TAMPERING WITH THE CBN ACT
The independence of the central bank is essential for economic growth and stability
In a re-enactment of what happened a decade ago when the National Assembly targeted the then Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi, the Senate recently passed for second reading a bill which seeks to amend the CBN Act of 2007. The bill which is being sponsored by Senator Sadiq Suleiman Umar (Kwara North) “is to enable the appointment of a person other than the Governor (of CBN) as the chairman of the Board,” according to a statement by Mohammed Isa, Special Assistant (Media) to the Senate President. While the potential damage to the economy is obvious, the energy and enthusiasm with which the idea is being pursued by the sponsors is both unnerving and myopic.
This bill, like the failed one of 2012, seeks to “divest the (CBN) board of the powers of determining and fixing salaries and allowances of its members and considering and approving the annual budget of the Bank which lie solely with the National Assembly”. And the motive for this bill is similar to the last one: “Lending their support to the bill, Senators Yahaya Abdullahi (PDP-Kebbi), Betty Afiapi and Orji Kalu said the bill was necessary considering the alleged involvement of CBN Governor in partisan politics during the recently concluded primary elections of political parties,” according to the senate statement.
Whatever may have been the misgivings against the alleged involvement of the current CBN Governor, Godwin Emefiele, in partisan politics, laws should never be targeted at individuals who would not be in office forever. The Maastricht Treaty of 1992 which enshrines the independent status of the European Central Bank (ECB) and the EU national central banks has in many countries become the preferred means of providing an institutional framework for monetary policy. The current president of ECB, Christine Lagarde is the chairman of the board of the bank owned by the 27- member central banks of the EU. The United States Federal Reserve (Fed), the equivalent of our own CBN is independent and currently headed by Jerome Powell, who also chairs a seven-member board.
Former Managing Director/CEO of the Nigeria Deposit Insurance Corporation (NDIC), Ganiyu Ogunleye, who had also previously held the position of CBN Director of Banking Supervision, contends that the Senate should not use their power to make or amend laws to weaken critical institutions. “The legislature is enjoined to deploy its enormous oversight powers to ensure that the CBN is accountable in the exercise of its autonomy. Independence without accountability is a recipe for disaster. Where there is misconduct or dereliction of duty, it is the officials involved that should be sanctioned. The bank should not be the villain,” said Ogunleye.
The CBN is the heart of the economy and tampering with its autonomy could hamper the effectiveness of monetary policy and the management of the macro-economic framework. Such move is also not investor friendly as few would have faith in a central bank controlled by the bureaucracy and inertia. Besides, those who are insisting on weakening the administration of the CBN are not assisted by history. The country sank into the very swamp of financial scandals and mismanagement during the Sani Abacha era because the CBN was brought under political control and lost its independence.
When this same idea was first mooted in 2012, two former CBN Governors joined the then incumbent to warn against the idea. The late Mallam Adamu Ciroma and Mr. Joseph Sanusi insisted that the move to whittle down the independence of the bank and weaken its leadership was unwarranted. Across the world, there is a growing recognition that the independence of central banks is necessary for economic growth and stability. We urge the Senate to perish the idea of amending the 2007 CBN Act.
