Following public outcry against the changing of the Nigeria currency prior to the 2023 general election, The House of Representatives has approved the proposed amendment to the Central Bank of Nigeria CBN 2004 to ensure that the banks operations meets the yearning and expectations of citizens
To this end, A Bill for an Act to Amend the Central Bank of Nigeria CBN Act,Cap 4, Laws of the Federation of Nigeria 2004 and for Related Matters Sponsored: Hon. Francis Ejiroghene Waive ( Delta,PDP) scaled second reading on the floor of the House.
The proposed amendment to the Central Bank of Nigeria Act (the “Principal Act”) the lawmaker said seeks to address several critical aspects of the Act in order to enhance the effectiveness,transparency, and accountability of the Central Bank of Nigeria (CBN)and its operations.
This legislative brief according to the sponsor of the bill will focus on the significance of amending Section 6 of the Principal Act and the rationale behind the requirement for the Chairman of the Board of Directors to be distinct from the Governor of the Bank,amongst other.
Section 6: Composition of the Board of Directors
The proposed amendment introduces a crucial change in the composition of the CBN’s Board of Directors as outlined in Section 6 of the Principal Act.
The proposed amendment adds a new paragraph, Section 6(2)(a), which mandates that the Chairman of the Board shall be a Former Governor of the CBN, a former Chairman of the Bank, or a former Managing Director of a bank.
This provision in the Act introduces an essential shift by requiring the Chairman to have a background outside of the current leadership of the CBN.
Secondly the amendments also provide for the separation of the Chairman of the Board form that of the Governor. Importance of a Distinct Chairman
Enhanced Independence and Oversight:
Separating the role of the Chairman from the Governor ensures a more effective system of checks and balances within the CBN’s governance structure. This differentiation reduces the concentration of power,enhances accountability, and provides an avenue for unbiased oversight of the CBN’s operations.
Prevention of Groupthink:
The presence of an independent Chairman with experience in the financial sector but not directly tied to the Bank’s current management will foster diverse perspectives in decision-making. This will discourage “groupthink” and promote robust deliberations that lead to well-informed and balanced policies.
3. Reduced Potential for Conflicts of Interest: A Chairman selected from outside the current leadership of the Bank diminishes the likelihood of conflicts of interest
that could arise when the Governor also assumes the role of theChairman,This separation reduces the risk of policy decisions being influenced by personal or vested interests.
Strengthened Public Confidence:
An independent Chairman can serve as a symbol of impartiality and transparency, thereby increasing public confidence in the CBN’s operations. This is particularly important in preserving the integrity of monetary and financial policies.
5. Expertise and Experience: By requiring the Chairman to have experience as a Former Governor, Chairman, or Managing Director of a bank, the amendment ensures that the Chairman possesses the necessary financial and economic expertise to provide effective leadership to the Board.
The bill sponsor said that proposed amendment to Section 6 of the Central Bank of Nigeria Act represents a significant step toward strengthening the governance structure of the CBN,The differentiation between the Chairman of the Board and the Governor of the Bank introduces a level of independence, oversight, and accountability that is essential for the effective functioning of the CBN.
There are some other sections of the Act that are in the proposed amendments which the bill sponsor said it would go a long way in strengthening the fiscal and monetary policy issues in the apex bank.
These amendment he said aligns with international best practices and demonstrates a commitment to transparent and prudent monetary policy management.
