The president chose my name. That's when everybody sort of got excited.
In 2015, a relatively unknown economist stepped into one of Kenya's most critical institutions.
It was a new country that I had not been fully engaged in for 20 years.
President Uhuru Kenyatta has appointed Patrick Njuguna, the nominee for the Central Bank of Kenya. Patrick Njuguna Njoroge.
In the first 2 months, I lost 5 kilos. What would keep me awake at night? It wasn't so much inflation and things like that. It was will the systems turn on the next morning? Some of these things if they broke and the thing didn't work in the morning, then the entire country would go down.
We are all a creation of the experiences we've had over the years. And my experiences of course begin very much in my family, being pushed to be a good student, good professional. And that has stayed with me throughout my life. It has changed in various ways. I'm no longer a student, so but I'm still a professional. The details change, but the principles and the underlying approach has remained the same.
In high school, which is a place where we learn a lot and we become more of ourselves, I went to Mangu. And that was fun. I learned a lot. I then went and did my A levels in Strathmore. Strathmore College then. That was the name then. Very exciting times. I always wanted to be an engineer. And that was a time when we were all in the sciences. And I was actually accepted to go into electrical engineering in the University of Nairobi. But during that period, I kind of realized that that's not what I want to do. And that's when I changed and ended up doing arts. So I studied Bachelor of Arts, economics, did a master's in the University of Nairobi, and then eventually ended up doing my doctorate at Yale. Came back, did 2 years at the Ministry of Finance, and then eventually got a job at the IMF. Did that 20 years. I mean, you may look at one aspect and sort of say, 'Oh, you know.' But that's not what defined me. What defines me is everything, you know, put together, yeah?
June of 2015, a position was advertised.
The Public Service Commission has advertised the position of Central Bank of Kenya Governor a week following the expiry of Professor Njuguna Ndung'u's term.
I and others applied. And then there was a whole bunch of interviews, including with the Public Service Commission. And then this was quite public. First time, I think, in CBK's history where this process was followed from start to end. I had come to Kenya to interview. I still had my job in Washington with the IMF. But then it became clear that the process was going to happen very quickly. And sure enough, you know, very quickly, the president chose my name and sent this name to Parliament to for the vetting. And that's when everybody sort of got excited because
Who is this person who's coming in from abroad? Does he know anything? Things took a turn that most people would not have planned for.
Following his appointment, the governor was faced with some challenges. He had been away from the country for a while and was not sure how the transition back and the adjustment to the role of governor would be.
It wasn't just the new job. It was a new country that I had not been fully engaged in for 20 years. And the country had moved on in all sorts of ways. So, there's also the cultural shock. In the first 2 months, I lost 5 kilos. 5 kilos that I didn't have to lose, but I lost that.
Upon assuming office, Governor Patrick Njoroge inherited an economy facing high inflation, banking sector instability, and several other challenges. To counter this, he took aggressive monetary actions in his first 2 months.
Basically, there was no time to lose. We hit the ground running. Inflation was very high. There was never a moment that you could sit back and sort of, you know, think calmly through things. There was no time for calm. It soon became clear that we needed to do more than just deal with inflation. We needed to improve the toolkit on monetary policy. So, we started that and eventually put together a white paper on monetary modernization of monetary policy, etc. much later and, you know, implemented it in various ways.
From the start, the governor's tenure marked a period of aggressive regulatory cleanup that was part of his efforts to instill discipline and transparency in a sector previously plagued by weak corporate governance.
And we also had the problems that were becoming evident in some of the banks. And a lot of forbearance before that and basically now we had to deal with three banks in quick succession. It was necessary to shut them down. And really insist on what the rules were and that they follow the rules.
The governor is just saying that we must now strengthen and remove the weaknesses in our banking system.
First one was in August. I believe it was August 14th, could be August 15th. It was a small bank, so the shock wasn't that dramatic. The second was Imperial Bank. That was in August 12th, I believe it was of 2015. That one was, the shock was much more, was larger. The shock wave. But I think the largest shock wave was April, earlier. But I think it was April 7th, April 8th. Thereabouts. Of 2016 when we shut down Chase.
On 7th of April this year, the collapse of one bank sent jitters through the Kenyan banking sector. That bank was Chase Bank.
Chase had, you know, in my language, had the face of Kenya. Very diverse depositors, etc. And that I think was good in the long run or even in the medium term because the banks began to do what they should have done. So in a sense, the culture began to change. The culture of forbearance went out the window and the culture of these are the rules and you follow the rules. We've enforced that.
In 2016, in the midst of the collapse and receivership of Chase Bank and Imperial Bank, Kenya's Parliament passed a law capping interest rates in response to public outcry over the high cost of credit and perceived predatory lending practices by commercial banks. The law capped lending rates at 4% above the Central Bank rate.
On September 14, 2016, if you remember, that is the 50th anniversary of the Central Bank. On that very day, we got a gift from Parliament, which was interest rate caps were imposed. And I call it a gift because it's something like, you know, you think of a rabbit, but then you end up getting a skunk. So, this was more of a skunk. We continued to communicate and explain how that will be so detrimental to the economy in terms of credit rationing, etc. And that's exactly what happened. And so, in the end, the caps are removed, etc. We were disappointed because we knew this was going to happen, and in a sense, it's the economy and the Kenyan people that ended up hurting.
