Ahead of the planned amendment to the Central Bank of Nigeria CBN Act, 2007, economic stakeholders and policy analysts have expressed concerns over the proposed amendments to the Central Bank of Nigeria (CBN) Act 2007 by the National Assembly.
They warn that the amendments could undermine the operational independence and flexibility of the central bank, which is crucial for achieving its price stability mandate.
Key concerns include the proposed establishment of a Coordinating Committee for Monetary and Fiscal Policies, to be chaired by the minister of finance. Analysts argue that this would promote undue political interference in economic matters, as the fiscal authority would dominate the committee’s membership and leadership.
Stakeholders in the Nigerian capital market voiced reservations over the proposed amendments to the Central Bank of Nigeria (CBN) Act No. 7 of 2007, warning of potential adverse economic consequences.
The Chartered Institute of Stockbrokers (CIS) and the Association of Securities Dealing Houses of Nigeria (ASHON) have raised concerns that the bill could undermine the independence of the Central Bank of Nigeria (CBN).
The legislation, which has passed its second reading and is scheduled for a public hearing on May 30th, 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.
Critics 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.
President and chairman of the Council of CIS, Oluropo Dada emphasised the pivotal role of the central bank in maintaining economic stability and preserving international credibility.
“Safeguarding the independence of the Central Bank of Nigeria is crucial for aligning with global economic best practices and ensuring decisions are driven by sound financial principles, free from undue influence,” Dada stated.
Chairman of ASHON, Sam Onukwue highlighted the potential impact on investor confidence, saying that “an independent Central Bank is a cornerstone for maintaining the country’s standing in the global financial community, which directly affects investor confidence, credit ratings, and the overall economic outlook.”
While both organisations acknowledged the merit of some proposed amendments aimed at enhancing corporate governance and compliance, they stressed the importance of considering the broader ramifications.
“It is imperative to ensure that fiscal authorities do not encroach upon the central bank’s operational independence, as this is vital for effective and timely monetary policy responses,” Dada emphasised.
As the public hearing approaches, financial market participants, economists, and analysts will closely monitor the proceedings and subsequent legislative actions. The outcome will have far-reaching implications for Nigeria’s economic policy framework and its position in the global economic landscape.
Also, the Conference of Civil Societies on Tuesday in Abuja expressed concerns that the plan may weaken the autonomy of the apex bank.
Leader of the Conference, Adams Otakwu, told newsmen that the plan will negatively impact the bank’s ability to play its roles effectively, especially in the areas of regulating the economy and Nigeria’s monetary policy.
Aligning with the position of the International Monetary Fund (IMF), the Conference of Civil Societies said the proposed amendments of the Central Bank of Nigeria (CBN) Act will weaken the bank, while also threatening its autonomy.
The group said their position, coming ahead of the Thursday, May 30 public hearing on the amendment, is to alert well-meaning Nigerians on the ” dangers of removing the banks autonomy”.
The groups, while appealing to the National Assembly to resist the attempt to deliberately weaken the CBN, added “that attempting to take away the bank’s autonomy under any guise would be tantamount to throwing spanners into the effective management of the economy.”
He noted that Nigerians are desirous of having in place a vibrant economy supported by an independent Central Bank.
He urged the government to focus on fixing the economy and not creating confusion by amending sections of the CBN Act that might weaken the institution.
“Our advice is that an amendment to the CBN Act, if any, should wait and be well thought out. The present Act contains enough checks that the National Assembly can trigger, if it so wishes,” he said.
Otakwu appealed to the media “to continue to flag issues around exchange rate pressures, rising input prices and security that still challenge the economy in your reports, thereby putting pressure on the fiscal and monetary authorities to play their constitutional roles in managing the economy.”
Senate Holds Public Hearing On CBN, NDIC Act Amendment Bills Thursday
Meanwhile, the Senate Committee on Banking, Insurance and Other Financial Institutions will on Thursday hold a Public hearing on the proposed Bills seeking to amend the Central Bank of Nigeria Act and the Nigeria Deposit Insurance Corporation Act.
This was contained in an invitation letter signed by Ogunrinde Tinuke, clerk of the Committee.
The Senate on February 27, 2024, passed for a second reading a Bill for an Act to Amend the CBN Act No.7 of 2007; and on February 29 read for the second time a Bill for an Act to Amend the NDIC Act No.63, 2023. The Senate referred both Bills to the Committee on Banking, Insurance and Other Financial Institutions for further legislative action.
Both Bills were sponsored by Mukhail Abiru, Chairman of the Committee and co-sponsored by 41 members of the committee.
While the proposed amendment to the NDIC Act seeks to make the Corporation more effective to ensure its independence and autonomy, and bring it in line with current realities, the proposed amendment to the CBN Act seeks to, limit the tenure of the CBN governor to a single non-renewal tenure of six years, increase loan advances to federal government from five to 10 per cent, and increase the paid-up capital of the Bank from N100 billion be N1 trillion.
The Bill also proposes the establishment of a committee to coordinate Monetary and Fiscal Policies, a change in leadership of the bank’s Board of Governors, an increase of CBN deputy governors to five, subject the budget of the CBN board to NASS approval, publication of CBN policies.