• Saturday, June 15, 2024
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The amendment of the CBN Act may pose great risk to the economy – Analysts

Why we should protect the independence of the Central Bank

The move to review the Central Bank of Nigeria Act 2007 by the National Assembly may erode the powers of the apex bank, water down its policies, and endanger the country’s economy, analysts polled by BusinessDay have said.

They noted that though the excercise will act as checks and balances to the CBN, it may send negative signals to investors, adding that having an independent central bank remains the accepted practice across all major world economies.

Muda Yusuf, an economist and chief executive officer of the Centre for the Promotion of Private Enterprise stated that the amendment Act will pose a great risk to the independence of the central bank.

“The CBN deserves its autonomy to shield it from undue interference from its activities. Too much interference will affect the quality of the economic policies emerging from the CBN as well as its personnel,” Yusuf said.

He explained that the independence enjoyed by the central bank is part of the reasons why investors are confident in positioning their businesses in the country, stressing that the problem is not really about the law but those that would be appointed to occupy certain positions upon amending it.

Citing the gross violations of the Act under the former governor of the CBN, Godwin Emefiele, the CPPE boss said if the laws are not rightly amended, the apex bank could easily be compromised.

“Whether the law is from the National Assembly or the Judiciary, once the CBN is compromised, a lot of things will go wrong,” he said.

Adeola Adenikinju, a professor of Economics and the President of the Nigeria Economic Society (NES) said the amendment of the 2007 Act will potentially erode the CBN’s independence, which could be detrimental to the nation’s economy.

“I have no doubt that the review of the CBN Act 2007 by the National Assembly will weaken the independence of the central bank,” he said.

“The central bank won’t be able to play effective monetary policies roles, even investors who contribute to the economy want to ensure that the central bank has the autonomy to make certain monetary decisions,” he added.

The University of Ibadan don said while the review is aimed at promoting transparency within the country’s apex bank, it will create more harm than good.

Adenikinju stressed that the conversation should bother around the total implementation of the 2007 Act rather than reviewing it.

The bill, sponsored by Tokunbo Abiru, a Lagos Senator and co-sponsored by all 41 members of the Senate Committee on Banking, Insurance and Other Financial Institutions is expected to make certain changes in the organizational structure of the Abuja-based bank.

Key aspects of the legislation the lawmakers are seeking to amend include the establishment of a 7-member coordinating committee for monetary and fiscal policies to be chaired by the minister of finance.

The tenure of the CBN governor and deputy governors upon the review will be set at a single non-renewal term of six years .

Also, it will see to the appointment of a minimum of one career staff of the bank in the committee of governors and appointment of at least one female among the external directors.

In addition, the bill is seeking to establish the position of chief compliance officer in the rank of a deputy governor, who reports directly to the board and may occasionally be summoned to appear before the relevant committee of the National Assembly.

Furthermore, the bill proposes that the CBN governor appears on a semi-annual basis whilst the National Assembly in the exercise of its constitutional duties should reserve the power to invite the governor to make presentations from time to time as need arises.

It also proposes publishing a monetary policy report and an interim financial report every six months, where the governor fails to make a report to the president and the National Assembly as required by law, he should be served with a warning letter by the National Assembly.

And if the failure persists, by a recommendation from the National Assembly, the governor will be suspended from office by the President, among others.

“Reviewing the CBN Act of 2007 could lead to potential changes in the central bank’s mandate, governance structure, monetary policy tools, and regulatory framework,” a source familiar with the matter said.

“The amendment could put too much political interference in economic matters. This could impact the economy, financial stability, and the central bank’s independence,” the source added.

“While some of the proposed amendments to the CBN Act are commendable as they were designed to entrench the culture of compliance, strengthen corporate governance, and reposition the bank for improved performance in attaining its mandate, some others could erode the bank’s autonomy and weaken the independence of monetary policy, at variance with international best practices,” a university professor who doesn’t want to be mentioned said.