Central Bank of Kenya has returned to profit with a Ksh17 billion ($170 million) surplus for the year ended June despite having gaps in top management.

The regulator, which posted a Ksh4.6 billion ($46 million) loss last year, has more than half of its top executives holding office in an acting capacity, its policy making committee not fully constituted and the office of the deputy governor vacant.

Currently, the Monetary Policy Committee has five members against the required nine. The Cabinet Secretary of the National Treasury is yet to appoint new members following the death of Prof Francis Mwega in February and the exit of Farida Abdul whose term ended in April.

Election year

The delayed appointments mean that should any member be unavailable for MPC sittings then the committee, which sets the country’s monetary policy, cannot conduct business as its quorum is set at five.

The committee consists of the governor, deputy governor, two employees of CBK, National Treasury Permanent Secretary and four members appointed by the Treasury CS.

The CBK posted revaluation gains of Ksh8.5 billion ($85 million) compared with a Ksh19.9 billion ($199 million) loss last year due to depreciation of the shilling.

The shilling dropped from an average of 101.3 units to the dollar to 103.5 by the end of June, resulting in higher local values for the foreign currency held by the regulator.

Profit from ordinary operations dropped 28.2 per cent to Ksh9.9 billion ($99 million) due to growth in operating expenses and a decline in interest income and trading income associated with the forex business.

The bank earned Ksh1.2 billion ($12 million) from the overdraft facility it extended to the government, a decline from the Ksh4 billion ($40 million) in 2016.

Interest from commercial banks dropped 35.8 per cent to Ksh3.4 billion ($34 million).

“The drop is due to reduced utilisation of the government of Kenya overdraft facility and reduced advances to commercial banks due to a relatively stable market during the year as compared with the previous year,” the CBK said.

The cost of printing new currency rose to Ksh2.3 billion ($23 million) due to higher releases of notes and coins, this being an election year.

Penalties and fines collected from commercial banks dropped by Ksh10 million ($100,000) to Ksh30 million ($300,000) indicating improved discipline among financial players.

Despite the record profits, CBK will not pay a dividend to the government as it forwarded the surplus to its general reserves which now stand at Ksh114.2 billion ($1.14 billion).

The bank has not remitted a dividend for the past five years, a period throughout which the government borrowed heavily and would welcome relief in income from state corporations. The law allows the bank to retain at least 10 per cent of it profit.

Central Bank subsidiary, the Kenya School of Monetary Studies, which offers hospitality and tutorial services reported an income of Ksh379 million ($3.8 million), up from Ksh217 million ($2.17 million) the previous year.

Licence fees from commercial banks and forex bureaus rose to Ksh292 million ($2.92 million) from Ksh250 million ($2.5 million) as CBK welcomed Dubai Islamic Bank, SBM Holdings and Mayfair Bank into the sector.

READ: CBK Governor Patrick Njoroge: A portrait of discipline, efficiency

Change of guard

Regarding the gaps in management, President Kenyatta has not appointed a deputy governor to the CBK following the exit of Dr Haron Siruma two years ago.

The bank is supposed to have two deputy governors, with one expected to be in charge of operations and the other monetary policy issues.
Currently, Sheila M’Mbijjiwe is the only deputy governor.

In the past financial year, the bank did not conduct a single board meeting due to failure by the Executive to appoint board members who were finally gazetted last November.

Seven of its 12 directors currently hold office in an acting capacity, with some having acted for up to four years.

The CBK had announced plans to undertake restructuring exercise in 2014 and advertised vacancies for eight director’s positions and two heads of department.

A change of guard in 2015 saw a plan drawn up by international advisory firm PriceWaterhouseCoopers shelved with the lack of a substantive board to take the matter forward.

Peter Wanyagi has been acting director for currency operations and branch administration department since July 12, 2013.

Peter Kigondu was appointed acting director in charge of Procurement, Logistics and Supplies in April, replacing Erastus Miriti who retired before he was confirmed in the position he held in acting capacity for two years.

Others holding brief are Terry Ng’ang’a as head of human resources, since 2015, John Birech, financial markets from 2015 and Mwenda Marete, in charge of banking, national payments and risk management, since last year.

Joshua Kimoro and Moses Ngotho were also given offices earlier this year in acting capacities. Mr Kimoro is the acting executive director of the Kenya School of Monetary Studies, replacing the long serving Prof Kinandu Muragu while Mr Ngotho is acting head of finance and ICT.

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