Njuguna Ndung’u: The Daunting in-Tray of Ruto’s Treasury CS

President William Ruto on Tuesday, September 27, named 22 nominees to serve in his first Cabinet - making the biggest step towards the formation of his administration.

Among the names submitted to Parliament for approval is Prof Njuguna Ndungu, who was nominated to serve as Treasury CS. 

Ndungu’s nomination has attracted the attention of financial stakeholders - many wondering what his leadership style will be and how he will get around turning around the economy, in line with President Ruto’s promise to achieve an economic revolution. 

Previously known as the Ministry of Finance, the National Treasury is one of the most influential dockets, given that it is in charge of shepherding the country’s economic and financial systems. 

Previous office holders have attracted more than usual attention - owing to their critical role in the economy's performance. 

Read Also: President William Ruto Names New Cabinet Secretaries [Full List]

Indeed, two previous holders - Mwai Kibaki (1969-1982) and Uhuru Kenyatta (2009-2011) rose to serve as presidents after leaving the ministry. 

Other notable Treasury heads include Musalia Mudavadi and the late Prof George Saitoti, who both served as Vice Presidents at various points. 

Mudavadi has been nominated for the controversial Chief Minister position in Ruto’s administration - a position largely seen as a de facto ‘third in command’. 

Who is Prof Njuguna Ndung’u?

Prof Ndung’u is no stranger to the Kenyan public finance system - having served as the Governor of the Central Bank of Kenya (CBK) for two terms (2007-2015). 

Born in 1960, Prof Ndungú holds a PhD in economics from the University of Gothenburg in Sweden. He also holds an MA and a BA in Economics from the University of Nairobi, where he is also an associate professor of economics. 

Prof Ndung’u is no stranger to the Kenyan public finance system - having served as the Governor of the Central Bank of Kenya (CBK) for two terms (2007-2015). 

If approved for the CS position, his credentials will make him the most-read economist to head the Treasury since Kibaki’s exit in 1982.

As a scholar, Ndung’u has been published widely in journals and books that will likely give a perspective on his economic philosophy. 

He was one of the founding economists at the Kenya Institute of Public Policy Research and Analysis (KIPPRA), a government think-tank that has existed since 1999. 

As KIPPRA’s principal researcher, Ndung’u played a critical role in Kenya's macroeconomic modelling that has shaped many of the policies introduced by the NARC government after it assumed power in 2003 - ushering in a period of economic revival that culminated in a five-fold growth in Kenya’s economy from a little over Ksh.1 trillion to Ksh.6.4 trillion in 2012.

The model developed by the KIPPRA team has been used as a training tool by most Eastern and Southern African countries. 

His work at KIPPRA was reported to have earned admiration from President Mwai Kibaki, who appointed him CBK Governor in 2007. 

He is not just a technocrat but has some political capital - having worked on the Ruto campaign’s economic think tank. He is the only CBK governor who has served two full terms since the introduction of statutory terms in 1982. The CS position is partially political, and the political suaveness may be handy. 

His Economic Philosophy

Prof Njuguna’s writings demonstrate his keen interest in financial inclusion and a liberal attitude towards technology as a platform for fostering financial inclusiveness. 

In The M-Pesa technological revolution for financial services in Kenya: A platform for financial inclusion, Ndung’u writes about his experience as CBK Governor when he was confronted with the dilemma of whether to approve the mobile transfer technology firm. 

He was optimistic about the opportunities of the platform’s financial inclusiveness but fearful of backlash from the banking sector, which, predictably, would take a beating from the technological disruption. 

The former CBK boss recalls that his team decided to approve Mpesa - even though they did not fully understand how they would regulate the platform. 

International institutions have often asked him to speak on the mobile money revolution that Mpesa turned out to be. The steps he will take to make Kenya a reputable financial hub in the region remain to be seen. 

We also expect more deliberate steps in achieving financial inclusion in line with his writings that also shaped the bottom-up economy philosophy that Ruto ran on. 

Read Also: How President Ruto Plans to Revive Kenya’s Economy

Debt Crisis

Ndung’u has in the past called for fiscal discipline as a way of managing the debt crisis that will likely dominate his in-tray at the National Treasury. The outgoing Treasury CS, Ukur Yatani has insisted that Kenya’s debt levels remain sustainable despite concerns by members of the public who feel the debt repayments are strangling the economy. 

The new administration has already hinted at taking more debt - in the form of a treasury bond to pay Ksh500 million outstanding bills owed to the government contractors and suppliers. 

It will be interesting how the new CS will get around the appetite for new debt amid debt levels that many Kenyans, including himself before his appointment, already feel is a crisis. 

High Cost of Living

Inflation and high costs of living have become major headaches around the world. The problem is exacerbated by the shocks of the Covid-19 pandemic and Russia-Ukraine conflict that has affected major supply chains including oil, wheat products, and fertiliser among others. 

The professor of economics, like many other Treasury bosses around the world, will not be spared from the stress of managing the high cost of living. Indeed, the Ruto administration has made it clear it has no affinity for fuel subsidies which has seen the cost of the commodity rise to an all-time high. 

It remains to be seen how the international oil prices will affect the cost of the product that affects so many other areas of both production and consumption. It will also be interesting to see how the new CS will respond to pressure from Kenyans who have cried for a reprieve from the high cost of living. 

Banking Sector

Prof Ndung’u’s passion for financial inclusion is likely to inspire the push for major changes in the banking sector. 

One of Ruto’s presidential campaign talking points was about returning the economy to the Kibaki era “when banks were begging us to take loans.” 

Indeed, banks had expanded their lending base when the incoming Treasury CS was at the helm of the CBK.

In recent times, the banking sector has been accused of focusing too much on lending to the government - which is much easier than lending to individuals and businesses in the economy.

According to David Ndii, Njuguna’s contemporary and colleague in the Ruto economic think tank, the law capping lending rates led to the majority of banks lending to the government which is considered near risk-free. 

Unlike individuals and businesses, the government has little or no risk of defaulting on its treasury bills and bonds, which explains its popularity among Kenyan banks. 

This has meant that growth in lending to the private sector has remained below the recommended range of between 12 and 15% leaving many Kenyans at the mercy of non-bank lenders who typically offer high-interest credit. 

It will be interesting to watch how the new Treasury boss will reorganise the financial systems to unlock the much-needed credit facilities and return the feeling that the average Kenyan has “money in the pocket,” as put by his bosses in the campaign lingo. 

Ndun’gu is also coming in at a time the CBK has been approving risk-based lending plans which while seen as a necessary move to increasing access to credit, will not do much to reduce attendant costs. 

Already, small businesses are bearing the brunt of risk-based loan pricing with banks charging SMEs between 0.2 to 0.8 percentage points higher for loans than individual borrowers and large corporations. 

Wrapping Up

The economy was one of the critical campaign platforms on which President Ruto and his team ran. The choice of Prof Ndung’u to steer the country’s purse and financial policies is a major step in realising the sweet campaign promises made to Kenyan voters. 

The CBK governor is a relatively experienced economist with a great reputation in financial inclusion. His steps in the coming months will be watched keenly as stakeholders hope for the revival of the economy amidst challenges such as high cost of living, low access to credit, and debt crisis, among others. 

Salary, Perks for a Cabinet Secretary in Kenya

The position of a Cabinet Secretary attracts some of the best perks in the Kenyan public service. The Salaries and Remuneration Commission (SRC) sets the basic salary of a CS at Ksh554,400. The CS is also entitled to a house allowance of Ksh200,000 and a market adjustment allowance of Ksh169,600. 

The monthly pay comes to Ksh924,000 without accounting for other allowances such as per diems and transport allowances. 

They are also entitled to annual medical cover, including their spouse and children under 25. The annual cover is valued at Ksh10 million for inpatient and Ksh300,000 for outpatient services. The CSs also get access to a mortgage of up to Ksh40 million – and a car loan of upto Ksh10 million.