The CBN's policy committee's relevance to the ongoing fight against rising domestic prices means it is no less important a target for reforms.
The release, last week, of new customer due diligence regulations by the Central Bank of Nigeria (CBN) underscored the importance of getting the regulatory space right. This is important, especially at this juncture in the evolution of the domestic economy when reforms by government not only threaten established practices, but as a result have imposed huge adjustment burdens on the mass of the population.
But is the inclusion by the CBN of customers' social media handles, in a lengthening list of requirements that financial institutions must rely on in order to identify their customers, the gratuitous invasion of privacy that critics of the policy argue it is?
Concerns over the collection of data on individual activities in these parts are not only exercised by the understanding that the governance of data is not a strong suit of our public institutions. There are, in addition, legitimate worries about the uses to which such information may be put, including hounding those who might disagree with government.Against these fears, though, PREMIUM TIMES has had to balance the need to strengthen the know your customer and due diligence client onboarding protocols of financial institutions, even as market-based reforms to the economy hold out the promise of an increase in the supply of financial resources.
This equally aligns with the demand of the Nigeria Data Protection Commission on the need to protect the rights and interests of Nigerians as data subjects. Hence, there is need for data limitation to the extents of the purpose for which it is primarily required.
While we note the burden on domestic economic entities from these reforms, we recognise that more liberal market structures would be required if the price mechanism is to function properly. Whereas a more liberal market environment necessarily requires minimum impediments to the entry and exit of suppliers and consumers from markets across the country, we are also persuaded that deregulation of an economy is not the same as the absence of regulations.
And so, the reforms that the CBN recently embarked upon matter. But not in the way that the initial responses to the apex bank's regulatory tweak suggest. Financial institutions' fiduciary responsibilities to their clients and to the economy require that their processes and procedures are not tainted by corrupt practices.
Inasmuch as the regulator bears responsibility for ensuring that each such institution is stable, the institution is responsible for ensuring that its customers' businesses do not compromise the integrity of the system. It could be in order, therefore, to ensure that these financial institutions regularly profile their customers. Yet, in this sense, the list of documents that banks have required before one may open an account are far more intrusive than is the customer's social media handle.
Not many customers will put their permanent addresses (full physical addresses), residential addresses, telephone numbers, bank verification numbers, and tax identification numbers on their social media handles. But they have willingly handed these over to banks. Nor are banks the only institutions that now feel that access to their customers' social media handles are important for their background checks, as many who have recently applied for travel visas will readily attest.
All of which invite attention to the the CBN's governance structure. The suspension on 9 June this year of the previous incumbent means we have had someone act in that capacity. It also means that the process for the appointment of a substantive governor ought by now to be in place. But because of the impact of the slew of reforms implemented by the Tinubu administration on domestic prices, the Central Bank's remit for maintaining price stability has not been more important for domestic outcomes than it is today. The genius of Mr Godwin Emefiele's tenure as governor was to point out qualities that a holder of that office should not have.
At the very least, the CBN governor must understand the role of the apex bank's staff in the design of appropriate policy responses. Given the fact that these are professional economists weighing in on the more arcane areas of their profession, it would help that the next central bank governor is an economist - Mr Emefiele was not. And, the consequences were evident in his many madcap schemes. He was a banker. For a while now, the local monetary policy space has come to conflate the "banker" in the description of a commercial bank staff with the "Bank" in the title of the CBN. Mr Emefiele again underlined the fallacy of this reasoning.
PREMIUM TIMES prefers therefore that the vacancy in the office of the governor of the CBN is advertised in four newspapers - two in Nigeria, and two abroad (with global reach) - as part of a professional headhunting process that ends with the recommendation of three names that the president may then nominate for confirmation by the National Assembly. That way, we may obtain a sense of the job description of the governor of the CBN. While we understand that a deep understanding of the finer details of macroprudential policies will underpin this job description, we do not expect that it will include invitations to duel with economic entities that the apex bank disagrees with.
PREMIUM TIMES believes that additional reforms to the organisation of the Central Bank will be required. First, to correct the damage Mr Emefiele's tenure wrought on the institution. Second, to make the bank fit for the task of managing monetary policy in a private-sector driven and market-led economy. In this sense, the most urgent is the requirement to separate the regulation of financial institutions (banks inclusive) from the perception, reinforced by Mr Emefiele's management style, that they are departments of the apex bank. Up to a point, the requirement for this re-organisation is met by separating the Central Bank from the Bankers' Committee. But we are now persuaded that a more goal-appropriate response would go all the way to hiving off the CBN's banking supervision unit as a stand alone section, so that the central bank may more narrowly and properly focus on its price stability remit.
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The CBN's policy committee's relevance to the ongoing fight against rising domestic prices means it is no less important a target for reforms. As members of the policy committee, we believe that the deputy governors were remiss regarding their bailiwick over the period Mr Emefiele was governor. While the apex bank might do no worse than conduct a review of its performance over this period, PREMIUM TIMES is convinced that it may need to restructure the deputy governor function, such that each of them has policy and operational oversight over one of the country's six geopolitical regions. Sitting in these regions, understanding the peculiar business and economic needs therein and attending policy meetings from there, should improve the conversations at the meetings of the Monetary Policy Committee.
