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.