NLC, Sanusi, Ciroma Fault Senate's Plan To Strip CBN Of Autonomy
ABUJA, May 28, (THEWILL) - The Nigerian Labour Congress (NLC), governor of Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi; and former governor of the bank, Dr. Adamu Ciroma, on Monday joined the league of Nigerians voicing their opposition to the proposed CBN anti-autonomy bill now before the Senate, warning that such law would have dire consequences for the economy.
The bill, which has scaled second reading in the Senate, seeks to make it mandatory that the apex bank must submit its annual budget to the National Assembly for scrutiny and approval.
Appearing before the Senate Joint Committee on Banking, Insurance and other Financial Institutions, and Judiciary in a one-day hearing on the CBN Amendment Bill 2012, Sanusi said the amendment would place the CBN at the mercy of politicians just like in Zimbabwe.
He argued that the proposed law is against best practices worldwide, as it would compromise its monetary policy formulations. He said the move would create a loss of confidence for foreign investors, listing 40 countries where their central banks do not submit annual budgets to the parliament.
Sanusi also disagreed with the view that nobody approves budget of CBN, maintaining that the apex bank submits its annual approved budget by its Board of Directors to the Budget Office of the Federation.
He added that the 12-member board is appointed by the president and confirmed by the National Assembly, and that the CBN has been very open with the National Assembly in its oversight functions.
“The question is, of all the functions of CBN, why should it be budgetary independence? There is not a single Central Bank in the world that I have seen where the budget goes to parliament. What is so special about the CBN that its own budget, out of all the Central Banks in the world, has to come to parliament?” Sanusi queried.
“The lack of budgetary independence can potentially be used to undermine the whole function of the Central Bank. If the Central Bank needs the approval of political authorities before it gets its budget, those authorities can compel the bank to act in a manner that befits what it seeks it to do.”
Continuing, he said, “Now the interest rate is too high; we have to keep it high because we have to check inflation. Now, if the budget was under the control of political authorities it is very easy, they will say fine, you have the interest rate, we will see when you come for your budget. And maybe because we need the approval of budget, we go and compromise on that.”
He cited the Federal Reserve Bank of United States, the Bank of England, Reserve Bank of South Africa, and the Central Bank of Ghana, amongst others, as banks that have the budgets approved by the Board of Directors.
“In each of these Central Banks apart from one, the budget is approved by the board; the annual account is approved by the board. The one Central Bank in which the budget is prepared by the board and approved by the minister is the Cenntral Bank of Zimbabwe,” he said.
“I think it is important that when we talk about legislation in central banking to benchmark the CBN, we should see whether we are benchmarking against 39 or against the Central Bank of Zimbabwe, and then look at the economy and currency of that country.”
Opening the public hearing, senate president, David Mark, who was represented by leader of the Senate, Sen. Victor Ndoma Egba announced that the Senate has no preconceived position on the matter but it was hoping to be guided by the insights and inputs of Nigerians on the matter.
The Nigerian Labour Congress (NLC) also disagreed with the move to deprive the CBN of its autonomy, saying it would handicap them from intervening in banking crisis.
“We must encourage the independence of all our institutions including that of Labour,” NLC’s vice president, Isa Aremu, said. “If there is no autonomy, it will be difficult for the CBN to intervene in the banking crisis. Monetary policies will not work if there is no independence. We support the autonomy of CBN.”
Similarly, former governor of CBN, Alhaji Adamu Ciroma agreed with the views against the Senate’s planned removal of the bank’s autonomy.
Ciroma, who served between 1975 and 1977, noted that CBN was structured after the British model, which is independent of the intervention of the day-to-day running of government.
Pleading for the insulation of the CBN from political interference, Ciroma said the CBN is built on rock of moral foundation, integrity and knowledge. He said the decision to remove the CBN from the Ministry of Finance and situate it under the presidency is not healthy for the apex bank.
He noted that while the CBN was under the purview of the Ministry of Finance, the CBN and the Ministry of Finance regularly interfaced on the economic policy in drafting the budget before it was presented to the Federal Executive Council (FEC) and later to the National Assembly. He also vouched for the integrity and expertise of the Board of Directors of the CBN.
“Unless you can deal with the economic and monitory policy right when things go wrong with the CBN, I don't know where the country will be,” he said. “Let us not bring a policy that will open the system to things that we cannot predict. They (board of directors of CBN) are made up of people with knowledge and integrity. Leave the CBN alone. What is important is ensuring that the right thing is done and that there is trust in the internal monetary system. We should not unnecessarily tamper with what is working.”
Former executive director of CBN, Prof Green Nwankwo, arguing that the CBN has performed well over the years, noted that it should be immune to political interference to be able to discharge its mandate, and warned that the current move would bring a crisis of confidence.