Tampering with the independence of the CBN may trigger unpredictable consequences
The potential damage to the economy is obvious but the energy and enthusiasm with which it is being pursued is unnerving. Last Monday, there was a public hearing of the Joint Committee of Justice, Bank and Currency of the House of Representatives on a bill for an act to amend the Central Bank of Nigeria Act of 2007. Specifically, the bill seeks to appoint a person other than the CBN Governor as the chairman of the board of the bank and exclude deputy governors and directors as members of the board. The bill further seeks to divest the board of the powers of consideration and approval of the annual budget of the bank, and subject the bank's operations to the oversight of the National Assembly. Indeed, the bill to amend the CBN Act recently passed through the second reading at the House of Representatives.
We have said it before and we are saying it again: the CBN Act does not need any amendment. Central banks all over the world (except for countries like Zimbabwe with all its obvious implications) are designed to be independent and free from political control and pressure. As the Chairman of the United States Federal Reserve, Ben S. Bernanke has wisely said, "Policy makers in an independent central bank, with a mandate to achieve the best possible economic outcomes in the longer term, are best able to take such a perspective. In contrast, policy makers in a central bank subject to short-term political influence may face pressures to over stimulate the economy to achieve short-term output and employment gains that exceed the economy's underlying potential". That is a very strong argument that we endorse.
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. Nigeria cannot afford to be an Island.
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. The move is also not investor friendly as few would have faith in a central bank controlled by the bureaucracy and all its inertia.
And expectedly, many stakeholders who turned out at the public hearing stridently opposed any attempt to compromise the independence of the apex bank, no matter the grievances of the sponsors of the bills. The current CBN Governor, Mr. Sanusi Lamido Sanusi, and two of his predecessors, Mallam Adamu Ciroma and Mr. Joseph Sanusi, and many others have insisted that the move to whittle down the independence of the bank and weaken its leadership is unwarranted. Sanusi warned that removing the administrative and financial autonomy of the bank would prevent it from discharging its mandate effectively. Ciroma said the proposed amendments to the CBN Act would create a complex problem and portray Nigeria as a "nonconformist," adding that "in deep conscience and honesty, I cannot find the rationale behind this plan."
Indeed, we fail to understand why the National Assembly is bent on tampering with a winning formula. What are the issues? Why would they want to weaken the CBN and by so doing expose it to manipulations? Is it not discharging its monetary policy and other functions effectively?
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 the Ministry of Finance and could not hold its own. It did as was directed. Whatever the issues the lawmakers may have with Sanusi, laws should not be targeted at individuals as governors come and go.
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The issue of the Central Bank Act is a complex one. On one hand, if the National Assembly undermines the independence of the CBN, it will trigger memories and fears of the Abacha days where government officials would be free to use the bank as their personal fund. However, I would think that the Federal Government has its three branches with its checks and balances and it would be harder to abuse the bank in that manner. Also, the CBN's independence can be said to be in question now. During the controversy regarding the ₦5000 bill, it was discovered that the IMF was controlling the CBN's monetary policy and pushing for this bill. It seems to be a case where the bank will be under government control or IMF control.
Mr Okoroafors comment on the need for independent CBN for Nigeria is unquestionable fair proposition. However, I have some misgiving to his views with regards to potential power play to the hands of IMF . The Executive interferance to the proposed introduction of 5000 naira bills is inherent with wider latteral economic implications in my view and the central Bank governor had been very ingenious in that score. Any citizen familiar with the operating forces in Nigeria economic frontier know that large extent of inflationary spiral in the economy is more than import through operation of internal dynamics . Our nation have been bastion for known and unknown economic and market players , most of whom bring in questionable deviation from economic norm . CBN director want to initiate regimes to force eqillibrum between economic forces to strengthen the value of Nigerian currency. I bet you , there's more fidicuary notes hidden in our currency than what you know and politicians should concentrate on their area of specility to give the governor every chance to do his job with efficient performance. What is the use of carrying few thousand naira in a suitcase while the German , French and even Italian lira have sum million and thousand in a piece of single notes? The Canadian and U.S dollars have thousand dollar notes to facilitate easy transportation. This changes do not necessarily increse the quantity of notes in circulation and so this makes that line of arguement baseless.I dont understand why quality time needed to deal with debate to recover billion and trillions in stolen money is begging for attention while we spend capital time on naira whose value is under one cent per unit . Lets be clear here. 5000 naira is less than the equivalent of 5000 cents or the equality of $31.25 ( less than 35 dollars) The same source that sought to interfere with CBN program to strengten and give the appearance of our poor currency some dignity including have control on how much money we have as opposed to excess unsupported naira flowing from foreign and domestic currency importers, many of them with active connaivance with corrupt bankers and law makers to render purchasing power of citizen impotent . The issue of Bakkasi is yet another vexing question from citizena and they both came from same Senator. We must begin to learn to give the CBN governor free hand like it is done in most developed and developing nations and it is my view that we have one right now who deserve that recognition
The CBN Act is good as long as the governor is educated, experienced in the relevant field and dedicated to his main role. But when you have a specialist in Arabic and Islamic studies with a quixotic attitude to match what you get is totally different - abuse of power and abuse of authority.
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Excisionist