Fresh threat to CBN’s autonomy worries stakeholders

Although her aides deny she made the statement, the recent remark attributed to the Minister of Finance, Mrs. Kemi Adeosun, in which she reportedly called for a whittling down of the powers of the Governor of the Central Bank of Nigeria (CBN), continues to bother stakeholders in the financial sector. TONY CHUKWUNYEM writes

Although her aides deny she made the statement, the recent remark attributed to the Minister of Finance, Mrs. Kemi Adeosun, in which she reportedly called for a whittling down of the powers of the Governor of the Central Bank of Nigeria (CBN), continues to bother stakeholders in the financial sector. TONY CHUKWUNYEM writes

With speculation mounting at that time about alleged attempts to force him to resign, former Governor of the Central Bank of Nigeria (CBN) Lamido Sanusi, warned that Nigeria’s economy would be significantly endangered if the independence of the apex bank was undermined. He told journalists on the sidelines of the World Economic Forum in Davos, Switzerland, in January 2014 that maintaining the independence of the CBN would be a major challenge that his successor will have to contend with. He stressed that it was important for a strong individual to be appointed to head the bank, due to the critical role it plays in the development of the country.

Importance of CBN autonomy

He said “Any undermining of the CBN’s independence may hurt the economy. If anyone tampers with it, the markets would punish the economy.

The CBN is a very strong institution that needs a strong leader and I think one of the things we have achieved over the last four or five years is to show that we can have an independent central bank in Africa.

“It is extremely important from the fiscal side, it is extremely important from the governance side, that the governor of the central bank is able to speak independently of political authority and raise an alarm and concerns and give constructive criticism and advice.”

But a few weeks after Sanusi made this statement, he was suspended from office by then President Goodluck Jonathan for allegedly breaching enabling laws, due process and mandate of the CBN. Interestingly, only last Wednesday, during her send-off celebration in Abuja, former Deputy Governor, Economic Policy, CBN, Dr. Sarah Alade, gave an insight into the kind of turmoil that ensued at the CBN when she acted as governor for a brief period following the manner of Sanusi’s ouster.

So not a few eyebrows were raised in financial circles on September 20 last year, when the Minister of Finance, Mrs. Kemi Adeosun, called on the CBN to lower interest rates.

Although most analysts probably regarded the move as the usual gambit of fiscal authorities desirous of boosting growth in the economy despite the banking watchdog’s concerns about inflation, there was unease in some quarters because the minister made the call on the eve of the CBN’s Monetary Policy Committee (MPC) announcing its decision on interest rates.

Critics saw her remarks as being designed to influence the outcome of the MPC’s meeting. In fact, the minister had said at the time “As you know, the Mon etary Policy Committee is meeting today and my position has been, ‘look this government is spending its way out of trouble, and that spending, much of it is being borrowed. So if you increase the interest rate, you increase our cost of debt service’. “In an ideal world, I need lower interest rates. I think business, when you are in a recession you cut interest rate to stimulate activity.

So we would love to see the MPC consider how they can help us lower interest rates,” she stated. It is, of course, no longer news that the MPC ignored the minister and voted to retain its key interest rate at 14 per cent, a move that earned it praises from respected financial experts, including former CBN Governor, Sanusi. Commenting on the MPC’s stance, Sanusi said: “I think it is a positive thing when the fiscal authorities and the many people in the private sector said they wanted a lower interest rate.

I was concerned that the CBN would succumb to pressure. And the fact that the CBN did not succumb to the pressure is a fact that it is beginning to claim its independence, which is a very positive thing.” It was probably against this background that the recent statement by the finance minister, in which she was reported to have called for a reduction of the powers of the governor of the CBN, is generating heated debate among analysts.

CBN governor’s ‘excessive powers

According to the report, Mrs. Adeosun made the call last week while receiving members of the House of Representatives Tactical Committee on recession. She allegedly blamed the extensive powers of governors of CBN for the disconnect between monetary and fiscal policies.

She was further alleged to have pleaded with the National Assembly to pass legislation reducing the powers of the governor and instituting a system of checks and balances for the regulator.

Adeosun was also alleged to have said that it amounted to excesses on the part of the CBN governor to decide and act on financial matters without recourse to the finance minister, who is constitutionally required to supervise financial policies and programmes of the Federal Government.

She was quoted as saying “I want to correct the impression that the CBN is under us. They are not. Unfortunately, a law was passed, making them independent and giving them more powers.

This has resulted in one person having so much power. “In the time of Professor Charles Soludo as CBN governor, he went to the National Assembly asking for more powers and you can see where that has taken us to. So, we are back to the legislature to help us correct this problem of too much power. As a result, there are no checks and balances.”

Experts oppose Ministers’ request

However, the reaction of financial experts to the Minister’s call have been generally negative, with virtually all of them who spoke with New Telegraph urging the National Assembly not to accede to her request. For instance, in his reaction, a Partner at David Gold & Co. (Chartered Accountants & System Auditors), Dr. David Aheruvoh, said: “Because of the important role they per- central banks all over the world should be autonomous and have enormous powers.

If they are not autonomous, the economy will be in shambles; politicians will run the show. Central banks should be given a lot of powers so that they can be held responsible if things are going wrong with the economy.”

According to him, instead of advocating for a reduction of the powers of the CBN governor, the minister should state exactly the aspects of monetary policy that she is not happy with about and the CBN will listen to her. “The CBN is a listening organisation, you are free to tell them where they have gone wrong and if they see that you have a strong argument, they will listen to you,” he said. Also, the Head of the Nigerian chapter of the Institute of Certified Forensic Accountants, Dr. Richard Mayungbe, said: “The autonomy of the CBN is sacrosanct so it should not be tampered with otherwise there would be chaos.

The Minister’s remarks show that there is no harmony between fiscal and monetary authorities. I will suggest that the MPC should be expanded to accommodate experts from the Ministry of Finance.”

He noted that dissatisfaction in some quarters with the CBN’s management of its forex policies was responsible for the call for its powers to be reduced. Similarly, a financial analyst, Mr. Ben Odiaka, argued that the minister’s statement could be an indication that she was having a tough time carrying out her responsibilities. “The finance minister’s duty is to ensure that fiscal spending goes into boosting productivity and Gross Domestic Product (GDP) while the CBN governor’s role is purely monetary.

However, they have to work together for the good of the economy.

The minister should desist from blaming the CBN governor for whatever challenges she is facing otherwise she would never be able to find a solution to the nation’s economic woes”, he said.

It will be recalled that a national newspaper reported the Director-General, West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo, as arguing that the minister’s call is not in line with global best practices. He was quoted as saying : “I have no details, but if this is actually what she said, it is not acceptable.

The central bank should remain independent and not be brought under the Ministry of Finance. Nigeria is too large and not equipped for that arrangement. The CBN should not be seen as a subset of the ministry.”

Conclusion

As an industry source pointed out, even if the finance minister has some valid reasons for seeking a reduction of the powers of the CBN, bringing up the issue at this time could distract from the all important task of boosting economic growth.

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