By Babajide Komolafe
LAGOS — THE Central Bank of Nigeria (CBN) Governor, Mallam Sanusi Lamido Sanusi, has said that his successor should be announced three months to the end of his tenure.
He also advised his successor to continue with his policy of tight money supply to consolidate on the gains of the low inflation rate achievement of his tenure.
He spoke, weekend, in Lagos at the 5th anniversary of the Women in Successful Career (WISCAR) where he delivered the keynote address and also featured in a panel discussion.
Said he: “Tomorrow (today) it will be six months to the end of my term, probably a bit early for the government to start talking about the next person. But I do hope that about two or three months before then, there should be some announcement.
“Central Bank governors don’t comment on who they think their successor should be, it is not our business to do that, it is the President’s decision. But If I have input at all, I will try to encourage that we announce a successor two to three months before the end of my tenure so that everybody knows who that person is, what the views are so that people can prepare accordingly. By the way, some of the names are out there in the newspapers and more will come out later.”
High interest rate
Responding to criticism of the high interest rate regime occasioned by the tight money supply of the CBN, Sanusi said high interest rate is the price the economy has to pay for low inflation rate and stable exchange rate.
He said: “If we bring down inflation, interest rate comes down in the long-term whenever inflation comes down and I hope the next CBN governor will continue on that and by 2015 bring inflation down to four to seven per cent. When you get Nigeria into a country where inflation is five per cent, interest rate will come down.
“The interest rate cannot be looked at in isolation. I always tell people that delivering low interest rate is the easiest thing a central bank can do. If I print enough money today, interest rate will come down to three per cent. But what will the rate of inflation be? What would the exchange rate be?
“Recently I have been criticised all over for the 50 per cent cash reserve requirement on public sector funds and I have seen all sort economists and analysts talk and that is fine.
“At the time I introduced the 50 per cent CRR on public sector funds, the India Rupee lost 20 per cent of its value, the South African Rand lost 16 per cent of its value, the Ghanaian Cedi lost 15 per cent of its value, the Indonesia currency lost 18 per cent of its value, the Brazilian Riel lost 12 per cent of its value, the Naira lost only 2.3 per cent. Where would you have been if the Naira had become N190 to a dollar?
“If you go to a bank, you get the dollar at N158. If you buy from the other market, that is a different matter. If you are genuine business, if you establish an L.C. from a bank, you don’t get the naira at more than N158 to a dollar and that is the interbank rate.”
“The reason it is N173 (at the parallel market) is because there was so much cash dollar being pumped to BDCs to sell to people who were not doing legitimate transactions. But a genuine business that establishes an LC to import goods and services buys at the interbank market.
“You have to keep a stable currency at a time when currencies are crashing because of the tapering of quantitative easing (QE).
“For Nigerians who have no social safety net, bringing down inflation affects their lives. They don’t want to go to the market with their small salaries and find out that they cannot feed their families. I have to keep inflation down for these people. I have to keep a stable exchange rate for you to pay the school fees of your children. I have to build up the reserves of this country, so that if there is an oil price shock, the country can continue going. The high interest rate is the price you pay for this.
“The low interest rate is not the problem, I can deliver it, I have told politicians. But where do you want inflation? Fifteen per cent? Where do you want the exchange rate? N180 or N190 to a dollar?
“Every time we just focus on interest rate, we forget the point. The point is that we are not doing development. It is the role of the state to provide electricity; it is the role of the state to provide security and to provide roads.”