Credit for the title of this article is to no other person than the Chair of former president Barack Obama’s Global Development Council, Mohamed El-Erian, who in his book with the above title highlighted the challenges that confront central banks globally.
El-Erian noted that central banks had been considered the only game in town and wondered whether the very high expectations placed on them might backfire in the future.
According to him, ever since the 2008 global financial crisis, central banks had ventured, not by choice, but by necessity, ever deeper into unfamiliar and tricky terrain of unfamiliar unconventional monetary policies as well as heavily intervened in the functioning of markets. He also revealed that during the 2008 financial crisis, in the US, “a myriad of emergency funding windows were opened to enable cash to be injected into the financial system, and from virtually any and all directions.”
Indeed, central banks globally are confronted with varying degree of challenges.
In Nigeria, faced with the challenge of the slump in crude oil prices in 2014, which thereafter snowballed into a foreign exchange crisis, the Central Bank of Nigeria (CBN) had to continuously adjust its policies to achieve the desired results. In addition, the delay by President Muhammadu Buhari in forming his cabinet months after he was inaugurated in 2015 then put the responsibility of managing the economy on the shoulders of the central bank.
Since last year, policy makers have been battling to lift the economy out of a biting economic recession. Nigeria’s first quarter 2017 Gross Domestic Product (GDP) showed that the economy contracted by 0.52 per cent (year-on-year) in real terms, indicating five consecutive quarters of contractions since the Q1 2016. This was however 0.15 per cent higher than the rate recorded in the corresponding quarter of 2016 (revised to –0.67 per cent from –0.36 per cent) and higher by 1.21 percentage points from the rate recorded in the preceding quarter (revised to –1.73 per cent from –1.30 per cent)
There are predictions that the decelerating inflation and negative GDP growth, as well as increased capacity utilisation and agriculture output are all signs that the economy was on the path to recovery.
But for the CBN Governor, Mr. Godwin Emefiele, the regulator has been developing home-grown policies to surmount challenges that confronted the economy in recent times.