Nairobi is teeming with opinion that is dismissive of the
newly appointed governor of the Central Bank, characterizing him as deficient
of ‘real banking experience'.
As is compulsory in our country, a lot of the rejection
of Prof. Ndung'u is hinged on the thought that the governor needed to come from
another 'tribe'. Let's ignore those sentiments and focus instead on the theory
that the Central Bank Governor needs to have a history in the banking industry. This line of thought by banking executives is upon close
scrutiny totally baseless. Looking first at the role of the governor, or if we
called it the job description, it can be derived from the mission statement of
the entire Central Bank, which is
"Maintaining price stability and fostering
liquidity, solvency and proper functioning of a stable market-based financial
system"
Further, the specific objectives of the bank are
enumerated as follows on the CBK website. Central Bank of Kenya (Amendment) Act, 1996 as
follows:
Principal Objectives
1. The first principal
objective shall be to formulate and implement monetary policy directed to
achieving and maintaining stability in the general level of prices
2. the second
principal objective shall be to foster the liquidity, solvency and proper
functioning of a stable market based financial system
Secondary Objectives
Without
prejudice to the generality of the above two principal objectives, the Bank's
secondary objectives shall be to:
1. Formulate and implement
foreign exchange policy
2. Hold and manage its
foreign exchange reserves
3.
License and supervise authorized dealers
in the money market
4. Promote the smooth
operation of payments, clearing and settlement systems
5. Act as a banker and
adviser to, and as fiscal agent of the Government; and
6. Issue currency notes and
coins
It is clear then, from the two principal objectives, that
what is most important is that the governor enjoys an advanced and technical
knowledge of economics; in addition to being of strong independent character
and leadership capability. This is also reflected with regard to the secondary
objectives.
The governor is not expected to be an expert in each and every
field. A competent and intelligent person with a background in economics would
be capable of leading the Central Bank towards a realization of these
objectives; whether through his own initiatives or by delegation of authority
and supervision. The core attribute, as with every large organization is
leadership..
To listen to those against his appointment, one would
think Prof. Ndung'u has been brought out of the academic wilderness. The
reality is that he has been the director of the Institute of Public Policy Research and Analysis,
a data-driven organization that carries out real research on economic issues in
order to advise the government on micro and macro-economic reforms. Supervising the big picture while maintaining high
integrity at the central bank is what is required of the governor. The day
today operations of the bank are a different calling altogether, duties that the
former acting governor Jacinta Mwatela can very ably carry out, relying both on
her vast experience and her intricate knowledge of the systems there. It would
be a great loss to the country to have her abilities diluted by imposing on her
an office that would deprive her of the time and flexibility to have a full
impact on the bank's running.
The optimization of Central Bank processes is not the
role of the new governor, he would be much more useful to the nation using the
strategic positioning of Central Bank's role through monetary policy to spur
stable macro-economic environment for rapid economic development in the
country.
The Central Bank is not in the business of banking as such
contemplating new branches or such expansionary strategies. Rather its
obsessions should be the quality of its data capture and the formulation of
strategy based on this information. This data related to inflation,
money-supply, interest rates and other such measures of economic health are
entirely familiar to Prof. Ndung'u and he should have no problem stepping right
in.
We have seen in the past what credible outsiders have
been able to do at CBK, both in Micah Cheserem and later in Dr. Andrew Mulei.
They both were instrumental in bringing back order to the nation's financial
system, stabilizing interest rates and run-away inflation in post-2002. Micah
Cheserem was arguably the saviour of Kenya's finances in the late 1990's.
Also prior to his ouster, Dr Mulei's record at the Central Bank was stellar in
spite of the fact that he had not been a CBK insider nor did he have 'hands-on'
banking experience. His origins at the Institute of Public Policy did not stnad in the way of his delivery of service to the bank and the country.
Prof.
Ndung'u needs to be let to do his job, banking experience or none.
|
I see your point about her operational nous being invaluable, and raise you the fact that she is close to retiring now, and is a talismanic figure in the circles of integrity.