By Babajide Komolafe

Opposition to the proposed amendment to the enabling Act of the Central Bank of Nigeria (CBN) designed to remove the autonomy of the apex bank gathered storm last week as stakeholders in the banking industry led by the Chartered Institute of Bankers of Nigeria (CIBN), Nigeria Deposit Insurance and other top bankers spoke against the move insisting that an independent central bank is the global best practice.

The National Assembly wants to review the CBN Act 2007 among other things to enhance the powers of the Bank to prohibit transactions with Foreign Currencies in Nigeria; compel the Bank to submit its Annual Budget before the National Assembly; alter the governance structure of the Bank and for Related Matters.

Specifically, the National Assembly wants the CBN, like other ministries, department and agency (MDAs) of the federal government to submit its annual budget for approval.  It wants to remove the deputy governors from the board of the CBN. The amendment also seeks to make an independent person appointed by the federal government the Chairman of the Bank’s board while the   CBN Governor will just be the chief executive.

While stakeholders support the amendment to empower the CBN to prohibit transactions in foreign currencies in Nigeria, they however oppose subjecting the Bank’s budget to legislative approval and the appointment of an independent person as chairman of the board.

On the empowerment of the apex bank to prohibit transactions in foreign currencies, the CIBN said, “As it relates to prohibition on transactions with foreign currencies, we are of the view that the proposed amendment has good intentions to strengthen the position of the Naira as the legitimate legal tender in Nigeria;  enhance monitoring and accountability of the foreign currencies in circulation; and reduced the  possible inflationary effect”.

The NDIC also supported the move saying, “All monetary transactions in Nigeria should be based on the local currency, the Naira. The practice where some transactions are quoted in foreign currencies is alien to best practices. Consequently, we strongly support the proposed amendment”.

But on the submission of budget and independent chairman of the CBN Board, CIBN said, “A survey of   35 central bank boards, in countries at various levels of development revealed that, without exception, the Central Bank Governor act as Chairman of the Boards of these central banks. It is also pertinent that, in Mexico and Korea, there are no external directors, as their Central Bank Boards consist solely of the governor and a number of deputy governors.

Lamido Sanusi, CBN governor

According to Mr. Segun Aina, OFR, FCIB, President/Chairman of Council who made the presentation on behalf of the Institute and the banking industry,  “The composition of the Board proposed by the Bill effectively reduces the impact of the CBN’s Management on board decisions and may lead to unintended consequences.

“The proposed amendment will undermine the independence of the CBN in discharging its functions satisfactorily to achieve the desired macroeconomic stability for the growth and development of the economy. The ability of the Central bank to speak out, if needed, and possibly in critical terms with respect to economic and budgetary policies, might also be impaired.”

NDIC on its part said that subjecting the budget of the apex bank to legislative approval process poses major challenge to the ability of the bank to function effectively. It said, “At first sight, it may appear imperative for the CBN to use the budget process being adopted by Federal Agencies/Parastatals.

“This method would include the use of the following common budgetary devices: displaying both gross receipts and operating expenses; its asset transactions; and projecting outlays of expenditures and receipts for five years into the future and from there generate a budget for the fiscal year for accountability and control purposes, among others. While the foregoing may be feasible, its application to central banks will no doubt, create major problems for their operations.

“In the case of CBN, this problem is particularly serious because many of the asset transactions of the CBN result from its efforts to influence the pace of growth of the economy through its control over money supply and these are not comparable to the asset transactions of other agencies.

“Projecting cash flows that include asset transactions would pose special problems for the CBN because they cannot be easily pre-determined. Moreover, the separation of monetary policy expenses from other expenses cannot be easily accomplished because of shared support and overhead costs.”

Similarly,  a Past President and Chairman of Body of Past Presidents of the Institute affirmed the position of the Institute by saying that the apex bank should continue to have its operational and financial autonomy and the budget should not be subjected to financial appropriations.  “I strongly implore members of the Senate and House of Assembly to leave the CBN Act alone as it was conceived by the founding Fathers in 1958”.

Another Past President of the Institute, HRH Prof. Green Nwankwo, OON, FCIB alongside Managing Director/Chief Executives of Banks spoke-out in total support of CBN autonomA top banker, Vice Chairman and Chief Executive Officer, Ancoria Investment and Securities Limited, Dr. Olusola Dada, also maintained 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.

This position was re-echoed by the Managing Director/Chief Executive Officer, Maxifund Investments and Securities Limited, Mr. Okechukwu Unegbu.

Unegbgu, who was a former Chief Executive Officer of the defunct Citizen International Bank, warned that amending the CBN Act would distort the system.

He made these remarks at the Zenith Bank sponsored Finance Correspondent Association of Nigeria (FICAN) bi-monthly forum that was held in Lagos recently. He spoke on the topic: “Banks’ Financial Performance in 2011 and Q1 2012: Implication for the Capital Market.”

He added,  “Why is the National Assembly trying to amend the CBN Act? The reason and only reason is because there is one strong character that had taken them on. We should be thinking of building strong institutions, so that anybody who gets there, whether the person is weak or strong, will continue to evolve in the system.

“We wrote a memo to the National Assembly, telling them that it is not right to do that. We fought for the financial and instrument autonomy of the CBN and so people cannot just destroy it.