What to expect from the man nominated for top CBK job

Corporate News

Dr Patrick Ngugi Njoroge. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• Dr Patrick Ngugi Njoroge's record shows he could fight inflation more aggressively.

President Uhuru Kenyatta’s decision to nominate Patrick Ngugi Njoroge for appointment as the new Central Bank of Kenya (CBK) governor has left investors guessing the policy direction the little-known economist will take if Parliament, as is widely expected, gives him the stamp of approval.

Keen followers of economic affairs will, however, find important clues of Dr Njoroge’s policy inclination from his long stint at the International Monetary Fund (IMF), where he is currently an adviser to one of the four deputy managing directors.

In a working paper he co-authored with a team of IMF economists, Dr Njoroge emphasises the moderation of business cycles as a key anchor of macroeconomic policies.

This means that he favours use of central bank tools such as control of money supply and interest rate-setting to keep the economy on a sustainable growth path — avoiding overheating and recession.

“Economic policy is often contingent on whether or not a country is experiencing a cyclical contraction or expansion, and so it is vital that appropriate tools be used to extract the country-specific business cycle from the data,” says the IMF paper that sought to determine business cycles in the Caribbean nations.

This position holds that the CBK should adopt an expansionary monetary policy in a sluggish economy by lowering the central bank rate (CBR) and buying bonds, in effect stimulating growth by encouraging investment and consumption through cheap money.

Reverse actions would be applied to slow down economic growth, especially if there is a threat of excess inflation or asset price bubbles.

If the paper represents the core of his policy standpoint then Dr Njoroge will likely favour an interventionist stance as far as macroeconomic policy is concerned.

Smoothing the business cycle in the current environment would, however, require a fine balancing act given the fickleness of economic growth. Besides, the economy, saddled with rising inflation despite the slowdown in economic activity, has been showing conflicting signals.  

The IMF study also underscores the importance of data and research as the basis of macroeconomic policies, mirroring the approach of former CBK governor Njuguna Ndung’u who deepened economic data collection and analysis during his tenure and actively applied it in the bank’s policy decisions.

READ: IMF man named Kenya’s next Central Bank governor

Dr Njoroge, who has decades of experience in economic policy formulation and research, will now have a chance to test his ideas as a key member of the CBK’s Monetary Policy Committee (MPC).

The Yale-educated economist has been in his current role at the IMF since 2012, prior to which he was the deputy division chief, finance department since 2006.

Dr Njoroge was the IMF mission chief to Dominica, a Caribbean island nation, from 2005 to 2006. This was his second position at IMF, having served as an economist between 1995 and 2005.

Dr Njoroge has two decades of experience at the institution that is considered one of the most powerful in the management of the global economy.

Before joining the IMF, he had significant experience in the public sector, having worked as a planning officer in the Ministry of Planning in 1985.
He served as an economist at the Ministry of Finance for two years from 1993 before he left for the IMF.

The incoming governor has a Doctor of Philosophy degree in economics from Yale University and a Master of Arts degree in the same field from the University of Nairobi where he also obtained his Bachelor’s degree in economics.

Dr Njoroge studied at Mang’u High School between 1973 and 1976 and attended Strathmore College between 1977 and 1978. His nomination is expected to get parliamentary approval, paving the way for a four-year term with the possibility of a second term.

He beat four other high-profile contestants who have extensive experience in the public sector having held senior positions in various ministries.

Others on the shortlist were CBK deputy governor Haron Sirima, Economic Affairs Director at Treasury Geoffrey Ngungi Mwau, former Planning permanent secretary and one-time CBK deputy governor Edward Sambili and Peninah Wanjira Kariuki.