Dr Patrick Ngugi Njoroge, whose private life was the subject of discussion during his vetting yesterday, said he does not own any asset in Kenya but keeps all his money in the bank. MY APPROACH Njoroge has been nominated as the ninth governor of the Central Bank of Kenya (CBK). The Yale-educated economist told legislators during his vetting that was dominated by concerns over high interest rates charged by commercial banks that he does not believe in regulating interest rates through legislation. However, Njoroge who has a PhD in economics, said he was still puzzled by the current interest rate charges in the Kenyan market.
He said the prevailing rates were only comparable to countries that had been hit by a banking crisis. “It is such a puzzle why the interest spreads are very large. It is indeed true that commercial banks have been making as high as 28 per cent in returns on equity,” Njoroge said. “I plan to work very closely with commercial banks on this issue.
My approach will be to see banks get more innovative and I will insist on market-based solutions that are sensitive to their profits but also at the same time address the high interest spreads,” he explained. But the vetting got heated up when the time came to know what his net worth and when some legislators insisted that he tells Kenyans a little more about himself having been out of the country for two decades. “I do not have a single asset in Kenya and I sold all my assets in the US,” he said. In 2014, Njoroge earned a gross pensionable income of $358,843, which translates to about Sh3 million per month at current exchange rates .
Parliament wanted to know why a man who was risk averse from his lack of investment would be in charge of Kenya’s most important institution tasked with ensuring a stable investment environment in the country. “It is not that I lack faith in the economy I am in. This is the point I am in at the moment but it does not mean it will be always be like this. I also do not fear to make decisions,” said Mr Njoroge, who joked that being an economist, it can be understood where he is coming from.
His personal life came at play during the vetting when legislators sought to know a little bit more about the life of the governor designate outside his economics career. NOTHING SINISTER “I am single by choice but I fully subscribe to the ideas of the family and there is nothing sinister in this,” Njoroge said when he opened up to Parliament on his private life. But in what is set to put him on a collision course with the government, Njoroge said he did not think the move to increase the capital by banks from the current Sh1 billion to Sh5 billion in three years would be in the interest of the sector.
“Small banks have niches they have been serving. Once they merge into big banks, they may not be interested in the same markets,” he said.
Njoroge told Parliament he would resign from the IMF on the same day he signs the offer letter from the CBK. The economist said he does not subscribe to roadside decision-making but would use data to guide his decision-making at the CBK. “I believe in data-driven decision making. I am not into making knee-jerk reactions. We need to weigh all sides.
It does not mean we shall not make mistakes, but at that particular point in time, we would have made the best decision depending on the data available,” Njoroge said. Njoroge is the freshest recruit from the International Monetary Fund (IMF) to be put in charge of another critical organ of Kenya’s economy. He is a long-serving IMF insider and he beat 22 other candidates to the hotly contested CBK’s top job. His appointment has cemented the country’s dalliance with the Washington-based institution.
Njoroge was hard pressed to explain if he would advance IMF’s model of economic growth on Kenya’s economy at a time when criticism of his previous employer have reached fever pitch. When he settles, Njoroge’s first assignment will be to stop the free fall of the Kenyan shilling. Njoroge, who advised the deputy-managing director of IMF in Washington, replaces Prof Njuguna Ndung’u who retired in March. But unlike his predecessor who enjoyed sweeping powers that saw him literally supervise himself, Njoroge will have his clout at the bank clipped by an independent board for oversight. SEASONED LAWYER Parliament also vetted Mohamed Nyaoga, a seasoned lawyer, to be the next CBK chairman.
Mr Nyaoga, who said he was worth Sh250 million, was hard pressed to explain any conflict of interest.
But he said he would resign from the boards of Eco Bank where he is a chairman and would also consider exiting Telkom Kenya as a director. Also vetted was Ms Sheila M’Mbijiwe, a banker and former member of the Monetary Policy Committee (MPC), to be one of the next deputies alongside Haron Sirima. Njoroge will also be expected to improve relationship between commercial banks and the CBK, which worsened in 2013 when the shilling touched the 107 mark trading against the dollar. This was the weakest point in 17 years. He is the first governor to be appointed through a competitive bidding process in what is likely to give him more legitimacy at the institution. Previously, the president would appoint CBK governor without a competitive process.
Njoroge will be expected to find a permanent solution to the shaky Kenyan shilling that has been on a slide since late last year.
THE STANDARD | KIJIJINEWS.COM