…as FG order on FX for food imports may be illegal
President Muhammadu Buhari’s directive to the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food into the country is a trampling of the independence of the apex bank, according to leading Senior Advocates of Nigeria (SANs) who spoke to BusinessDay on the matter.
The President had on Tuesday said he had directed the CBN to stop providing foreign exchange for importation of food into the country, claiming there has been a “steady improvement in agricultural production and attainment of full food security”.
“Don’t give a cent to anybody to import food into the country,” Buhari said, according to Garba Shehu, presidential spokesman, in a series of tweets.
But the legal luminaries faulted the Presidential directive, saying it amounted to usurpation of the powers of the CBN.
“As things will be, perhaps unknown to the Presidency, the law no longer allows executive control of the CBN. Indeed, the President has no constitutional, legal or executive powers over the CBN that enables a directive as to the operational activities of the CBN – in the way he has over his general staff,” said Konyin Ajayi, a professor and Senior Advocate of Nigeria (SAN).
Ajayi explained that it would be a usurpation of powers if the statement credited to the President is seen other than as an opinion or desire in his overall view of government’s position on exchange controls of monetary policy.
“As the courts are, for instance, granted independence, so has the CBN by virtue of the CBN Act which the President is under oath to uphold,” he noted.
Another SAN, who does not want his name mentioned, agreed with Ajayi.
“Legally, the president cannot order an independent entity like the Central Bank of Nigeria to do what he wants even if that which the President wants done might be a good thing to do,” the SAN told BusinessDay.
He, however, added that the CBN might be to blame for the development.
“But we have a dilemma here. The CBN may have made itself amenable to supervision by the president by its foray into the fiscal space, the political space – on account of the demonstrable incompetence of the executive branch. So the president may now begin to see the governor of the bank as he sees one of his ministers and think he can order him around,” he said.
Even though the constitution empowers the President to appoint a CBN governor subject to approval from the Senate, the CBN Act of 2007 provides the apex bank with the autonomy that makes it free from direct political or government interference in the conduct of monetary policy.
The monetary authority is usually in charge of attaining price stability by managing the interest rates as well as the total supply of money in circulation and is controlled by the central bank of a country, while a country’s fiscal policy is determined by the executive and legislative branches of the government, charged with the responsibility of influencing economic activities through taxes and government spending.
Osaro Eghobamien, another Senior Advocate of Nigeria, said it was necessary to understand the context in which the President’s directive was given; whether “the directive issued was one that relates to fiscal policy (a statement to achieve full employment, price stability and sustained growth in the economy, with the intention of stimulating local demand) or whether it was one that relates to monetary policy (the mechanism for controlling the total supply of money in circulation)”.
“If categorised as a statement tending towards fiscal policy, undoubtedly the President has the powers to make such directives regarding economic policies just as the Minister of Finance would do. The complexity is that the Central Bank is not created to execute fiscal policies. The situation is different when dealing with issues relating to monetary policy in which case the President will not have the powers,” Eghobamien said.
“The CBN is in control of the mechanism that regulates the FOREX and as a result there is some overlap in its functions. Under the law, whereas the CBN has the powers to hold FOREX, it is the executive that has the powers to decide the sector to which the CBN may allocate FOREX. The intricacy inherent in this issue is demonstrated in the intervention role that the CBN is performing. It is pertinent to note that the CBN has in the past assumed the role of allocating FOREX and it is must be presumed that it takes directives from the President in that regard,” he said.
Eghobamien said the CBN is independent and its independence is in relation to its stated objectives.
“These objectives are as stated in the CBN Act including: (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. (see section 2(a) of the CBN Act 2007),” he said.
He said the provisions of section 1(3) of the Central Bank Act, 2007 must be viewed from that perspective and that if the President had made a directive in connection with any of the above objectives, it would be undermining the independence of the CBN.
“We do not consider that the President’s statement undermines or relates to any of these objectives. Instead, the statement relates more to enhancing the agricultural sector, boosting employment and using the allocation of forex to re-enforce the enhancement of the sector.
“Whilst it is readily conceded that the function of maintaining external reserves to maintain the value of the legal tender (ascertain exchange rate) is a matter for the CBN, we take the view that the question as which sector is permitted to purchase the scarce resource is for the executive and not for the CBN to decide,” he said.
“On a final note, the CBN ought to be seen as an independent institution and as such the President ought not to convey the impression that he controls the CBN. This is notwithstanding the fact that his comments were more of general economic policies. After all, the CBN is not statutorily mandated to execute fiscal policy. Better still such pronouncement should be left to the CBN governor after consultations with the President,” he said.
Previous administrations had one way or the other meddled in the affairs of monetary authorities. While former President Goodluck Jonathan removed the then CBN governor Sanusi Lamido Sanusi, late President Umaru Musa Yar’Adua stopped Chukwuma Soludo from implementing some monetary policies.