Senate Proposes 6-year Single Term For CBN Governor

The National Assembly is proposing legislation to establish a six-year, non-renewable term for the governor of the Central Bank of Nigeria (CBN).

On Tuesday, February 27, the Senate approved a bill for a second reading that aims to change the Central Bank of Nigeria (CBN) Act to give the governor and deputy governors of the top bank a single, non-renewable term of six years.

The bill aims to alter Section 8(2) of the CBN Act and is sponsored by Senator Mukhail Adetokunbo Abiru (APC, Lagos) along with the other forty-one members.

Abiru stated that the goal of a six-year single term for the CBN Governor, Deputy Governors, and Board of Directors was to lessen political influence on the appointees during his lead debate on the broad principles of the Bill.

“The Bill proposes to amend this provision to provide a single non-renewal term of 6 years for the Governor and the Deputy Governors.

“This is the practice adopted by many independent Banks such as the US Federal Reserve and the European Central Bank where their Chief Executive Officers serve only one non-renewable term.

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“Empirical evidence shows that a single term for the members of the Executive and Board members of central banks helps to reduce political influence on monetary policy decisions and the time inconsistency problem associated with non-independent central banks,” he argued.

The Senate, acting on behalf of the National Assembly, is also recommending a N1 trillion recapitalization base for commercial banks, which is now at N100 billion.

According to Abiru, the proposal in the Bill aims to stipulate that the paid-up capital of the banks should be N1 trillion and that this amount can be increased periodically by the government, either through transfers from the General Reserve Fund or through other means that the government, after consulting with the Board, may find appropriate.

Since the current Act does not provide for the establishment of a Coordinating Committee for Monetary and Fiscal Policies, the bill also seeks to do so.

He said: “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.

“To this end, the Bill introduces for the purpose of coordination of the monetary, fiscal and trade policies, a Coordinating Committee for Monetary and Fiscal Policies.

“The functions of the Committee shall include: setting internally consistent targets of monetary and fiscal policies that are conducive to controlling inflation and promoting financial conditions for sustainable economic growth; Applying caps to any fiscal deficit at a level that can be financed without having recourse to direct monetary financing from the Bank etc.

“It also seeks to regulate the issuance of Ways and Means by CBN to the Federal Government.

“Specifically as proposed in the bill, while the current CBN Act, empowers the CBN to grant temporary advances to the Federal Government to finance unexpected shortfall in budget revenue without a stated time frame, the proposed law wants the advance 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.

“In order to firm up this provision and prevent a repeat of the recent experience in which the Bank’s Ways and Means have fueled inflation and significantly distorted economic management, the Bill proposes the following: any such direct advance to the Government should not exceed 10% of average government actual revenues during the preceding three years.

“For the purpose of determining the government’s actual government revenue, proceeds from asset sales shall be excluded to avoid capturing revenues from exceptional items.

“Such temporary loans should be repaid in full within three months from the date it is made available. This is consistent with global practice.

“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.

“In order to minimize default risk, any sum which becomes outstanding at the end of the expiration of the credit period should be held against and recovered from the proportion of the Federal Government’s FAAC Receipts”, he explained.

On Tuesday, Mr Robert Agbede, Mr Ado Yakubu Wanka, and Mrs Muslimat Olanike Aliyu, members of the CBN Directors Board, were screened.

A Gentle Reminder: Every obstacle is a stepping stone, every morning; a chance to go again, and those little steps take you closer to your dream.

Nnamdi Okoli