Senate Proposes Bill To Strip CBN Of Interest Rate-Setting Power, Transfer Authority To New Coordinating Committee

The Senate has proposed a bill to strip the Central Bank of Nigeria (CBN) of its final decision-making power in setting interest rates.

According to a copy of the bill , this authority is to be transferred to a newly proposed Coordinating Committee for Monetary and Fiscal Policies, which will be headed 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) with 31 co-sponsors.

Senator Abiru emphasised the necessity of the amendments, stating: “This bill is a pivotal step towards modernising 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.”

He added that the primary objective of the amendment was to enhance the effectiveness of the CBN in line with current realities and best practices.

One of the significant amendments proposed is the recapitalisation of the CBN from its current capital of N100 billion to N1 trillion.

This change aims to strengthen the financial stability and operational capacity of the Bank.

On interim board, the bill grants the President the power to constitute an interim board from the existing directors of the CBN.

This board will operate for a period not exceeding sixty days, ensuring continuity in the Bank’s functions during transitional phases.

Under the new provisions, the CBN’s budget will be subject to the approval of the National Assembly, aligning with the Fiscal Responsibility Act, 2007. This move is aimed at increasing transparency and accountability in the Bank’s financial management.

Abiru said a new position, Chief Compliance Officer (COO), will be introduced.

The COO is required to prepare quarterly reports on the Bank’s compliance with the Act’s provisions. These reports will be submitted to the Board, the President, and relevant committees of the National Assembly.

Also in the bill, the CBN Governor, Deputy Governors, and Chief Compliance Officer will now be appointed for a single term of six years with no possibility of reappointment.

This change, he said is intended to ensure fresh perspectives and reduce the potential for entrenched interests.

Another significant shift proposed by the bill is the establishment of the Coordinating Committee for Monetary and Fiscal Policies.

This new body will comprise the Minister of Finance as Chairman; the Minister of Industry, Trade, and Investment, the Minister of Budget and Economic Planning; Governor of the CBN; Two external board members of the CBN; Chief Economic Adviser to the President; 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.

On experience and pedigree, 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.

Abiru explained that this requirement aims to ensure that only highly qualified individuals hold these critical positions.

The bill also calls for gender balance in the composition of the CBN Board and mandates a one-year notice before any changes to Naira notes are implemented.

Additionally, the bill mandates severe penalties for those who refuse to accept the Naira as payment or engage in the buying or selling of Naira notes at a markup.

These penalties include a minimum prison term of six months or a fine of no less than N500,000.