How CBN Strayed From Core Mandate — Cardoso

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), stated that the top bank departed from its fundamental duty during the previous administration of Godwin Emefiele.

Cardoso stated this during the annual bankers’ dinner and 60th anniversary of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos State on Friday night.

According to the former Commissioner for Economic Planning and Budget in Lagos, the previous administration injected N10 trillion into quasi-interventionist operations that were not the apex bank’s areas of strength.

He stated that recent occurrences have not painted the apex bank in a favourable light.

“I am aware that developments in recent years have also cast the CBN in a negative light,” he remarked. There are many reasons for these issues, such as bad corporate governance, the Central Bank of Nigeria losing some of its institutional independence, going off track from its main job, using money tools in unusual ways, a foreign exchange market that was not working well and was hard to understand, getting involved in fiscal activities under the guise of supporting development, and not being clear on how fiscal and monetary policies relate to each other.

“Previously, the CBN deviated from its primary mandate and engaged in quasi-fiscal operations that poured over N10 trillion into the economy through various projects in sectors ranging from agriculture to power, among others.” These plainly diverted the bank’s attention away from its own goals and placed it in areas where it lacked expertise.

“The Central Bank of Nigeria, under my supervision, would actively address these challenges.”

Continuing what he said, the apex bank’s quasi-interventionist operations will be halted.

“The CBN’s core purpose is to ensure price stability while also producing legal currency, safeguarding external reserves, promoting a healthy financial system, and providing economic and financial assistance to the government.”

“In accordance with our approach of focusing on its core mandate, the CBN would halt direct quasi-interventionist operations and instead implement monetary policies using conventional monetary policy tools,” he stated.

Furthermore, the country’s commercial banks would be directed to increase their capital base, according to the apex bank chairman.

He claimed that commercial banks today lack sufficient capital in comparison to what the finance industry need to service a $1 trillion economy.

“Considering the policy imperatives and predicted economic expansion, it is critical for us to assess the capability of our banking business to serve the bigger economy,” he said.

“It is not simply about the financial system’s existing stability, as we have already demonstrated at the current evaluation to prove stability.”

“However, we must question ourselves whether Nigerian banks will have enough capital proportionate to what the finance industry requires to service a $1 trillion economy in the near future.” Unless we take action, the answer, in my opinion, is “no.”

“As a result, we must make difficult judgements on capital adequacy.” The Central Bank will direct banks to boost their capital as a first step.”

The CBN last enhanced bank capital bases in 2005, when the current Anambra State Governor, Charles Soludo, was the central bank chief. The capital base was increased from N2 billion to N25 billion.

‘New Digital Services Regulation’

Cardoso, who was chosen by President Bola Tinubu on September 15, 2023, and confirmed by the Senate on September 26, 2023, stated that his administration will create a new regulatory and compliance structure.

“Recent advancements in the payment services sector have prompted worries about the usage of technology as well as the present licencing and regulatory framework,” he said. We have seen certain licensees acting outside of their allowed activities, therefore exceeding the limits set for them.

“Any purposeful or unintentional noncompliance will result in sanctions, as operators are responsible for ensuring that they are licenced for the services they do.”

“As we perform a comprehensive assessment of the payment services licencing structure, we will conduct wide consultation to build a new regulatory and compliance framework fit for the technology-driven payment services sector.”

Cardoso stated during the apex bank’s Monetary Policy Committee (MPC) meeting that the meeting must be informative and effective.

“The MPC meeting has not been effective for quite some time,” he said, adding that the CBN Act 2007 requires the MPC meeting to be held four times a year, which the bank has met for 2023.

“Our priority is to make these sessions relevant and effective,” he said.

The CBN governor was optimistic that the Nigerian economy’s microeconomic and societal difficulties could be overcome.

“It is clear that we are confronted with enormous microeconomic and social issues.” These difficulties originate from a range of circumstances, including the unintended effects of failing to implement critical policies,” he explained.

“I want to reassure you that, while the task is formidable, it is not insurmountable.”

“We can restore basic defects with corrective measures and the right policies.”