For Further Consultations, Senate Bows to Pressure, Suspends Action on Amendment of CBN Act

*Apex bank permits IOCs to sell 50% of repatriated export proceeds to authorised FX dealers

Ndubuisi Francis, James Emejo and Sunday Aborisade in Abuja

The Senate has bowed to public pressure by suspending the planned public hearing on the amendment to the Central Bank of Nigeria (CBN) Act 2007 to allow for further consultations and input from key stakeholders.
This is coming as the apex bank yesterday issued further clarification on the 50 per cent balance of the repatriated export proceeds, saying that the balance of the proceeds may be sold to authorised dealers or eligible users of Foreign Exchange (FX) with eligible transactions.

The Senate Committee on Banking, Insurance and Other Financial Institutions said the suspension followed the controversy generated by the amendment process for the bill titled: ‘An Act to Amend the Central Bank of Nigeria Act No. 7 of 2007.’
The Chairman of the committee, Senator Tokunbo Abiru, disclosed this in a statement issued yesterday through his Special Adviser, Prof. Uche Uwaleke.
In the statement, the committee also denied alleged plans by the National Assembly to transfer interest rate decisions from the CBN to a committee to be chaired by the Minister of Finance.
“This is completely untrue. The fact is that the amendment bill proposes a coordinating committee as an institutional framework for the alignment of fiscal and monetary policies.

“Its aim is neither to usurp the roles of the Monetary Policy Committee of the bank nor weaken the instrument independence of the CBN.
“For the avoidance of doubt, Section 12 of the current Act establishes the Monetary Policy Committee, as well as stipulates its functions and composition. These provisions are all retained in the amendment bill.
“Be that as it may, let me seize this opportunity to inform you that given the controversy this has generated, the Senate Committee on Banking, Insurance, and Other Financial Institutions has postponed the planned public hearing to allow for further consultations with and inputs from key stakeholders,” the statement said.
The controversial bill was sponsored by Senator Abiru and co-sponsored by all 41 members of the Senate Committee on Banking, Insurance, and Other Financial Institutions.

The legislation, which had passed its second reading and was scheduled for a public hearing on May 30, seeks to modify the CBN’s autonomy by subjecting its budget to National Assembly approval and establishing a new Coordinating Committee for Monetary and Fiscal Policies.
Economic and financial experts have argued that these changes could introduce political interference in monetary policy decisions, hampering the central bank’s ability to manage the economy effectively and objectively.
Key aspects of the bill the lawmakers are seeking to amend include the establishment of a seven-member Coordinating Committee for Monetary and Fiscal Policies to be chaired by the Minister of Finance; tenure of CBN governor and deputy governors to be set at a single non-renewal term of six years for the governor and the deputy governors; 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.

The bill also seeks 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; limit to temporary advances to the federal government; and issuance of new legal tender to replace existing ones.
Because the governor of the apex bank also serves as the Chairman of the Board, the bill proposes that the Board Committees should be headed by Non-Executive Directors instead of the deputy governors.

Equally, the bill also proposes that the CBN governor appears on a semi-annual basis while 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 the need arises.
The bill also proposes publishing a monetary policy report and an interim financial report every six months.
It also proposes that 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, a recommendation from the National Assembly would be made for the governor’s suspension from office by the president, among others.
Before its suspension, the Senate Committee on Banking, Insurance, and Other Financial Institutions had invited members of the public to a one-day public hearing in Abuja.

The proposed amendment has however generated controversy.
Some stakeholders have argued that the proposed amendment is commendable as it was designed to entrench the culture of compliance, strengthen corporate governance, and reposition the apex bank for improved performance in attaining its mandate.
However, many banking and economic experts have opposed it, contending that it may end up eroding the powers of the banking sector regulator.
For those who hold this view, the exercise would not only put the country in a bad light but would also send negative signals to investors.
According to them, having an independent central bank remains the accepted practice across all major world economies.
Only recently, the International Monetary Fund (IMF), in its Article IV consultation on Nigeria sued for caution, raising concerns that the amendments to the CBN Act might weaken the apex bank’s autonomy.

However, in a chat yesterday, Uwaleke who commented on the amendment bill told THISDAY that the role of the Coordinating Committee had been misinterpreted to mean that it is meant to replace the Monetary Policy Committee (MPC) of the CBN.
“Far from it. It is simply meant to provide a platform for proper alignment of fiscal and monetary policies. Section 12 of the current Act, which establishes the MPC and stipulates roles and composition is not tampered with,” he said.
Stakeholders in the capital market had earlier voiced reservations over the proposed amendments, warning of potential adverse economic consequences.
The Chartered Institute of Stockbrokers (CIS) and the Association of Securities Dealing Houses of Nigeria (ASHON) had also raised concerns that the bill could undermine the independence of the CBN.

CBN Permits IOCs to Sell 50% of Repatriated Export Proceeds to Authorised FX Dealers

In another development, the apex bank yesterday issued further clarification on the 50 per cent balance of the repatriated export proceeds, saying that the balance of the proceeds may be sold to authorised dealers or eligible users of FX with eligible transactions.
CBN disclosed this in a circular dated May 31, 2024, and posted on its website yesterday.

The circular was signed by Dr. W.J. Kanya for the CBN Director, Trade and Exchange Department, and addressed to all authorised dealers.
In the circular, the apex bank also clarified that the 50 per cent balance may be sold wholly “if the IOC does not have any financial obligation to settle with the funds during or after the 90 days retention period.”

Earlier last month, the CBN had stated that a 50 per cent balance of the repatriated export proceeds could be used to settle financial obligations in the country, whenever required, during the prescribed 90-day period.
The apex bank also emphasised that the initial 50 per cent of the repatriated proceeds could be pooled immediately or as when required.
The circulars followed recent inquiries by banks and other stakeholders on its circular in respect of Cash Pooling requests by banks on behalf of IOCs.
The central bank stated that banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documents, for approval by the central bank.

Accordingly, the CBN explained that expenses on petroleum profit tax, royalty, domestic contractor invoices, cash calls, and domestic loan -principal and interest payment, are eligible for settlement from the balance 50 per cent.
Others include transaction taxes, (including Nigerian Content Development (NCD) Levy), education tax, and forex sales at the Nigerian Foreign Exchange Market.
Earlier in February, the CBN had introduced a cocktail of policy interventions to further boost FX liquidity in the system, declaring that going forward, International Oil Companies (IOCs) would only be allowed to repatriate a maximum of 50 per cent of export proceeds in the first instance.

The central bank added that the balance of 50 per cent of export proceeds may be repatriated after 90 days from the date of inflow of the proceeds.
Also, the apex bank prohibited the payment of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) by cash.
The apex bank declared that PTAs and BTAs must be disbursed through electronic channels only, including debit or credit cards to curb abuses and boost transparency in FX transactions.

However, the apex bank pointed out that the policy intervention on IOCs was in line with ongoing reforms in the foreign exchange market, noting that proceeds of crude oil exports by the IOCs operating in the country are often transferred offshore to fund their respective parent accounts, otherwise referred to as “cash pooling”.
The CBN said this practice has an impact on liquidity in the domestic foreign exchange market.
The central bank pointed out that while it strongly supports the need for IOCs to have easy access to their export proceeds, particularly to meet their offshore obligations, such repatriations must be done with minimal negative impact on liquidity in the Nigerian foreign exchange market.