Weak shilling challenge for IMF veteran - Daily Nation

Weak shilling challenge for IMF veteran

Wednesday June 3 2015


Dr Patrick Ngugi Njoroge. Nominee for the position of the Central Bank governor. PHOTO | LINKEDIN | NATION MEDIA GROUP 

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The nomination of Dr Patrick Ngugi Njoroge as the new Central Bank governor did not come as a surprise.

Out of the three shortlisted candidates who were interviewed by the Public Service Commission for the job, Dr Njoroge was widely regarded as the man with superior credentials.

The other names on the shortlist were Dr Geoffrey Mwau, currently the Economic Secretary at the National Treasury and the current deputy governor, Dr Haroun Sirima.

Although Prof Njuguna Ndung’u retired three months ago, it was not until Wednesday that President Uhuru Kenyatta nominated Dr Njoroge and sent his name to the National Assembly to be vetted before he is formally appointed.

Incidentally, Dr Njoroge and Prof Ndung’u were classmates as undergraduates.

Also nominated was lawyer Mohamed Nyaoga, for the position of CBK chairman, Ms Sheila M’Mbijiwe and Dr Sirima for deputy governor.

“This ends the brewing uncertainty over the vacuum at CBK, which was a threat to foreign investment,” said economic analyst Robert Shaw in an interview with the Daily Nation yesterday.

Dr Njoroge is an economist with solid credentials, having spent most of his working life interacting and engaging with Central Bank governors from other countries and negotiating policy programmes with national treasuries of African governments on behalf of the International Monetary Fund (IMF).

He has been with the IMF for 20 years where he has been a senior manager occupying the position of deputy division chief. Holders of this position lead IMF missions to various countries.

Before his nomination, he was the adviser to the deputy managing director at IMF.


Sources from the Public Service Commission, who interviewed Dr Njoroge, told the Daily Nation that he impressed the team with his knowledge, insight into the major challenges facing central banking in Kenya and his temperament.

The fact that he has been a senior IMF staffer of long standing is something markets are likely to respond to positively because international markets regard the IMF as an international credit agency.

Will he handle political pressure in an environment where the governor these days shares powers with the chairman of the board? Does he have what it takes to deal with pressures from the powerful banking fraternity? The jury is still out.

On the face of it, the fact that he has been out of touch with the local situation — especially with the domestic financial markets — for the 20 years he worked outside Kenya is likely to present him with a major challenge. He has also not had experience managing an institution of the size of the CBK, which has over 2,000 high calibre staff.

“Being away for so long does not make him the wrong person but it will be interesting to see how he injects his international experiences to transform CBK beyond what his predecessor had done,” said Mr Shaw.

Prof Njoroge’s backers opined that because he will be coming in as an outsider, he is best placed to approach the tasks ahead with unprejudiced eyes and is free from the influences of powerful interests in the banking sector.

Dr Njoroge is a devout Opus Dei Catholic and is regarded as a protégé of the well-known academic and mentor of many of the economists working in Kenya’s public service today, Prof Terry Ryan.

Among the most immediate challenges will be stabilising the shilling, which has in recent weeks been trading at over Sh98 to the dollar.

He is assuming office at a time when the exchange rate is facing severe volatility. Last week, the CBK Monetary Policy Committee brought forward its meeting to deal with the situation. Expectations are that when the committee meets on Tuesday, it will jerk up the policy rate to shore up the shilling.

In the long run, Dr Njoroge’s main challenge will be how to bring down lending  spreads and to make sure that depositors are paid positive rates by commercial banks.

On inflation, another core mandate of the Central Bank, the challenge will be to bring down the rate within the target level of five per cent.

Lately, signs have been that the economy is beginning to feel inflationary pressure, with indications that core inflation was heading way past the target.
Another key mandate of the CBK is the issue of currency. Here, the challenge Dr Njoroge faces will be even more daunting because the constitutional timeline for rolling out new banknotes ends on August 27.


Under the Constitution, notes and coins issued by the Central Bank of Kenya may bear images that depict or symbolise an aspect of Kenya but shall not bear the portrait of an individual.

Despite the fact that preparations for new currency notes started in 2012, with new designs developed by August 2013, CBK is yet to issue bank notes in accordance with the requirements of the Constitution. Will the new governor be the one to implement the much-talked about consolidation of the banking sector by forcing mergers and increasing capitalisation requirements?

Dr Njoroge becomes the ninth governor of the CBK. The first was Dr Leon Baranski, who served from May 1966 to May 1967. Others were Mr Duncan Ndegwa, Mr Philip Ndegwa, Mr Eric Kotut, Mr Micah Cheserem, Mr Nahashon Nyagah, Dr Andrew Mullei and Prof Ndung’u.

Additional reporting by Edwin Okoth