Bill to amend CBN Act scales second reading in Senate

The Senate on Tuesday passed for second reading, a bill for an act to amend the Central Bank of Nigeria (CBN) Act 2007.

The bill was sponsored by 41 members of the committee on banking, insurance and other financial institutions.

Leading debate on the general principles of the bill, Adetokunbo Abiru (APC-Lagos), chairman of the committee, said the bill was read for the first time on January 30.

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He said the mandate of CBN was derived from the 1958 Act of Parliament as amended in 1991, 1993, 1997, 1998 and 2007.

Abiru said the extant Act of 2007, which empowers the bank with the overall control and administration of the monetary and financial sector policies of the federal government, has not been amended for over 16 years, despite growing changes to the bank’s balance sheet.

He said there were also challenges in monetary policy implementation occasioned by fiscal dominance and the rapidly changing financial landscape.

Abiru said the proposed amendments were, therefore, aimed at strengthening the bank to discharge its primary mandate of maintaining monetary and price stability in support of the government’s economic growth objectives. He said the amendment was designed to align its governance mechanisms with global best practices.

According to him, the current act made no provision for coordination of monetary and fiscal policies which accounted for the reason monetary policies of the bank often diverge from fiscal policies to the detriment of the economy.

He said the bill introduces for co-ordination of the monetary, fiscal and trade policies, a coordinating committee for monetary and fiscal policies.

He listed the functions of the committee to include: “Setting internally consistent targets of monetary and fiscal policies that are conducive to controlling inflation and promoting financial conditions for sustainable economic growth.

“Applying caps to any fiscal deficit at a level that can be financed without having recourse to direct monetary financing from the Bank, that is Ways and Means.”

He said membership of the proposed committee shall consist of minister of finance who shall be the chairman, minister of budget and economic planning, minister of industry trade and investment, minister of agriculture, governor of the central bank.

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Others, according to Abiru, are the chief economic adviser to the president, and director-general of the Securities and Exchange Commission.

The senator said the bill also proposes to amend the provision to provide a single non-renewal term of six years for the governor and deputy governors of the apex bank.

This, he said, was the practice adopted by many independent banks such as the United States Federal Reserve and the European Central Bank, where their chief executive officers serve only one non-renewable term.