Central banks are independent national institutions and supreme monetary authorities which are at the heart of the economy. They manage currency and are given free control over the production and domestic distribution of money and credit for a country with the aim of achieving price stability and economic growth.
But central banks seem to have one common challenge. An economic expert and the president, of World Money Watch, Ms. Kimberly Amadeo, noted that central banks were often misunderstood in their efforts to heal the economy. They were often poorly misunderstood, raising the level of suspicion.
According to Ms. Amadeo, due to the independence of central banks, politicians and sometimes, the general public, were suspicious of central banks and subjected them to scathing criticisms. She further noted that politicians worried about central bank policies because they would face a political cost if their spending cost was cut.
The observations apply to the Central Bank of Nigeria. Historically, the policies of the CBN have been grossly misunderstood and unduly criticized by vested interests including some politicians for selfish reasons.
There was stiff opposition and unwarranted criticisms when the CBN under the leadership of Professor Charles Soludo initiated the banking consolidation policy in 2005 to fortify the banking industry.
Prior to the policy, the banking sector was fragile and marginal; with poor asset quality, persistent illiquidity, over-dependence on public sector funds, and a weak capital base. Most banks operated with a capital base of less than $10 million in 2004 before the policy was initiated.
The largest bank as of 2004 had a capital base of $240 million compared to the smallest bank in developed countries with a capital base of $526 million which was larger than all the Nigerian banks put together.
The CBN mandated banks to increase their paid-up capital from N2 billion to N25 billion with the aim of creating a banking system that would be part of the global change and which would be strong, competitive, and reliable and which depositors could trust and investors could rely on.
For selfish reasons, vested interests opposed and unduly criticized the good-intentioned policy. But with the full backing of the then President, Chief Olusegun Obasanjo, Professor Soludo was resolute and implemented the policy which transformed the banking industry for good.
The good-intentioned policy of the next CBN Governor, Sanusi Lamido, to curb corporate rascality in the banking industry and rein in those who he said exploited the financial system was also misconstrued and opposed by vested interests. But Sanusi was aggressive and uncompromising. He launched a corporate governance project for clarity and accountability and thereafter, the banking industry started witnessing very minimal corporate rascality.
Also, some strategic policies of the CBN under the leadership of Godwin Emefiele have been grossly misunderstood and unduly criticized in the apex bank’s efforts to heal and restore confidence in the naira and the economy. Emefiele is a dedicated patriot and pragmatic leader.
