Central Bank of Nigeria Governor Lamido Sanusi said his successor’s main challenge will be to maintain the independence of the institution and any undermining of that may hurt the economy.
“If anyone tampered with it, the markets would punish the economy,” Sanusi said in an interview with Bloomberg TV Africa at the World Economic Forum in Davos. “It’s a very strong institution that needs a strong leader and I think one of the things we’ve achieved over the last four or five years is to show that we can have an independent central bank in Africa.”
Sanusi, 52, will leave his position in June when his contract ends. During his five-year term, he fired bank executives to clean up an industry that was near collapse, kept interest rates at a record in the face of calls from businesses for lower borrowing costs and last month raised concern about the state oil company retaining revenue.
“It’s extremely important from the fiscal side, it’s extremely important from the governance side, that the governor of the central bank is able to speak independently of political authority and raise an alarm and concerns, and give constructive criticism and advice,” he said.
President Goodluck Jonathan hasn’t yet said who will replace Sanusi. Jonathan hasn’t solicited his advice on a potential successor and he hasn’t given it either, Sanusi said.
The governor said he has “no fears” of tightening monetary policy further to keep inflation down and to stabilize the currency. The bank can increase its key interest rate from 12 percent and the cash reserve requirement on public sector funds to 100 percent if needed, he said.
“I don’t think we are at the end of possible tightening cycles, but I do think that the scope for further tightening is getting narrower and narrower,” he said. “We do need to rely more on other instruments.”
The central bank in Africa’s top oil producer has kept its policy rate unchanged at a record high since October 2011, helping to bring inflation down to the lowest level in more than five years in 2013. That still hasn’t been enough to persuade the Monetary Policy Committee to cut rates as oil savings fall, eroding the funds available to defend the currency. The cash reserve requirement on public funds was increased to 75 percent from 50 percent at an MPC meeting earlier this week.
Inflation will be kept within a band of 6 percent to 9 percent this year, controlled mainly by monetary conditions, Sanusi said.
“Government spending has not been huge, the real challenge has been on the revenue side and on the foreign-exchange side,” Sanusi said. “I see no reason why from 2015, Nigeria cannot move to within the range of South Africa’s 3 percent to 6 percent, or 4 percent to 7 percent” for inflation, he said.
While Nigeria’s bank earnings will be hit in the short term by the monetary tightening on public funds, it will encourage them to attract more private sector deposits, said Phillips Oduoza, chief executive officer of United Bank for Africa Plc.
“In the short run, it is going to affect every person, but in the long run, I think the system is going to be better off,” Oduoza said in a separate interview in Davos today. “Financial inclusion is very, very key. We have a significant number of people that are not in the financial system.”
Sanusi said he’s unconcerned by “personal relationships,” given the backlash he’s faced since writing a letter to Jonathan alleging the state oil company had withheld $49.8 billion in revenue. The letter sparked a public outcry when it was leaked to local newspapers last month, with Jonathan criticized for failing to tackle corruption. Lagos-based ThisDay newspaper reported on Jan. 9 that Jonathan told Sanusi to resign over the leaked letter.
“We meet at work and people should do their job,” he said. “I do hope that the president will be happy if I do the job very well.”
Finance Minister Ngozi Okonjo-Iweala told reporters on Dec. 18 a reconciliation of the accounts showed unaccounted oil receipts from the Nigerian National Petroleum Corp. stood at $10.8 billion. The NNPC has said it spent the funds on pipeline repairs, fuel subsidies, crude losses and reserve fuel.
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