From Lateef Taiwo

A Bill that seeks to amend the Central Bank of Nigeria ,CBN Act, Cap C4 on Thursday Scaled second reading in the House of Representatives.

The sponsor of the bill
Hon. Francis Ejiroghene Waive in his lead debate informed that the proposed amendment to the Central Bank of Nigeria Act (the “Principal Act”)seeks to address several critical aspects of the Act in order to enhance the effectiveness,transparency, and accountability of the Central Bank of Nigeria (CBN)and its operations.

According to the lawmaker, the legislative brief will focus on the significance of amending Section 6 of the Principal Act and the rationale behind the requirement for the Chairman of the Board of Directors to be distinct from the Governor of the Bank,amongst other.

He further disclosed that section 6 of the bill has to do with the Composition of the Board of Directors emphasising that the proposed amendment introduces a crucial change in the composition of the CBN’s Board of Directors as outlined in Section 6 of the Principal Act.

The proposed amendment according to the sponsor of the bill will adds a new paragraph, Section 6(2)(a), which mandates that the Chairman of the Board shall be a Former Governor of the CBN, a former Chairman of the Bank, or a former Managing Director of a bank.

This provision introduces an essential shift by requiring the Chairman to have a background outside of the current leadership of the CBN as well as the amendments provides for the separation of the Chairman of the Board from that of the Governor.

The lawmaker pointed that the proposed bill will enhanced Independence and Oversight arguing that separating the role of the Chairman from the Governor will ensures a more effective system of checks and balances within the CBN’s governance structure as differentiation would also reduces the concentration of power,enhances accountability, and provides an avenue for unbiased oversight of the CBN’s operations.

The Bill according to the lawmaker will ensure Prevention of Groupthink as the presence of an independent Chairman with experience in the financial sector but not directly tied to the Bank’s current management will foster diverse perspectives in decision-making.

The proposed amendment will discourage “groupthink” and promote robust deliberations that lead to well-informed and balanced policies toward
a reduced Potential for Conflicts of Interest.

Meanwhile the Chairman will be selected from outside the current leadership of the Bank diminishes the likelihood of conflicts of interest that could arise when the Governor also assumes the role of theChairman,This separation reduces the risk of policy decisions being influenced by personal or vested interests.

“Strengthened Public Confidence: An independent Chairman can serve as a symbol of impartiality and transparency, thereby increasing public confidence in the CBN’s operations. This is particularly important in preserving the integrity of monetary and financial policies.
5. Expertise and Experience: By requiring the Chairman to have experience as a Former Governor, Chairman, or Managing Director of a bank, the amendment ensures that the Chairman possesses the necessary financial and economic expertise to provide effective leadership to the Board”.

“The proposed amendment to Section 6 of the Central Bank of Nigeria Act represents a significant step toward strengthening the governance structure of the CBN,The differentiation between the Chairman of the Board and the Governor of the Bank introduces a level of independence, oversight, and accountability that is essential for the effective functioning of the CBN. This amendment aligns with international best practices and demonstrates a commitment to transparent and prudent monetary policy management”.

The proposed amendments to the Central Bank of Nigeria Act, as outlined in this
legislative brief, collectively contribute to a more transparent, accountable, and
effective operation of the Central Bank. These amendments underscore the
commitment to good governance, fiscal responsibility, and the prudent management
of the Nigerian economy. It is recommended that the National Assembly carefully
considers these amendments to promote the overall economic well-being of the country and the welfare of its citizens.