Sanusi Lamido Sanusi, Executive Governor of Central Bank of Nigeria (CBN) in next ten months will vacate his position as the chieftain of the country’s apex bank. He showed no interest in asking for the renewal of his job when the first term elapses in 2014.
Sanusi without a doubt has contributed to the macro-economic stability of Nigeria. But he was without controversy, some of his undertakings were not popular but he found strength, if not solace in the application of sound monetary policy. With the monetary tool at his disposal he has managed to maintain a fairly stable monetary policy. By lowering inflation, Sanusi has striven and was able to maintain some-what decent price stability. A reasonable price stability will be taken for what is it within the context of Nigeria’s reality. By putting into consideration that Nigeria economy is an importation orientated economy with oil as a major source of foreign exchange must be acknowledged.
When Sanusi came in there was financial instability and liquidity crunch, which was triggered by poor management especially on the failing banks that were over laden with toxic debts. He was able to reform the failed banks and re-capitalized them. Sanusi performed a delicate task of infusing capital into the banking sector without overheating the economy.
Although he was successful with the fixing of the banks but the inflation rate was not immediately suppressed. He promised to tame the inflation, which became difficult, if not elusive to accomplish but he eventually brought down inflation rate at less than ten percent as he earlier promised.
The tightened of the monetary tools may have brought down the inflation rate, but downside was the high interest rate that stood over 12 percent, which is not something to write home about. High interest rate may be attractive to investors in the capital market but it is not conducive for sustainable economic growth. High interest rate do discourages borrowing and that may dampen economic growth.
In reality with regards to an import and oil economy, the power of monetary policy may be limited and even waned. The best possible paradigm is to get the monetary and fiscal policies to be complementary. This is where the intervention of the executive and legislative branches becomes imperative. The complementary objective is to fashion out a pro-growth tax policy and to build electric infrastructure to incentivize economic growth and achieve an endurable macro-economic stability.
The answer to the economic problems may be found in the fiscal policy. The executive and law makers must work together to implement policies that could stimulate the economy and incentivize investors to infuse capital in the economy. The tax policy that is favorable for investment and repatriation of capitals are necessary to make the economy grow faster and bountifully. Lower taxes and meaningful regulations are good to catalyze the weak economic growth. .
Moderation in taxes and logical regulations with regards to fiscal policy may open the door to a steady and faster economic growth. The provision of durable infrastructures especially electricity and security hold the key to a growing and sustainable economy.
Sanusi’s tenure was not all rosy; some of his signature achievements including the introduction of Islamic banking was controversial. The opponents of Islamic banking argued that Nigerian constitution is secular and that the introduction of Islamic banking may reinforce sectarian politics. But he never bogged down nor back down, he stood up and judiciously defended the premise of Islamic banking in Nigeria.
Sanusi was quick to donate money to many organizations and institutions does not sit well with many law makers who accused him for overreaching and usurpation of the legislative power of the purse, the power to appropriate funds. Many legislatures insisted that constitution that guarantees CBN governor of independence must be taken away. But eventually cool heads prevail and the constitution was not altered and CBN continues to enjoy its independence.
Sanusi neaerly made the greatest blunder of his professional life asa banker by his decision to print N5,000 naira bank note but he was averted by ordinary Nigerians who seems to know more about the subsequent effect of such an action more than the white collar professionals who sit in Abuja air-conditioned offices.
Emeka Chiakwelu, Afripol Principal Policy Strategist and Analyst commented," By printing a large denomination of naira notes, the value of the naira will nosedive while inflation will gain momentum and that can be disastrous to the economy. Sometimes, our policy makers especially those of them that are making important financial decisions act like those that do not grasp the fundamentals of monetary and macro economic theories. One cannot quench a burning fire by throwing kerosene into it. How can you tame inflation by application of tools that will make it worse than before? I am totally disappointed with Central Bank of Nigeria."
Chiakwelu further stressed, "Does Nigeria desire to make naira become worthless akin to Zimbabwe currency that is miserably worthless? Is Nigeria policymakers ever ‘chill out’ and think critically on how their decisions may destroy the house they are trying to build. These impulsive financial and monetary decisions were what wrecked the economy of Zimbabwe. Nigeria is tilting to the path of Zimbabwe economic gulag where hyperinflation and incoherent economic decision will doom the nation’s economy."
Sanusi support for the removal of fuel subsidy was not universally acceptable to most Nigerians especially the large chunk of the country's poor that are surviving with less than two dollars per day. The danger they perceived in the removal of fuel subsidies were buttressed when the removal was partially implemented. The prices of household products were hiked up, transportation fares and kerosene prices were beyond the reach of the average Nigerians. Even inflation rate was briefly higher than anticipated and all these slowed down, if not muted the full implementation of fuel subsidies removal.
In totality, Sanusi will leave behind a stable monetary policy but the work of macro-economic stability is beyond the limited function of the governor of Central Bank. When fiscal and monetary policy becomes complimentary a more stable , successful and sustainable economy becomes imminent and viable .