Nigerian Lawmakers to Pause Debate on Amending Central Bank Law

(Bloomberg) -- Nigerian lawmakers are pausing debate on proposed changes to a law governing the central bank, following questions about potential implications for policy independence.

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“The National Assembly has decided to put on hold the amendment process to allow for more consultations,” said Uche Uwaleke, a special adviser to the Senate’s committee on banking, insurance and financial institutions.

The draft bills before the Senate include a proposal to establish a policy coordination committee led by the finance minister. Its tasks would include setting “internally consistent targets of monetary and fiscal policies that are conducive to controlling inflation and promoting financial conditions for sustainable economic growth.”

Uwaleke said that the proposed committee would not “usurp” the bank’s Monetary Policy Committee, whose role is stipulated in the proposed bill.

Still, the International Monetary Fund cautioned last month that changing the Central Bank of Nigeria Act could undermine central bank independence, a sentiment echoed by the nation’s financial industry.

Read more: Nigeria Delivers Big Rate Hike to Aid Its Bruised Naira

“There is a risk that ongoing work by members of the legislature to amend the CBN Act could weaken the central bank’s governance and autonomy,” the IMF cautioned in its regular health assessment of the Nigerian economy. “Several elements in the current draft Bill as disclosed in the public domain would, if enacted, significantly weaken the institutional framework and its independence.”

The proposals must be debated before they can advance to the desk of President Bola Tinubu for his assent or veto.

Nigeria is fighting the highest rate of inflation in 28 years and part of the problem stems from past central bank practices of funding the government by printing money – something current Governor Olayemi Cardoso says won’t happen on his watch.

Tinubu appointed Cardoso in September after replacing the previous head of the central bank, who was subsequently arrested on charges including fraud, which he denies.

(An earlier version of this story was corrected to remove reference to stripping central bank of crucial powers)

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