The National Assembly has made strides with a proposal that could see the Central Bank of Nigeria’s (CBN) capital base soar to a whopping N1 trillion.
This proposition was part of a broader legislative effort encapsulated in a bill that recently advanced to its second reading in the Senate.
This bill, titled “Bill for an Act to Amend the Central Bank of Nigeria Act, 2007 to strengthen the Bank, and for other related matters thereto, 2024 (SB. 325),” is spearheaded by Senator Adetokunbo Abiru (APC, Lagos East), alongside the robust support of 41 other Senators, to amend various facets of the existing CBN Act, 2007.
Key among the proposed changes is a dramatic increase in the CBN’s authorized capital from the current N100 billion—a figure that legislators argue has been significantly diluted over time due to the naira’s devaluation.
This financial bolstering is seen as a crucial step in ensuring the CBN remains a formidable pillar in Nigeria’s economic landscape.
Senator Abiru, in his lead debate, underscored the bill’s potential to significantly empower the CBN in fulfilling its core mandates, marking a pivotal step towards enhancing Nigeria’s financial system integrity and stability.
He said: “Recapitalization of the Bank; The Bank’s current authorized capital of ₦100 billion (One Hundred Billion Naira) as stated in section 4 (1) has over the years been eroded by the devaluation of the naira.
“The Bill proposes to amend this to provide that the paid-up capital of the Bank shall be 1 Trillion Naira and may be increased from time to time by such amount as the Government may approve either by way of transfers from the General Reserve Fund or by such other means as the Government, in consultation with the Board, may approve.”
Six years single tenure for CBN governor, deputies
Another aspect of the bill is the restructuring of the CBN’s leadership tenure. It seeks to amend the apex bank’s law to introduce a single, non-renewable term of six years for both the governor and deputy governors, a move that could significantly influence the bank’s governance dynamics.
Senator Abiru said: “Tenure of CBN Governor and Deputy Governors: Section 8 (2) of the CBN Act currently grants the Governor and Deputy Governor’s tenure of five years and they are eligible for re-appointment for another term not exceeding five years. The Bill proposes to amend this provision to provide a single non-renewal term of 6 years for the Governor and the Deputy Governors.
“In addition, the Bill proposes that where a vacancy is created by the death or resignation of a CBN Governor or Deputy Governor, the President can appoint an acting Governor in the interim pending the appointment of a substantive Governor or Deputy Governor. Where a substantive appointment is made, such appointment will be for a fresh term rather than serving the tenure of the previous Governor or Deputy Governor.”
On currency replacement
Additionally, the bill proposes a meticulous overhaul of the country’s currency replacement process. Specifically, it advocates for a transition period where both old and new currency notes would concurrently serve as legal tender for two years.
This strategy is designed to mitigate any potential economic disruptions, stipulating that the CBN must retain at least 70% of the new currency stock before phasing out the old notes.
This phased approach aims to ensure a seamless transition that preserves economic stability.
On Ways and Means Advances
Moreover, the legislative proposal includes a measure to enforce stricter financial discipline within the federal government, compelling it to repay loans obtained from the CBN under Ways and Means advances within a three-month window from the issuance date.
Senator Abiru said: “The current CBN Act, empowers the CBN to grant temporary advances to the Federal Government to finance unexpected shortfalls in budget revenue. The advance is not to exceed five per cent of the previous year’s actual revenue of the Federal Government and it is to be paid back at the end of the financial year in which it was granted.
“To firm up this provision and prevent a repeat of the recent experience in which the Bank’s Ways and Means have fuelled inflation and significantly distorted economic management, the Bill proposes the following: any such direct advance to the Government should not exceed 10% of average government actual revenues during the preceding three years. To determine the government’s actual government revenue proceeds from asset sales shall be excluded to avoid capturing revenues from exceptional items.”