The proposed review of the Central Bank of Nigeria (CBN) Act 2007 by the National Assembly threatens to undermine the autonomy of the apex bank, dilute its policies, and jeopardize the country’s economic stability. This move, while ostensibly aimed at promoting checks and balances, may signal a troubling shift to investors and contravene the global standard of an independent central bank, according to analysts consulted by BusinessDay.
Muda Yusuf, economist and CEO of the Centre for the Promotion of Private Enterprise, warns that the amendment poses a grave risk to the CBN’s independence. “The CBN’s autonomy is crucial to protect it from undue interference. Excessive meddling will degrade the quality of economic policies and demoralize its personnel,” Yusuf stated. He emphasized that the CBN’s independence is a key factor in attracting investor confidence, stressing that the issue lies not with the law itself but with those appointed to enforce it.
Pointing to the egregious breaches of the Act under former CBN Governor Godwin Emefiele, Yusuf argued that inappropriate amendments could easily compromise the apex bank. “Whether the law is from the National Assembly or the Judiciary, once the CBN is compromised, a lot of things will go wrong,” he warned.
Adeola Adenikinju, professor of economics and president of the Nigeria Economic Society (NES), concurs, stating that the amendment could critically erode the CBN’s independence, with dire consequences for the economy. “A review of the CBN Act 2007 by the National Assembly will weaken the central bank’s autonomy, hindering its ability to effectively implement monetary policies. Investors seek assurance that the central bank can make autonomous monetary decisions,” he remarked.
Adenikinju argued that the focus should be on fully implementing the 2007 Act rather than amending it. While promoting transparency within the CBN is important, the proposed review could do more harm than good.
“A more collaborative approach is recommended, where stakeholders can work together to strengthen the CBN’s framework for transparency and accountability, while ensuring its ability to make independent decisions crucial for economic stability.”
The bill, sponsored by Senator Tokunbo Abiru and co-sponsored by all 41 members of the Senate Committee on Banking, Insurance and Other Financial Institutions, aims to make significant changes to the CBN’s organizational structure. Proposed amendments include establishing a seven-member coordinating committee for monetary and fiscal policies, chaired by the finance minister, and appointing a minimum of one career staff member to the committee of governors, alongside at least one female external director.
The bill also seeks to create the position of chief compliance officer, reporting directly to the board, with a mandate to appear before the National Assembly when summoned. Additionally, it proposes that the CBN governor appear semi-annually before the National Assembly, with the power to issue warnings and recommend suspension to the President if the governor fails to comply with reporting requirements.
While some amendments aim to strengthen compliance, corporate governance, and performance, they risk introducing excessive political interference, which could destabilize the economy and compromise the CBN’s independence. “The amendment could put too much political interference in economic matters, impacting financial stability and the central bank’s autonomy,” a source familiar with the matter cautioned.
In summary, the proposed review of the CBN Act of 2007, while well-intentioned in parts, risks eroding the Central Bank of Nigeria’s (CBN’s) autonomy, thereby weakening monetary policy and deviating from international best practices.
To safeguard Nigeria’s economic future, it is imperative that the CBN maintains its independence, free from undue political influence. A more collaborative approach is recommended, where stakeholders can work together to strengthen the CBN’s framework for transparency and accountability, while ensuring its ability to make independent decisions crucial for economic stability. This could involve fostering clearer communication between the CBN and the public, outlining policy objectives and their rationale.
Additionally, establishing a robust framework for legislative oversight, without compromising operational independence, would promote public trust and confidence in the CBN’s actions. By striking this balance, Nigeria can ensure a strong and effective central bank that fosters sustainable economic growth and development.
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