Recent reports suggest that Central Bank of Nigeria (CBN) Governor Godwin Emefiele has been sacked by President Muhammadu Buhari. These reports have not yet been confirmed and we will continue to monitor the situation, however, early reports suggest that Emefiele might be replaced by either Ahmed Kuru (CEO/Managing Director of the Asset Management Corporation of Nigeria) or Aishah Ahmed (Deputy Governor of the CBN and Financial Systems Stability Directorate).
Both candidates on the current short-list are generally well regarded and would likely represent a positive market reaction if these rumours prove to be true. There has been much speculation as to whether Emefiele, who has been governor since August 2015, would remain in his post following last week’s election. The consensus had suggested that if opposition candidate Atiku Abubakar won the election, Emefiele would certainly not be retained for a second term (which is due in June and includes a mandatory leave period beginning in April). He would instead be replaced by someone who would push for greater FX flexibility, potentially moving towards a floating naira, as suggested by Atiku himself.
However, Buhari’s victory had increased the chances of Emefiele being retained for a second term, though this was also far from certain. If recent Nigerian history were to serve as an indication, no CBN governor has served for more than one term since the beginning of the Third Republic in 1999.
Regardless of whether Emefiele is replaced or not, whoever leads the central bank during Buhari’s term will face considerable economic difficulties, including high and persistent levels of inflation (11.37% YoY), stagnant economic growth (c2%), and an FX regime that remains nebulous at best. As laid out in our pre-election report, we believe that the CBN should continue to push for further harmonisation in the FX windows and eventually move to a managed or outright float of the currency in order to isolate the country’s FX reserves, buffer itself from exogenous shocks, and achieve a greater degree of external competitiveness (currently hampered by a real effective exchange rate overvaluation).