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CBN Act amendment can weaken apex bank’s autonomy – IMF

The Central Bank of Nigeria has released a strong affirmation of the security of cash within Nigerian banks, highlighting the country's banking sector's soundness. Amid widespread unconfirmed rumours, not originating with the CBN, raising concerns about the health of Nigerian banks, the central bank of Nigeria asked the people not to panic and to continue with their usual banking activity. To ease people's anxieties and comfort them, the CBN emphasized its readiness and capability to carry out its stated role of maintaining a stable financial system in Nigeria. This statement by the CBN responds to the concern caused by unverified information and seeks to reassure the public about the safety and stability of the country's banking industry. "The Central Bank of Nigeria has noticed reports, in certain media outlets, about a recommendation for the Federal Government to take over some CBN-supervised financial institutions," said the apex bank's acting Director, Corporate Communications, Hakama Sidi-Ali, in a statement issued on Wednesday. "To avoid any doubt, Nigerian banks are still safe and sound. The CBN advises the public to go about their daily lives without getting disturbed by reports regarding the health of Nigerian banks that have not come from the CBN. "The CBN is fully equipped to carry out its statutory duty of ensuring the stability of Nigeria's financial system. "We assure the general public and depositors that their funds are safe in Nigerian financial institutions. "Bank customers are therefore advised to proceed with their banking transactions as usual, as there is no cause for concern." This statement follows a report by the CBN's special investigator, Jim Obazee, alleging that Godwin Emefiele, the former governor of the federal bank, used proxies to establish two financial institutions. According to the report, Emefiele utilised proxies to acquire Union Bank of Nigeria for Titan Trust Bank Limited and Keystone Bank without providing any proof of payment. As a result, it recommended that the Federal Government reverse the sale and take over the banks.
    By Sunday Michael Ogwu

The International Monetary Fund (IMF) has said there is a risk that the ongoing work by members of the legislature to amend the CBN Act could weaken the bank’s governance and autonomy.

The IMF disclosed this in its report under the 2024 Article IV consultation with Nigeria.

Under Article IV of the IMF’s Articles of Agreement, the fund holds bilateral discussions with members, usually every year.

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The fund, in its release, noted that several elements in the current draft Bill as disclosed in the public domain would, if enacted, significantly weaken the bank’s institutional framework and independence.

It pointed out specifically that, “The envisaged ‘Coordinating Committee for Monetary and Fiscal Policies’ chaired by the Minister of Finance could undermine the autonomy of the CBN and its Monetary Policy Committee, which is separately chaired by the Governor of the CBN.”

The IMF however noted that Nigeria, under its new administration, has set out on an ambitious reform path to restore macroeconomic stability and support inclusive growth.

It welcomed the bold reforms implemented by the new administration and commended the authorities’ focus on revenue mobilization, governance, social safety nets, and upgrading policy frameworks in the face of Nigeria’s significant economic and social challenges.

In view of the downside risks, IMF stressed the importance of steadfast, well-sequenced and well-communicated reforms to restore macroeconomic stability, reduce poverty, support social cohesion, and pave the way for faster, inclusive and resilient growth.

It stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path, maintaining exchange rate flexibility and building reserves.

The IMF also supported the increase in the minimum capital for banks and urged the CBN to unwind the regulatory forbearance introduced during the pandemic.

It, however, noted that while the CBN has published recent annual financial statements and announced plans to phase out development lending and monetary financing, other recommendations remain outstanding.

The federal government, through its engagement teams by the finance ministry and the CBN, agreed with the importance of maintaining external stability and emphasised that the reforms they have implemented as well as efforts to bring in FX liquidity – including the requirement for international oil companies to hold 50 per cent of repatriated oil receipts in Nigeria for 90 days – are geared towards that end.

They IMF sees pressure on the exchange rate now coming from illicit flows, including through crypto-asset platforms, and not being driven by fundamentals, noting that some ceilings on FX access are intended to curb abuse.

The authorities disagreed with the proposed reclassification of the de facto exchange rate which they consider backward-looking, emphasising that in their view, the exchange rate is entirely market-determined and should be classified as a floating regime.

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