond without borrowing from abroad. Awolowo once remarked that Isong was sought out because of his specialised training and competent in economics.
The operative question at this point is: how does a country go about picking who to man its apex bank? This is the way it works in the United States: "While some education in economics, experience on Wall Street, and largely non-partisan public service may increase the odds that a nominee will be guided by sensible views, they provide no guarantee. Fortunately, there is something else that has predicted Chairmen's views exceptionally well in the past: their own writings and statements. Each of the past Federal Reserve chairmen expressed quite clearly the views that dominated policymaking during his tenure at confirmation hearing or before. This finding suggests a crucial strategy for evaluating potential candidates for Federal Reserve chair: find out their beliefs about how the economy works and what monetary policy can contribute. Read all of their previous writings. Ask them about their model of the economy and listen very carefully to their answers."
Because of the position I took, I have been receiving calls from top executives in the banking industry while I was invited to the CBN on Monday though I could not keep the appointment. But I appreciate their concerns since I have spoken on the phone to at least three of the officials. The kernel of their argument, which I can synthesise from all the discussions, is that the CBN can merely play advisory role to government especially under our circumstance where the President is so powerful, he can do almost anything he wanted. The officials said I was unfair because I should know the CBN Governor can't control government spending which is most often dictated by politics while fiscal irresponsibility seems to be the order of the day from the federal government to the states. I fully appreciate what they are talking about because I know the level of statutory rascality within the system.
The long and short of the whole argument, however, is that we have the kind of CBN we deserve and to expect magic from Mr Sanusi is to be unfair to the man. Another argument is that there is so much rot within the banking sector that it would require the full attention of the CBN otherwise the economy would have been in worse shape. From all my discussion, it was easy to see that the CBN Governor can only be as pro-active on the economy as the system would allow him to be, assuming he knew enough to be able to make a difference.