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Senate Proposes Bill to Transfer CBN Interest Rate Authority

In a significant legislative move, the Nigerian Senate has proposed a bill aimed at reshaping the financial regulatory landscape by stripping the Central Bank of Nigeria (CBN) of its final decision-making authority on interest rates.

This power would be transferred to a newly proposed Coordinating Committee for Monetary and Fiscal Policies, led by the Minister of Finance.

The bill, titled “An Act to Amend the Central Bank of Nigeria Act No. 7 of 2007,” is sponsored by Senator Tokunbo Abiru (Lagos East) and co-sponsored by 31 other senators.

Senator Abiru emphasized the importance of these amendments, stating: “This bill is a pivotal step towards modernizing our financial regulatory environment. By aligning the CBN’s operations with contemporary best practices, we aim to foster a more robust and transparent economic framework for Nigeria.” The primary objective of the amendment, he noted, is to enhance the effectiveness of the CBN in line with current realities and best practices.

One notable amendment is the proposed recapitalization of the CBN, increasing its capital from N100 billion to N1 trillion. This change aims to bolster the Bank’s financial stability and operational capacity.

The bill also introduces provisions for an interim board, granting the President the authority to appoint board members from the existing directors of the CBN. This interim board would serve for up to sixty days, ensuring continuity during transitional phases.

In a bid to increase transparency, the CBN’s budget will be subject to approval by the National Assembly, aligning with the Fiscal Responsibility Act of 2007. Additionally, the bill proposes the creation of a new position, Chief Compliance Officer (COO), who will be required to prepare quarterly compliance reports. These reports will be submitted to the Board, the President, and relevant committees of the National Assembly.

The tenure of the CBN Governor, Deputy Governors, and Chief Compliance Officer will also be revised, with each appointed for a single term of six years without the possibility of reappointment. This change is intended to ensure fresh perspectives and mitigate entrenched interests.

A major shift proposed by the bill is the establishment of the Coordinating Committee for Monetary and Fiscal Policies. This committee will include the Minister of Finance as Chairman, along with other key ministers, the Governor of the CBN, two external board members of the CBN, the Chief Economic Adviser to the President, the Director-General of the Securities and Exchange Commission, and the Director-General of the Debt Management Office. The committee’s goal is to set targets for monetary and fiscal policies that align with controlling inflation and ensuring sustainable economic growth.

The bill stipulates that the Governor and Deputy Governors must have at least 15 years of recognized financial experience, while the COO must have at least 15 years of experience in auditing or legal practice in Nigeria. This requirement is intended to ensure that only highly qualified individuals occupy these critical positions.

The proposed legislation also mandates gender balance on the CBN Board and requires a one-year notice before implementing any changes to Naira notes. Additionally, it introduces severe penalties for those who refuse to accept the Naira as payment or engage in buying or selling Naira notes at a markup, including a minimum prison term of six months or a fine of at least N500,000.

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