CBN’s ascendancy and power play over autonomy

Perhaps the use of the word ‘autonomy’ remained quiet until a hint of it was made regarding the mode Dr. Clement Isong was removed in 1975, by the then “corrective government of General Murtala Mohammed.”

But since then, the National Assembly had severally expressed the desire to amend the current CBN Act 2007 with the sole aim of diluting the powers of the apex Bank.
In one of his speeches, a former Managing Director of defunct Liberty Bank Plc, Chief Lawson A. Omokhodion, said the CBN Act of 1958 was used by six different governors to operate the CBN in a period of 33 years without any crisis.

These included Roy P. Fenton, 1958–1963; Alhaji Aliyu Mai Bornu, 1963–1962; Dr. Clement Isong, 1967–1975; Mallam Adamu Chiroma, 1975–1977; Ola Vincent, 1977–1982; and Alhaji Abdulkadir Ahmed, 1982–1993.

Omokhodion, who is currently the Chairman/Chief Executive Officer, Frisenergy Limited, described the 2007 Act as a hasty document, bereft of sound judgment and characterised by fear and uncertainty and the beginning of the financial system crisis.

However, Dr. Paul Ogwuma, who was the CBN Governor between 1993 and1999, and Joseph Sanusi, who was the helmsman of the apex bank between 1999 and 2004, and adjudged the most experienced banker and technocrat ever to have mounted the saddle, used the CBN Banks and Other Financial Institutions (BOFIA) Act, promulgated by decree No. 24 of 1991, to operate.

Central Bank of Nigeria’s (CBN) governor Godwin Emefiele. / AFP PHOTO / PHILIP OJISUA

A change became imminent in June 2004, when Prof. Chukwuma Soludo, assumed office and barely one month after, he unveiled a 15-point agenda, prominent among which was the consolidation of banking reforms that set N25 billion benchmark capital base.

Following immediately was a push for the Operational Autonomy that was not provided in the 1991 BOFIA nor had been in other previous laws. This was granted the apex bank in May 2007.

By virtue of Section 1 (3) of the amended Act, operational autonomy was expressly granted the CBN, the power that extends beyond maintaining price stability and perhaps, to several development interventions and its expenditure details. This was the tide to the institution’s autonomy.

The Act raised the authorised capital of CBN; provided for Senate confirmation in the case of appointment of the Governor, the deputy governors, precisely four of them; and its directors. It is the same provision that made it impossible for the removal of the governor except by two-third majority vote of the Senate.

However, a deputy governor can be removed and replaced by the governor on recommendations to the President.

The emergence of this section of the Bank’s enabling Act and its wide applications, according to experts, may have been the beginning of the ongoing superior-subordinate struggle with the Finance ministry and alleged “excesses” of the Governor.

For example, Mallam Lamido Sanusi, is said to have worked under the framework to remove the managing directors of banks for being unfaithful to the tenets of the banking profession and for defrauding depositors through criminal manipulation of their accounting records without recourse to any authority.

Charles Chukwuma Soludo

Soludo, had reiterated the importance of the autonomy as guaranteed by the CBN Act not long after his exit from the bank at a send-forth dinner organised for him, warning that such a move could jeopardise the effectiveness of monetary policy and management of the macro-economic framework in Nigeria.

“In order to avoid going to the other extreme, the institution of the CBN must be preserved no matter the level of disagreement,” he said.

Conversely, the first obvious challenge on the autonomy of the CBN came in 2014, when Sanusi was suspended indefinitely and mostly for being either vociferous or loquacious.

In less than 24 hours after the suspension, Nigeria’s economic indices fell to negative – the lowest level in 15 years, as the Nigerian Stock market reacted violently to the suspension.

The development prompted the then Minister of Finance, Dr. Ngozi Okonjo-Iweala, and the Acting Governor of CBN, Dr. Sarah Alade, to reassure Nigerians and the international community that there was no cause for alarm.

A financial analyst, Yinka Subomi, recounted: “Commodity prices and foreign exchange nosedived to unprecedented low levels within hours, culminating in all economic indices in the system slipping to negative and the investor community saw it as invasion of the autonomy and uncertainty.”

But before this point, there were strong indications that he was about to be investigated over financial dealings, but government might have been hampered by some part of the 2007 Act.

He was summoned by the lawmakers on several occasions to either explain his actions or claims that headlined media reports and sometimes, cautioned.

For long now, there are bills on payments system aimed at reducing the role and supervisory framework of the apex bank, under the guise of providing for the management, administration, operation, regulation, oversight and supervision of payments, clearing and settlements system in Nigeria and for connected matters.

In fact, the bill provides for recognition of an association of payment system participants as regulator of the members.

Presently, a new call is by the corner, and it is reportedly from the Minister of Finance, Mrs Kemi Adeosun, who declared the powers of the CBN Governor as “too much”.

Reduction of CBN Governor’s powers
Be that as it may, experts have always differed on the autonomy of the CBN Governor.

While the incumbent, Godwin Emefiele maintained his silence, former governors, Sanusi Lamido Sanusi, now the Emir of Kano, sent a “no comments” text message response, and his counterpart, Prof. Chukwuma Soludo, said in an email response that he would not want to “publicly join issues on a matter she (Adeosun) said she was misquoted,” but promised to “do so in the future!”

In view of the seriousness of the issue, a lot of concern has been raised over the prospect of the CBN losing its autonomy, executive oversight of the CBN, will only elongate the turn-around time in decision making of the Banker to the Government, which needs to take prompt monetary decisions as the needs arise.

Elsewhere in the world, like Venezuela and Zimbabwe, attempts by the executive to control the Central Bank plunged the countries into economic doldrums that these countries are still having challenges managing.

Emir of Kano, Alhaji Muhammadu Sanusi II

Still, others who spoke with The Guardian on the issue, were passionate in their arguments. While the former Economic Adviser to former President Olusegun Obasanjo, Dr. Magnus Kpakol, warned against any attempt to dilute the CBN powers, a faculty member at the Pan Atlantic University, Dr Austin Nweze preferred to advise the Finance Minister to strengthen the CBN even more, instead of seeking to cut the Bank’s existing powers.

But Dr. Olalekan Obademi of the Finance Department, University of Lagos, believed the minister’s request was in order. He explained that precedents set by previous CBN governors, particularly in donation of public fund unilaterally, and opaque budget details, called for such an action.

Specifically, Kpakol noted that given the challenges in emerging economies, apex banks now engage in development or intervention programmes to help the economy, which cannot be done by government due to fiscal and political concerns, as it may not be successful.

“There is nothing that said both fiscal and monetary authorities must agree at all times, but they must be harmonised by policy reaction for the overall good of the economy, hence the minister and the governor should rather be in regular interactions to grow their understandings,” he argued.

Nweze, noting that the request is headed in the wrong direction, said the minister may not have fully appreciated the role of the CBN in the economy, and the implications of such a request on the confidence of international investors that the country is frantically looking for.

He insisted that Adeosun should be calling for more powers for CBN, and strengthening of weak frameworks to enable it perfect its functions.

“CBN became everything for the country because fiscal inputs have been lacking for too long. It took nearly two years for this administration to come up with economic policy. She should step up the fiscal policy drive and the monetary policy will naturally follow. I have not seen any expression of power by this governor. What would she have said, if it were Mallam Lamido Sanusi, who used the office very well. I do not support this assertion,” he said.

But as far as Obademi is concerned, no one should have absolute powers, in order to check abuse.

He said: “There is nothing like absolute liberty. Even the President has no such power. Maybe, there would not be a limit, as long as it relates to the core function of the Bank, but when it comes to spending, at least a boundary should be placed.”

Rather than bicker over superiority or controls, the Senior Partner, PKF Professional Services, Lagos, a global firm of Chartered Accountants, Tajudeen Akande, in an earlier interview with The Guardian, noted that fiscal and monetary policies cannot be mutually exclusive.

“You control the economy on two sets of policies – the fiscal policy, which is about tax system, budgetary and all, while the monetary policy has to do with interest rate, exchange rate, inflation and all that. They are not mutually exclusive.”

He noted that fiscal plans through budgeting put pressure on the economy and that the monetary policy has to come in at all times as the adjuster.

He said: “The monetary and fiscal policies must be working together. The idea of having the Ministry of National Planning is to have a vision and the Finance Ministry will now put numbers to it. The CBN should be on the table to say, ‘oh, if you’re doing much spending, we don’t have too much money…’ But what we have now are policies that are reacting. It comes out and then after, we would have run it for two months and we have seen the effects then people shout and the policy is reversed.”