Patrick Njoroge: The central banker who made friends, foes

Patrick Njoroge started his reign at the Central Bank of Kenya (CBK) with many people, including members of Parliament, trying to understand him—single by choice, without investments in Kenya and wanting nothing to do with trappings of power.

And as time ticks away to the end of his eight-year term at the CBK, many more people, including bankers and journalists, are still trying to understand a lot more about this soft-spoken stickler for perfection man who takes no prisoners.

He formally exits his role as the CBK governor on June 17, having made friends and foes in equal measure because of what he did or did not do.

Dr Njoroge is different worlds to different to people. From the Imperial Bank depositors still chasing after their deposits to millions of bank customers he unapologetically fought for, he exits the stage with a chequered legacy.??

While he may be many things to different people, he believes he is just him, at least going by the speech he delivered to Kenyatta University students during the 45th graduation ceremony in December 2018.

“In the end the only thing that remains is me. Do I defend with my reputation valiantly? Am I the best version of myself at all times? Am I unwilling to compromise my reputation for some immediate benefit?” he posed in the speech.

His father wanted him to be an engineer but the ‘him’ in Dr Njoroge saw him study a Bachelor of Arts degree in Economics and crowned it all with a Master of Arts degree and a Ph.D. in the same profession.

Dr Njoroge, in a 2021 interview with Yale University, where he got his Ph.D, said the greatest challenge he ever faced as a CBK governor was closing the mid-sized lender Chase Bank in April 2016.

“The bank was connected with virtually every corner of the country, in terms of the people, sectors and more. It did not help that this came a few months after we closed two other banks,” said Dr Njoroge.

One of the senior officials at the Kenya Deposit Insurance Corporation told the Business Daily that “I?was still in my pajamas” when a call from Dr Njoroge to go and take keys of Chase, which CBK had just shut, came in.

The closure of Dubai Bank, Imperial Bank and Chase Bank in quick succession months after he assumed office in June 2015 introduced Dr Njoroge as a central banker out to shine light at every corner of the sector.

But it also marked the beginning of his love-hate relationship with banks, many who have without daring to go on record, accused Dr Njoroge of coming up with ultra-regulations that painted them as scandals-in-waiting, who needed to be scouted every step.?

For the press, he quickly evolved from a friendly regulator who in 2016 threw a media hangout in Sagana to an unreachable person who only communicated when he said he wanted to.

"I don’t run the CBK using newspapers,” he once told off a journalist who had asked for his reaction on the remarks by analysts that the shilling would lose more ground against the dollar.

He maintained this stance during post-monetary policy committee (MPC) meetings, cherry-picking the questions to respond to even when he faced criticism that his MPC communique was too lagging and with little clues on forward guidance.

At the onset of Covid-19 pandemic, he asked banks to come up with succession plans, directed them to enter into loan restructuring agreements with customers, become reserved with dividend payments and suspends fees on digital transactions with mobile money wallets.?

Dr Njoroge’s heavy hand on the flow of dollars in the economy and the exchange rate became the source of his fights with media, analysts and even the International Monetary Fund which reclassified the Kenyan shilling from ‘floating’ to ‘other managed arrangement’ and kept saying the local currency was overvalued.

Dr Njoroge, who spent 20 years working at the IMF until 2015, hit back accusing his former employer of using Kenya as a guinea pig by relying on a methodology that had glaring weaknesses.

Unlike his predecessor, Prof Njuguna Ndung’u who outmaneuvered several storms including anticorruption sleuths who wanted him charged over irregular award of a Sh1.2 billion security system tender, Dr Njoroge exits with his reputation intact.

Having turned down trappings of power including the grand house and Range Rovers or Mercedes Benz that comes with the job, he cut an image of a central banker out for something different.

He preferred to live in a communal house in Nairobi's Loresho estate. Yet, even with his simplistic life, his rich leadership style meant he still wielded soft power.

Dr Njoroge defied President Uhuru Kenyatta on calls to relax checks on cash transactions of at least $10,000 (Sh1.4 million). And even with similar calls from President William Ruto, the checks still stand.

In October last year, when DP Rigathi Gachagua claimed in a TV interview that the country had run out of forex reserves, he issued a rebuttal to the executive through a morning press release, providing what he termed as the “correct position.”

When members of the Kenya Association of Manufacturers complained about dollar shortages, Dr Njoroge rubbished them off, asking them to “understand that they are small” and go to the forex market to buy dollars “like everyone else."

Even when Treasury, under which CBK falls, tried to come up with a Financial Markets Conduct Bill in 2018 which it said was to protect consumers, Dr Njoroge was not afraid to equate it to a veiled attack on the CBK mandate.

He said the Treasury-sponsored bill was a financial sector equivalent of “being asked to trade in your well-serviced SUV for a souped-up Subaru.” The bill did not proceed.

“It may have flashy lights, stabiliser at the back, noisy exhaust and racing strength but it is still a Subaru. It is time for action. Make no mistakes, CBK is under attack,” he said.

He is exiting the office having put a freeze on issuing greenfield licenses in Kenya’s banking sector, instead favouring mergers and acquisitions.?

Nearly half of the 14 CBK licensed microfinance banks and 15 small banks have sold out stakes to large players in bid to inject stability in the banking sector. The deals have seen the flight to safety among depositors pose.

Dr Njroge succeeded in introducing market discipline in the banking sector, especially starting with implementing the rate cap laws that clipped banks’ powers in pricing for loans.

He always kept an arms-length relationship with banks, something that rattled many bankers who say they only had to take in instructions, but not offer their opinions to the regulator.

While rate cap was a policy he fought against, demonstrating that it would strangle the flow of loans to the private sector, he never tired reminding bankers that they had invited the trouble upon themselves by charging customers rates as high as 25 percent.

And even the rate cap was removed in November 2019, he still reminded bankers that they had to work on new pricing models and present them for approval before they are approved.

Over three years later, some banks are still yet to get approval to transition to risk-based models, in essence condemning them to rate cap regime rates.

?“If they don’t show how their homework is done, we will send them home to explain their workings. You cannot just give us an answer, you need to show your workings to our satisfaction,” he said early last year in reference to banks struggling to get clearance.

And after years of monitoring digital lenders, who he described as controlling under one percent of total credit in the economy but “in terms of noise and pain, it is more than 90 percent,” Dr Njoroge is exiting the scene having brought them into formal regulation.

The digital lenders, who he at some point ejected from the credit reference bureaus platforms, cannot now negatively list customers who default loans below Sh1,000.

President Ruto recently nominated former Treasury PS Kamau Thugge as Dr Njoroge’s successor. Dr Thugge will be the tenth governor at the CBK after Parliament adopted his name.

Parts of this article first appeared in the Business Daily Africa where I work.