 Welcome back now. The governor of the Central Bank of Nigeria, CBN Olaemi Kadosa, has said that for quite some time there has been a dislocation of the monetary transmission mechanisms rendering the MPC meetings largely ineffective. Now Kadosa hinted that a new price management and stability framework that will lead to improvement in average living standards is underway. Now the inflation management plan soon to be unveiled by the Central Bank of Nigeria is in conjunction with the Ministry of Finance and other relevant fiscal authorities. I have the principal partner Woodward Jens Kart Konsulte and Sherbou Shoguita joining me now to discuss further on this development. Good morning to you, Sherbou. Thanks for staying with us, Sherbou. Let us start this way. There are lots of revelations and inroads made at the weekend by the Central Bank governor, Yemi Kadosa, and he has said that his predecessor permed 10 trillion Naira into quasi-interventionist activities that were not the areas of strength of the apex bank. How do you reason this aberration? What exactly went wrong? Okay, thanks for having me again. The speech of the Central Bank governor, the new Central Bank governor was quite interesting. It was extremely engaging and it was something that, you know, everybody that truly is in the financial sector would need to pull back and run through. And there was a lot of messaging and then there were also some things that were not said, but that were kind of alluded to, that it's important that the markets understand. Talking about the activities of the CBN prior to his assumption of this office, describing those activities as an aberration may not be entirely correct and I am a bit concerned that what appears to be an attempt to demonize the Central Bank, you know, we have to remember that the Central Bank is an institution. It's not a person. And the Central Bank of a country is the Central Bank of that country, regardless of who the Central Bank of now might be, stating that the CBN went outside of its mandate, got distracted, and all of those things may not necessarily be true. So if you look at the things that the Central Bank was doing with a lot of the policies of the former CBN governor, I think a lot of his policy actions were a big problem for the economy. But I don't think one of those problems was the interventionist activities of the CBN. I think those activities were necessary given the where the Nigerian economy is today. The Nigerian economy is in a crisis. And we have to recognize this when an economic crisis, an economic crisis that can be likened to a situation of a country at war. It's that serious. Inflation is out of control, exchange rates, volatility is out of control. We are having 30% swings in the value of your currency within the matter of days. This is an aberration. There is no economy that can survive that kind of volatility. And these things have been in this situation for a while. When you run an economy in crisis, interventionist activities by Central Banks is not an aberration, it's not unusual. And I can give you examples. During the COVID pandemic 2020 and 2021, all Central Banks across the entire world, the Federal Reserve, the UK Bank of England, the EU Central Bank, the various country Central Banks did provide financial intervention programs to fund and boost development and growth. Because economy was suffering from official decline into recession on the back of the decline in economic activity during the COVID pandemic. That's one example. Central Banks got directly involved in creating funds and providing those funds to households, to businesses, small businesses, medium-sized businesses, large corporations. The Central Banks in those countries provided that. You can go back as well to 2007, 2008, the global financial crisis, the Central Banks across the world provided bailout funds. So this thing that the CBN was doing under MFLA in the last three, four years, the anchor borough program, the various intervention funds to the aviation sector, to the energy sector, is nothing new. In fact, the Central Bank of Nigeria, before MFLA 2010, I remember vividly, had a manufacturer sector intervention fund that was specifically targeted at medium-sized manufacturing enterprises that had run into crisis and that had loans that were crippling the banking sector. The CBN provided intervention funds to bail those manufacturers out and then to help them revamp their businesses. So when a new CBN got not comes on board and then tries to create the impression that the actions and the activities of the Central Bank prior to its assumption were abnormal, there were an aberration or a distraction, it's not true. It's not true at all. And I wonder what the objectives are. I think what we need to see is the Central Bank today providing policy direction for the entire economy, monetary and otherwise, to lift us out of the problems that we're seeing now, to curtail inflation as a matter of urgency and to at the same time boost growth. Those two objectives are very difficult to balance, but they must do it. All right, let's examine some of the things that he said specifically concerning inflation and other macroeconomic indices. The MPC meetings, he actually talked about that and the outcomes, and he said the outcomes have actually been largely ineffective over time. Right now, headline inflation has surged to 27.33% as that's our last month figures. Nakadosa said the CBN was well aware of the damage inflation had caused to our living conditions and businesses are showing that a new inflation policy would actually be taken over time. I just want to get your reactions concerning his statement concerning the outcomes of the MPC and how ineffective they have been. Yes, I agree with the central part of that. The MPC interventions via the traditional monetary policy with instruments to try to manage inflation has been effective. And I've been singing this like a canary for the last one year. I've been asking the central bank to stop relating to the inflation as though it was just a monetary supply issue alone because it's clearly not the case in Nigeria today. So yes, the CBN government is absolutely correct that the MPC pronouncements have not curtailed the inflation effectively over the years. Yeah, in the last 24 months or so there was the same inflation continuing to increase month and month except for December. So clearly something wasn't working. So he's correct. Now, what will the solution to that be? I found it a bit curious and maybe worrisome that he did not provide a clear statement which regards to what is happening to the NPR or to the MPC in that speech. All he did say was that they are not holding the MPC meetings for two consecutive times now is not in contraption of the law. So he did not say what would happen. Are they going to maintain the standard practice that we've had with our central banks of having MPC meetings every two months as against once a quarter as provided by the law and having it every two months as against once a quarter is obviously also not against the law. That was being done because the central bank realized that the interventions needed to happen more frequently than what the law provided. But you've said you are not breaking the law by not holding the MPC in September and by not holding it in November. But you have not told us when you will hold it. And I think the market needs to have this information. So now talking about the inflation, sorry, talking about the inflation management framework that they're coming up with, the market will be waiting eagerly to get the breakdown of what that will contain. Obviously the NPR must be one of the components of that framework. But we would like to see what the other component would be that might now make the instrumentality of the NPR as a policy instrument more effective. We would have to wait to see that. And that's a good, potentially it's a good pronouncement from him. But until we see the details, we will not know exactly how to work. Okay, now going forward, inadequate foreign exchange supply depreciation of the exchange rate limited external reserves weakened output and high unemployment have pushed up interest rates affected asset quality and solvency ratios in the banking sector. Now Kadozo seems to believe that through targeted policies in as much as you said that he's not aligned, transparent market operations and coordination between the monetary and the fiscal authorities, we can be assured of a more stable exchange rate, control inflation and also create a enabling environment for businesses and individuals to thrive. Do you agree? Okay, a whole lot was said by the central. Can you hand this go ahead? Did you get my question? Yes, yes. I got your question. So basically, I found it quite curious that the central bank of Nigeria spoke about transparency and the importance of transparency to the functioning of the especially the foreign exchange markets. All markets, whether they're foreign exchange, financial capital markets, money markets, whatever kind of market that you're talking about that involves exchange of value, transparency and information flow are very critical components of ensuring that that market is efficient as achieving its objectives. So it's a good thing that the governor said that but what I found also quite curious is the central bank continues to push out information about happening in the foreign exchange markets without providing adequate information to explain how it is happening. The how is as important as the act itself to ensure that market players can plan, they understand what is happening and why it is happening. So if the CBN says for example that back loads are being cleared with banks, with the issue of forward contracts and all of that and with the issue of maybe the airline back loads, if the CBN says on the week by week basis we're clearing these back loads, I think it is absolutely critical that the CBN provides the how because if you do not provide the how to the market then they cannot independently determine what direction the market will go in. If the how is unsustainable then the gains that we see in the price, in the evaluation of our currency will be temporary and that will have very damaging effects in terms of long-term, medium-term and long-term planning for the players in the market. So yes the CBN governor is absolutely correct about transparency but he needs to walk the talk and not just talk it alone. The CBN has been pumping out information without providing the basis of that information. Where is this liquidity coming from? Alright so basically for sake of time let's just finalize on the recapitalization. In 2004 commercial banks were asked to recapitalize from 2 billion to 25 billion naira. Remember the mergers marriages of misfits and the whole lot of that that came out of all of that. Now 19 years on there are plans for banks to boost their capital base to meet with the expectations of a growing economy. I just want to quickly get your thoughts concerning this recapitalization for commercial banks. Well I mean look if you want to grow your economy to 1 trillion a economy in about four or five years there's nothing wrong with saying that your financial system must also be stronger, must develop the capital capacity to fund and drive that growth. So asking for a recapitalization is not necessarily a bad thing. I think the one would be very critical like the CBN governor has said we have stability in the financial and the banking sector in a particular moment. What you don't want to do is to walk the talk. So whatever the approach the intervention approach or approach for this capitalization exercise is very critical. Number one you don't want to do it in a rushed manner. Number two you want to allow the players and industry to have a significant say in how they go about achieving this recapitalization. So regulation must provide guidance rather than compare action and I think if we do that then we will definitely achieve the gains that the CBN governor spoke about and will be trying to achieve. So any challenges on the part of the commercial bank themselves in terms of mergers, acquisitions or any other ways to go about that. Absolutely capitalization would happen with that by virtue of mergers, acquisitions or by raising of new capital. Whichever one of those options that you look at it's not going to be a work in the park. Depending on the quantum of increase, the quantum of change that the CBN will be imposing on the banking industry it might be easy and it might not be so easy. What we would expect probably we will be seeing some further consolidation in the sector as a result of this and you know I cannot for the life of me say anything wrong with that. I think that's good. I think stronger banks are good to create a strong economy and hopefully guidance would also be provided by the CBN to ensure that that strength in the banking sector is transmitted down the bottom of the pyramid to the point of the economy. All right thank you so much Shebo. Just have to let you go because we are completely out of time. Shebo Shopee Toys the principal partner of Woodridge and Scott Consulting. Many thanks for being a part of the show. Always a pleasure. Thanks for having me. All right that's the size of the show for today. I am Justin at the new business Insight returns to your screen. Same time. Bye for now.