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CBN Autonomy: Why the Senate Should Tinker With the CBN Act 2007?

By on June 5, 2012

The argument heating up economic, financial and political debate centers around the sanctity of the Central Bank of Nigeria’s autonomy.
CBN governors are powerful figures with near absolute monetary authority. They have discretionary ability to sanction financial institutions that serve millions of Nigerians in their capacity as depositors, debtors, or shareholders.

Matters arising become:
Who will police the police in the unlikely scenario they go wrong?

Who is to say the CBN cannot err as it endeavors to formulate and execute appropriate financial and economic policy for the advancement of the Nigerian people?

The CBN definitely has good intentions in theory behind their decision making but often the execution goes awry.
For instance, let’s take the unfortunate example of the revelations regarding Air Nigeria released by a former director of the company John Nnorom.
Yesterday he said Air Nigeria is a flying coffin because management does not spend money maintaining the planes.
He also said Chairman of Air Nigeria, Barrister Jimoh Ibrahim diverted N 35.5 billion meant for plane maintenance amongst other things into NICON Investment account.  The N 35.5 billion was disbursed to Air Nigeria as part of a CBN intervention fund for the Aviation sector.
CBN obviously did not do a good job in monitoring these intervention funds after disbursement and now the Senate may have to step into the matter in order to forestall future tragedies in the aviation sector and the corresponding damage to the economy.

Another illustration buttressing the need for greater oversight is the property CBN purchased from AA Oil owned by Alhaji Abubakar Aliyu, one of Nigeria’s most politically exposed persons. Aliyu is a close associate of Jonathan, and Adoke. He is also a partaker, partner and conduit for the N 155 oil block slush funds.

It is on record that CBN bought a property from Alhaji Aliyu’s AA Oil at N 21 billion before the 2011 elections. The problem is AA Oil bought the same property from government for less than N1 billion a few years earlier. AA Oil made a return of investment of 2000%, at the expense of the Nigerian treasury.

CBN’s participation in such transactions whether knowingly or unknowingly is a big pointer as to why even an apex bank requires supervision.
After all, how can the CBN not have conducted simple due-diligence on the transaction?
If the CBN can err in simple matters like these, then chances are they may err in matters of greater economic importance.

The verdict is that they indeed be monitored and only the legislative can be the watchdog of the people.
In America for instance, the Senate almost prevented the $ 700 billion bank bailout package that benefitted Wall Street, angered Main Street, and birthed the global #Occupy movement.
The Nigerian House of Assembly deserves to have such powers if not greater for beyond the politics and corruption, they are the voice of the people.


Fola Doherty writes in from Abuja.