Concerns over the fact that the new law seeks to weaken the CBN’s autonomy

•The expert is seeking the establishment of a fiscal and monetary commission

Experts have warned that the bill tagged “establishment of a Coordinating Committee on Monetary and Fiscal Policy” may interfere with the monetary independence of the Central Bank of Nigeria (CBN).

They said the integrity of the data and models used to set interest rates could be subject to manipulation by management.

While opinions vary on the possible impact of the proposed law once it comes into force, some experts say it differs significantly from the CBN’s Monetary Policy Committee (MPC) bill, which sets interest rates based on economic data obtained in both Nigeria and and beyond.

The argument is that in the face of a growing gap between fiscal and monetary authorities in implementing policies and programs that can help economic development, this authority is merely filling an existing gap that has been noted over the years and addressing the fundamental policy gaps that hinder economic growth in the sector real.

In fact, the National Assembly is trying to change Art. 12 of the Constitution by replacing certain sections. Subsection (5) provides that regular consultations on monetary policy shall take place between the Minister and the Bank and that the Bank shall publish once every six months a document called the Monetary Policy Report explaining the sources of inflation; (ii) inflation forecasts for a period of six to eighteen months from the date of publication of the document, and (iii) the policies and means by which the Bank intends to achieve its policy objectives.

Some stakeholders insisted that the importance of the commission lies in the need for the government’s monetary and fiscal authorities to adopt policies that are complementary and consistent with the achievement of macroeconomic objectives. Such targets include, but are not limited to, inflation, interest rates and GDP growth.

The members of the proposed committee are drawn from the Budget Office of the Federation, CBN, Debt Management Office, Federal Ministry of Finance, National Bureau of Statistics, National Planning Commission and Office of the Accountant General of the Federation.

The committee’s mandate is implemented primarily through quarterly meetings, during which members review domestic and international market developments to assess their impact on economic stability and growth.

Other activities of the Committee include organizing workshops and seminars and undertaking any tasks which any of the member agencies may from time to time delegate to the Committee, such as formulating and presenting positions on any strategies (including debt) to member institutions on the subject as appropriate and undertake any tasks which any member institution may from time to time delegate to the Committee.

In an explanatory note at the end of the proposed amendment, the Senate committee said: “The bill seeks to amend the Central Bank of Nigeria Act to take account of the changing dynamics of the financial services industry and is intended to strengthen monetary policy, ensure financial stability and support a regulatory environment conducive to sustainable economic growth , and align our regulatory framework with global best practice to ensure the continued resilience of the financial services industry.”

However, economist Kelvin Emmanuel insisted that the Senate’s decision to include Sections 12(6)(8) in the proposed 2007 CBN Amendment Act to create a joint committee for fiscal monetary oversight and coordination undermines the autonomy and independence of the apex bank .

He noted that the removal of the proposed amendment to Art. 38, which was intended to link the federal government’s share of FAAC revenues to the ways and means of advance payments both within and above the proposed limit of 10 percent of real income of the previous year, as well as above the three-month advance limit, which attracts 0.5 percent per month, dashes the hope that stakeholders had in ensuring that Section 38 abuses would not be repeated.

He called on the chairman of the Senate Finance Committee, Tokunbo Abiru, to support activities that are ruining the country’s financial stability.

Emmanuel argued that as a retired banker who in the past led Polaris Bank as managing director, Abiru should have known better, saying: “At the root of current inflation and the lack of a forward curve in exchange rates is the excess supply of money from quantitative sources of monetary easing and redirection CRR, which created liquidity in the system without commensurate production and taxes to support it, in order to balance cost-push inflationary and demand forces.

Emmanuel also found loopholes in managing the country’s growing debt.

He said: “The federal government’s current account debt stands at MPR +3 and after several years of refinancing, repayment through securitization with an additional tax on public finances in the form of double-digit OMO facilities used to remove excess money supply is a terrible act of financial management. I believe the president should declare a state of emergency regarding revenue generation. His annual scorecard should make him deeply concerned about the performance of members of the federal executive council.

Retired banker Ande Mohammed warned against compromising the CBN’s independence under any circumstances.

“The independence of the CBN should not be impaired or altered. Without reason, the National Assembly should not place the central bank under the authority of Finance Minister Wale Edun. This will be a big mistake. We must condemn the recent decision to revise the CBN Act for this purpose,” he said.

Instead of amending the CBN Act, he advocated the establishment of a joint committee of the fiscal and monetary authorities for policy review and convergence.