Moves by the Senate to separate the Chairman of Central Bank of Nigeria, CBN, board from the governor of the apex bank, Wednesday, got a boost as a Bill for an Act to amend the CBN Act CAP C4 LFN 2004 and for related matters, 2018 (SB. 448) scaled second reading.
According to the Senate, with the bill, the approval of the CBN budget by National Assembly will then be made compulsory, just as it will also ensure that salaries of CBN staff will be fixed by the Revenue Mobilization and Fiscal Commission, RMAFC.
If the Bill scales third reading and is signed into law by the President, the CBN governor will henceforth present to the National Assembly the state of economy and what monetary policy measures were being pursued by the bank.
These are contained in a Bill for an Act to amend the Central Bank of Nigeria (CBN) Act CAP C4 LFN 2004 and for related matters, 2018 (SB. 448) by Senator Samuel Anyanwu (PDP, Imo East).
In his lead debate, Senator Anyanwu said: “The Bill, among other things, seeks to amend the CBN Act to provide for greater efficiency, transparency, independence and accountability in the monetary policy environment.”
“For long now, there have been calls by financial experts and stakeholders for the legislative framework of the Central Bank to be reviewed to ensure greater accountability and supervision of the CBN and its board in line with the current global trend. The CBN has been seen as utterly autonomous and alien in its monetary policy decision making with no recourse to any other government body.
“This is then aggravated by the CBN Act which clothes the CBN board chaired by the Governor with arbitrary powers. The Act allows the board to create, review and approve the CBN budget, set its own salaries including that of the staff and no other body has supervisory powers over the CBN or oversight functions over its monetary policy decisions.
“No doubt the Central bank independence is necessary to protect policy makers against the temptation of using monetary policy in a distortionary way. However, there are boundaries to its independence in order to ensure financial prudence, efficiency and stability in a country.
“The weak supervision of the CBN stems from the fact that by the Act, the CBN Governor acts as the chairman of the CBN board and this is not in accordance with the principles of corporate governance which advocates the separation of the roles of the chairman of the board and the Governor to ensure appropriate internal checks and balances. In most developed countries, to ensure accountability, banks are supervised by a board not chaired by the Governor.
Countries like UK, Switzerland, New Zealand and Iceland all have boards that have split the task of the governor from that of the chairman of the supervisory board.
“Currently, going by the provisions of the Act, there is little or practically no oversight of the CBN by the National Assembly, owing to the fact that the CBN neither reports its monetary policy decision making to National Assembly nor is its annual budget approved by the National Assembly.
Considering our political and institutional context, there is need for checks and balances. These anomalies and several others are proposed to be corrected by this amendment.
“Some highlights of the proposed amendments include: Separating the Chairman of the CBN board from the CBN governor Ensuring the approval of the CBN budget by the National Assembly; Providing for the salaries of CBN staff to be fixed by the Revenue Mobilization and Fiscal Commission; Providing for the presentation to the National Assembly by the CBN Governor on the state of economy and what monetary policy measures are being pursued by the bank.’’
