The IMF requests a review of the 2007 Act

In order to improve the bank’s autonomy and governance, the International Monetary Fund has called for a review of the Central Bank of Nigeria Act of 2007.

The latest report from the IMF, titled “Nigeria: 2022 Consultation on Article IV – Press Release; Staff Evaluation; as well as a statement made by the Executive Director for Nigeria.

The CBN Act of 2007 is being called for a modern review at a time when the bank’s autonomy is being questioned over its naira redesign policy.

Many have questioned the legitimacy of the Supreme Court and the CBN’s independence since the court’s recent decision to lift the ban on the old N1000, N500, and N200 notes.

Femi Gbajabiamila, the Speaker of the House of Representatives, also recently stated that the apex bank was still subject to the law despite the CBN’s alleged autonomy.
He stated, “Many have debated CBN independence and autonomy.” CBN is not exempt from the law as a result. The House of Representatives is authorized by the Constitution to issue an arrest warrant for anyone; We can summon anyone, and the House was going to do exactly that until the CBN governor arrived. As a result, we are keeping a close eye on things.

However, in order to make price stability the central bank’s primary goal, the IMF emphasized the importance of maintaining the central bank’s autonomy.

In addition, it urged the CBN to resume publishing its annual financial statements in accordance with international standards.
According to a portion of the report, “The 2007 CBN Act needs to be modernized to strengthen the central bank’s autonomy and governance and to establish price stability as its primary objective.”

“The CBN’s financial reporting practices should be strengthened by returning to annual financial statement publication and fully adopting the International Financial Reporting Standards.” As progress has been limited thus far, the CBN should take steps to implement the assessment’s (the 2021 Safeguards assessment) recommendations.

In addition to safeguarding the independence and tenure of central bank officials, the IMF emphasized the necessity of strengthening the central bank’s autonomy by reducing the presence of government officials on the apex board and committees.

“A safeguards assessment of the CBN was finished in April 2021, but little has been done to put the recommendations into action.

In general, international standards are adhered to by the CBN’s internal and external audit mechanisms.

“However, in order to enshrine price stability as the primary objective, modernize the CBN Act, safeguard the independence and tenure of central bank officials, and increase the central bank’s autonomy, including by reducing the presence of government officials on the board and the CBN’s committees. A majority non-executive board and an audit committee that is separate from executive management ought to be included in legal amendments to allow for independent oversight of the CBN.

“Financial autonomy should be protected by prohibiting quasi-fiscal operations and developmental lending activities, which must be phased out, and by imposing clear statutory limits on credit to the government. The complete adoption of the International Financial Reporting Standards and the resumption of the publication of annual financial statements are both necessary steps to improve financial reporting practices. The report stated, “staff continues to engage with the authorities on these issues, and limited progress has been seen on implementation of the recommendation.”

In addition, the IMF urged the CBN to gradually phase out some quasi-fiscal activities that have grown rapidly since the pandemic.

It was noted that there were efficiency concerns despite the fact that some of these activities, such as the Anchor Borrowers’ Program, which provides credit to farmers, fill a gap in the market.

Additionally, it warned that an excessive expansion of quasi-fiscal activities would exacerbate fiscal deficit monetization, erode the credibility of the CBN’s mandate for price stability, and worsen financial repression.