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Kenyatta Likely to Reappoint Njoroge as Central Bank Chief

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Kenyatta Likely to Reappoint Njoroge as Central Bank Chief

  • Policies to keep Kenya’s currency stable likely to continue
  • Bank consolidation expected, small-business loans seen growing
Patrick Njoroge
Patrick Njoroge Photographer: Luis Tato/Bloomberg
Patrick Njoroge
Photographer: Luis Tato/Bloomberg

Kenyan President Uhuru Kenyatta is likely to reappoint Patrick Njoroge for a second term as governor of the east African nation’s central bank, according to people with direct knowledge of the matter.

A steady currency, efforts to boost loans to small businesses and market-led bank consolidation put him in good standing to retain the job, according to the people, who asked not to be identified because the matter is still private. The president is expected to make an announcement on the regulator’s leadership soon, the people said.

Njoroge, whose first four-year term ends June 18, told reporters last week to direct questions on the subject to the appointing authority. The Kenyatta administration officials failed to return calls when contacted for comment.

The Shilling

Njoroge’s reappointment emboldens him to continue measures that have seen the shilling exchange rate barely move since June 2015, when most other African currencies have seen double-digit depreciation. It also means the currency’s valuation will remain a sticky issue -- Njoroge said the International Monetary Fund, his former employer, made mistakes in calculations that showed the local unit was 17.5% overvalued.

“The shilling defied all to be strong in his first term,” said Tony Watima, a Nairobi-based independent economist. In April, Njoroge told Bloomberg Television that Kenya has “a flexible exchange rate. We do not target a rate or direction.” The central bank doesn’t prop it up, he said.

Cheaper Loans

Last month, the regulator said banks will start offering loans to small businesses for as little as 9%. This after the High Court in March annulled a law that limits what lenders can charge for credit at no more than 4 percentage points above the prevailing benchmark rate. Njoroge opposed the cap, saying it complicated monetary policy formulation.

“Increasing loans to small businesses will be one of Njoroge’s key assignments in his second term,” said Habil Olaka, chief executive officer of the Kenya Bankers Association, a lobby of lenders.

Weaker Expansion

Policy makers kept the main lending rate at 9% last month for a fifth consecutive meeting on the outlook that inflation would slow, which it did to 5.5% in May. Spells of drought have forced up the cost of food, contributing to price growth accelerating at 6.6% in April, the fastest pace in 19 months. Njoroge said the drought could also see the economy expanding 5.9% this year, compared with earlier forecasts of 6.3%.

Banks’ Consolidation

Njoroge’s approach of voluntary bank consolidation, as opposed to the Treasury’s failed bid to increase banks’ capital requirements fivefold to force tie-ups, has been vindicated by deals in the pipeline. KCB Group Plc is buying National Bank of Kenya Ltd. and NIC Group Plc and Commercial Bank of Africa Ltd. are merging.

“We are not done yet,” Njoroge said on bank consolidation.

More Debt

Expansionary fiscal policy that’s raising government borrowing, with a budget deficit estimated at 6.1% of gross domestic product in the year ending June, will challenge Njoroge in his second term. The government is in talks with the IMF for a new standby loan should the country face balance-of-payment problems.

Last month, the World Bank approved a $750 million loan for Kenya, soon after the government raised $2.1 billion in Eurobonds.

For more on Kenya’s latest Eurobond, click here

“The headroom for new borrowing has diminished,” Njoroge said last month.

(Adds debt in penultimate paragraph.)