The Central Bank of Nigeria (CBN) has reacted to business leaders and others who recently opposed giving CBN governor Godwin Emefiele immunity in new Banking and Other Financial Institutions (BOFIA) Bill at the National Assembly.
“First, the provision they refer to as being currently conceived as part of the new BOFIA already exists as Section 53 in the old Act, which is now Section 51 in the amended Act passed by the National Assembly.
“The current bill has not proposed any changes to that section at all. Second, contrary to their misleading anxiety and associated reportage, the provision of Section 51 does not purport to confer immunity on the Governor of the Central Bank of Nigeria like that which obtains for State Governors”, CBN said in a release signed by Isaac Okorafor, Director, Corporate Communications.
CBN claims that the import of the said provision is “to set a threshold against which suits against public officers must be filtered, such that for a suit to be maintainable it must scale that threshold by proving bad faith on the part of the pubic officer. It is not a bar against action.”
Furthermore, the apex bank noted that its attention has been drawn to a recent press release titled “Matters of Urgent Attention” by the Nigerian Economic Summit Group (NESG), which calls into question some of the measures taken by the CBN to support the stability of our financial system and enable faster recovery of our economy, following the negative impact of the COVID-19 pandemic on Nigeria.
According to CBN, this provision protects the Federal Government, the Central Bank of Nigeria and their respective officials against adverse claims for actions or omission in good faith exercise of powers under BOFIA and other specified statutes including the Central Bank of Nigeria Act and regulations made thereunder”.
“Indeed, a review of the legislative history of BOFIA will readily show that the said provision also appeared as Section 49(1) of the then BOFIA of 1991. Further digging also readily show that the same law is employed in other legislations including the extant: Central Bank of Nigeria Act 2007 (Section 52); the NDIC Act 2006 (Section 55) and; the Investments and Securities Act 2007(Section 302).
“A similar provision is in the AMCON (Amendment) Act 2020, as it had been noticed that debtors and the like simply rush to court, obtain injunctions and stop orderly resolution of cases and proper implementation of the law. The false alarm raised by the Nigerian Economic Summit Group raises serious credibility questions on the actions of the group, as its comments, which have been circulated across the globe, significantly harmed the credibility of the Governor and the CBN as an institution”, CBN stated.
“On border closure, we are disappointed that the NESG has not shown any tendency to deeply interrogate the real reasons for the closure. While the CBN is not opposed to its reopening, we must never forget the real reason why that border was shut in the first place: significant economic sabotage involving smuggling of many fake products, drugs, small arms, and other goods. How can a Nigerian farmer struggle for months to plant, cater, and harvest their crops only to find that those crops cannot attract good prices because of smuggled products from across our borders? Does the NESG know that according to the International trade Center, Benin Republic imports as much as rice as China and nearly as much frozen chicken as the U.K.? In which country does the NESG think all these rice and chicken end up? How then can a Nigerian rice farmer or poultry owner survive?”, the apex bank stated.
It noted that “While the Federal Government is doing its best to tackle these issues and reopen the border, we must bear in mind that border issues require cooperation by other countries. But if these countries, given their huge benefits from a rigged system, deny there is even a problem, how can Nigeria reopen the border without resolving these matters? With respect to foreign exchange, the CBN operates two windows: wholesale and retail. In the wholesale window, banks are allocated FOREX weekly, which is meant to be allocated to their customers at their discretion, reflecting customer size and distributive efficiency, for final sale to parents paying school fees, patients settling medical bills abroad, SME traders importing small-scale inputs and raw materials, and general travelers for business and personal trips. The CBN also allocates a certain amount of FX to licensed BDCs per week, who resell to small-scale users. In both categories, the CBN does not know the final buyers of this FX.”
CBN went further noting that in the retail window, banks submit a detailed list of applicants who are then allocated foreign exchange based on availability. “Given that these submissions are first scrutinized by the banks and are accompanied by the provision of significant documentation, we do not understand the extra transparency being called for by the NESG. Based on very limited information and cross-country exposure, the NESG refers to the CBN’s recent directive, which simply sets a floor on saving rates as “price fixing”. Given that in an ideal economic textbook/theory, saving should be equal to investment, we expected total deposits should closely mirror total loans”
CBN said that over the past several months, it has noticed an increasingly large gap between total deposits in the banking system and total credit to the economy. “While total deposits stood at about N25 trillion in January 2020, total loans stood at N17 trillion. As of August 2020, while total deposits have increased to N29.7 trillion, total loans were only N19 trillion.
“Many rich cooperates have simply been content with saving their cash balances and collecting huge interest payments, rather than expanding their investment, which should lead to hiring more people and producing more goods. In other to forestall a continuation of this trend, the CBN had to act to discourage these practices for the good of the economy.
“In other words, the rationale for moving to reduce the saving rates by banks is actually to encourage more lending. We also need to note in light of COVID-19 and to encourage more investments, many Central Banks have cut their saving rates to nearly zero. In fact, some Central Banks, including the European Central Bank, the Bank of Japan, Denmark’s Central Bank and the Swiss National Bank, are now operating negative interest rates, which means customers pay banks to keep their deposits.”
