Stormy Days Ahead?

Published 10 years ago

The ignominious ousting of Sanusi Lamido Sanusi, arguably Nigeria’s most recognisable Central Bank governor in history, heralded a tidal wave of public opinion and sent shockwaves throughout financial markets.

Following allegations of financial misconduct in the bank’s 2012 annual report, Sanusi was questioned by Nigeria’s President Goodluck Jonathan in May and suspended in February while on assignment in Niger. The timing has led some to conclude that it is a consequence of the embarrassment he caused the government by questioning the country’s national oil company over $20 billion that was missing from the national account.

The action caused debate over whether the president acted legally since the constitutional provision for removal of the Central Bank governor states it must be approved by a two-third majority in the senate. In the aftermath, the naira recorded a significant loss in value, trading at N169 to $1 from a previous day closing price of $163. This was described by Proshare, a market intelligence firm, as the worst single day drop in 15 years.


Sanusi was a symbol of Nigeria’s economic stability because of his prudent monetary policy regime. His achievements included reducing inflation of over 11% in 2009, when he assumed office, to single digit rates, as well as maintaining exchange rate stability which saw the naira strengthening against the dollar over the past 24 months. The overall performance of the system under his watch fueled confidence in Nigeria’s economy and led to heightened interest in the country’s bonds and investments.

Predictably, his abrupt removal was met by a panicked response from investors. The government moved quickly to reassure stakeholders, with finance minister Ngozi Okonjo-Iweala emphasizing that the prudent fiscal and monetary policies that had been pursued up till now, will be maintained.

While the minister’s assertion and a similar statement by the interim head of the bank, Sarah Alade, provided some calm, the system will continue to be characterized by uncertainty until at least several months into the tenure of the incoming helmsman, Godwin Emefiele, the CEO of Zenith Bank, one of Nigeria’s largest lenders.

Emefiele, a former university lecturer, is a veteran of the banking sector having been on the management team of Zenith since it was founded in the early 1990s. While his nomination is surprising, he is viewed favorably by industry observers due to his reputation as a steady hand.


In light of these events, Nigeria’s monetary policy authorities are faced with the formidable challenge of facilitating a stable environment that will enable continued growth of the economy. At the previous meeting of the Monetary Policy Committee, the bank’s policy making authority, key issues were identified which pose a challenge to monetary stability in the near to medium term. These include the depletion of the country’s reserves, dwindling flows of foreign investment, the widening gap between the official exchange rate and that of authorized dealers, and the upward tendency of inflation.

These will persist in the coming months as the country prepares for national elections next year. Investors are likely to tread cautiously as the outlook evolves, hence authorities may resort to implementing extraordinary measures based on coordinated fiscal and monetary policy actions, in order to stem volatility. However, the recent high growth potential classification of Nigeria as part of the MINT countries, along with Mexico, Indonesia and Turkey, means overall interest in Africa’s largest economy in waiting is unlikely to wane.

Meanwhile, Emefiele will assume office as the 11th governor of the Central Bank. With a calm disposition that is the antithesis of Sanusi’s vibrant personality, he is viewed as having a temperament that is more suited to the role. Highly regarded by colleagues and observers, he will need to leverage his considerable experience to build on the achievements of the bank’s previous leadership, as he steers it through a period of uncertainty.

The manner of Sanusi’s removal has raised old questions about the independence of the Central Bank governor in a country where political leaders wield considerable influence. While he has confirmed that he will not go back to the job, Sanusi intends to challenge his removal in court in order to clarify the legality of the president’s action for the benefit of his successors.