By Stanley Onyeka, Lagos
The Executive Board of the International Monetary Fund (IMF), has cautioned certain amendments to the Central Bank of Nigeria (CBN) Act, saying it might weaken the autonomy of the apex bank.
This is a part of the Executive Board Assessment, following its conclusion of the 2024 Article IV Consultation with Nigeria on April 29.
Rather than weakening the CBN autonomy, the IMF encouraged further progress in implementing the outstanding recommendations from the 2021 safeguards assessment.
Indeed, a bill titled: “An Act to amend the Central Bank of Nigeria Act No 7 of 2007,” had already scaled second reading in the Senate at February end.
This bill, co-sponsored by all the 41 members of the Senate Committee on Banking, Insurance and Other Financial Institutions, was read a month earlier for the first time on January 30th.
The promoters of the bill argued that the proposed amendments are aimed at strengthening the CBN to discharge its primary mandate of maintaining monetary and price stability in support of the government’s economic growth objectives while aligning its governance mechanisms with global best practices.
In particular, the lawmakers are concerned that the current CBN Act 2007, which charges the Bank with the overall control and administration of the monetary and financial sector policies of the federal government, has not been amended for over 16 years.
This is despite growing changes to the Bank’s balance sheet and challenges in monetary policy implementation occasioned by fiscal dominance and the rapidly changing financial landscape.
They also expressed worries over the tenure of the
Governor and the Deputy Governors, for which the bill provides a single non-renewal term of six years.
They insisted that: “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.”
Near-term risks are tilted to the downside, but determined and well-sequenced implementation of the authorities’ policy intentions would pave the way for faster, more inclusive and resilient growth.
Economic reforms
Regarding Nigeria’s economy, the IMF noted the Federal Government’s “ambitious reform path to restore macroeconomic stability and support inclusive growth.”
It added that “The authorities reformed the fuel price subsidies, unified official foreign exchange windows, and are focused on revenue mobilization, governance, and enhancing the monetary and exchange rate policy frameworks, as well as strengthening social safety nets.”
It said further that “Following monetary policy tightening in February and March 2024 and a resumption of FX interventions, the naira has started to stabilize.
“Near-term risks are tilted to the downside, but determined and well-sequenced implementation of the authorities’ policy intentions would pave the way for faster, more inclusive and resilient growth.”
The Fund also expressed concern that “Food insecurity could worsen with further adverse shocks to agriculture or global food prices.
It added that “Adverse shocks to oil production or prices would hit growth, the fiscal and external position, and exacerbate inflationary and exchange rate pressures.”
Nevertheless, it said that: “Growth is projected at 3.3% for 2024 as both oil and agriculture outputs are expected to improve with better security.
“The financial sector has remained stable, despite heightened risks. Determined and well-sequenced implementation of the authorities’ policy intentions would pave the way for faster, more inclusive, resilient growth.
“Inflation reached 32% year-on-year in February 2024, driven mainly by food price inflation (38%) and loose financial conditions.
“With continued monetary tightening, inflation is projected to gradually decline to 24% year-on-year at end-2024.”
Against this backdrop, the Directors “commended the authorities’ actions to rein in inflation and restore market confidence.”
They stressed the importance of keeping a tight monetary policy stance to put inflation on a downward path, maintaining exchange rate flexibility, and building reserves.
They further welcomed the removal of foreign exchange (FX) market distortions and encouraged the authorities to continue improving its functioning, including by adopting a well‑designed FX intervention framework.
This is even as some Directors also noted that “carefully and sequentially phasing out capital flow management measures when warranted would be important.”
