Tag: cbn

Whoever amongst you sees something abhorrent let him change it physically; but if he is incapable, then, let him change it verbally; and if he is still incapable to do so then let him change it wishfully; however the last option is an evidence of a very weak faith”. Hadith of Prophet Muhammad (SAW).

Dear Governor of the Central Bank of Nigeria, Ordinarily, this open letter would not have been necessary if some other avenues were available for public servants like you to rob minds with the ordinary citizens of Nigeria. Similar letters had been written in the recent past through this column to some other prominent public servants in Nigeria including Mr. President. Though you are being surreptitiously labelled unjustifiably by the Press as the most controversial CBN Governor ever in Nigeria, it is a matter of delight for reasonable Nigerians who follow your focused direction that you are calmly weathering the storm despite unwarranted heat being maliciously generated from certain quarters to ensure your failure.

You would have probably noticed that ‘The Message’ as a column takes a special interest in your office. This is not because you are a Muslim and in charge of money but because your courageous and patriotic performance so far deserves public cooperation and support. And, by winning the World Banker of the year 2011 award, you have put the malicious sceptics to shame. Ever since you became the CBN Governor in 2010, this column has followed your track record very keenly and has randomly commended or admonished you as the situation warranted. Yet, we have never met one on one.

By and large, as the 10th Governor of the Central Bank of Nigeria you have wonderfully proved your mettle by showing that administrative prowess is surely a property of intellect with which only the Almighty Allah endows whoever He wishes. The very quantum of your impeccable achievements in that exalted office in the past two years conspicuously stand you out of the pack. In a sane country the citizenry should be proud of you.

However, there are moments in the life of a leader when it may become necessary to look over his shoulder and see if the foot soldiers are still there to man the rear effectively. Perhaps for you this is one of such moments.

Going down the memory lane, you will recall that though the British Colonialists first brought monetary coins and currency notes to Nigeria in 1892 such monies were not in public circulation until 1912 when the West African Currency Board was established to issue currency notes for the sub-region. Nevertheless, the history of Nigeria’s Central Bank did not take root until 1952 when the report of an enquiry into banking practice in Nigeria was submitted. That enquiry led by G. D. Paton a Briton appointed by the Colonial Administration paved the way for the first Banking Ordinance designed to ensure orderly commercial banking and to prevent any establishment of unviable banks that year. Subsequently, a draft legislation for the establishment of Central Bank for Nigeria was presented to the House of Representatives in March 1958 which became fully implemented on July 1, 1959 when the CBN officially came into existence.

Since then, the Central Bank Act, 1958 (as amended) and the Banking Decree 1969 (as amended) have constituted the legal framework within which the CBN operates and regulates banks. Also, the wide range of economic liberalization and deregulation measures which began in 1986 with the adoption of a Structural Adjustment Programme (SAP) resulted in the emergence of more private banks and other financial intermediaries. The Banks and Other Financial Institutions (BOFI) Decrees 24 and 25 of 1991, which repealed the Banking Decree 1969 and all its amendments were, therefore, enacted to strengthen and extend the powers of CBN to cover the new institutions in order to enhance the effectiveness of monetary policy, regulation and supervision of banks as well as non-banking financial institutions. Unfortunately in 1997, the General Sani Abacha led Federal Government enacted a new CBN (Amendment Decree No. 3 and BOFI (Amended) Decree No. 4 to remove completely the limited autonomy which the Bank had enjoyed since 1991.

Thus, the 1997 amendments brought the CBN back under the supervision of the Ministry of Finance an opportunity that opened the gate for reckless looting of the national treasury. The Decree made CBN directly responsible to the Minister of Finance with respect to the supervision and control of banks and other financial institutions, while extending the supervisory role of the bank to other specialised Banks and Financial Institutions. That amendment placed enormous powers on the Ministry of Finance while leaving the CBN with a subjugated role in the monitoring of the financial institutions with little room for the Bank to exercise discretionary powers. In 1998, another CBN (Amendment) Decree No. 37 which repealed the CBN (Amended) Decree No. 3 of 1997 was enacted. The Decree provided a measure of operational autonomy for the CBN to carry out certain traditional functions which enhanced its versatility.

However, the current legal framework within which the CBN operates is the CBN Act of 2007 which repealed the CBN Act of 1991 and all its amendments. The Act provides that the CBN shall be a fully autonomous body in the discharge of its functions under the Act and the Banks and Other Financial Institutions (BOFI) Act with the objective of promoting stability and continuity in economic management. In line with this, the Act has widened the objects of the CBN to include ensuring monetary and price stability as well as rendering economic advice to the Federal Government.

Besides, the regulatory powers of the CBN were strengthened by the Banks and other Financial Institutions (Amendment) Decree No. 38 of 1998 which repealed BOFI (Amendments) Decree No. 4 of 1997. By this Decree, the CBN’s powers on banks, especially those relating to withdrawal of licenses of distressed banks and appointment of liquidators of such banks, including the NDIC was restored. Through those amendments, the CBN may vary or revoke any condition subject to which a license was granted or may impose fresh or additional condition to the granting of a license to transact banking business in the country. This is the Act that gives you as the CBN Governor the enormous powers which you now wield within the banking sector albeit to the great advantage of Nigeria and Nigerians.

Now that we have a controversy at hand over the desirability or otherwise of introducing a new denomination of Nigerian currency it may become pertinent to also look if briefly at the history of Nigerian currency from colonial times. You will remember that the West African Currency Board was initially responsible for issuing currency notes in Nigeria from 1912 to 1959. Hitherto, the various tribes in Nigeria had used various forms of money including cowries and manilas.

But on July 1, 1959, the Central Bank of Nigeria issued the first Nigerian currency notes and coins thereby forcing the West African Currency Board to withdraw its notes and coins from circulation in the country. It was, however, not until July 1, 1962 that legal tender status was changed to reflect the country’s new status. The notes were again changed in 1968 as a war strategy following the misuse of the country’s currency notes in certain circumstances.

And on March 31, 1971, the then Head of State, General Yakubu Gowon announced that Nigeria would change to decimal currency on January 1, 1973 in line with the modern monetary policy in the world. He said the major currency unit to be called Naira would be equivalent to ten shillings of the British currency of Pound Sterling while the minor unit would be called kobo 100 of which would make one Naira. The decision to change to decimal currency followed the recommendations of the Decimal Currency Committee set up in 1962 which submitted its report in 1964. But for the January 1966 military coup that led to a civil war, the Nigerian decimal currency would have been in use since 1966.

The change that took place in January, 1973 was a major one which involved both currency notes and coins. The major unit of currency which used to be one Pound (£1) ceased to exist and the one Naira which was equivalent to ten Shillings (10/-) became the major unit. Yet on February 11, 1977 a new banknote denomination of 20 Naira value was issued as the highest denomination. This was special in two respects. Its issuance became necessary not only as a result of the growth of incomes in the country but also as a preference for cash transactions and the need for convenience. Thus, N20 note became the first currency note in Nigeria to bear the Portrait of a Nigerian citizen, in this case, the late Head of State, General Murtala  Ramat Muhammed (1938-1976) who was killed in a February 13 1976 military coup attempt.  He was declared a national hero on the 1st of October, 1978. The note was issued on the 1st Anniversary of his assassination as a befitting tribute to a most illustrious son of Nigeria.

Again, on July 2, 1979, new currency notes of three denominations: N1, N5 and N10 were introduced. These notes were of the same size: 151 x 78 mm as the N20 note issued in 1977. In order to facilitate identification however, distinctive colours similar to those of the current various banknotes were used. The notes bore the portraits of three other eminent Nigerians who had been declared national heroes on October 1, 1978. These were Herbert Macaulay; Sir Abubakar Tafawa Balewa and Chief Alvan Ikoku. The back of each of these notes was engraved in such a way as to reflect the cultural traits of the country. But by 1991, when the Structural Adjustment Programme (SAP), had terribly battered the value of the Naira rendering it almost valueless, both the 50k and N1 Notes were reduced to coins. Later, in response to the expansion in economic activities and to facilitate an efficient payments system, the N100, N200, N500, N1000 were introduced respectively in December 1999, November 2000, April 2001 and October, 2005. And on February 28, 2007, N50, N20, N10, and N5 banknotes as well as N1 and 50K coins were reissued with new designs, while a new N2 coin was introduced.

Since 1991 when SAP rendered the Naira almost valueless, the coined denominations of Nigerian Naira has become moribund having been rejected by the populace thereby turning Nigeria into a country without coins. Despite this however, Nigerians had never queried any need for introducing new currency denomination as they are now doing in respect of N5000 note.

Now, many questions are begging for answers:

1.   At a time when corruption is virtually at its crescendo in the country and you as the CBN Governor are calling for a cashless economy what informs the introduction of the highest currency denomination note of N5000?

2.   Is there no contradiction in advocating for a cashless economy with one side of the mouth and campaigning for introduction of N5000 with the other side as you are now doing?

3. What is the logic in introducing N5000 note at a time when Nigerians have not been convinced on the need to return to the use of coins which you are now trying to reintroduce?

4. Why is such a delicate and highly controversial action being unilaterally taken with neither the involvement of the legislature nor the consent of the populace through a referendum?

5. In a democracy, who should have the way on a vital national policy as new currency? Is it the majority or the minority? Are you aware that an imposition of such a policy by you the CBN Governor, the Presidency and the pseudo politicians called business group may boomerang especially when the same group is seemingly responsible for the current national economic doldrums?

6. How economically reasonable is it to spend about N40 billion to mint new currency only to gain N7 billion as being claimed by your spokesmen?

Perhaps you need to be hinted that the general impression in the country about this new monetary policy and which is probably responsible for the overwhelming opposition to it is the suspicion that you may be inadvertently colluding with some corrupt politicians to ditch Nigeria economically.  This impression is a direct opposite of the high esteem in which you were held before now by most Nigerians because of your marvellous performance in the banking sector. In the past one year, two Nigerian public officials have positively rendered the populace nonplussed by their wonderful actions. These are your esteemed self and the Inspector General of Police Muhammad Dikko Abubakar.

Mr. CBN Governor, you have done well so far. Please, do not allow these chameleonic politicians to use you for their own purpose because they will eventually dump you characteristically and turn back to laugh at you. A leader is known not by the power he wields but by his application of magnanimity in the use of such power. You are already considered by the populace to be a national economic hero. Do not allow any political charlatan to reduce you into a villain. Politicians are best known for doing that. You are not one yet but you know them. A word is enough for the wise. We shall meet again in a foreseeable future to exchange notes God willing.

•Historical facts in this article were culled from the internet.