External publications

Walking a tightrope progress in balancing multiple central bank objectives in Kenya, Nigeria and Uganda

Dafe, Florence
External Publications (2014)

Bonn: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)

When it comes to finance in Africa, much of the discussion in academic and policy circles has focused on the challenges African central banks face in safeguarding price and financial stability while facilitating financial deepening. However, in many African countries, price stability, financial stability and financial depth have been enhanced over the past decade, and changes in central bank policy have often been conducive to such better outcomes.

This report sheds light on some selected cases of recent progress by central banks in Africa in striking a balance between their multiple, and at times conflicting, objectives. Taking the cases of Kenya, Nigeria and Uganda as examples, the report explores the extent to which and the ways in which central banks have made progress over the past decade in striking a balance between the objectives of price stability, financial stability and financial deepening. The report also identifies drivers of progress and challenges to sustaining it, building particularly on data obtained from interviews with policy-makers, donors and researchers in Kenya, Nigeria and Uganda.

By describing progress recently made by selected African central banks in balancing multiple objectives, the report seeks to contribute to the ongoing debates on the risks and opportunities which arise when central banks juggle multiple objectives and on progress in economic governance in Africa. The report also provides some starting points for thinking about a guide to central banking practice in Africa. Given the current wide gap between central bank theory and practice in Africa, a new framework for guiding central bank­ing in African countries, where central banks are coming under mounting pressure to support economic growth, will be invaluable.