•Expert seeks establishment of fiscal, monetary committee

The bill tagged ‘establishment of a Coordinating Committee for Monetary and Fiscal Policies’ may interfere with the monetary independence of the Central Bank of Nigeria (CBN), experts have warned.

They said that the integrity of data and models deployed to determine monetary rates could be subjected to executive manipulation.

While opinions on the possible impacts the proposed bill will have when it becomes law differ, some experts said the bill is notably different from the CBN’s Monetary Policy Committee (MPC), which determines rates using economic data obtained both within and outside of Nigeria.

The argument is that with a growing gap between the fiscal and monetary authorities in implementing policies and programmes that can aid economic development, the body is only fulfilling an existing gap that has been noticed over the years and addressing fundamental policy gaps that frustrate the growth of the real sector.

Indeed, the National Assembly seeks to amend Section 12 of the Principal Act by substituting some sections. Sub-section (5) states that there shall be regular consultation on monetary policy between the Minister and the Bank and the Bank shall, once every six months, publish a document called the Monetary Policy Report, explaining the sources of inflation; (ii) the forecasts of inflation for the period between six to eighteen months from the date of publication of the document while (iii) the policies and means by which the Bank intends to achieve the policy targets.

Some stakeholders have insisted that the committee’s relevance lies in the need for the monetary and fiscal arms of government to adopt policies that are complementary and consistent with the attainment of macroeconomic goals and targets. Such goals and targets include inflation, interest rate, and growth in the GDP amongst others.

The members of the proposed committee are drawn from the Budget Office of the Federation, CBN, Debt Management Office, Federal Ministry of Finance, National Bureau of Statistics, National Planning Commission and Office of the Accountant-General of the Federation.

The committee’s mandate is executed primarily through its quarterly meetings at which members review domestic and international developments to assess their impact on economic stability and growth.

Other activities of the Committee are to organise workshops and seminars and undertake any assignment which any of the member agencies may assign to the Committee from time to time, such as articulation and presentation of position papers on any strategies (including debt) to member institutions on a need basis and undertake any assignment which any of the member institutions may assign to the Committee from time to time.

In an explanatory memorandum provided at the end of the proposed amendment, the Senate committee, said: “The bill seeks to amend the Central Bank of Nigeria Act to address the changing dynamics of the financial services industry and aims to enhance monetary policy, ensure financial stability, and foster a regulatory environment conducive to sustainable economic growth as well as align our regulatory framework with global best practices for the continued resilience of the financial services industry.”

But an Economist, Kelvin Emmanuel, insisted that the decision of the Senate to include sections 12 (6) (8) in the proposed amendment of the 2007 CBN Act intends to set up a joint committee for supervision of fiscal monetary policy as well as coordination impugns on the autonomy and independence of the apex bank.

He noted that the removal of the proposed amendment to section 38 that sought to link the Federal Government’s share of FAAC revenues to ways and means advances both within and above the proposed 10 per cent limit of the previous year’s real revenues as well as more than three months of advance limit that attracts 0.5 per cent per month, is shattering the hope that interested stakeholders had in ensuring that a repeat of the abuse sections 38 is not repeated.

He called out the finance Senate committee chairman, Tokunbo Abiru, for supporting action that is ruinous to the financial stability of the country.

Emmanuel argued that as a retired banker that in the past led Polaris Bank as its managing director, Abiru should know better, saying, “At the foundation of the current inflation and lack of a forward curve with the FX rates is excessive money supply from quantitative easing and CRR diversion, that has caused liquidity in the system without commensurate production and taxes derived to back it, as a means to equalize cost-push and demand-pull inflationary forces.”

Emmanuel also picked holes in the management of the nation’s rising debt stock.

He said: “The Federal Government’s borrowing overdrafts at MPR +3 and after several years of roll-over, repaying through securitisation with an additional tax on government finances that comes in the form of double-digit OMO instruments used to mop up excessive money supply is a horrible act in fiscal management. I think the President needs to declare a state of emergency on revenue generation. His one-year scorecard should give him deep concern on the performance of the members of the federal executive council.”

A retired banker, Ande Mohammed, cautioned against tampering with the independence of the CBN under any guise.

“The independence of the CBN should not be touched or changed. For no reason should the National Assembly subject the central bank to the authority of the Minister of Finance, Wale Edun. That will be a big error. We must condemn the recent decision to revise the CBN Act for this purpose,” he stated.

Rather than amending the CBN Act, he advocated the establishment of a joint committee between the fiscal and monetary authorities for policy review and convergence.