Misdirections at the Central Bank of Nigeria

EZE ONYEKPERE FROM PUNCH

The redesign of the Nigerian currency by the Central Bank of Nigeria is raising fundamental questions on the domain and objectives of monetary policy. This is coming against the background of the difficulties and challenges which ordinary Nigerians have experienced while cooperating with the bank. This discourse reviews the implementation of the currency redesign within the context of the CBN Act and the overall imperative for a sound financial system.

S.2 of the CBN Act, 2007 states that the principal objects of the bank shall be to – (a) ensure monetary and price stability; (b) issue legal tender currency in Nigeria; (c) maintain external reserves to safeguard the international value of the legal tender currency; (d) promote a sound financial system in Nigeria; and (e) act as banker and provide economic and financial advice to the Federal Government. By S.18 of the Act, the bank is empowered to (a) arrange for the printing of currency notes and the minting of coins; (b) issue, re-issue and exchange currency notes and coins at the bank’s offices and at such agencies as it may, from time to time, establish or appoint.

The bank also has a developmental banking role as envisaged in S.31 of the Act. This developmental banking role is for the purpose of promoting the development of money or capital markets in Nigeria or of stimulating financial or economic development so however that in any such case, the total value of the holdings of shares or, as the case may be, debentures to which this section applies shall not at any time exceed ten times the aggregate of the bank’s paid-up capital and the general reserve fund of the bank.

Furthermore, the bank in S.32 has omnibus incidental powers, subject as is expressly provided in the Act generally to conduct business as a bank, and do all such things as are incidental to or consequential upon the exercise of its power or the discharge of its duties under this Act.

These objectives, functions and powers do not suggest that the bank is set up as an alternative government that solves all Nigerian challenges within the street sense of money solving all challenges. But the CBN seems to be proceeding with this street sense. When the airlines were down, the bank pumped money; when the Federal Government thought we need to increase local food production, the bank responded with cash that was disbursed outside the bureaucracy of the Ministry of Agriculture which houses the technical skills and overall mandate for food production. Back to the currency redesign.