By Awa Kalu, SAN

In his words, Central Bank independence is a concept that has gained global acceptance. It is a holistic concept that entails four key elements namely: financial, administrative, personal and operational independence. In the true sense, it is an institutional arrangement in which the Central Bank has freedom to take decisions in the pursuit of its mandates.

It is a situation in which the Central Bank is free from undue political influences usually informed by short-term considerations. In further elaboration of the need for independence, the Governor purposely submitted that “the very strong institutional arrangement of the European Central Bank and the relationship between it and the National Central Banks (NCB) and between the NCBs and governments of member countries best conveys the meaning of a truly independent Central Bank.

One aspect of Central Bank independence that is very critical to achieving the major mandates of a Central Bank is financial independence. Financial independence for a Central Bank has four ingredients, namely: “the right to determine its own budget; the application of the general accounting principles; clear provisions on the distribution of operating surpluses and
clearly-defined financial liability for supervisory authorities.”

The Governor placed reliance on a speech by the Governor of the Central Bank of Cyprus in 2008 in which it was argued that “the ability of a Central Bank to perform smoothly its tasks could be undermined when, for example, the Central Bank does not have sufficient control over its budgetary process for administrative and operating issues.

Thus, financial independence takes into account a multitude of factors such as the ability of the NCB to determine its own budget, to prepare its accounts in accordance with general accounting principles and to enjoy the requisite autonomy in staff matters.”

After a survey of the operators of at least forty Central Banks in diverse countries including the United States of America, England, Malaysia, Mexico and South Africa, the Governor submitted to the amusement of the diverse and discerning audience that only the Central Bank of Zimbabwe faced the unbelievable hurdle of budgetary control by its legislature. Was it a case of quod ed demonstradum?

The answer was supplied by senior citizens such as Alhaji Adamu Ciroma and Professor Green Nwankwo both of whom gave invaluable service to the Central Bank in their prime. Alhaji Otiti, former deputy- governor of the Central Bank, the Chartered Institute of Bankers, a former chairman of the Institute of Stockbrokers, Comrade Issa Aremu, National Vice-President of the Nigeria Labour Congress, the National Association of South-East and South-South Professionals all spoke in favour of retaining the autonomy of the Central Bank unmitigated by the vagaries of politics or other short-term considerations.

Other eminent speakers were the chief executives of the United Bank for Africa Plc, Zenith Bank Plc, Access Bank etc. The striking thing about this public hearing was the unanimity of opinion indicating that the National Asembly, perhaps, is on the wrong path. Will the august Assembly beat a retreat? Time will tell but the National Assembly needs to be reminded of the age long maxim vox populi vox dei.

It would also serve a useful purpose to remind all persons who have the powers of law making that laws are made for the good of the greater number. To this end, laws are always classified as good or bad and the inevitable questions that arise in the assessment of good or bad laws relate to the following- “How many people benefit from the good consequences of law?

How many people benefit from the reduction of harm or consequences of a law? Do the benefits from promoting good consequences outweigh the acts of reduction of harm? Do the benefits from reducing harm outweigh the costs to the greater good in taking no action?