For so long, the “independence” of the Central Bank of Nigeria (CBN) is something that amuses me and at the same time, confuses me. Though I may not be alone with that feeling, however, much of those feelings are filled with more questions than answers.
For instance, each time the thought of CBN comes to my mind, what usually follows is whether the apex bank is truly independent. This is not because I’m not unaware of the CBN Act, 2007, which grants “full autonomy” to the apex bank but the pattern of its operations is usually contrary to the precept. While in theory, the CBN is believed to be independent of government but in practice, that seems not to be the case.
CBN came into being in 1952 but it took the implementation of draft legislation by the House of Representatives for it to commence full operations on the 1st of July, 1959. Initially, the bank enjoyed limited autonomy and power to regulate as well as supervise banks and non-financial institutions but it lost that power when Decree No.3 and No.4 repealed Decrees 24 and 25 of 1991 and placed the CBN under the supervision of the Ministry of Finance.
In essence, the CBN was stripped of any semblance of ‘independence’ and the government had firm control over its affairs. Expectedly, that weighed decisively on monetary policy and economic management, which probably informed the promulgation of Decree No.37 of 1998 that restored operational autonomy for CBN to carry out its traditional functions and enhances its versatility.
By 2007, the power of the apex bank power was solidified by an Act of the National Assembly that “provides that the CBN shall be a FULLY AUTONOMOUS BODY (emphasis mine) in the discharge of its functions under the Act of the Banks and Other Financial Institutions Act with the objective of promoting stability and continuity in economic management.” Not done, the Act “widened the objects of the CBN to include ensuring monetary and price stability as well as rendering economic advice to the Federal Government.”
While the 2007 Act was unambiguous in the statutory role and power of CBN in monetary policy and economic management, politicians appear to be like parents who often find it tough to let go of the control they have on their children’s lives. In the book, CBN is a ‘fully autonomy body that should take monetary and economic decisions without any interference but in practice, the government or its agent are usually the ones taking the shot, either knowingly or unknowingly.
Let’s start with the recent directive by President Muhammadu Buhari to the CBN not to “give a cent to anybody to import food into the country”. The tone of the president’s call was indicative enough that he was meddling with CBN policy and further cast doubts on the flaunt ‘independence’ of the apex bank. Since the CBN had been given the mandate of ensuring ‘monetary and price stability’, it meant nothing but an encroachment for the president to handout ‘directives’ on how it should allocate foreign exchange.
Probably, alarmed by the president’s directive, a former Deputy Governor of CBN, Professor Kingsley Moghalu, took to Twitter to ask whether “@cenbank (CBN office handle) is now a ministry to be ‘directed’ by President @MBuhari?” The professor of international business and public policy quoted a section of the CBN Act 2007 which shielded the bank from political interference in its functions and posited that “A major reason for our (Nigeria) poverty, instability, and a weak economy is weak institution.” He added by calling on Buhari to “leave @cenbank alone to discharge its mandate independently within the ambit of the CBN Act, and stop ‘directing’ it.”
For one thing, we have to understand that political authorities’ teleguiding functions of the CBN, would hamper the versatility and output of the bank. Of much interest is the fact that governments usually look at short term targets, often guided by their intentions to attract glorification and swell support base but central banks generally focus on longer-term targets and give the economy direction.
But often, politics takes the centre stage and domineering on the apex bank independence. The trend is not just limited to the Buhari government but something as old as the independence of the country. In the past years, instances abound on how the government encroached into the CBN and interfered with its functions.
At different times, Nigerians watched with consternation as some heads of government ignored known provisions and practices to treat public treasury as their estate and convert CBN to an ATM of some sort. This kind of attitude contributed in no small amount to economic doldrums and pushed the country into abject poverty.
In 2014, there was a controversy on how the then CBN chief, Sanusi Lamido, was relieved from office by President Goodluck Jonathan. Though the former president had ‘suspended’ the ex-bank boss and not outright sack but that event exposed the perceived autonomy of the CBN is with challenges. While the government is well within its rights to question the central bank or any of its officials, the turnoff, however, comes from the ability to influence the ‘suspension’ of the head of the bank.
In every instance, the government has been consistent with actions and inactions that undermines the ‘independence’ of the CBN. Let us get something straight– an independent CBN may not always do the right thing and guarantee economic stability but in the long-run, we can be sure that it is safer than the alternative.
Oke Umurhohwo is a Political Analyst and Strategist. He tweets via @OkeStalyf and can be reached via firstname.lastname@example.org