Is the Central Bank of Nigeria Really Autonomous?
The Central Bank of Nigeria (CBN) is the country's apex monetary authority responsible for formulating and implementing monetary policies that regulate the country's money supply, credit, and foreign exchange rate. As an independent central bank, it should be free from external control and political influence to effectively carry out its mandates. However, the level of independence of the CBN has been a subject of debate among scholars and economists, with some arguing that the bank's independence is limited.
Autonomy of the CBN
The autonomy of the CBN is enshrined in the CBN Act of 2007, which mandates the bank to operate independently without any interference from the government or any other external bodies. The Act provides for the appointment of the CBN governor and deputy governors by the President, subject to confirmation by the Senate, for a term of five years. The Act also stipulates that the removal of the CBN governor or deputy governors can only be done with the approval of two-thirds of the Senate.
However, the autonomy of the CBN has been called into question, particularly in recent times. In 2020, the Nigerian government directed the CBN to restrict foreign exchange access to importers of maize and other food items. This directive contradicted the CBN's earlier policy of providing forex to businesses engaged in food importation, raising concerns about the bank's independence.
Political Influence
The CBN has often been accused of being influenced by the government's political interests. For example, in 2014, the CBN Governor, Lamido Sanusi, was suspended by the government for allegedly exposing a missing $20 billion in the national oil account. Critics claimed that Sanusi's suspension was politically motivated and aimed at silencing him.
Furthermore, the CBN has been known to provide funding for government projects, which some analysts argue undermines its independence. In 2016, the CBN disbursed a sum of N250 billion to the Federal Government to finance its various development projects. Critics argued that such funding compromised the CBN's independence and made it difficult for the bank to hold the government accountable.
In 2022 and current 2023, the present CBN governor, Godwin Emefiele has been seen frequenting the Aso Villa in Abuja to see Mr. President, Muhammadu Buhari on monetary matters. With regards to the recent Naira swap policy, the CBN governor made it known to the public that the Apex Bank sought the approval of Mr President.
Moreso, President Buhari on a monitored live tv show, confirmed that he directed the CBN governor to redesign the 200, 500 and 1000 Naira notes in order to curb corruption and vote buying by politicians during the 2023 elections. Many economists and analysts have frowned at the interference of the President in CBN's monetary policies.
In summary, the Central Bank of Nigeria's independence has been called into question, and many argue that it is not as independent as it should be. While the CBN Act of 2007 guarantees the bank's autonomy, its policies and actions have often been influenced by the government's political interests.
To ensure the CBN's true independence, it is necessary to insulate the bank from political interference and provide it with the necessary operational autonomy to carry out its mandates without external pressure.
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