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Why The Screening Of Mr. Emefiele Should Be Suspended By Odilim Enwegbara

February 25, 2014

As a concerned citizen of Nigeria, I am writing this memo to 'The Senate President' since that is the best way to bring to the attention of our apex lawmakers the contradictions inherent in the CBN Act of 2007, which handed enormous and undemocratic (unconstitutional) powers to the Governor, and which if not quickly curtailed through the amendment of the Act, sooner than later the Central Bank of Nigeria could turn into a monster that could terrorize our nascent democracy and our economy.   

As a concerned citizen of Nigeria, I am writing this memo to 'The Senate President' since that is the best way to bring to the attention of our apex lawmakers the contradictions inherent in the CBN Act of 2007, which handed enormous and undemocratic (unconstitutional) powers to the Governor, and which if not quickly curtailed through the amendment of the Act, sooner than later the Central Bank of Nigeria could turn into a monster that could terrorize our nascent democracy and our economy.   

The immense powers the CBN Governor possesses could only be qualified by Mayer Rothschild who in 1832 said, “The man who controls Britain's money supply controls the British Empire.”

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Since the CBN Act of 2007 came into being, we are all witnesses to how unpleasant the relationship between the President of Federal Republic and the Governor of the Central Bank of Nigeria has become to the extent of public disagreements leading to the recent suspension of Mallam Sanusi Lamido Sanusi, whose tenure was yet to have ended.

The argument that because political circles are considerably shorter and that such a political circle could subject the CBN to political pressures, which could trigger an inflationary bias to monetary policy is another bunkum paraded by western-interest pushers. Truly, politicians in a democratic society are short-sighted because they are driven by the need to win their next election. But, then, are politicians not going to elections with their performance score cards to the electorate?

If the monetary policy of the CBN is going to improve their chances at the polls, why should the politicians not support the CBN monetary policy? The truth is that since it’s the politician that hired the CBN managers, it should be the politician the managers are answerable to.  This is because the people that elected the politician are the ones the politician faces when the economy fails.

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For this reason, the Senate will only be postponing the next clashes should Distinguished Senators go ahead to screen President's nominee for the Governor of CBN, without first amending the 2007 Act so as to address the inherent ambiguities in the Act.

With the huge powers in his hands as a result of the Act, Professor Charles Soludo was virtually in full confrontation with the late President Musa Yar'Adua, including pushing for his so-called naira re-denomination without even an express approval of the President Yar'Adua. The only thing that seemed to reduce the tension was when he needed he needed second tenure from Yar'Adua.  

Also both as the head of CBN Administration and its Board of Directors, acting under the influence of such immense powers, Mallam Sanusi Lamido Sanusi went as far as running the CBN with sheer absolutism and a kind of monarchical philistinism. Especially discovering that as the chief banker of the Nigeria he was never answerable to the President, who by the Constitution of Federal Republic of Nigeria is the economy's chief presiding officer and chief accounting officer, who the electorate and the nation should be held fully accountable on the state of the country's economy.

One of the flaws of the CBN Act of 2007 is in its corporate governance structure, which allows the Governor as the Chairman of the CBN Board of Directors, which is supposed to be the CBN watchdog. By allowing the Governor such enormous undemocratic powers is enough reason why the Governor should see himself as the head of a sovereign entity in Nigeria.

That is why I invite our Distinguished Senators to give the Amendment of the CBN Act of 2007 the urgent consideration it deserves, with the goal of ensuring that the unlimited powers handed an unelected technocrat be curtailed and subjected to the full oversight of the apex legislature.
Rolling back some provisions of the CBN Act has become necessary particularly those sections which make the apex bank look as a sovereign entity. Or why should the CBN, as an agency of Government be allowed to enter into agreements with foreign powers, with multilateral financial institutions, as well as with many central banks around the world, without legislative oversight? By doing so, isn't the CBN making foreign policy without legislative oversight?

The question our Senators should ask themselves is: For how long should we allow the country’s monetary policy not only in the hands of unelected technocrats but also allow them the freedom to pursue such an anti-investment, anti-growth, and anti-jobs policy, when if they are fully kept under strict legislative oversight, certainly they should have kept their energy on making the real sector economy attractive to both domestic and foreign investors?

Isn't it absurdity that at the heart of our representative democracy, the CBN operates outside the confines of democracy? That is why Nigerians are demanding that the amendment should come with full-blown transparency and accountability so that the apex bank is guided by the true economic mood of the country. In other words, Nigerians are demanding that their lawmakers properly oversight this opaque institution.


In an effort to introduce far-reaching transparency and accountability into the Fed, Congress has since rolled out draconian legislation, aimed at curtailing its powers. One of such far-reaching measures is the introduction of the American Monetary Act, designed to resolve the ambiguity over who controls the Fed. Another is the Federal Reserve Transparency Act, designed to pull back the curtain from a secretive and unaccountable Federal Reserve.
But there’s no important legislation as the Bill HR 1207 before the House of Representatives, which if passed will bring full transparency and accountability to the system’s Federal Open Market Committee. This, it will do by mandating that the day after each FOMC meeting, Congress should send in the Government Accountability Office, an investigative arm of the US Congress charged with examining matters relating to the receipt and payment of public funds and audit everything said and done during the meeting.

Why shouldn’t our own lawmakers also curtail the current excesses the CBN Governor enjoys by amending the CBN Act of 2007 to ensure that the apex bank's critical monetary policy decisions — particularly its interest rate stance — are fully brought to the Banking and Finance Committees of both houses?

Why shouldn’t amendment of the CBN Act of 2007 include mandating the apex bank’s policymakers to ensure that all their policy decisions are made in promoting job creation and real sector investment as the charter establishing the US Federal Reserve mandates?


Since the 2007 CBN Act gives the governor an immeasurable power, the person who should be given that power, the power to fully regulate the activities of the banks in the country without co-option, should definitely be someone with an absolute patriotism and professionalism. But to ensure that the CBN Governor does not have traces of policy allegiance to the banks he or she is appointed to regulate, emphasizing that no one should be appointed direct from any commercial bank. Some years should be required after leaving the banking industry before someone could be appointed the CBN Governor.
In other words, five years of leaving the banking industry should be the minimum for someone with a career in one of the banks to be appointed the country's chief banker. In fact, a look at the last five Chairman of the Board of Governors of the Federal Reserve, certainly none of them came straight from the commercial banks.

Enshrining this into law requires an urgent addition of a section in the law governing CBN which should say that with the present independence of the apex, appointing the apex bank’s governor straight from one of the banks should not be allowed so as not to allow the governor to pursue policies mostly beneficial to their natural constituencies, even when it appears publicly not to be so.


To remove the flawed corporate governance structure which allows the CBN management to become its own watchdog, should require the amendment the present composition of the CBN Board, its budget preparation, its budget approval, and its staff salaries and remunerations to minimize the inherent conflict of interest and the problem of accountability in the 2007 Act.
Removing the unconstitutional and undemocratic powers handed to the apex bank in 2007 in the name of the so-called international best practices, especially to enshrine the independence of the CBN Board, to fully enshrine good governance, the amendment should reduce the 12-man Board to a seven-man Board, without the Governor as Chairman and with only the Governor as member from the CBN.

The Chairman of the CBN Board of Directors should be a former Vice President, former Minister of Finance, or former CBN Governor. This is the only way to trim the excesses of an incumbent governor.


While the section that says that to remove the CBN Governor, the President should seek a two-thirds of the Senate, is good, the amendment should have a clause where the President should have an ''economic emergency power’’ to suspend an incumbent CBN Governor for a maximum of 60 days, during which the President should seek a two-thirds of the Senator to confirm the Governor's removal, if need be.


One of the best monetary policies to be credited to Sanusi Lamido Sanusi is the increase of Cash Reserve Ratio, a monetary policy focused on removing public sector deposits with banks by Ministries, Departments, and Agencies of government which have made unproductive and not quarantined liquidity to reach the financial system in a way that caused economic financialization and deindustrialization.

Increasing CRR on public deposits is the only way to discourage MDAs from depositing public funds in banks at the expense of development projects the funds are meant for. Not only that, there is enough evidence that it is the same public funds kept with banks that end up being borrowed at cutthroat rates by Government for financing fiscal deficits.

That is why the ongoing CRR policy started by Sanusi should not be halted by any incoming CBN Governor since that is the only way to force banks to be more creative in their seeking of deposits so that they can become proactive investors in the country’s real sector firms, since it is only through such partnerships that individual and corporate incomes can be grown and sustained upward.  


In order not to allow the repeat of poor banking oversight that caused banking crisis in 2008, most countries have since established banking regulatory commissions or corporations with the responsibility of regulating and supervising banks, so that this way central banks could become more focused and more efficient in formulating and implementing monetary policy, safeguarding financial stability, and managing foreign exchange accounts.
One of those spin-offs is the 'China Banking Regulatory Commission' from the People's Bank of China, which has since its creation is responsible for regulating and supervising banks in China.

To promote a sound and dynamic banking sector, as well as a regulatory framework that promotes system stability and minimizes regulatory arbitrage, facilitates risk-based supervisory approach, rather than creating entirely new agency, being already as a financial asset management corporation, AMCON should be transformed into 'Nigeria Banking Regulatory Commission' (NBRC), so that the CBN should focus on its core duty of monetary policy.

In addition to supervising banks, financial asset management companies, trust and investment companies, and other depository financial institutions, the new commission should also be responsible for approving new banking institutions, formulating prudential rules and regulations, and conducting a wide range of powers of examination as well as off-site and on-site investigations, detecting risks in the banking sector and establishing an early-warning system.

NBRC should be in a better position to evaluate the capital and risk levels of banks, such as credit concentration risk and liquidity risk as well as non-credit risks such as reputation and strategic risks, and corporate governance and system control risks. Also supervisory review of banks should include prudential meetings, meetings with boards of directors, co-operation with external auditors, as well as sharing information with other government supervisory agencies should become more efficiently done.

Besides drafting laws and administrative regulations as well as proposals for drafts or amendments, the Supervisory Rules and Regulations Department should be responsible for drafting regulations and provisions for the supervision of banking institutions as well as investigating important issues in the reform and development of the banking industry.

Banking supervision should be divided into two departments: Banking Supervision I, responsible for handling the day-to-day supervision of the commercial and microfinance banks; and Banking Supervision Department II, responsible for the day-to-day supervision of non-bank financial institutions, including financial asset management companies, trust companies, financial leasing companies, and lending companies; but excluding securities, futures, and insurance institutions.

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The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters


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