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Experts insist on autonomy for CBN

By on September 20, 2013

Economists and other stakeholders in the economy  Wednesday renewed their advocacy for the autonomy of the Central Bank of Nigeria (CBN).

Speaking at the ongoing 54th annual conference of the Nigerian Economic Society (NES), experts unanimously argued against an earlier move by the National Assembly to vet the annual budget of the central bank, citing the uncertainty and delicate nature of monetary operations of the Bank.

In a lead paper titled: ‘Central Bank Autonomy, Accountability and Governance: Issues, Challenges and Option’, an Emeritus Professor of the University of Ibadan, Ademola Oyejide, said the concept of central bank autonomy became an issue due to the spiral inflationary trend of the 1970 and 1980s in the United States and Western European economies.

According to him, central banks’ autonomy was not only theoretically desirable but also practically proven to be an effective mechanism of ensuring price stability or low inflationary macroeconomic management in the face of the fiscal rascality currently exhibited by political authorities.

He cautioned that the issue of ensuring an autonomous CBN was more relevant in view of its developmental function as the central bank of a developing economy.
Oyejide said the CBN must be shielded from all political interference and urged government to strengthen the country’s development institutions to be able carry out developmental roles effectively.

In the same vein, another contributor – Joe Umoh, a Professor of Economics, further pointed out that in an underdeveloped country such as Nigeria, the CBN could not afford to neglect its role of ensuring that the economy was driven towards encouraging full employment considering the high level of youth unemployment in the country.

Also, a Professor of Economics, Sam Olofin, argued that the issue of CBN autonomy was better appreciated when the operations of other central banks across the world were closely examined.
He said: “Nobody wants the Nigerian economy to go the way of the economy of Zimbabwe where the central bank is under the direct control of the presidency and they had to abandon their currency when the rate of inflation sky-rocketed.”

According to him, there were few countries where the kind of control that is being advocated for the central bank is practiced.

Olofin said: “The best practice is for the central bank to be autonomous in the sense that its monetary policy is not controlled by the fiscal authorities by the ministry of finance, its budget is approved by the board on behalf of the government which approves the board by the way.

“This is because the budget is a law and once the National Assembly approves a budget, it cannot be altered. In the case of the central bank, it is not realistic to expect that it can present its budget for it to be passed before implementation”, he added.

 

 

 

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