By BABAJIDE KOMOLAFE
FINANCIAL experts said that the autonomy of the Central Bank is a critical to macroeconomic growth and stability.
“The formal autonomy of the central bank is a pre-requisite for macroeconomic stability in Nigeria., said Samir Gadio, Emerging Markets Strategist, Standard Bank London.
Commenting on-going efforts to amend the CBN Act, he said, “There is such a wide consensus on this concept both in Nigeria and externally that one can only wonder about the real motivations behind the proposed bill to amend the CBN Act. If passed, the new legislation would be a major setback for the reform process and price stability…a setback of such magnitude that it is still unclear whether the authors of the bill genuinely want it to be adopted.
Unlike the present Act which makes the CBN governor as the chairman of the board and the Deputy governors as board members, the proposed amended CBN bill would provide for the appointment of a Chairman of the CBN Board (in reality a political appointee) and the exclusion of CBN Deputy Governors and Directors from the Board.
Also, the Board would include representatives of the Ministry of Finance and the Accountant-General of the Federation. Furthermore, the bill seeks to divest the Board of the power to consider and approve the annual budget of the central bank.
“Generally, we (RenCap) think all central banks across the world, not just the CBN, should be independent so that they are not influenced in terms of policy direction,” said Yvonne Mhango , Vice President, Sub-Saharan Africa Economist, Renaissance Capital (RenCap)
“You have the government that has the treasury under their management and controls fiscal policy. Fiscal policy in Africa is a stronger policy tool than the monetary policy and the reason is because monetary policy is a blunt instrument. This is because the transmission mechanism between the financial market and the real economy is very weak.
“So, the government has the fiscal policy and monetary policy should be left for the CBN which should be independent. In Africa, I don’t see why there should be significant appetite to control monetary policy.”
Vice Chairman and Chief Executive Officer, Ancoria Investment and Securities Limited, Dr. Olusola Dada, also said that all over the world, central banks are independent. Dada advised that the CBN Act should not be amended such that the apex bank will be reporting to the ministry of finance, insisting that the Bank ought to report directly to the Presidency.
“In this era of globalisation, Nigeria cannot afford not to follow the global trend. A truly independent and autonomous CBN has become more imperative for the integration of our financial system with the world economy in general and the West African sub region in particular..
“What is required now is not to erode the financial autonomy of the CBN but rather to build and strengthen relationships that would enhance complementary role between the monetary and the fiscal authorities, and ensure accountability and transparency,” he added.”