Senator Abiru, in his lead debate on the bill co-sponsored
by 41 other members of the committee, said six years single term for CBN
Governor, Deputy Governors and Board of Directors, said it was geared towards
reducing political influence on them.
“The bill proposes to amend this provision to provide a
single non-renewal term of six years for the Governor and the Deputy Governors.
“This is 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.
“Empirical evidence shows that a single term for the members
of the Executive and Board members of central banks helps to reduce political
influence on monetary policy decisions and the time inconsistency problem
associated with non-independent central banks,” he said.
On the N1 trillion recapitalization, Abiru in the bill said
the proposal seeks to provide that the paid-up capital of the bank shall be N1
trillion and may be increased from time to time by such amount as the
Government may approve, either by way of transfers from the General Reserve
Fund or by such other means as the government, in consultation with the board,
may approve.
The bill, also seeks for creation of Coordinating Committee
for Monetary and Fiscal Policies since the extant act made no provision for
such.
He said: “The current Act made no provision for coordination
of monetary and fiscal policies which is the reason that monetary policies of
the bank often diverge from fiscal policies to the detriment of the economy.
“To this end, the bill introduces, for the purpose of
coordination of the monetary, fiscal and trade policies, a Coordinating
Committee for Monetary and Fiscal Policies.
“The functions of the committee shall include: setting
internally consistent targets of monetary and fiscal policies that are
conducive to controlling inflation and promoting financial conditions for
sustainable economic growth; applying caps to any fiscal deficit at a level
that can be financed without having recourse to direct monetary financing from
the bank, etc.
It also seeks to regulate the issuance of Ways and Means by
CBN to the Federal Government.
Specifically, as proposed in the bill, while the current CBN
Act, empowers the CBN to grant temporary advances to the Federal Government to
finance unexpected shortfall in budget revenue without stated time frame, the
proposed law wants the advance 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.
“In order to firm up this provision and prevent a repeat of
the recent experience in which the Bank’s Ways and Means have fueled inflation
and significantly distorted economic management, the Bill proposes the
following: any such direct advance to the Government should not exceed 10% of
average government actual revenues during the preceding three years.
“For the purpose of determining the government’s actual
government revenue, proceeds from asset sales shall be excluded to avoid
capturing revenues from exceptional items.
“Such temporary loans should be repaid in full within three
months from the date it is made available. This is consistent with global
practice.
“The current provision, which stipulates before the end of
the fiscal year is prone to abuse as it creates a window for the government to
obtain overdrafts from the bank in January and wait until December to make
repayment.
“In order to minimize default risk, any sum which becomes
outstanding at the end of the expiration of the credit period should be held
against and recovered from the proportion of the Federal Government’s FAAC
Receipts,” he explained.
Members of Board of CBN Directors screened on Tuesday were
Mr. Robert Agbede, Mr. Ado Yakubu Wanka and Mrs. Muslimat Olanike Aliyu.
