How CBN Strayed From Core Mandate — Cardoso

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, said the apex bank strayed from its core mandate under the previous administration of Godwin Emefiele.

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

The former Commissioner for Economic Planning and Budget in Lagos said the previous administration pumped N10trn into quasi-interventionist activities that were not the areas of strength of the apex bank.

He said events in the past few years have not portrayed the apex bank in good light.

He said, “I am aware that events over the past few years have also put the CBN in bad light. These issues can be attributed to various factors such as corporate governance failures, diminished institutional autonomy of the Central Bank of Nigeria, a deviation from the core mandate of the bank, unorthodox use of monetary tools and inefficient and opaque foreign exchange market that hindered clear access, a foray into fiscal activities under the cover of developmental finance activities and there was also a lack of clarity in the relationship between fiscal and monetary policies amongst other challenges.

“Hitherto, the CBN has strayed from its core mandate and engaged in quasi-fiscal activities that pumped over N10trn in the economy through different initiatives in sectors ranging from agriculture, power, and many others. These clearly, distracted the bank from achieving its own objectives and took it to areas where it had limited expertise.

“Under my leadership, the Central Bank of Nigeria will vigorously address these issues.”

Continuing he said, quasi-interventionist activities of the apex bank will be discontinued.

“The primary mandate of the CBN is to ensure price stability in addition to other objectives such as issuing legal currency, safe-guarding external reserves, promoting a sound financial system and providing economic and financial advice to the government.

“In line with our strategy to focus on its core mandate, the CBN will discontinue direct quasi-interventionist activities and instead utilise orthodox monetary policy tools for implementing monetary policies,” he said.

Bank Recapitalisation
Furthermore, the apex bank chief said commercial banks in the country will be directed to increase their capital base.

He said commercial banks currently don’t sufficient capital relative to the finance system needs in servicing a $1trn economy.

He said, “Considering the policy imperatives and the projected economic growth, it is crucial for us to evaluate the adequacy of our banking industry to serve the envisioned larger economy.

“It is not just about the stability of the financial system at the moment as we have already established at the current assessment to show stability.

“However, we need to ask ourselves: will Nigerian banks have sufficient capital relative to the finance system needs in servicing a $1trn economy in the near future? In my opinion, the answer is ‘No’ unless the we take action.

“Therefore, we must make difficult decisions regarding capital adequacy. As a first step, the Central Bank will be directing banks to increase their capital.”

The last time the CBN increased capital base for banks was in 2005 when current Anambra State Governor, Charles Soludo, was the apex bank chief. Capital base was raised from N2bn to N25bn.

‘New Regulation For Digital Services’
Cardoso, who was appointed by President Bola Tinubu on September 15, 2023 ad confirmed by the Senate on September 26, 2023, said a new regulatory and compliance framework will be developed under his administration.

He said, “Recent developments in the payment services landscape have raised concerns regarding the use of technology and the existing licensing and regulatory framework. We have observed that some licensees are operating outside their approved activities, breaching the boundaries set for them.

“Any intentional or non-intended non-compliance will be subjected to sanctions as operators have the responsibility to ensure that they are licensed for the activities they undertake.

“As we conduct a comprehensive review of licensing framework for payment services, we will engage in extensive consultation to develop a new regulatory and compliance framework that is suitable for the technology-driven payment services sector. ”

‘MPC Meetings Must Be Effective’
On the Monetary Policy Committee (MPC) meeting of the apex bank, Cardoso said the meeting must be useful and effective.

“For quite some time, the MPC meeting has not been effective,” he said, adding that the CBN Act 2007 requires that the MPC meeting holds four times a year and the bank has satisfied the requirement for 2023.

“Our focus is on ensuring that these meetings are useful and effective,” he stressed.

‘Challenges Surmountable’
The CBN chief was optimistic that micro-economic and social challenges facing the Nigerian economy were surmountable.

“It is evident that we are facing significant micro-economic and social challenges. These challenges stem from a variety of factors including unintended consequences of not setting necessary policies,” he said.

“I want to assure you that while it is a formidable challenge, it is not insurmountable.

“With corrective measures and the right policies, we can restore fundamental flaws.”