The Senate on Tuesday passed for second reading a bill seeking some amendments to the Central Bank of Nigeria (CBN) Act, including a proposal to increase the bank’s authorised capital to N1 trillion.
The current CBN Act, in section 4 (1), puts the authorised capital at N100 billion, which lawmakers said had over the years been eroded by devaluation of the naira.
The Red Chamber also sought to amend Section 8 (2) of the apex bank’s law to provide for a single non-renewable term of 6 years for the governors and their deputies.
The bill, sponsored by Mukhail Adetokunbo Abiru (APC, Lagos) and 41 others, also seeks to mandate the CBN to give a notice of at least one year to replace the existing banknotes while allowing both the old and new currency notes to serve as legal tender simultaneously for two years.
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The proposed amendment sought to compel the federal government to repay the loans it received from the CBN, under Ways and Means advances, within three months from the date they are made available.
Senator Abiru, in his lead debate, said the bill, if passed into law, will further strengthen the CBN to carry out its principal objectives in line with section 2 of the act which is to ensure monetary and price stability, issue legal tender currency in Nigeria, maintain external reserves to safeguard the international value of the legal tender currency, and promote a sound financial system in Nigeria.
N1trn recapitalisation
The bill proposes to amend the bank recapitalisation to provide that the paid-up capital of the bank shall be 1 trillion naira and may be increased from time to time by such an amount as the government may approve either by way of transfer from the General Reserve Fund or by such other means as the government, in consultation with the board, may approve.
Tenure of governors, deputies
Daily Trust reports that Section 8 (2) of the CBN Act currently grants the governor and deputy governor’s tenure of five years and they are eligible for re-appointment for another term not exceeding five years.
The bill proposes to amend this provision to provide a single non-renewal term of 6 years for the governors and their deputies.
Senator Abiru said this was 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.
The bill also proposes that where a vacancy is created by the death or resignation of a CBN governor or deputy governor, the president can appoint an acting governor in the interim pending the appointment of a substantive governor or deputy governor. Where a substantive appointment is made, such appointment will be for a fresh term rather than serving the tenure of the previous governor or deputy governor.
CBN’s advances to FG
The current act empowers the CBN to grant temporary advances to the federal government to finance unexpected shortfall in budget revenue.
The advance is 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.
Issuance of new currency notes
The Senate said the current act, which gives the CBN the power to issue new banknotes without specifying a time frame within which the old currency ceases to be a legal tender contributed to the confusion that characterised the last currency redesign exercise and the resultant huge economic loss to the nation.
It therefore seeks to mandate the apex bank to give reasonable notice of at least one calendar year of its intention to replace the existing legal tender.
“The entire programme should last at least two years from the date of the announcement of its intention.
