By Tom Okpe
The House of Representatives has proposed amendment to the Central Bank of Nigeria, (CBN) Act, the Principal Act; which seeks to address several critical aspects of the Act in order to enhance effectiveness, transparency, and accountability of the apex bank and its operations.
The Bill, ‘an Act to amend the CBN Act, CAP C4, Laws of the Federation of Nigeria, 2004 and for related matters 2023,’ sponsored by Rep Francis Ejiroghene Waive, passed through second reading on the floor of the House at plenary on Thursday.
Waive stated that this amendment will focus on the significance of amending Section 6 of the Principal Act and the rationale behind the requirement for the Chairman of the Board of Directors to be distinct from the Governor of the Bank, amongst others.
He particularly, stated that Section 6: Composition of the Board of Directors, will be looked at, critically for the smooth pruning of the CBN.
“The proposed amendment introduces a crucial change in the composition of the CBN’s Board of Directors as outlined in Section 6 of the Principal Act.
“The proposed amendment adds a new paragraph, Section 6(2)(a), which mandates that the Chairman of the Board, shall be a Former Governor of the CBN, a former Chairman of the Bank, or a former Managing Director of a bank.
“This provision introduces an essential shift by requiring the Chairman to have a background outside the current leadership of the CBN.”
Secondly, he said; “the amendments also provide for the separation of Chairman of the Board form that of the Governor.”
Importance of a Distinct Chairman: Enhanced Independence and Oversight:
“Separating role of the Chairman from the Governor, to ensure a more effective system of checks and balances within the CBN’s governance structure.
“This differentiation reduces the concentration of power, enhances accountability, and provides an avenue for unbiased oversight of the CBN’s operations.”
Prevention of Groupthink: “The presence of an independent Chairman with experience in the financial sector, but not directly tied to the Bank’s current management will foster diverse perspectives in decision making.
“This will discourage ‘groupthink’ and promote robust deliberations that lead to well-informed and balanced policies.”
Reduced Potential for Conflicts of Interest:
“A Chairman selected from outside the current leadership of the Bank diminishes the likelihood of conflicts of interest that could arise when the Governor also assumes the role of the Chairman, this separation reduces the risk of policy decisions, being influenced by personal or vested interests.”
Strengthened Public Confidence:
“An independent Chairman can serve as a symbol of impartiality and transparency, thereby, increasing public confidence in the CBN’s operations.
“This is particularly important in preserving the integrity of monetary and financial policies.”
Expertise and Experience:
“By requiring the Chairman to have experience as a Former Governor, Chairman, or Managing Director of a bank, the amendment ensures that the Chairman possesses the necessary financial and economic expertise to provide effective leadership to the Board.
“The proposed amendment to Section 6 of the Central Bank of Nigeria Act, represents a significant step toward strengthening the governance structure of the CBN.
“The differentiation between Chairman of the Board and the Governor of the Bank introduces a level of independence, oversight, and accountability that is essential for the effective functioning of the CBN.
“This amendment aligns with international best practices and demonstrates a commitment to transparent and prudent monetary policy management,” Waive observed.
On amendment to Section 7 (1): Day to Day Management and Accountability:
“The proposed amendment to Section 7 (1) of the Principal Act addresses the day-to-day management of the CBN.
“Section 7 (1), the Governor, or in his absence the most senior Deputy Governor shall be in charge of the day to day management of the Bank and shall be answerable to the Board for his acts and decisions.
“This is opposed to the current provision which gives the Governor the power to choose which of the Deputy Governors, to act in his absence.
“This amendment clarifies the chain of command within the CBN, ensuring that the
Governor, or the most senior Deputy Governor takes on the role of managing the
Bank’s daily operations.
“This allocation of responsibility minimizes ambiguity and ensures efficient decision-making.
“The provision that the Governor or Deputy Governor is accountable to the Board for their actions strengthens oversight. It enhances the Board’s role in reviewing operational decisions and ensures that such decisions are aligned with the broader objectives of the CBN.”
Amendment to Section 8 (3):
Determination of Salaries;
“The proposed amendment to Section 8 (3) of the Principal Act addresses the Governor and Deputy Governors of the CBN, subject to the approval of the Revenue Mobilization and Fiscal Commission and not the Board of the Bank.
“Section 8 (3) The salaries or allowances including pension and other allowances payable to the Governor and to the Deputy Governors shall be as stipulated, from time to time, by the Revenue Mobilization Allocation and Fiscal Commission, subject to approval of the President of the Federal Republic of Nigeria.”
Strengthening Fiscal Accountability:
Independent Determination of Compensation:
“By stipulating that the compensation of the Governor and Deputy Governors be determined by the Revenue Mobilization Allocation and Fiscal Commission, subject to the President’s approval,this amendment ensures an independent and objective process for setting remuneration.”
He further stressed that fiscal responsibility provision, aligns with principles of fiscal responsibility and accountability, reducing the potential for arbitrary, or excessive compensation decisions.
Amendment to Section 16: Exchange Rate Mechanism;
“The proposed amendment to Section 16 of the Principal Act addresses the determination of the exchange rate of the Naira.
“The exchange rate of the Naira shall be determined, from time to time, by a suitable mechanism, devised by the Bank for that purpose, provided such rates shall at all times, be uniform throughout the country both at the Bank, Commercial Banks or any such persons licensed to carry on the business of Bureau De Change.”
Uniform Exchange Rates:
“The provision ensures that the exchange rates remain uniform throughout the country, regardless of the entity involved in currency exchange. This fosters economic predictability and prevents distortions.”
Amendment to Section 20 (3):
“Call-in of Notes and Coins
protect public interest in the event of the need for currency swap of Naira redesign as
witnessed from late last year to early this year, direct the Bank to call in its notes or coins, subject to a notice of not less than 1 year.
“This amendment reinforces the need for adequate time for the notice of change of the Naira notes before exercising the power to call in the old notes.
“Clarity in Transition; the provision that both old and new notes can be used as legal tenders during the notice period minimizes disruptions in economic activities and ensures a smooth transition.”
On introduction of New Section Budgetary Process, the proposed introduction of a new Section 48 to the Principal Act addresses the preparation and submission of the Bank’s budget estimates to the National Assembly.
“The Board shall prepare and submit to the National Assembly, through the President not later than 30th September of each year an estimate of its expenditure and income during the next succeeding year.”
Enhanced Fiscal Accountability and Transparency
“Timely Budget Submission; Requiring the Board to submit its expenditure and income estimates to the National Assembly through the President enhances transparency and accountability in the Bank’s financial planning.
“Legislative Oversight; this provision reinforces the oversight role of the National Assembly in reviewing and approving the Bank’s budget, ensuring that financial decisions align with national priorities.”
The lawmaker also said the proposed amendments to the Central Bank of Nigeria Act, as outlined in this legislative brief, collectively contribute to a more transparent, accountable, and effective operation of the Central Bank.
“These amendments underscore the commitment to good governance, fiscal responsibility, and the prudent management of the Nigerian economy.
“It’s recommended that the National Assembly carefully, considers these amendments to promote the overall economic well-being of the country and the welfare of its citizens,” he added.