THE Senate on Tuesday, February 27, commenced the process of amending the Central Bank of Nigeria (CBN) Act 2007, which will among others, make the tenure of the apex bank governor a six-year single term as against renewable five years prescribed in the Act.
It also proposed N1 trillion recapitalisation for commercial banks which presently stands at N100 billion.
The Senate, through its Committee on Banking, Insurance, and Other Financial Institutions, also at the plenary screened nominees for the board of directors of the apex bank today.
Read Also:
- Over N10trn intervention funds by CBN damaging Nigeria’s economy – Cardoso
- Senate probes N30trn loan obtained by Buhari
The proposal for a six-year single term for the CBN governor, its deputy governors, and members of its board of directors was contained in a bill seeking amendment of the CBN Act 2007, sponsored by Adetokunbo Abiru ( APC Lagos East ) in his capacity as the chairman, Senate Committee on Banking.
Abiru, in his lead debate on the bill co-sponsored by 41 other members of the Senate, said a six-year single term for CBN governor, deputy governors, and board of directors was to reduce political influence on them.
“This is the practice adopted by many independent banks such as the US Federal Reserve and the European Central Bank where their chief executive officers serve only one non-renewable term.
” Empirical evidence shows that a single term for the members of the executive and board members of Central Banks helps to reduce political influence on monetary policy decisions,’ he said.
On commercial banks recapitalisation, Abiru in the bill said the proposal sought to provide that the paid-up capital of the banks shall be N1 trillion and might be increased from time to time by such amount as the government might approve.
The bill also seeks the creation of a coordinating committee for monetary and fiscal policies since the extant Act made no provision for such.
He said: “The current Act made no provision for coordination of monetary and fiscal policies which is the reason that monetary policies of the Bank often diverge from fiscal policies to the detriment of the economy.
” To this end, the bill introduces the coordination of the monetary, fiscal, and trade policies – a coordinating committee for monetary and fiscal policies.
“The functions of the committee shall include: setting internally consistent targets of monetary and fiscal policies that are conducive to controlling inflation and promoting financial conditions for sustainable economic growth, applying caps to any fiscal deficit at a level that can be financed without having recourse to direct monetary financing from the Bank, ” he added.
The bill also sought to regulate the issuance of ways and means by the CBN to the Federal Government.
Specifically, as proposed in the bill, while the current CBN Act, empowers the CBN to grant temporary advances to the Federal Government to finance unexpected shortfalls in budget revenue without a stated time frame, the proposed law wants the advance not to exceed ten per cent of the previous three years actual revenues of the Federal Government and it is to be paid back at the end of the financial year in which it was granted.
“To firm up this provision and prevent a repeat of the recent experience in which the Bank’s ways and means have fueled inflation and significantly distorted economic management, the bill proposes the following: any such direct advance to the government should not exceed 10 per cent of average government actual revenues during the preceding three years,” reads part of the bill.
The bill also seeks to minimise default risk, any sum which becomes outstanding at the end of the expiration of the credit period should be held against and recovered from the proportion of the federation allocation receipts.
Members of the board of CBN directors screened on Tuesday were Robert Agbede, Ado Yakubu Wanka, and Muslimat Olanike Aliyu.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.