Three variables, at least, are inviolable in any policy development process; policy formulation, implementation and evaluation. Any other variables are tangential with and integral to any of these three.
There are various policy formulation systems in the literature. According to Htwe, there are unicentric, multicentric and the intermediate systems of policy formulation. The unicentric system is the one in which only the authority (generally the government) is responsible. This results in a regulated system in which everything revolves around the authorities. In a multicentric system, many autonomous actors (research institutions and organizations) compete for the development of the policy. The intermediate type is a pluricentric system which is based on networking. This latter model seems to be the preferred one in contemporary practice because it is believed that a policy can be successfully implemented if there is invariably widespread support among the important players in the network. The CBN appears to deploy the unicentric system. This implies that only the authority, through the MPC is responsible for the formulation of financial policy in Nigeria.
Htwe further lists the ingredients that must be present in any policy. These are: the definition of the problem to be addressed, a statement of goals and a broad outline of instruments (approaches and activities) by which the goals are to be achieved. The question to is this: has the CBN considered any or all these in formulating financial policies?
In policy formulation, certain practical steps are needed in order to come up with a policy that is not only implementable but owned by a majority of the stakeholders. We must note that there are many varieties of policy formulation strategies. However, no matter the procedure used, there are fundamental issues that should be addressed in policy formulation.
First, we should know the basis for the policy. In the context of a financial policy, it must be formulated on the basis of the pertinent valid information and sound technical advice. It should be a well-informed policy, bearing in mind the medium and long term programme of government. How technically and expertly informed are the CBN's financial policies?
The second issue is who should be involved in formulating the financial policy? We have already seen that the CBN is the one responsible for the formulation of financial policy in Nigeria. Chowdhury, however, notes that one of the steps that lead to a good policy is a form of participatory process. This entails the constitution of group of experts with representatives of the concerned agencies, departments, consultants, etc who will prepare a draft policy. In the case of Nigeria, the 12- man MPC is the core charged with the responsibility of formulating the monetary policy. Working with this committee are the Monetary Policy Technical Committee (MPTC) which provides technical documents; the Liquidity Assessment Group (LAG) that assesses daily liquidity situation and suggests policy actions; the Fiscal Liquidity Assessment Committee (FLAC) that provides information on the operations of the treasury to assist LAG in forecasting the liquidity level as established by Ezema. As consultative as this appears, we still find that unless some major stakeholders, namely professional bodies like Nigeria Economic Society (NES), Ministries of Planning and Finance, Civil Society Organizations (CSO) and Labour, are involved in the apex committee, the process might not generate a good policy that is generally acceptable and implementable.
Policy Circle (2012) asserts that individuals and the institutions they represent are central to policymaking. These individuals and institutions should come from within and outside of government. Policy Circle noted that in the past, policymaking was concentrated in the hands of policymakers and a few influential people/organizations outside of government. This seems to be the practice of the CBN in the composition of the MPC. However, over the past decade, policymaking in most parts of the world has increasingly included a wide range of stakeholders outside of government. This implies that the intermediate system, which is pluricentric, is the most acceptable mode of policy formulation. Non-Governmental stakeholders participate through advocacy, representation in government bodies, consultation and policy dialogue with policymakers, and participation on coordination mechanisms. Allowing responsible NGOs to participate in the drafting of national policies contributes in developing technically sound policies and stakeholder agreement on the problem definitions and solutions. The volume of controversy surrounding the 5000 naira note, for example, suggests low participation by Non-Governmental stakeholders in the formulation of the policy. To what extent are the relevant stakeholders represented in the financial policy formulation process of the CBN?
Third, we should define the stages of the policy formulation process. This helps to establish where the various stakeholders are required. The stages include setting of goals and priorities, defining options, appraising options, drafting the policy, workshops, and inter-ministerial meetings on the proposed policy direction attended by various interest groups in and outside of government. Again, we ask: does the CBN go through these stages in formulating the financial policies? If yes, are the relevant stakeholders involved in the various stages? If No, why?
Another important issue in policy formulation is having the information needed for the exercise. For example, the CBN in formulating the monetary policy needs to decide on the intermediate and final targets. The MPC charged with formulation of monetary policy gets information from the MPTC which provides the technical documents. Information should also be got from Ministries like Finance and Planning, Professional bodies, Universities, Research Institutions, Nongovernmental organizations, Banks, etc. These will be mostly technical in nature. The more informed the policy, the better. How informed are CBN's financial policies?