Economists Warn: Changes to CBN Act Could Cripple Nigerian Economy

The National Assembly’s move to review the Central Bank of Nigeria Act 2007 has sparked concerns among analysts, who warn that it could undermine the apex bank’s authority, dilute its policies, and pose risks to the country’s economy, according to insights gathered by BusinessDay.

While acknowledging that the review could serve as a form of checks and balances on the CBN, analysts caution that it might send negative signals to investors. They emphasize that maintaining an independent central bank is a global standard observed by major economies worldwide.

Muda Yusuf, an economist and CEO of the Centre for the Promotion of Private Enterprise, voiced apprehension that the proposed amendment could jeopardize the central bank’s autonomy.

He stressed the importance of shielding the CBN from undue interference to maintain the quality of its economic policies and personnel.

Yusuf highlighted that the independence of the central bank plays a crucial role in attracting investor confidence to Nigeria. He cautioned against potential compromises to the apex bank, citing past violations under former CBN governor Godwin Emefiele.

Similarly, Adeola Adenikinju, a professor of Economics and President of the Nigeria Economic Society (NES), expressed concerns that amending the 2007 Act could weaken the CBN’s independence, which is vital for the nation’s economy. He emphasized the significance of the central bank’s autonomy in implementing effective monetary policies and attracting investor trust.

Adenikinju argued that rather than revising the Act, efforts should focus on fully implementing its existing provisions to promote transparency within the apex bank.

The bill, spearheaded by Lagos Senator Tokunbo Abiru and co-sponsored by the Senate Committee on Banking, Insurance, and Other Financial Institutions, seeks to introduce changes to the organizational structure of the Abuja-based bank.

Key revisions include establishing a 7-member coordinating committee for monetary and fiscal policies chaired by the finance minister. The proposed legislation also aims to set the tenure of the CBN governor and deputy governors at a single non-renewable term of six years.

Additionally, it advocates for gender diversity by requiring the appointment of at least one female among external directors and one career staff member of the bank in the committee of governors.

The bill also proposes creating the position of chief compliance officer in the rank of a deputy governor and mandates the publication of monetary policy and interim financial reports every six months.

While some aspects of the proposed amendments are lauded for enhancing compliance and corporate governance, concerns remain about potential political interference and erosion of the central bank’s autonomy, which could impact the economy and financial stability.