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Bills threaten CBN role- Sanusi

31 May 2012, 16:21

Lagos - Two bills being proposed in parliament that would give legislators powers to vet the central bank's budget and appoint its board are a serious menace to the bank's independence if passed, the governor told Reuters.

Analysts see the central bank as one of the few reformist institutions in an oil state plagued by corruption.

Governor Lamido Sanusi argues that the central bank's independence from political interference is crucial for macroeconomic stability.

"We think this bill will ultimately undermine the autonomy and independence of the central bank, and potential confidence in the economy and the financial system," Sanusi told Reuters by phone from an African Development Bank conference in Tanzania on Thursday. One bill was tabled in the senate in an extraordinary session on Monday.

"The bank shall cause its budget to be submitted to the National Assembly," a copy obtained by Reuters on Thursday says. Another bill to enable the assembly to replace the bank's board with political appointees was put before the lower house last week, lawmakers said. No date has been set to vote on either.

"(It is) the ... principle of checks and balances. There is no power that is absolute to itself," Deputy Senate President Ike Ekweremadu, who backs the bill, said at the hearing.

The president currently picks the governor and the board but after that it acts independently for a fixed five-year term during which it is not accountable to politicians.

"There is a strong correlation between the independence of a central bank and price and macroeconomic stability. Only Zimbabwe (of African countries) doesn't have it," Sanusi said.

Zimbabwe's politically-controlled central bank printed so much money that the local currency became worthless, with inflation at a billion percent, before it abandoned it in 2009.

Politically motivated?

It is not clear how much support the bills are likely to have. Sanusi also said he thought they would fail.

"Not a single individual at the hearing supported it. We believe the national assembly will listen to stakeholders and not approve these amendments," he told Reuters.

At the hearing, Minister of State for Finance Yerima Ngama and Minister for National Planning Shamshudeen Usman gave speeches in which they argued against it, according to a transcript obtained by Reuters.

Analysts suspect this is a case of settling political scores as Sanusi is a vocal critic of parliament's recurrent expenditure.

Market players have praised the governor for his efforts to reform the banking system, including preventing its collapse during a 2008/9 financial crisis.

In a $4 billion bailout, he went after powerful elites suspected of fraudulently inflating assets, sacking eight bank heads whom many thought untouchable.

He is also seen as a relative hawk on inflation: tightly controlling the money supply, keeping interest rates high and intervening to stabilise the naira whenever oil-fuelled government spending threatens price stability.

"The new legislation would be a major setback for the reform process and price stability," said Standard Bank's Samir Gadio, adding that the bank's independence was vital to curb excesses.

Sanusi rarely misses the chance to criticise what he sees as excessive government spending, blaming it for stoking inflation and depleting forex reserves, despite record high oil prices.

"The aim of the bill is to get Sanusi. He went to the national assembly and said 'you guys are spending recklessly'. They didn't like that, so it's pay-back time," said Bismarck Rewane, CEO of Lagos-based consultancy Financial Derivatives.

"They want to teach him a lesson. I doubt it will pass."

- Reuters


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