From Kenneth Udeh, Abuja
Subsequent Governors of the Central Bank of Nigeria (CBN) and their Deputies may no longer be eligible for tenure renewals after the expiration of their five year stay in office following the second reading of a bill to amend the Central Bank of Nigeria Act No.7 of 2007 By the Nigerian Senate on Tuesday.
The bill which received the nod of the Senators on Tuesday amongst other recommendations , proposes a single term of six years for CBN Governors and their Deputies.
The bill sponsored by the Chairman Senate Committee on Banking, Insurance and other Financial Institutions Senator Tokunbo Abiru explained that the tenure amendment is in consonance with what is obtainable in independent Banks such as the US Federal Reserve and the European Central Bank where their Chief Executive Officers serve only one non-renewable term.
In his lead debate Abiru explained that a single term for the members of the Executive and Board members of central banks will help in reducing political influence on monetary policy decisions and the time inconsistency problem associated with non-independent central banks.
Additionally as against the current renewable tenure of four years, the Bill proposes that five external directors should hold office for a non-renewable term of five years (one year less than the six-year proposed tenure of the Governor and Deputies).
Another amendment being considered in the bill is the establishment of a coordinating committee for Monetary and Fiscal Policies. Abiru pointed out that the current Act made no provision for coordination of monetary and fiscal policies which is the reason that monetary policies of the Bank often diverge from fiscal policies to the detriment of the economy.
The former Bank MD told his colleagues current economic distress can be attributed to the absence of the aforementioned committee, stressing that it is the reason monetary policies of the apex bank often diverge from fiscal policies to the detriment of the economy.
The bill also seeks to make it compulsory for the CBN to subject its yearly budget to the approval of the National Assembly in which Abiru explained will promote transparency and make the Apex bank more accountable.
Amendments is also being considered in the ways and means budget financing which empowers the CBN to grant temporary advances to the Federal Government to finance unexpected shortfall in budget revenue not to exceed five per cent of the previous year’s actual revenue of the Federal Government and it is to be paid back at the end of the financial year in which it was granted.
According to new recommendations in order to avert a repeat of the recent experience in which the Bank’s Ways and Means have fueled inflation and significantly distorted economic management, the Bill posits that any such direct advance to the Government should not exceed 10% of average government actual revenues during the preceding three years.
Abiru added that such temporary loans should be repaid in full within three months from the date it is made available. Aside from being in line with Global practice, the Lagos East Senator maintained that the current provision which stipulates before the end of the fiscal year is prone to abuse as it creates a window for the government to obtain overdrafts from the Bank in January and wait until December to make repayment.
It is also proposed that among the four Deputy Governors provided under section 6 (2) of the current Act, at least one career staff should be elevated to the position of Deputy Governor from within the Bank.
To avert another repeat of the recent National crisis created as a result of tue introduction of New Naira notes the bill specifies that the CBN must give a reasonable notice of at least one (1) calendar year of its intention to replace the existing legal tender.
Also, the entire process of Naira reintroduction should last at least two years from the date of the announcement of its intention and the old and new currency notes and coins are expected to serve as legal tender simultaneously.
It is also recommended that the Bank should be in possession of sufficient new currency (not less than 70% of the old stock of currency to be withdrawn) before embarking on such a programme.
Other proposals made in the bill are; Appointment of a minimum of one career staff of the Bank in the Committee of Governors, Appointment of at least one female among the External Directors, establishment of the office of a Chief Compliance Officer for the Bank, of the rank of a Deputy Governor, who reports directly to the Board and may occasionally be summoned to appear before the relevant committee of the National Assembly, Eligibility of Non-Executive Directors to head Board Committees instead of the Deputy Governors, Governor’s Appearance before the National Assembly , Ratification of the Bank’s Budget in line with the FRA 2007, provisions of sanctions to Governors who fail to report to the National Assembly and Publication of Monetary Policy and Interim Financial Reports.
In his lead debate Abiru also mentioned that amendments will also be made in the recapitalization of the CBN which will mark up it’s paid-up capital of the Bank shall be 1 Trillion Naira from its current N100 Billion naira.
In his submission Abiru informed the Senate that the proposed amendments are aimed at strengthening the Bank to discharge its primary mandate of maintaining monetary and price stability in support of the government’s economic growth objectives as well as align its governance mechanisms with global best practices.
He explained; “The Bill if passed into law will further strengthen the Bank to carry outs its principal objectives in line with section 2 of the Act which is to ensure monetary and price stability, issue legal tender currency in Nigeria, maintain external reserves to safeguard the international value of the legal tender currency, promote a sound financial system in Nigeria; and act as Banker and provide economic and financial advice to the Federal Government.
In their contributions the majority of the Senators supported the bill which was co-sponsored by 41 other members of the Banking, Insurance and other Financial Institutions committee.
The idea of single non renewable tenure was welcomed by Senator Osita Izunaso (Imo West), he however disagreed that the compliance officer must be a deputy director of the CBN . According to him any staff who is risen to the position of a Director in the CBN should be made eligible to head such a position.
He said; “A single tenure of six years is commendable, when they are reappointed for a second term we always encounter problems. One of the problems we have is the renewal of Deputies. As for the Compliance Officer, I don’t want to agree with being a deputy Governor of the CBN. What we need and the Officer must come from within the CBN who has risen to the office of the director in the CBN.
Niger East Senator, Sani Musa opposed the a six year single tenure arguing tha6 five years is enough, he however agreed that the ways and means loan obtained by the Federal Government from the CBN should be repaid within 3 months. Musa also advised that the foreign reserves should be diversified into other International currencies asides the dollars and also local currencies.
At the conclusion of the contributions the bill was read for the second time via voice votes presided by the Deputy President of the Senate, Senator Jibrin Barau and it was referred to the Banking committee to report back within two weeks.