In the aftermath of the Naira redesign and Cashless Policy, the nation erupted with cash scarcity, extended wait times at banks, and destruction of bank property by some upset citizens. Despite the uproar, a legislative summons and a court case, Godwin Emefiele maintained that the redesign was in line with international best practices, and the independence of the CBN, and as such, does not need the approval of external parties including public opinion before it can implement its policies. Does this then mean that the CBN is untouchable?What exactly does the independence of the CBN mean?
What does it mean for the CBN to be independent?
Section 1(3) of the CBN Act guarantees the independence of the CBN. It provides thus, “in order to facilitate the achievement of its mandate under this Act and the Banks and Other Financial Institutions Act, and in line with the objective of promoting stability and continuity in economic management, the Bank shall be an independent body in the discharge of its functions”. This means that the CBN is a fully autonomous body and its decisions and actions cannot be questioned by any organ of government.
However, there are three issues for which the CBN, in the discharge of its functions, is required to seek external authorization, and only from the President of Nigeria: any alterations to the legal tender (the Naira); any investment of the Bank’s funds outside Nigeria; and the Bank’s annual report. However, this is as far as it goes. The president can neither direct the Bank on what policies to take nor issue directives on how the policies of the CBN should be implemented.
Section 8(4) of the CBN ActThe CBN is expected to present an annual report of its activities to both the president of Nigeria and the National Assembly. Also, Section 50 of the CBN Act states that “the Bank shall, within two months after the close of each financial year, transmit to the National Assembly and the President a copy of its annual accounts certified by the auditor”.
Outside of these, the only approving authorities for CBN operations are its Committee of Governors consisting of the CBN governor and the four deputy governors and the CBN board of directors which includes the governor, the four deputy governors, and seven external members including the permanent secretary of the Federal Ministry of Finance and the accountant-general of the federation.
Differences between the CBN under the Minster of Finance and now in terms of independence
Before 2007, the CBN was under the supervision of the Ministry of Finance. The CBN was directly responsible to the Minister of Finance with respect to the supervision and control of banks and other financial institutions while extending the supervisory role of the CBN to other specialised banks and financial institutions. The amendment placed enormous powers on the Ministry of Finance while leaving the CBN with a subjugated role in the monitoring of the financial institutions with little room for the bank to exercise discretionary powers.
At present, the Ministry of Finance has no power whether supervisory or otherwise over the CBN and is not consulted in any of the CBN’s policies.
the CBN, although an agency of the government, is a distinct body and can sue and be sued in its own name.
The extent of the independence of the CBN
We can address the extent of the CBN’s independence based on the two recent occurrences.
The first is the action filed in the Supreme Court against the Federal Government by the Kaduna, Kogi and Zamfara state governments. According to the motion ex parte filed by the plaintiffs on February 3, 2023, since the redesign of the 200, 500 and 1000 naira notes, there have been challenges of acute shortage in the supply of the banknotes in the states, as well as long queues at banks even after citizens have duly deposited their old notes to the banks. More so, the plaintiffs argued that the notice period given by the federal government was insufficient, even though the former January 31st deadline to deposit the old notes was extended to February 10, to allow more people time to deposit the old notes. It was submitted that this 10-day extension is insufficient to address the issues brought by the policy. Therefore, the states sought an interim injunction (temporary order) to stop the full implementation of the February 10 deadline given by the Central bank of Nigeria (CBN) as the deadline for the use of the old notes. The interim order was made pending February 15 when the court will hear the substantive suit.
According to Olisa Agbakoba, SAN, the action brought by the state governments may be flawed. First, the CBN is a body that can be sued in its own name. Section 1 (2) of the CBN Act provides that “The Bank shall be a body corporate with perpetual succession and a common seal and may sue and be sued in its corporate name”. This means that any action that is brought before the court with the aim of affecting the actions or policies of the CBN, the CBN must be brought as a party before the court.
More so, Section 232 (1) of the Constitution provides that “the Supreme Court shall, to the exclusion of any other court, have original jurisdiction in any dispute between the federation and a state or between states if and in so far as the dispute involves any question (whether law or fact) on which the existence of a legal right depends”.
To this effect, the original jurisdiction of the Supreme Court can only be invoked if there is a current dispute between the Federation and a State, or between two States, as required by this section. Section 318 (1) of the Constitution defines the Federation as the Federal Republic of Nigeria. The Supreme Court has further explained in the case of Attorney General (Kano state) v Attorney General (Federation) and Attorney General (Anambra state) v Attorney General (Federation) that the Federation or the Federal Republic of Nigeria is different from the Federal Government.
According to the court, “It must be noted that there is a clear difference between the “Federation” or “Federal Republic of Nigeria” on the one hand and “Government of the Federation” or “Federal Government”. Whereas the Federation refers to the federating units comprising all the states and the Federal Capital Territory, the Federal Government or Government of the Federation refers to the executive arm of the Government, which contrasts with the legislative powers and judicial powers domiciled in the National Assembly and the Judiciary respectively”.
However, in section 251 (1) (d) of the Constitution, the Federal High Court has the jurisdiction in cases “connected with or pertaining to banking, banks, other financial institutions, including any action between one bank and another, any action by or against the Central Bank of Nigeria arising from banking, foreign exchange, coinage, legal tender, bills of exchange, letters of credit, promissory notes and other fiscal measures”. This provision also shows that the CBN, although an agency of the government, is a distinct body and can sue and be sued in its own name.
The other is President Muhammadu Buhari’s directive that the 200-naira note alone should remain legal tender until April 10, 2023. This directive was issued following the Supreme Court’s ruling in the case against the Federal Government that the former February 10 deadline was too short.
However, banks have refused to collect old notes since the February 10 deadline set by the CBN elapsed. This is because the CBN is the sole body responsible for regulating banks. The CBN supervises and regulates financial institutions through its Financial Services Regulation established by section 43 of the CBN Act. The bank also acts as a banker to other banks in Nigeria and provides guidelines for banks and other financial institutions to follow. This also espouses the independence of the CBN and the distinctiveness of the body.
So is the CBN untouchable?
Every institution and agency of government is bound to the Constitution which is the highest court of the land. No government agency is above the law including the CBN. Therefore, the CBN is subject to the laws as provided by the Constitution. Despite the CBN’s independence, the bank must adhere to the grud norm and act in the best interest of the country and its citizens. The CBN Act grants the CBN independence to the extent that “the Bank shall wherever necessary seek the cooperation of and cooperate with other banks in Nigeria to further such policies not inconsistent with this Act as shall in the opinion of the Bank be in the national interest.
Furthermore, the arms of government follow a strict separation of power as detailed in the Constitution. However, the National Assembly, that is, both the Senate and the House of Representatives may summon the CBN Governor. Such summons is in line with section 88 (1) (b) of the Constitution which is to the effect that the National Assembly shall have the power by resolution published in its journal or in the official gazette of the Government of the Federation to cause an investigation into the conduct of affairs of any person, authority or ministry or government department charged or intended to be charged with the responsibility for executing and administering laws enacted by the National Assembly and can summon any person in Nigeria, including the CBN Governor for this purpose.
Finally, the CBN is not immune to civil action. The bank can be sued by any aggrieved person. The actions and policies of the CBN are still subject to judicial review of the courts. The judicial arm of government has the power of judicial review of executive and administrative action which is to review the correctness or incorrectness of any action by any agency of the executive arm of government.