It was more than expected that former Nigeria’s central bank governor Lamido Sanusi will be sacked at some point due to the underlying political tension he had created and earlier this month those speculations were laid to rest after President Gooodluck Jonathan suspended him.
But now another African central bank governor could be on the chopping board. This time a corruption case brought against the Central Bank of Kenya Governor Njuguna Ndung’u for alleged abuse of office and graft in an IT system tender is threatening to throw him out of office.
Ndung’u is accused of abuse of office for irregularities in a 1.2 billion shilling ($13.9 million) contract that was awarded last year to Horsebridge Networks Systems East Africa Limited for the installation of security software at the Central Bank.
Kenya’s Director of Public Prosecutions (DPP) Keriako Tobiko has been quoted in local media saying Ndung’u’s actions led to the loss of more than 400 million shillings ($4.6 million) in public funds.
Unlike other government corruption cases that have mostly been swept under the carpet, Tobiko has gone ahead and ordered the Arrest of Ndung’u on February 11th. Ndung’u has however denies any involvement, appealed the arrest, and the High Court is scheduled to continue hearing the case on March 28th.
“We are sending a deterrence message to any government officials who may be tempted to embezzle any public funds or misuse power in the tendering process that we are watching and we will bite back ruthlessly,” Emily Kamau, head of the DPP’s anti-corruption and economic crimes division, told Sabahi.
“It will not be business as usual anymore. Let the government employees entrusted with public funds and privileges utilize them lawfully.”
Not Business As Usual
If Ndung’u is eventually arrested and prosecuted, he will have to vacate his office to pave way for in-depth investigations. The only thing still keeping him in office, serving his second term of four years, is the security of tenure he enjoys under Kenyan law that also stops President Uhuru Kenyatta from suspending or firing him.
“He is lucky that he enjoys the security of tenure thus the president’s hands are tied he cannot fire him immediately,” constitutional lawyer Anderson Mwiti told Sabahi.
This will be the first time in Kenya that a sitting central bank governor is removed over corruption allegations and the effect on the market could be adverse.
Under his tenure at the regulatory office, Ndung’u has been credited with giving an enabling environment for growth in financial inclusion in east Africa’s largest economy. Financial Inclusion in Kenya now stands at over 75 percent having rose steadily from below 21 percent in 2006.
The increase has been mainly attributed to the growth in mobile financial services use with over 31 million people connected to some form of mobile banking service in a country of slightly above 40 million people.
Increased Financial Inclusion
Ndung’u was however heavily criticized for acting too slow in 2011 to tame a runaway inflation rate that hit the highs of 19 percent in November of the same year pushing the local currency to an all-time high of 107 per dollar on October 11,2011. The currency has since recovered to trade at around 86 per dollar due to the monetary tightening policy measure the bank took after that.
In Nigeria, news of the dismissal of Sanusi sent the local currency, the naira, tumbling to its lowest valuation vis-à-vis the dollar since 1999 and the fallout, both political and economic, has raised the specter of currency crisis in the months ahead if Nigeria does not soon rekindle market confidence in the naira.
The same effect is expected to plague the Kenyan shilling if the central bank governor is forced to leave office over his arrest. A foreign exchange traders at one of the local leading banks told AFKInsider “the shilling will tumble a bit due to the uncertainty that Ndung’u’s exit may cause.”
For his part, Maurice Awiti, associate director at the University of Nairobi’s school of economics, said investors should not fear that the case will bring instability in the market.
“There is no need to panic because the Central Bank has a continuity strategy which is not based on one person but a strong institutional succession plan,” he told Sabahi, explaining that the bank’s deputy governor would take the top leadership role if needed.
“The most important thing is for the Central Bank to monitor monetary policy issues and ensure fiscal discipline continuity without letting the governor’s case trigger market volatility,” Awiti said.
