With government spending also expected to rise ahead of next year’s presidential election, the new governor will have no room to let up on monetary policy and will have to raise interest rates at some point over the next year, analysts say.
Emefiele’s appointment follows the departure of governor Lamido Sanusi, a vocal critic of the government’s record on tackling corruption, who was suspended by President Goodluck Jonathan in February.
His removal raised concerns about the bank’s independence and Emefiele will be closely watched by markets fearful of government interference at the bank.
The government accused Sanusi of irregularities in his handling of the central bank’s budget and President Jonathan has said the bank’s independence will remain sacrosant.
(READ MORE: Sanusi ‘not shaken’ by court ruling)
Africa’s biggest economy, which imports around 80 percent of what it consumes, is struggling with a weaker currency, down 3 per cent against the dollar this year, and dwindling foreign reserves.
Political risk over February 2015 elections and a violent Islamist insurgency that has killed hundreds this year are also clouding Nigeria’s outlook, with the abduction of more than 200 school girls by Boko Haram making world headlines recently.
“The governor resumed today and we are just done with the official handing over,” said central bank spokesman Isaac Okorafor. Emefiele, who took over from acting governor Sarah Alade for a five-year term, will give a press conference on Thursday at 10 a.m. (0900 GMT), he said.
At 52 Emefiele is the same age as Sanusi and has more than 20 years’ experience in banking. He was managing director of Zenith Bank, Nigeria’s second biggest, where he built a well-capitalised institution, banking sources say.
His biggest challenge will be the naira, under pressure over the past year on concerns that reduced US monetary stimulus will crimp fund inflows to emerging markets.
It is currently trading at around 162 to the dollar, outside the bank’s preferred 150-160/dollar range.
The new governor will also have to keep inflation within the bank’s single-digit target, despite looser fiscal policy as polls approach.
Repeated intervention by the central bank to keep the naira within the band has run down foreign exchange reserves, and liquid reserves have declined by about 6.53 billion dollars or 18.2 per cent from 42.46 billion dollars at the start of 2014.
That is a burn rate of about 44 million dollars a day and raises the prospect that interest rates, which have been on hold at 12 per cent since October 2011, may have to rise at some point.
Analysts expect Emefiele to be more discreet than Sanusi, who was often criticised by government officials for going far beyond his remit with his criticisms of government spending.
Banking sources describe Emefiele as a conservative figure who appears confident in public but gives little away.
Monetary policy choices may be limited. He could raise the policy rate, which would prop up the naira and attract investors to domestic debt but hurt lending, or devalue the naira band.
Devaluation, however, would put pressure on the country’s banks as it would lift principal and interest payments on Nigerian government and corporate Eurobonds.